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Renewable Portfolio Standards. February 22, 2004  

Renewable Portfolio Standards.  

Colorado’s legislature is poised to enact mandatory renewable portfolio standards. House Bill 1273 will require the state's two investor-owned utilities, Xcel Energy and Aquila Inc., to obtain 15 percent of their power from renewable resources by 2020,

Fourteen other stateshave enacted some form of RPS legislation. Voluntary Green energy programs have been in place in many states but consumers have generally not been willing to pay the higher cost associated with Green energy.In Colorado, for example, Xcel Energy found that only 0.5% of their customer load was willing to pay the green program's 2.5c/kWh premium needed to recover the higher power costs.

Mandated programs force the issue since the added cost of renewable energy will be included in all consumers’ monthly energy bills.

Renewables typically cost more than traditionally generated power but a group in Colorado claims that RPS will result in a 31 cent per month savings in the typical consumer energy bill. This study is very optimistic for the following reasons.

• It assumes that windpower will displace natural gas and that natural gas prices will remain very high. (Most electricity in Colorado is generated using coal)

• The study also assumes that windpower capital costs will decline by over 35% from today's level to reach $750/kW by 2023 with advances in wind turbine technology. This is highly unlikely in that most of the technology used in windpower is old technology that has been cost reduced over the past 100 years. The rotors and controls represent the best opportunity for cost improvements but they represent a small portion of total cost. Lower capital costs can only occur by using larger units but the largest production unit today is 2.5MW and larger prototype units are slated for ocean installations. Terrain frequently dictates the size of the units.

• If the expired production tax credit is not extended, the savings from the study evaporate.

• The study assumes a capacity factor of 35% and increasing to 40% but the best capacity factor achieved thus far at Colorado’s two wind farms is 26%: In other words, the units will produce much less electricity than assumed in the study.

If renewables were indeed less expensive than conventional alternatives, why mandate their purchase and set a minimum market share? The PUC could eliminate the 2.5c/kWh premium for green energy and see whether consumers would opt for green power over traditional power.

The map shows the states that have adopted some form of RPS.                         

February 22, 2004

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