Enjoy the wind, while it’s still free.
Next year, you’ll be paying for it in your electric bill.
While wind itself doesn’t cost anything, buying, installing and maintaining the equipment to turn it into megawatts of electricity is expensive.
In Kansas, the cost is likely to reach into the billions.
Starting next year and for the next few years, you can expect to pay about $2 to $2.50 more a month on your Westar Energy bill as the company brings on line the first phase of its wind expansion plan.
Overall, that 300 megawatts of wind power will increase the company’s rates by $55 million in 2009, its first year of operation, according to documents filed with the Kansas Corporation Commission.
The 20-year cost works out to $830 million, the documents show.
And that’s just the start.
The 300 megawatts is slightly less than half of what will need to be added to existing wind power to meet Gov. Kathleen Sebelius’ goal of Kansas getting 10 percent of its electricity from wind by 2010.
The governor wants to increase the use of wind power to 20 percent by 2020.
Assuming future wind projects have similar costs, Kansas consumers could end up paying about $4.8 billion over the next 20 to 30 years to meet those goals.
Whatever power sources Kansas may use, consumers need to brace themselves for bigger energy bills to come, said David Springe, consumer counsel for the Citizens’ Utility Ratepayer Board.
“The message I keep trying to tell people is, ‘You really need to be thinking ahead to a future where your energy bills are 50 percent higher than they are today,’ ” he said. “That, or conservation is going to have to substantially increase.
“It’s not too far off, either, maybe five years from now,” he added. “It’s not a pretty picture.”
Reliable and affordable?
Lt. Gov. Mark Parkinson, appointed by the governor to head state energy policy, is a fan of wind power.
“Any new source of energy, whether it’s coal, natural gas or wind, will have a price tag – that’s the reality of meeting new energy needs,” Parkinson said in a statement issued in response to Eagle inquiries. “What we can do as a state is encourage energy sources that are reliable and, in the long run, the most affordable – which is wind.”
U.S. Department of Energy projections show that through 2030, wind power, on average, is expected to remain more expensive than coal, natural gas or nuclear generation.
Although the fuel cost is zero, wind farms have much higher construction, operation and transmission costs, the federal data shows.
Seth Bundy, a spokesman for Parkinson, said the lieutenant governor is basing his claim of long-term savings on state-specific projections by the Kansas Energy Office.
Officials of that office could not be reached for comment. Some national studies do show wind to be more economical when health impacts and other societal costs of fossil-fuel use for energy generation are factored in.
Westar resisted large-scale wind development for years, but “it’s become more cost-effective for our customers than it was a few years ago,” said company spokeswoman Karla Olsen.
Westar has a case before the Kansas Corporation Commission to determine how the company will be allowed to collect its costs and profits from wind.
Because wind is riskier than traditional energy sources, the company is asking the commission to add 1 percent to its regular 7.89 percent rate of return. The rate of return is the amount the commission grants Westar above its documented costs, to allow the company to earn a profit.
The company can expect some opposition to trying to increase its return on wind.
“We’re not too fond of that,” said Springe of CURB, the state agency that represents residential and small-business utility customers. “We can’t see why (Westar) shareholders should make additional profit for doing the right thing.”
Although wind is more expensive than traditional energy sources and CURB exists to protect consumers, the board supports the governor’s goal because it will reduce pollution, Springe said.
But that doesn’t mean anything goes when it comes to alternative energy, he said.
“We want to make sure that if we have wind as a policy, we want to get it as economically as possible for consumers,” he said.
Build, or contract out?
An open question is whether it will be cheaper in the long term for the power company to build its own wind farms or buy wind power on contract, Springe said.
Westar’s trying both.
Half the new wind energy Westar will provide will come from a company-owned and operated plant in Wichita County. Westar proposes to build those costs into its basic service rate.
The other half of the power would be purchased from wind-farm developers. If the commission agrees, that cost would flow through to customers in Westar’s fuel cost adjustment, a sliding rate that compensates the company for the cost of fueling its power plants.
Despite the higher cost of wind, state utility officials generally support the governor’s goal.
“I have not been against development of any kind of alternative energy,” said Rep. Don Myers, R-Derby, a 15-year veteran of the House Utilities Committee.
But Myers and others say the biggest drawback of wind is that utilities using it will have to maintain conventional power plants to back it up on days when the winds are calm, usually in late summer.
“It’s never going to be as reliable as a base (nuclear or fossil fuel) power plant,” Myers said. “Generally, the time the wind isn’t blowing is the time everyone needs to use their air conditioning. You still have to build a power plant and you have to pay for it, whether it’s idle or not.”
Overall, Myers said, he expects the cost of power to rise, whether Kansas uses traditional or alternative energy.
But, he said, “I would much rather see us paying increased rates for a base power plant, such as nuclear, which in the long run is cheaper on a kilowatt-hour basis.”
Dick Rohlfs, Westar’s director of retail rates, said the company will mostly use natural gas power plants to back up the wind generation.
Rohlfs said rising prices of traditional fuels and the possibility of selling “renewable energy credits” could make wind more cost-effective as time goes by.
An emerging market allows companies and some individuals who are “desiring to be called green” to purchase credits to offset their discharges of carbon-compound gases that scientists say contribute to global warming, Rohlfs said.
Money raised from the credits goes to encouraging expanded use of renewable energy.
“It’s not a very wide market right now,” Rohlfs said. But “our traders have seen prices of $3.50 per megawatt hour.”
Overall, the sale of energy credits could reduce Westar’s costs by about $3.5 million a year, he said in his commission testimony.
By Don Lefler
25 October 2007
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