Francis Menton: When the costs hit home, nobody will give up fossil fuels
The article below was written by Francis Menton at the Manhattan Contrarian: As noted in my post this past Sunday, no amount of fake happy talk in the so-called “Glasgow…
Renewable energy advocates in Minnesota often think that by using wind and solar energy over existing and fully depreciated coal power plants, electricity consumers will save money on their electric bills.
They fail to understand that building wind and solar energy sources, or purchasing their power from independent power providers through contracts, increases utility spending and the revenue that utilities must recover through ratepayers, thus raising the cost of electricity.
Despite numerous utility and state records explaining this in detail, renewable energy advocates who believe investing in renewable energy saves consumers money only need to look at this hearing regarding Xcel Energy’s Multi-Year Rate Plan filed in 2015, and Xcel’s rate case itself, to understand how incorrect they are.
Within the hearing, an Administrative Law Judge made the following remark:
The impetus for the Company’s three-year and five-year MYRP proposals is its view that the traditional rate case approach of using a test year does not work well in times when investment spending is high but there is little load growth. Investment spending increases the Company’s revenue requirement, and when sales are not growing there is pressure to increase rates, which leads to frequent rate case filings.
Then, in Xcel’s rate case filing where they requested to increase electricity prices on their customers, the utility made the following statement about which investments are increasing its need for revenue:
The Company’s revenue deficiency in 2016 reflects the costs of significant investments in our system, both in 2015 and over the next several years, as we continue to invest in carbon free energy sources and replace critical infrastructure while preparing for the future. These investments are resulting cleaner air, a better environment and a more resilient, flexible and reliable energy system that can deliver value to our customers for decades to come, but they require sufficient revenues to support them.
Outlined above is exactly what we at American Experiment have been saying for years – that building renewable energy sources to satisfy government mandates instead of growing electricity demand is resulting in higher electricity costs for all Minnesotans. Yet, many renewable energy advocates still don’t want to admit that increased spending on renewable energy sources results in more expensive electricity.
But it really does – and here’s even more evidence to prove it.
If investing in renewable energy sources is not driving up the cost of electricity, then renewable energy advocates need to explain the following trends shown in the graphs below.
Xcel Energy was the first utility company in Minnesota mandated to incorporate renewable energy into its portfolio (while others were only encouraged) beginning in 2005. Also beginning in 2005, Minnesotan’s experienced:
As you can see from the graph above, electric bills in Minnesota started increasing substantially after 2005, exactly when renewable energy generation in the state started growing at a significant rate.
This graph shows annual electricity rates in 2017 dollars from 1990 to 2017. Through 2004, electricity prices dropped by nearly 20 percent because utility companies relied on fuel-based generators that often operate past their depreciation schedules, meaning utilities don’t need to recover capital costs through electricity ratepayers.
Since 2004, however, prices have reversed course and risen by over 25 percent due to roughly $20 billion invested in renewable energy sources that simply were not needed, the transmission lines to transfer the electricity they produce and converting coal plants to natural gas facilities (as well as building brand new natural gas generators).
Renewable energy advocates often claim rates are rising in order to make up for decreasing electricity sales, leaving utilities with fewer sales to recover costs from.
However, American Experiment has already debunked this myth, as electricity prices are not only increasing to cover for fewer electricity sales but to cover for increased spending in renewable energy, as will be seen in the next point.
Residential electricity sales have remained relatively flat since 2005, decreasing by not even one percent through 2017. However, as you can see, utility revenues from residential rates have continued to increase by nearly 25 percent because, as noted by the Administrative Law Judge above, large investments are increasing the amount of revenue utilities need to recover through ratepayers.
And, as Xcel Energy noted, these large investments causing revenues to grow have been to incorporate more renewable energy onto the electrical grid.
Whether it be through base rates or adjusted through rate riders, Minnesota electricity consumers are being charged more for it all.
Now that we have laid out the evidence showcasing that electricity costs are rising in Minnesota at exactly the same time increasing levels of renewable energy has entered our electrical system, we need to show that this isn’t merely correlation.
As many of you already know by reading our former posts, the cost of wind energy does not stop and building a few turbines. The cost of wind power is so expensive because, as an unpredictable and intermittent generator, it needs additional energy sources online at all times in the case that it can’t produce electricity when the wind isn’t blowing.
Since wind energy needs additional energy sources online for the electrical grid to remain reliable, new wind farms are oftentimes accompanied by the construction of a new combined cycle and/or peaker natural gas facility, as well, especially when the purpose of building a wind farm is to replace a retiring coal plant. Wind energy simply cannot replace the full electricity load generated by an existing fuel-based energy source without help from another fuel-based generator.
This means that wind energy never actually displaces existing generating capacity on the electrical grid and is merely additional capacity that ratepayers are forced to pay for on top of everything else.
The graph below shows how this is playing out in Minnesota.
Total electricity consumption for all sectors in Minnesota has remained relatively flat since 2004, yet the total capacity online able to generate electricity has increased by nearly 50 percent from 12,230 megawatts (MWs) to 18,103, or by almost 6,000 MWs, thanks to renewable energy mandates requiring utilities to build intermittent wind and solar farms that only add to existing capacity.
This means that Minnesota ratepayers are now being forced to foot the bill for 50 percent more capacity than is required to meet electricity demand.
Interestingly enough, while coal capacity has dropped by more than 1,000 MWs since 2004, wind energy capacity has grown by more than 3,000 MWs, natural gas capacity has grown by nearly 3,000 MWs, as well as solar capacity by over 500 MWs.
In other words, for every 1 MW of coal retired, more than 6 MWs of wind, solar, and natural gas have been built.
Electricity costs are rising for all Minnesotan’s at precisely the same that renewable energy mandates are facilitating the construction of expensive and intermittent renewable energy facilities, as well as the natural gas infrastructure to cover for when the wind isn’t blowing, and the sun isn’t shining, while electricity sales are stagnated, leading to an electrical grid with an excess of power plants to pay for through electricity rates.
How do renewable energy advocates explain this trend?
Furthermore, how do they deny the numerous utility and state filings that admit increased spending on renewable energy is driving the cost increase?
They call it correlation – but we believe the evidence is strongly in support of the claim that investing in renewable energy in Minnesota is directly the cause of increasing electricity costs in our state.
We have yet to hear a reasonable explanation saying otherwise.