Renewables Promise Savings and Stability for Energy Market

Consumers in California could save US$1.8 billion if utilities in the state were to diversify their electricity mix to include 20 percent from renewable energy.

CAMBRIDGE, Massachusetts, US, 2001-09-20 [] California is in danger of becoming over reliant on natural gas because more than 95 percent of contracts for future energy production are committed to that fuel, notes ‘Powering Ahead,‘ a new report from the Union of Concerned Scientists. The economic analysis shows that adding renewables to the mix could save consumers up to $1.8 billion and provide greater economic stability for the state. “California has experienced first hand the dangers of a market dominated by volatile fossil fuels,” says author Deborah Donovan of UCS. “Now we have the hard numbers to prove renewable energy is beneficial for California’s economic health.” “Just as you diversify your stock portfolio, diversifying the state’s power plan with California’s abundant, cost-effective renewable resources, will reduce price volatility and make the state less dependent on fossil fuel and electricity imports,” she explains. The report analyzes the economic impacts of a Renewable Portfolio Standard similar to the market based mechanism adopted by 12 other states. By gradually increasing the portion of electricity generated from renewable sources, UCS concludes that California’s power portfolio would will help protect consumers from problems that have plagued California over the past six months including price hikes, blackouts, and air emission increases. Other states with RPS laws include Arizona, Connecticut, Iowa, Maine, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Pennsylvania, Texas and Wisconsin. UCS says the most successful is Texas, where requirements for new renewables have been set high enough to trigger market growth which will enable that state to meet its renewables target several years ahead of schedule. California experienced spikes in the price of natural gas of 20 times the historical average last year, while the cost of renewable energies has declined steadily. Wind power at 3c/lWh is cheaper than electricity from gas-fired facilities, but the California Department of Water Resources, which buys power for the state, uses a formula that eliminates wind power, thereby creating a significant market disincentive for new wind investment, explains the report. “Price fluctuations, combined with the fact that renewable energy producers have not been appropriately paid for environmental benefits, have reduced the incentive to invest in renewable projects,” says Richard Norgaard, a professor of Energy at the University of California Berkeley. “The beauty of the RPS is that it creates a long-term market for renewable generators. This allows new projects to be financed cost-effectively, escaping the boom bust cycles that this industry has historically experienced, and bringing the price down. ” If California were to adopt a RPS of 20 percent by 2010, UCS concludes that consumers could see cumulative savings of up to $1.8 billion on their electricity bills. The reduction in natural gas consumption will likely reduce the price, and CO2 emissions would be reduced by 24 megatonne per year by 2010. A California RPS would also stimulate investment in new renewable energy, creating jobs and income in rural areas as well as in the high tech and manufacturing sectors California governor Gray Davis has promised to increase the state’s total renewable energy production to 17 percent by 2006, up from current levels of 12 percent.

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