Studies Show That the Move to Renewables Will Save Consumers Money

Posted by on June 23, 2014 in Green

Wind_turbineWe have, over the past couple of weeks, written about the impact of the rapid growth renewables, particularly, rooftop solar, on the economic outlook for electric utilities. First we described the downgrade, by Barclay’s investment bank of the entire sector based on fears of a downward spiral, precipitated by massive grid defection among residential customers.

A follow-up piece described a report by the American Council for an Energy Efficient Economy, which had a considerably less dire tone, suggested the changes in electricity would like be relatively modest over the next twenty years.

Both of these reports were focused specifically on rooftop residential solar, or what the utilities call distributed generation. Utility scale renewables projects are another important piece of the puzzle and one that, according to a press release by the World Resources Institute (WRI), will have a beneficial impact on both utilities and consumers.

WRI evaluated reports issued by reports  four major utility companies including New York Independent System Operator(NYISO), Midcontinent ISO (MISO), serving the Midwest, PJM Interconnect, serving the mid-Atlantic region, and Western Interconnection, serving 14 states west of the Rockies

In a world where the vast majority of new generation capacity is either coming from renewable or natural gas, and where demand growth has been stagnant, utilities are now finding the opportunity to retire, older, inefficient plants that are more costly to operate. This will reduce operational cost, which is good for everyone involved. These lower wholesale prices for electricity will far outweigh the infrastructure investments needed to incorporating these new renewable sources into the grid. Depending on whether the utility is structured as a regulated monopoly, or investor-owned, which varies by state, will determine how much of those savings will be passed along to consumers.

Let’s take a look at some numbers. MISO expects to see annual savings $12.2 billion achieved by installing 40 GW of wind power by 2020. After accounting for additional infrastructure cost, that’s a net benefit of $9.4 billion, or $241 per person. PJM’s report shows a savings of $14.5 billion per year, achieved by providing 22% of their power from windmills. That works out to net savings of $6.9 billion or $113 per person after the integration costs are factored in. NYISO’s plan to add 8GW by 2016, will reduce operational costs by $1.8 billion, or $65 per person. Last, but not least, according to NREL, Western Interconnect, will save, by providing 33% of their power from solar and wind, $7 billion per year, or $83 per person. Infrastructure costs, works out to 2% of the total savings achieved.

These four utilities combine to provide power to 60% of the US population.

In a nutshell, what these reports show is that when conservatives scream and complain about how the new EPA rules governing power plant emissions are going to raise the price of electricity, they are simply wrong.

The trend is clear and it is here. In 2013, only 10% of new capacity was from coal. By 2020, according to Citigroup, all new capacity will come from renewables.

Image credit: SilverShadow_UK: Flickr Creative Commons

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