Renewable sources such as wind expensive
Utilities in New York, Connecticut, Massachusetts and two dozen other states may face a credit-crimping consumer backlash over costs to increase power supplies from wind and other renewable sources, Standard & Poor’s said.
A surge of so-called renewable portfolio standards in the past two years means the higher cost of wind or solar generation will be added to bills at the same time as higher prices for traditional fuels and network expansions, Ann Selting, a San Francisco-based S&P analyst, said in a report released yesterday.
“Aggressive” requirements in 29 states and the District of Columbia require 58,200 megawatts of new renewable generation by 2015, or 6,000 megawatts a year, Selting estimated. The U.S. added a record 5,000 megawatts of wind power last year, according to the American Wind Energy Association.
“Consumers have yet to fully experience the cost and retail rate impacts of this shift,” Selting wrote. “Not all utilities will be able to achieve RPS requirements on the schedule required, which could lead to penalties.”
Holders of utility bonds will benefit from wider disclosure of potential costs so that customers are less likely to rebel against higher rates that will be required, she said.
Consumers have been led to believe that the cost to shift to renewable energy will be “negligible” while the cost to California may reach $1 billion by 2010, setting up potential for a backlash over rates, Selting said.
The price of wind power from new projects doubled to $50 per megawatt-hour in 2006 from as little as $25 in 2000, the report said, citing research by Lawrence Berkley Labs. Increased demand for wind, often the cheapest renewable power source, may lift prices to as much as $120 a megawatt-hour in southern California, Selting said.
Southern California’s benchmark power price was about $89 a megawatt-hour yesterday, according to Bloomberg data.
New York and Connecticut share high residential electricity prices and aggressive renewable targets, she said. California’s requirement of 20 percent of its power from renewable sources by 2020 would be raised to 50 percent should a proposed voter initiative reach the ballot and win passage in November, she said.
One megawatt of power from plants fueled by coal, natural-gas or nuclear energy can supply about 800 average U.S. homes, according to Energy Department data. A megawatt of wind-generating capacity is enough for 300 homes, because wind is intermittent, according to the American Wind Energy Association.
Standard & Poor’s is a unit of New York-based McGraw-Hill Cos.
The report didn’t identify specific utility owners that may face credit squeezes from renewable portfolio standards. Consolidated Edison Inc. and National Grid Plc own the largest utilities in New York, and Northeast Utilities is the biggest utility owner in Connecticut. National Grid and NStar own utilities in Massachusetts.
Edison International and Sempra Energy are the largest utility owners in California by market value.
By Jim Polson
12 March 2008
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