Utilities Chase Distant Winds
Jul 31 - The News & Observer, NC
The answer to North Carolina's green energy challenge is blowing in the
wind-swept mesas of Texas.
With the first deadlines fast approaching for North Carolina's renewable
energy targets, power companies in this state are snapping up green
certificates from out-of-state wind farms. The certificates don't buy
electricity, but pay for credits needed to meet state targets.
There are eight Texas wind farms registered in North Carolina to market the
certificates to Progress Energy, Duke Energy and local power agencies. Just
this week, a pair of wind farms in North and South Dakota were registered by
the N.C. Utilities Commission.
State law allows North Carolina's power companies to buy renewable energy
certificates without any electricity so that utilities here would be free to
shop around and keep costs down for customers.
Texas is the nation's leading state in wind energy development, and provides
some of the cheapest renewable certificates in the nation. Progress Energy,
Duke Energy and a group of 19 municipal power agencies have already bought
certificates from Texas wind farms to help meet North Carolina's green
energy mandates, which start phasing in in 2012 and increase through 2021.
Utilities here can satisfy up to 25 percent of their clean energy mandates
by buying certificates from out of state. Environmental advocates say that
as long as allowances for the out-of-state credits are limited, this state's
renewable energy industry, still in its infancy, will have a good chance of
getting established.
But some worry that federal legislation being debated in Washington to cut
greenhouse gas emissions could encourage power companies to increase their
dependence on dirt-cheap out-of-state renewable credits.
That outcome could undermine state energy policy to create a renewable
industry here and reduce this state's reliance on coal, which generates more
than half the state's electricity.
"If we're burning coal in our power plants and buying wind credits in the
prairie states, that doesn't give us any environmental advantage," said
Rosalie Day, policy director at the N.C. Sustainable Energy Association in
Raleigh. "The purpose is to create jobs and environmental benefits in our
state."
Renewable energy certificates are an enigma to a majority of the people who
are already paying for them in their utility bills. The certificates --
which go by the acronym RECs -- don't buy anything tangible. They are a
subsidy to help clean energy producers make a profit.
The buying and selling of renewable certificates, minus electricity, is an
accepted practice in much of the country, and serves as the accounting basis
for an emerging green economy.
The electricity and the green certificates are priced as separate
commodities and can be sold together or separately. Shipping electricity
cross-country is too costly and impractical, giving rise to a thriving
market for renewable certificates.
By 2021, the state's energy policy requires that 12.5 percent of the
electricity sold by Progress Energy and Duke Energy must come from a
combination of renewables and conservation programs.
A federal standard moving through Congress would raise the standard to 20
percent, but the effects on North Carolina are not clear, because the
current version exempts smaller power agencies and counts new nuclear plants
as renewable energy. The 1,428-page bill squeaked by the House in June and
must still go through six Senate committees, with substantial revisions
expected.
In this state, renewable energy investments are already underway.
On its contracts with renewable generators here, Progress pays about 6 cents
a kilowatt hour for the electricity, and a premium ranging from 6 cents to
18 cents for the green credit, depending on the project, spokesman Mike
Hughes said.
The costs of the certificates are privately negotiated and confidential, but
Texas wind credits are a bargain compared to certi ficates for North
Carolina renewable resources such as swine waste, poultry waste, landfill
gas, wood scraps and sunshine. A certificate for supporting Texas wind power
can cost less than 1 cent per kilowatt hour in that state.
The reason for the low cost is supply and demand.
Texas wind farms produce more renewable energy than is required under that
state's green energy standard. Texas wind farms sell the electricity in the
Southwest, but are stuck with an oversupply of renewable certificates and
market the certificates in states with a shortage.
"You're trying to sell them for the highest price," said Steven Stengel,
spokesman for Next Era Energy, the nation's biggest developer of wind
energy. "North Carolina presents a new opportunity for us."
john.murawski@newsobserver.com or 919-829-8932
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