Solar, wind will drive up electricity costs — study

Source: Daniel Cusick, E&E reporter • Posted: Friday, August 5, 2016

A new critique of the Obama administration’s energy policies finds that dispatching new renewable energy resources will significantly drive up electricity costs.

Last week, the Institute for Energy Research issued an update of what has become a perennial analysis on the levelized costs of energy (LCOE). In it, the group argues that electricity from new solar and wind energy plants is now 2.5 to 5 times more expensive than electricity from existing nuclear and coal plants.

“Unnecessarily shutting down our existing generation in favor of expensive and intermittent wind and solar power means Americans will be left with higher electricity bills and less money in their pockets,” IER President Thomas Pyle said in a statement, calling the study “a much-needed reality check to the debate over our nation’s electricity policy.”

The analysis comes as the Obama administration’s Clean Power Plan regulation to cut emissions from the power sector turns 1 year old. It joins a growing number of studies from conservative organizations raising economic concerns about policies designed to transition the nation’s energy sector away from carbon-emitting fuels such as coal and oil in favor of cleaner alternatives like wind and solar power.

IER, a sibling organization of the free-market American Energy Alliance, said its findings are grounded in Energy Department and Federal Energy Regulatory Commission data. Moreover, officials say the analysis accounts for an often overlooked metric necessary to determine the real cost of electricity — what it terms the “levelized costs of energy for existing generation sources,” or LCOE-E.

The U.S. Energy Information Administration, which prepares LCOE analyses for the Department of Energy, does not account for existing generation sources when preparing such studies. Rather, it applies another quantitative method known as the “levelized avoided cost of electricity” (LACE) to help reconcile “specific technological and regional characteristics” between projects of different types, as well as how new projects affect the displacement of existing resources.

IER’s analysis does not comment on DOE’s avoided costs methodology. But it is sharply critical of traditional LCOE analyses, saying they fail to account for the “imposed costs” of renewable energy mandates and the additional costs utilities and grid operators incur to integrate renewables into the power system.

As in previous years, the group’s findings were strongly refuted by renewable energy advocates.

Dan Whitten, a spokesman for the Solar Energy Industries Association, called the study “a textbook apples-to-oranges comparison” based on the premise that the country’s current fleet of power plants, many of which have already exceeded their life expectancies, can operate for decades longer.

“Their entire argument is built upon the false assumption that existing, depreciated power plants will continue to be inexpensive to operate and will not need to be replaced,” Whitten said in an email. “Used cars are also cheaper than new cars until they break entirely or become unreasonably expensive to repair and maintain,” he added by way of analogy.

Officials with the American Wind Energy Association did not respond to a request for comment. But Michael Goggin, the group’s senior director of research, posted a response on IER’s website challenging the latest report.

“Nice try, but this attack was comprehensively rebutted when you tried it last year,” Goggin wrote with a link to a 2015 blog post. He characterized IER’s findings as using highly inflated cost estimates for wind energy and glossing over DOE’s LACE methodology for reconciling differences between technologies and markets.

To that, AEA spokesman Chris Warren replied, “And we thoroughly debunked your rebuttal here,” posting a point-by-point rebuttal to AWEA’s criticisms.

Free-market groups have been highly critical of the Clean Power Plan as well as U.S. climate commitments under the U.N. Framework Convention on Climate Change. The American Energy Alliance last month endorsed Republican presidential candidate Donald Trump, citing Trump’s promise to roll back many of the Obama administration’s energy policies.

While IER’s latest analysis may be the most comprehensive new critique of the Obama administration’s renewable energy policies, it isn’t the only one.

Last month, the National Center for Policy Analysis issued a two-page “case study” examining the costs and other issues of transmitting renewable energy over long distances using high-voltage transmission lines. The brief also argues that Texas, the nation’s No. 1 wind energy producer, has adopted policies forcing utilities to use wind power at significantly higher costs than power derived from other resources and that those extra costs are being passed through to ratepayers and taxpayers.

A third study, published by the free-market Civitas Institute, based in Raleigh, N.C., asserts that North Carolina’s 12 percent renewable portfolio standard will drive electricity costs up by 42 percent and cost the state 50,000 jobs by 2020. The report’s author, University of Wyoming economist Timothy Considine, has written similar analyses for other free-market groups, including the Rio Grande Foundation in New Mexico, the MacIver Institute in Wisconsin and the Nevada Policy Research Institute.

In a lengthy response last week to these and other similar studies attacking renewable energy policies in up to a dozen states, AWEA’s Goggin argued that such efforts are bound to backfire. “Once the errors are corrected, the analysis actually shows that wind energy provides billions of dollars in savings to consumers and creates thousands of jobs,” he said.