How Green Energy is Working There
Innovation in the electricity market does not
occur as it would in other markets. For starters,
most areas of the country are served by monopoly
providers. This means there is very little incentive
to seek new ways to create electricity. Secondly,
most providers are heavily regulated, often
compounding risk-reluctant utilities with
risk-averse regulators. In fact, according to a
recent report from the American Energy Innovation
Council, electric utilities spend a paltry 0.1
percent of their revenue on research and
development, far below the U.S. industrial average.
The upside of this conservativeness has been the
creation of ubiquitous, reasonably priced, reliable
service. This has served our society well for the
last hundred years, but unfortunately the future is
unlikely to be like the past. Many parts of our
electric system are facing the end of their useful
lives and need to be replaced. In addition, the
fuels we use to power the electric system are
subject to risky and disruptive price volatility.
A new set of environmental considerations is forcing
us to rethink the industry's nearly complete
reliance on traditional fuels. If we are going to
"win the future," we will need an electricity sector
that is more 21st century and less 19th century. The
challenge is how to innovate without jeopardizing
the widely available, affordable, reliable service
consumers have depended upon.
That's where renewable energy standards can come in
to play. The basic principle is similar to a
fundamental concept in financial planning - build a
diverse investment strategy that can weather
changes. Renewable energy standards introduce
diversity by lowering market barriers and creating
an opening for renewable technologies that have
different attributes and risk profiles than
traditional fuels. Colorado's experience shows that
this approach has led to impressive results.
In six years, Colorado has diversified its
electricity mix and built a thriving renewable
energy industry while maintaining stable electricity
bills. We have seen the cost of renewable energy
credits for large photovoltaic solar projects
decline by 75 percent, and wind in Colorado is now a
least-cost energy resource.
In 2004, the voters of Colorado passed the renewable
energy standard ballot initiative. This was the
first voter-approved renewable energy standard in
the country - and with legislative support it
evolved over time to become one of the most
progressive. The initiative set a requirement that
Colorado's investor-owned utilities generate 10
percent of their retail sales from renewable
resources by 2015.
Economic Development
As it became apparent that the state's largest
utility would meet the renewable requirements years
ahead of schedule, the Colorado General Assembly has
increased the standard twice to the now-existing 30
percent by 2020. Finally, the voters and the General
Assembly both mandated the entire program be halted
if it increased utility bills by more than 2
percent. You get the picture: Innovate but contain
the risk.
In 2004, Colorado's IOUs had negligible amounts of
wind and solar power. Today, 12 percent of their
electricity comes from these resources. Colorado's
utilities have integrated these variable resources
with only minor costs and have led the country in
techniques to integrate intermittent resources on
the grid.
On the economic development side, Colorado is now
home to one of North America's largest
concentrations of wind turbine and tower production
facilities. Our solar manufacturing cluster includes
breakthrough thin-film technology that is
revolutionizing the production of PV. As a first
mover, Colorado is also home to many of the
research, support, production and sales operations
that are driving renewable energy expansion.
While Colorado's largest utility, Xcel Energy, has
exceeded its goals, it has stayed within the 2
percent cap set by the legislature. In fact, despite
Xcel making the major capital investments in its
Colorado system, the average residential electricity
bill has failed to keep up with inflation over the
last five years.
Colorado's renewable energy standards proof is in
the pudding. We have a much more diverse, robust,
modern energy portfolio. We have seen significant
economic development. We have kept costs reasonable.
What else could you want?
Published In: EnergyBiz Magazine November / December
2011
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