State surveys renewable energy’s costs
In 2007, Minnesota passed a law that required all the state’s electric utilities to fulfill a quarter of their energy needs with renewable resources by 2025. Although the final goal is more than a decade away, the Minnesota Public Utilities Commission recently requested that utilities report requirement’s cost or benefit to consumers.
Great River Energy reported that in 2010 the estimated wholesale rate impact of the Renewable Energy Standard (RES) requirement to Great River Energy’s members was $22 million. That amounts to $0.002 per kilowatt-hour (kWh), which means that a home using 1,000 kWh per month would pay an additional $24 every year as a result of the RES.
The report included costs associated with renewable generation from wind and biomass as well as administrative and transmission costs. Great River Energy’s primary reason for higher costs is that its cost of purchasing wind energy was higher than the value of that energy, on average, during the times of production.
Until energy market prices recover from the recent lows, renewable energy is expected to continue to be a cost to Great River Energy. However, if prices rebound renewable resources could become economical.
Great River Energy reported that in 2010 the estimated wholesale rate impact of the Minnesota Renewable Energy Standard requirement was $22 million |
“At this point, the environmental benefits of wind energy are coming at a cost to our members,” said Great River Energy Member Services Vice President Jon Brekke. “The impacts could grow as we ramp up to the full 25 percent goal by 2025, but this depends on many complex factors including future market conditions.”
These costs are not unique to Great River Energy. Other utilities also reported on RES impacts using various calculation methods. As a result of the various methods and unique resource portfolios, there was wide variation in reported cost impacts.
Great River Energy’s existing renewable energy resources (including wind and biomass) will ensure that the cooperative remains compliant with Minnesota’s RES through at least 2020.
Great River Energy invested early in wind generation in an effort to claim the best sites for wind resources and transmission access. Existing projects have also benefited from federal tax incentives which are scheduled to expire at the end of 2012.
