Few Utilities Power Ahead with Renewables

As surely as last year’s Paris fashions make their way west to New York, U.S. utilities are beginning to embrace European-style programs like feed-in tariffs and green power premiums.

State-level decoupling regulations are easing that transition to some extent. But many utilities are still reluctant to embrace the change fully, especially as prices for conventional energy have come back down and utilities are finding that available capacity in voluntary green power is going unsubscribed.

Utilities do not like the financial uncertainty posed by long-term contracting for renewable power to supply the programs if they are not going to be able to move the power. It inevitably puts the utility’s shareholder obligations at odds with its ratepayer obligations and results in one of two solutions: green premiums go up and make the company look bad on green; or, everyone on the system pays to cover the nut, and no one is happy.

Still, there are some utilities that are pushing forward with very aggressive programs, in spite of estimated rate increases from 5 to as much as 20 percent. What kind of utilities, you ask?

Well, there’s the rub. Municipal utilities — including the Los Angeles Department of Water and Power — and cooperatives — like Austin Energy — are choosing to move forward with very progressive, European-style system-wide rate hikes that will go directly to subsidize renewable power.

As noted in a recent Austin Statesman editorial on the proposed program in the Texas capitol, “it’s important to realize just how much weight city leaders have placed on environmental stewardship.”

In other words, the rate hikes and renewable support are a political statement. Indeed, they would have to be. There is little indication that even the most progressively deregulated states, such as California and Massachusetts, have rate structures in place that would allow for investor-owned utilities to take the same kind of risk on green power.

If programs like those proposed by LADWP and Austin Energy are clearly not scalable in the context of the “Edison” model, are media outlets and policymakers irresponsible when they to point to programs like these as potential models or as standard-bearers?

In the past, many of the same commentators pointed to Austin Energy’s GreenChoice program as another example of how a utility can lead in green power programming; but, because Texas is not fully deregulated, that program essentially substitutes for the competition that is offered by third-party suppliers elsewhere, at no cost to other ratepayers.

There is nothing wrong with looking to the innovations being made in public power, as long as we are careful to confine the lessons taken away from those programs to the public power context. Local political will empowers these co-ops to hike rates in the name of green.

But it is clear that the political will for the broad-based regulatory reform that would make these programs scalable is lacking in Washington.

photo: yurisantin