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NY Times: Cost of Green Power Makes Projects Tougher Sell



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Shocker:

Michael Polsky’s wind farm company was doing so well in 2008 that banks were happy to lend millions for his effort to light up America with clean electricity.

But two years later, Mr. Polsky has a product he is hard-pressed to sell.

His company, Invenergy, had a contract to sell power to a utility in Virginia, but state regulators rejected the deal, citing the recession and the lower prices of natural gas and other fossil fuels.

“The ratepayers of Virginia must be protected from costs for renewable energy that are unreasonably high,” the regulators said. Wind power would have increased the monthly bill of a typical residential customer by 0.2 percent.

Even as many politicians, environmentalists and consumers want renewable energy and reduced dependence on fossil fuels, a growing number of projects are being canceled or delayed because governments are unwilling to add even small amounts to consumers’ electricity bills.

Deals to buy renewable power have been scuttled or slowed in states including Florida, Idaho and Kentucky as well as Virginia. By the end of the third quarter, year-to-date installations of new wind power dropped 72 percent from 2009 levels, according to the American Wind Energy Association, a trade group.

Mr. Polsky calls the focus on short-term costs short-sighted.

“They have to look for the ratepayers’ long-term interest,” he said, “not just the bills this year.”

Electricity generated from wind or sun still generally costs more — and sometimes a lot more — than the power squeezed from coal or natural gas. Prices for fossil fuels have dropped in part because the recession has reduced demand. In the case of natural gas, newer drilling techniques have opened the possibility of vast new supplies for years to come.

The gap in price can pit regulators, who see their job as protecting consumers from unreasonable rates, against renewable energy developers and utility companies, many of which are willing to pay higher prices now to ensure a broader energy portfolio in the future.

In April, for example, the state public utilities commission in Rhode Island rejected a power-purchase deal for an offshore wind project that would have cost 24.4 cents a kilowatt-hour. The utility now pays about 9.5 cents a kilowatt hour for electricity from fossil fuels.

The state legislature responded by passing a bill allowing the regulators to consider factors other than price. The commission then approved an agreement to buy electricity from a smaller wind farm, although that decision is being challenged in the courts.

Similarly, in Kentucky this year, the public service commission voted down a contract for a local utility, Kentucky Power, to buy electricity from NextEra Energy Resources in Illinois.

According to the commission, Kentucky Power argued that the contract would position the utility “to better meet growing environmental requirements and impending government portfolio mandates for renewable energy” and that it would benefit customers.

But Kentucky’s attorney general, Jack Conway, joined by business and industrial electricity users, opposed the deal, contending that it would have increased a typical residential customer’s rates by about 0.7 percent and was “a discretionary expense” that the utility’s customers could ill afford.

The rest here.



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