Once extravagant, renewable power plans go cheap

Source: By JAMES OSBORNE, Staff Writer, Dallas Morning News • Posted: Friday, March 6, 2015

File 2012/Staff Photo

A turbine at a wind farm near Olney in West Texas spins to generate electricity. Consumers who’ve long paid extra for renewable energy in their electricity contracts are now seeing prices competitive with traditional power generation.

But not so with consumer electricity plans that promise energy exclusively from wind turbines and solar farms. As those renewables have proliferated in recent years, green plans have become readily affordable.

So much so that in Texas, the country’s largest wind energy producer, renewable energy plans count among the cheapest options available. In a review of the state-run website PowertoChoose.org, three of the 10 lowest-priced plans offered in Dallas this week were advertised as 100 percent renewable energy plans.

The abundance of electricity now flowing from wind farms in West Texas and the Panhandle has opened a new market. Power companies are competing against each other for customers who want to cut down their carbon footprint but won’t pay a premium to do so.

Diamond Gregg, a student at Brookhaven College in Farmers Branch, said she considers herself environmentally conscious. But she had stuck to standard power plans until talking to a sales rep with Green Mountain Energy at an on-campus technology fair earlier this year.

“I liked the idea. They showed me some figures, and evidently it’s going to save me some money,” she said.

While rates across the country have come down, green power plans still cost more in most states.

According to data compiled by the U.S. Environmental Protection Agency, power utilities charge from less than 1 cent to 4 cents per kilowatt-hour extra for a renewable electricity plan. For an average household, that could work out to as much as $40 a month.

But in deregulated markets, where rates are not set by government regulators and retailers compete for customers, going green may even save some customers money.

Going shopping

In Texas, hundreds of retailers compete on rates through ever-changing daily offers. Because natural gas prices have fallen, power prices are at their lowest level in years. On Thursday, the cheapest renewable-only plan for a Dallas resident was 5.8 cents per kilowatt-hour, only 0.4 cents more than the cheapest standard plan. And that was about half the rate that the average Texas residential customer pays, according to federal data.

On the same day, a New York City resident shopping on ChooseEnergy.com would find the second-cheapest fixed-rate electricity plan was 100 percent renewable.

“Generally, most green marketing programs tend to be at a cost premium. If you’re starting to see green power become competitive with regular power plans, that might be something newer than what we’ve been seeing on a national level,” said James Critchfield, director of the EPA’s Green Power Partnership, which promotes renewable energy.

How are retailers doing it?

Common sense dictates that green plans sell at a premium. Retailers must buy electricity not only from the grid, generated in a constant flow from solar farms and coal plants alike, but also must also pay wind and solar farms for a “renewable energy credit.” For each megawatt of power generated, Texas awards 1 credit.

The cost of those credits has fallen dramatically as wind farms have proliferated. Wind power generation has grown from less than 20 million megawatt-hours a year in 2009 to more than 35 million megawatt-hours last year, says the U.S. Energy Information Administration. There are so many RECs on the market that it costs about $1 a month to make a plan green for the average customer, said John Spicer, CEO of Breeze Energy in Dallas.

Retailers, including Green Mountain, largely declined to discuss their pricing strategies. But Spicer, who launched his company in 2012, said the decline in the price of green power plans had as much to do with competition as anything.

“Texas is lucky in a variety of energy ways. There’s a lot of wind power produced here, and it does moderate prices in the market,” he said. “But there’s a variety of overlays as to how companies approach price. Some people just want to maintain their customer base. We’re trying to grow customers.”

A jolt at first

It’s a long way from the early 2000s, when renewable energy plans entered the market. Austin Energy, which supplies all the electricity to the city of Austin, first started offering renewable power plans in 2001. Eight years later, the average customer still paid an extra $50 a month. Now that same customer pays an extra $7.50 a month. And interest in the plans is snowballing.

Debbie Kimberly, vice president of customer energy solutions at Austin, said about 8,700 of its customers signed up for its green plan, 38 percent more than January 2014.

In January, Dallas-based TXU Energy, one the state’s largest retailers, began offering to buy renewable energy credits to match its customers’ entire electricity consumption for an extra $9.99 a month.

Similar shifts can be seen in markets around the country, said Emily Williams, a deputy director with the American Wind Energy Association.

“We’ve seen the cost of wind energy drop by more than 50 percent over the last five years, particularly in wind-rich states like Texas. And that’s translating into consumer savings,” she said. “We’re hoping to keep driving costs down.”

For those who have been promoting clean energy and early adopters, the price decrease is welcome news. Mark Martinek, a Dallas homebuilder who has been on a renewable plan since about 2004, said he hopes the extra money he spent over the last decade helped the wind industry to expand.

Likewise, Tom “Smitty” Smith, the Texas director of the nonprofit Public Citizen, declared victory for the years spent fighting for renewable energy standards and more power lines to West Texas to support the wind industry there.

“What you see is if you build it, they will come. And the price of energy will drop,” he said.