Commentary: Ignore all the noise you hear about renewable energy being expensive. The most efficient new natural gas power plant costs 7.5 cents a kWh over its lifetime. Solar power generators routinely offer long term purchase power agreements at 4 cents per kWh and falling. Wind power contracts are approaching 3 cents per kWh.
Don’t believe me? Just look at the purchased power contracts recently signed by the cities of Austin, Texas and San Jose, California. Or read the filings of El Paso Electric and PNM with the Public Regulation Commission about recent power bids. It’s no wonder that half of the new electric generation built in the United States over the past two years has been solar and wind.
Yet somehow this revolution in clean and cheap energy has passed El Paso Electric by. They continue to build expensive gas fired generation. Regulators have exempted them from meeting their minimum renewable energy requirements for four years running. Currently, about 10% of their generation is renewable. It will drop to 9% by 2025 according to the company’s draft long term plan.
So how does the company get away with building high cost gas generation plants when solar and wind are cheaper? Partly by claiming technical hurdles that just about every major utility around the country seems to have solved. But mostly by gaming a regulatory tool called the Reasonable Cost Threshold.
Conceived at a time when renewables were expensive, the cost threshold was put in place to prevent utilities from over spending on solar and wind while meeting state mandated minimum renewable energy requirements. The regulation states that a utility cannot increase total costs by more than 3% over traditional power generation by installing renewable energy. When that threshold is reached, the utility is not required to add more renewable power capacity.
With renewables so cheap, that shouldn’t be a problem. At least not until El Paso Electric’s accountants get their hands on the cost calculation. The company totals up all the expenses of running renewable energy facilities, but does not give them credit for substantial capital cost savings resulting from solar power’s ability to stand in for gas plants and serve our summertime peak load. If Apple Computer published financial statements that showed all their expenses but excluded half their sales, nobody would invest in them either!
Every year El Paso Electric uses this bogus accounting to claim they have exceeded the Reasonable Cost Threshold and therefore cannot use additional renewable capacity. And every year the Public Regulation Commission says “okay!” Not only do they approve it, commission staff blessed this calculation method to keep things “simple.”
The logic used to justify this approach is so convoluted that I refuse to confuse readers with it. Better to let El Paso Electric and the Public Regulation Commission try and explain the rabbit hole they’ve created.
Fortunately, we do have an opportunity to change this ludicrous practice in the Renewable Power Plan case currently before the Commission. Unfortunately, El Paso Electric doesn’t need any more generation capacity until at least 2021. There is little we can do to put wasted money back into ratepayer pockets and take fossil fuel pollutants out of our air until then.
When 2021 does roll around, the Public Regulation Commission should require all new El Paso Electric Power Plants to be renewables until they reach the legal requirement of 20% renewable capacity originally scheduled for 2020.
After they reach the 20% goal, they should keep building renewable generation. After all, who knows how cheap wind, solar and even energy storage will have become by then?
Steve Fischmann is a former state senator, and co-chair of the New Mexico Fair Lending Coalition.