Boulder's energy future ideal is cleaner, cheaper

Mar 9 - McClatchy-Tribune Regional News - Erica Meltzer Daily Camera, Boulder, Colo.

One day in 2017 or maybe sooner, the power that flows through Boulder's distribution system and into homes and businesses may not come from Xcel Energy.

If and when that day comes, business and residential customers should not notice any difference, city officials say.

The only difference is that it will be cleaner and cost less.

City officials say that average rates are likely to range from $13.90 per kiloWatt hour to $16.21 per kiloWatt hour, compared to $16.34 per kilowatt hour for Xcel Energy, even under models that provide nearly 60 percent of Boulder's power needs from renewable energy on "day one."

Skeptics, including Xcel Energy and some members of City Council, have wondered if the city's models are too good to be true.

Other public power utilities have set aggressive clean energy goals, but none are calling for more than half of their energy to come from renewables at such an early date.

Boulder Regional Sustainability Coordinator Jonathan Koehn said the city took enormous care with its modeling, and if anything, reality might be rosier than the models.

Hewing to conservative path

Numerous working groups staffed by volunteers from the community, many of them with experience in the energy field, developed the inputs that went into the models, from interest rates to energy prices. Meetings that were scheduled for an hour or two would stretch into the afternoon as members debated which factors to include and how to calculate them.

"If there was a conservative way to go, that's the path we took," Koehn said. "We expect those numbers to be scrutinized and they need to hold up to that scrutiny."

The city projects that Xcel will get only about 23 percent of its energy from renewable sources, and officials said they used publicly available documents on file with the Public Utilities Commission to arrive at that number.

Xcel Regional Vice President Jerome Davis said the projections developed from those documents are not an accurate reflection of where the company will be in 2037 because Xcel is constantly reassessing its resource mix and adding more renewables, including a recently approved plan to bring more wind energy online.

"The assumption in the model is that Xcel is going to be the way they are for the next 20 years, and that is incorrect," Davis said. "They're modeling like we're a moment in time. Our history shows a great deal of evolution in the very issues that are important to them."

Koehn said a municipal utility would have several advantages over Xcel, both in adding renewables and keeping costs low.

City approach values flexibility

The city doesn't plan on building its own generation facilities anytime soon, though many activists and planners envision substantially more on-site generation through solar and other means in the future. Koehn said that means the city won't need to make large up-front capital investments other than in acquiring Xcel's distribution system and can use a mix of long- and short-term contracts to maintain maximum flexibility.

With a mix of contracts, if one type of power gets expensive or new technological advances make another type of power more attractive, it will be easier for the city to switch.

Koehn also rejected the suggestion by Xcel that the city would merely be taking up existing renewables in Colorado, making Boulder look greener without actually reducing greenhouse gas emissions statewide.

Boulder plans to get its wind and solar energy from new projects that would add renewables to the state, Koehn said.

Koehn said the city already is getting several calls a month from wind-energy companies interested in doing business with Boulder.

Davis said anyone building wind farms specifically for Boulder is likely to want a long-term contract to cover the capital investments.

Another advantage, Koehn said, is that the city won't have to pay shareholders. Any revenue a municipal utility brings in over and above expenses can be used to invest in more energy efficiency programs, in new infrastructure or in lowering rates.

The city charter says that no more than 4 percent of revenues from a municipal utility can be put into the general fund. That money would replace money the city currently gets from Xcel.

Davis scoffed at the notion that Boulder would not have the same profit motives as Xcel.

"We have shareholders," he said. "You'll have bondholders. If anything, bondholders are more demanding."

City officials said their financial models take into account the debt service the city will need to pay, and they still believe they can keep rates competitive with Xcel.

Mixed record for publicly owned utilities

Ursula Schryver is vice president of education and customer programs at the American Public Power Association, a trade group representing some 2,000 publicly owned utilities. She said they often have lower rates than investor-owned utilities, both because they are not organized as for-profit businesses and because they have more accountability to customers, who vote for the elected representatives who set rates.

Most public utilities formed decades ago in areas that weren't served by power companies, but they also include large cities like Austin, Seattle and Los Angeles. There are 17 new public utilities that have formed in the last decade, Schryver said, and 12 that have folded, selling either to other electrical cooperatives or in a few cases to investor-owned utilities.

Schryver said several of the utilities that folded were very small rural utilities that had infrastructure issues after natural disasters.

Some municipal utilities have formed to respond to other concerns. Winter Park, Fla., split off from an investor-owned utility over concerns about reliability and put more money into infrastructure.

Schryver said other communities, including Santa Fe, N.M., and Utica, N.Y., are researching municipalization as a way to add more renewables.

Public utilities can respond to local concerns in a way that investor-owned utilities cannot, Schryver said.

