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Boulder’s Newest Energy Venture: Municipal Utility

In Boulder, Colorado, a city known for its entrepreneurial spirit, environmental enthusiasm, and “go local” attitude, the government has turned its attention to going local in energy. Since the city let its 20-year franchise agreement with the incumbent utility, Xcel Energy, expire without renewal, we are in the midst of a debate over the future of green energy in Boulder. The menu of options for addressing the sustainability of its power production is dwindling to two – accept the proposal from Xcel Energy to build a new 200 MW wind farm to support Boulder’s energy needs specifically or, create a municipal utility to establish local control.

Boulder has been known to cook up an idea or two – we are the home of young companies like Boulder WindPower, Tendril, and of course, Pike Research. With a penchant for entrepreneurial endeavors and a focus on local resources, city government is eying its own venture. The plan is a Local Portfolio Standard (LPS) that pairs energy efficiency with local power generation sources – mostly wind, rooftop solar, hydropower, and natural gas – to achieve a very low carbon-intensive power portfolio. Instead of farm-to-table, think creek-to-plug. According to consultants working for the city, efficiency and renewables could account for more than half of forecasted energy demand by 2020. The LPS would also establish local decision-making power, create local jobs, and support local industry.

Successfully creating a municipal utility is not a far-fetched idea; several cities in recent years have pursued such a strategy to achieve their energy and climate change goals. They have been able to do so while keeping cost increases to a minimum. Boulder believes it can do the same, as it currently has a diversity of resources at its fingertips. Among them, Boulder Housing Partners owns approximately 16 percent of all rooftop solar in the city limits. Research indicates that as much as $21 million annually could be retained by the city, money that could be invested in energy efficiency programs instead of ending up in shareholders’ pockets.

A healthy bit of competition still exists as Xcel has offered an alternative to municipalization. The proposal involves adding up to an additional 200 MW of wind power to a wind farm being constructed by NextEra Energy, Inc. The additional megawatts would be dedicated specifically to Boulder. Thanks to a melange of market forces (industry slow down, large scale project, and new technology) the price of Xcel’s project is approximately 30 percent lower than any contract offered in the last five years. The cost would be roughly $29-$42/MWh over the next 20 years, with Xcel covering the avoided costs and Boulder paying for the renewable energy credits (RECs). The project would be completed by 2013 resulting in up to 70 percent renewable energy in Boulder in the first year. The LPS would move considerably slower at delivering renewable energy, as litigation alone could take between three and five years.

The costs associated with starting such a venture, both monetary and otherwise, could increase risks for local consumers in terms of price stability. Boulder has a diverse population – a concentrated mix of residential, university, small business, and corporations – that all define affordable at different price points. Despite their differences, all consumers value reliability and cost stability. The acquisition of Xcel’s generation resources and infrastructure is estimated to cost between $350 million and $400 million. So, the real question is what are consumers willing to pay for local control and reliability over the long-term?

The hurdles that stand between now and a final decision are daunting. A draft legislative proposal is due in the middle of July, more technical and financial analyses are required, and a final vote won’t come until November when the issue will be presented to residents via the ballot. There is an obvious appeal of municipalization, I think greatest of which is the ability to leverage the wealth of clean resources in the surrounding area. With that in mind, I have some reservations about the conservative estimates Boulder is relying upon to make its financial case. Likewise, I think the city needs to articulate a concise plan of action regarding Smart Grid City and how that initiative will continue to advance. Regardless of the outcome, what we are experiencing here in Boulder may be a trend of consumers demanding new technologies from their power provider, or seeking out alternative strategies to achieve the same end.

Article by Brittany Gibson, appearing courtesy the Matter Network.