Green Energy Fuels Utilities

Utilities like green energy. They also like the tax benefits that come with providing them. While such investments have proved fruitful, power companies are expressing concerns that those emerging technologies are still expensive and that the permitting process is just as onerous as other fuel sources.

Much of the growth so far in the renewable energy sector is largely because of government-sponsored tax breaks and state renewable mandates that instruct utilities to provide a certain level of green energy. The goal is to create demand, which in turn attracts suppliers to the field and ultimately leads to the development of newer and better products and services. It’s not just good for the environment. It’s also healthy for companies’ bottom lines.

“As long as the returns are attractive, this will be a period of rapid deployment,” says Steve Lant, CEO of CH Energy Group in New York State, at Edison Electric Institute’s annual meeting. “We will build out our portfolio.” Non-hydro renewable sources now make up two percent of the United States’ generating portfolio of 770,000 megawatts.

Meanwhile, 22 states have renewable portfolio standards while 9 more are considering rules to require utilities to provide some power from green sources. The federal government, meantime, could do the same. The reluctance of federal lawmakers is genuine as each region of the country has its own geography and innate resource base. Any federal mandate would subsequently weigh heavier in certain areas.

About 20 percent of all utilities nationally participate in green energy programs. Those 600 utilities are giving 40 million customers in 34 states the ability to purchase some level of renewable energy. Consumers in all states, however, can ensure the advancement of renewable energy by buying credits from utilities.

New York State initially required that green energy make up a quarter of its electric supply by 2013. That rule has since been strengthened. As a result of both restructuring laws and renewable portfolio standards, CH Energy Group invested with partners in an ethanol plant in Nebraska as well as two wind projects in New Jersey and Pennsylvania. It also has a biomass facility in New York State.

According to CEO Lant, long-term power agreements provide financial security while the plants have all achieved their targeted returns. The investments have been buoyed by the fact that traditional fuel cost keeps rising as well as by government subsidies and the purported environmental benefits.

The growth of green energy will continue nationally, he adds, but fossil fuel plants that are able to capture and bury carbon emissions and nuclear generation may well be the preeminent facilities of the future.

“Renewables may just be a 10-year bridge,” says Lant. Local opposition to those kinds of plants, he adds, is as intense as other kinds of generation and has prevented some projects from getting permitted.

High Priorities
Investing in renewable energy is definitely not risk free. Utilities are understandably nervous about putting capital into emerging technologies that may not have an immediate payback and that may not adequately be recovered through the rate base. But proactive companies suggest that the resistance can be overcome through “integrated resource planning” that forecast generation needs and what it will take to provide power.

Take Portland General Electric, whose generation mix must include 25 percent green energy by 2025: It is now trying to aquire more renewable power that includes wind, solar and tidal facilities. It also plans to utilize coal gasification. It says that it was able to get an automatic rate adjustment clause approved by regulators. That simply allows the utility to pass its higher costs to consumers if underlying fuel prices rise or the initial projections are wrong.

All told, the company says that consumers there would accept a 5 percent premium over traditional fuel sources to support green offerings.

Meantime, the Public Service Co. of New Hampshire has experienced early success with its endeavors into the green field. It took three well-functioning coal-fired boilers that were producing nice profits and converted those facilities into ones that could also burn wood chips. The change cost at least $75 million. But the new 50-megawatt facility actually has lower operational costs and higher earnings. Moreover, the company’s emissions have been drastically reduced.

The utility made the change because New Hampshire implemented a renewable portfolio standard requiring it and other companies to provide 25 percent of its energy from renewable sources by 2025. For now, it’s a seller’s market in the New England region. But utility officials are concerned that their good fortune may not last as the tables eventually turn and more suppliers begin tapping limited resources.

Success is a function of collaboration and education, both of which will push the green energy agenda in a responsible manner. “The whole idea is to address the expansion of renewable programs in a holistic way,” says Mike May, CEO of Hawaiian Electric Co., whose generation portfolio must include 20 percent green energy by 2020. “It’s not just a numbers game but a true commitment.”

Air quality is atop the nation’s agenda. And policymakers at all levels are following the will of the people and enacting laws that require and motivate utilities to utilize renewable energy programs. Initially skeptical, many companies are now finding real benefits to that business strategy. Their subsequent success has worked to broaden the portfolio of available fuels and has thereby justified the proactive new policies.

Ken Silverstein is an award-winning journalist who is the editor-in-chief of Energy Central’s publication, EnergyBiz Insider. With a background in economics and public policy, he has spent several years writing about the issues that touch the energy and financial sectors, and his work has been published in more than 100 periodicals.

Republished with permission from CyberTech, Inc. EnergyBiz Insider is published three days a week by Energy Central. For more information about Energy Central, or to subscribe to EnergyBiz Insider, other e-newsletters and EnergyBiz magazine, please go to http://www.energycentral.com/.

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Renewable Energy World's content team members help deliver the most comprehensive news coverage of the renewable energy industries. Based in the U.S., the UK, and South Africa, the team is comprised of editors from Clarion Energy's myriad of publications that cover the global energy industry.

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