"The community focuses on the issues that are important to them," Schryver said. "Is it having the lowest rates possible? Is it having more renewables?"

Austin Energy's Ed Clark said the Texas public utility has set a goal of 35 percent renewables by 2020 in response to the community's concerns about the environment and quality of life issues.

Right now, the utility is between 25 percent and 27 percent, with a portfolio that includes wind, solar and a biomass facility that burns wood chips.

Clark said he wouldn't make an assessment of Boulder's resource plan from so far away, but public utilities in the south are hampered in increasing their renewables by the high demand for electricity for air-conditioning in the summer. During cooler months, the percentages of renewables on Austin's grid can approach 50 percent, but high electricity use during times when there is less wind pull down the averages, he said.

The utility's investment in renewable energy isn't just about reducing greenhouse gas emissions today. It's also about contributing to the development of renewable energy technology, Clark said.

Right now, solar and especially biomass remain significantly more expensive than carbon-based energy sources like coal and natural gas. However, the price of wind power has come down considerably -- the only reason it's not cheaper than natural gas is that natural gas prices are at historic lows -- and solar is also becoming more affordable.

A key factor driving down the cost of solar are the rebate programs offered by nearly every utility in the country. Demand for solar panels has spurred innovation, he said.

Natural gas, coal would remain in Boulder energy mix

The Boulder model that produces the most renewables for the lowest rates still includes substantial natural gas and even coal in the resource mix.

That model shows 29 percent coal and 11 percent natural gas in 2017, supplementing 59.8 percent renewable energy, most of it from wind. By 2037, the renewables would increase to 61.7 percent, with natural gas supplying 30.2 percent and coal supplying 7 percent.

If coal were removed from the mix, Boulder's energy supply would be roughly 50 percent renewables and 50 percent natural gas.

The city's projection for Xcel in 2037 shows 52 percent of energy coming from natural gas and 20 percent coming from coal, with just 24 percent renewables.

The limits of current storage technology mean that Boulder could continue to need power from carbon-based sources to shore up intermittent wind and solar. That's also why the city's models don't show a substantial increase in renewables over the next 20 years.

That doesn't mean that's how things would actually play out, Koehn said.

"Something will have to change to move this line significantly, whether that's in storage or in generation," he said.

"Something" will surely change, but it's hard to know what that might be, so Boulder didn't model it, Koehn said.

Davis said another "something" that might change is the price of natural gas. If prices go up, Boulder customers would be better off with Xcel, who can spread the costs among a larger customer base.

Koehn said Boulder ran models using natural gas prices substantially higher than Xcel's median predictions, and the city still would be able to offer competitive rates. Xcel has a larger customer base but also has to buy proportionally more natural gas.

Boulder might have more ability to increase its use of other energy sources if natural gas got more expensive, Koehn said.

Boulder ran models that included even more renewable energy, but they didn't produce significantly more greenhouse gas emission reductions and rates would have been higher than Xcel Energy's.

Again, existing technology was a constraint, and the utility would quickly reach a point of diminishing returns.

'Xcel: 'People view us as the expert'

Davis said Xcel has been approached by Boulder business owners, as well as the media, to weigh in on the city's numbers. He said that shows that the community trusts Xcel's expertise.

"People view us as the expert here," he said. "We can go through it. We can be the third-party evaluator. We can save the city money. But without the model, we can't do that."

Xcel Energy filed a public records request demanding Boulder release the models it used to generate its numbers.

Boulder has said all of its inputs and outputs are readily available. However, under Colorado public records law, it is not required to release software, nor, officials believe, is it required to release the actual formulas that were programmed into the software. Xcel, they say, can buy the same software the city used and recreate the formulas.

Throughout the process of analyzing the feasibility of municipalization, Boulder officials have complained that Xcel won't release information to the city.

If the City Council decides in April to move ahead with municipalization, one of the next steps is submitting its work to a third-party evaluator (who will not be Xcel).

Contact Camera Staff Writer Erica Meltzer at 303-473-1355 or meltzere@dailycamera.com.

Municipalization discussions

An online survey continues through March 27 at bouldercolorado.gov. Inspire Boulder, the city's digital town hall platform, also hosts ongoing discussions about municipalization plans.

A conference call to address concerns and questions from the business community takes place from noon to 1 p.m. Tuesday. To register in advance, go to bouldercolorado.gov/energyfuture/businesscall.

An open house on municipalization strategies takes place from 6:30 to 8:30 p.m. Wednesday at the West Senior Center, 909 Arapahoe Ave.

The Boulder City Council holds a public hearing and votes on a municipalization strategy at its April 16 meeting.

To read the full report on municipalization strategies and alternatives, go to boulderenergyfuture.com.