Cheap Wind ‘Crosses the Threshold,’ Could Replace 6,000 GWh of Colorado Coal
Colorado is in a position to cut carbon and save ratepayers money, without risking the reliability of its electricity system, by replacing a massive 6,000 gigawatt-hours (GWh) per year of coal-fired generation with two gigawatts of wind, a team of clean energy advocates and financial analysts reported on Greentech Media earlier this month.
A dozen years after Colorado voters mandated a state renewable energy standard, “the scale of uneconomic and polluting assets on the grid, renewable energy’s potential to reduce costs and environmental impact, and the impact on the utility’s financial reality are now becoming clear,” writes Ron Lehr, who served as chair and commissioner of the Colorado Public Utilities Commission (CPUC) from 1984 to 1991.
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“Since wind and solar costs are continuing to decline, other utilities and states could eventually encounter the situation described…where new wind can beat operating costs of old fossil generation,” he writes. “As other stakeholders look into financial impacts of crossing the threshold where new renewable energy costs less than old fossil fuels, we hope Colorado’s experience encourages similar analyses in other places.”
Utility regulators in Colorado began noticing the new, cost-effective potential of wind and solar in 2013, Lehr recalls, when the two technologies captured 10% of a 6,200-MW portfolio the CPUC and the state’s Public Service Company (PSC) had opened up for new power supply.
“A striking notion then emerged,” he writes. “If wind and solar were coming into the PSC competitive bid process at costs lower than the average of the utility’s existing generation fleet, then some of those existing generators must be producing power at costs higher than new wind and solar. And if those old plants cost more than the newer wind and solar plants, shouldn’t they be shut down or retired to make room for more of the cheaper, cleaner energy generation?”
Utilities “have strong financial incentives to hang onto old plants and continue to profit from them, rather than sign power purchase agreements (PPAs) with wind and solar developers, on which they don’t profit,” Lehr notes. So “in Colorado, with low wind and solar costs at hand, the question became: How can fossil plants that raise the cost of service to consumers be shut down or retired in favour of new wind and solar to support, rather than oppose, the utility’s financial interests?”
After two years of analysis, Lehr and his colleagues estimated that seven of the PSC’s 10 remaining coal plants had higher operating, maintenance, and fuel costs than new wind supported by a $25-per-megawatt-hour Production Tax Credit. “No carbon or other emissions values were included in the financial analysis,” he adds. “So if these real costs were added to the evaluation, additional old coal plants would cost even more to run than new wind.”
A preliminary analysis also showed that none of the PSC’s older coal plants were contributing to the flexibility the utility needs to match the ups and downs of electricity demand, since natural gas plants generally serve that purpose on the Colorado system.