Execs from three influential utilities did a SWOT analysis on renewable energy, assessing its Strengths, Weaknesses, Opportunities, and Threats for their companies at WindPower 2014, the just-concluded annual industry conference.
The utilities were quick to define the strengths.
Xcel Energy has deployed wind and solar when and where it is the best resource, said Public Affairs VP Doug Benvenuto. “At 1 AM on May 24, 2013, we got over 60% of our power from wind. Wind has saved us over $37 million in fuel costs. We are also a major utility solar provider.”
Both serve to meet state mandates and standards, Benvenuto said, but “markets need to learn that wind is the best economic and environmental choice.”
With its current price approaching $0.021 per kilowatt-hour across much of the Midwest where Xcel serves 3.5 million electricity customers, Benvenuto said, “it is the most cost efficient choice and a hedge against gas prices and environmental regulations.”
Despite not having a state mandate, Nebraska Public Power District (NPPD) is at 500 megawatts of wind on the resource strength and the utility’s 10% renewables target, explained Sustainable Energy Manager Dave Rich. But its mix is 55% “old coal” that new wind and natural gas can’t compete with. “Coming EPA regulations may change that,” he said.
Requirements that existing coal plants be retrofitted with scrubbers could cost NPPD a billion dollars, Rich said. That would force serious consideration of natural gas and wind. “We’re waiting for the final rulings to see what EPA does and how much it will cost.”
Rate basing wind would make it more attractive for DTE, Serafin said, but with a full portfolio of committed old coal, that is presently not an option. “But with EPA regulations, older generation will have to come out of the rate base and wind can go in.”
Meanwhile, it is “a very effective hedge against gas price volatility,” Serafin added, and was an “important buffer” during this past winter’s cold, when gas prices spiked.
They agreed renewables’ grid integration cost is a weakness but disagreed about how big the weakness is.
“The grid is now becoming comfortable with variability,” Serafin said. “It is not as onerous as we thought.”
“Since we joined the Southwest Power Pool, the costs have decreased significantly,” Rich agreed, citing SPP’s bigger and more varied resources spread across a wider region.
Xcel believes utility-scale solar is “a better choice,” Benvenuto said. “We have enabled the rooftop solar choice. But it shifts the cost for the grid, it is not the best way to cut emissions, and it competes against wind.”
Integrating wind adds grid stresses and costs that should be allocated. But improved supply, load, and resource forecasting has reduced those costs. “For Xcel, getting the costs of rooftop solar and the other renewables properly allocated is the most important question,” Benvenuto said. “Rooftop solar has certain advantages. We proposed a renewables integration tax credit for utilities, not as a money-maker but to make sure the costs of integration are carried by all customers.”
Renewables also offer opportunities, Rich said. In a rural state like Nebraska, solar and wind can shift the load imposed by irrigation from peak hours to when the wind blows and the sun shines because farmers want to take advantage of low cost electricity.
A corporate NPPD customer that obtained a PPA for a 60 megawatt wind project was able to pass through the costs of integration, Rich added. “They were lower than expected and wind did not impact reliability.”
Rooftop solar is not an opportunity or a threat in Michigan because “it is not the best deal for our customers,” Serafin said. The EPA regulations make wind and natural gas opportunities. “But we remember the 1980s, when gas prices were very low and then spiked. So wind is an excellent hedge even where it doesn’t beat the cost of gas.”
“There is a story to be told about the synergy between wind and natural gas, Benvenuto agreed. “It is to the benefit of the wind industry to have a strong natural gas industry.”
There was no debate on the threat.
“Our concern is the boom-bust cycles caused by the politics of the production tax credit,” Serafin said.
“Whether the PTC is extended, extended with a phase out, or phased out, it will be better than what we have now, the boom-bust cycles,” agreed Benvenuto. “If the Republicans win the Senate as well as the House, wind may have to take what it can get.”
The big picture
When the discussion ended, moderator and OwnEnergy Founder/CEO Jake Susman polled the audience for a SWOT analysis:
Strengths: Low cost, RPS compliance
Weaknesses: Integration costs
Opportunities: Hedge against natural gas price and environmental regulation
Threats: PTC expiration, DG’s negative impact on load, EPA regulations