New Renewables Undercut Existing Fossil Prices in U.S. Grid Transition
U.S. utilities can now buy new renewably-generated electricity at less than it costs them to operate existing fossil plants, a senior executive at Denver-based Xcel Energy told Greentech Media this week.
“In many areas, the incremental cost of renewable generation is currently less than the embedded cost of existing generation,” said Jonathan Adelman, Xcel’s area vice president of strategic resource and business planning. “If we can buy a new resource at a lower cost than the existing resource, that is going to advance the transition.”
He added that the massive shift analysts foresee in U.S. electricity markets over the next 10 to 20 years “fundamentally comes down to economics. The secondary driver is customer expectations. Lastly, policy, both at a state and federal level.”
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In late August, Xcel received regulatory approval to phase out 660 megawatts of coal-fired generating capacity, reduce its carbon dioxide emissions by 60%, and boost renewable energy to 55% of its supply mix by 2026, all while saving ratepayers about US$213 million. “The Colorado Energy Plan Portfolio is a transformative plan that delivers on our vision of long-term, low-cost, clean renewable energy for our customers, stimulating economic development in rural Colorado, and substantially reducing our carbon emissions,” Xcel Colorado President Alice Jackson said at the time. “We are excited to move forward.”
Now, Greentech is pegging the utility’s investment in solar, wind, and storage batteries at $2.5 billion, and the combined ratepayer savings at up to $374 million. While Adelman warned the pace of adoption for renewables might shift as U.S. federal tax subsidies are phased out, he expressed confidence the technologies will continue to thrive.
“The renewable industries have clearly demonstrated their ability to substantially drive down costs,” he said. “I personally continue to be relatively optimistic that these industries will find savings to stay competitive, even with the reduction of tax incentives,” and in spite of record-low natural gas prices that “will be a large variable here”.
He stressed that the Colorado Energy Plan is not driven by compliance standards that it actually exceeds across all the utility’s service areas.
“In my mind, these are not easy things to do, but they are really good things to do,” he told Greentech. “The challenge is how to smoothly [make the] transition to a non-traditional generation fleet, while meeting our fundamental responsibilities for both reliability and cost.”