Conservative legislators decry wind power mandate for utilities
07/24/2014 6:54 AM
08/06/2014 12:19 PM
Some conservative leaders in the Kansas Legislature say wind power has been a huge burden on Kansas utility ratepayers, and the state needs to stop forcing utilities to buy it.
They say they will renew their push in the upcoming session to effectively halt any further requirement for the state’s utilities to buy more wind power.
Those in the Kansas wind energy industry and their allies reject that argument, saying that wind doesn’t cost that much more and that the move will hurt a burgeoning industry, one that has big potential for growth.
Enacted by the Kansas Legislature in 2009, the Renewable Portfolio Standard has been spectacularly successful in nurturing Kansas’ wind industry.
The RPS requires the state’s major utilities to get 15 percent of their electrical power from wind or other renewable sources by 2016 and 20 percent by 2020. It is one of the reasons that Kansas has jumped from about 1,000 megawattsof wind energy capacity in 2009 to 2,700 megawatts in 2013 – with much more in the planning stages.
The RPS narrowly survived a repeal attempt in the last session when it fell a few votes short in the state House of Representatives.
Although the standard has had support from Gov. Sam Brownback, the mandate has become a target for some conservatives in Kansas and elsewhere. A number of national conservatives groups are pushing to overturn state wind power mandates.
The Brownback administration declined to comment on the possibility of changing or eliminating the standards.
RPS opponent Dennis Hedke, R-Wichita, chairman of the House Energy and Environment Committee, said he wants to put all energy sources on the same level – and find the lowest cost for ratepayers.
“People are certainly feeling the pinch and the ones hurting the most are those on fixed income,” he said.
Kansas utilities have been pretty aggressive about adding wind power.
In November, Westar signed a power purchase agreement with Apex Clean Energy to buy 200 megawatts of electricity from a wind farm to be built south of Arkansas City in Oklahoma.
When the Apex wind farm starts operating at the end of 2015, Westar will have about 860 megawatts of capacity, which would put it well over the 15 percent mark, according to the company.
According to Kansas Corporation Commission documents, the five other major utilities in Kansas subject to the law – Kansas City Power & Light, Empire District Electric, Kansas Electric Power Coop, Midwest Energy and Sunflower Electric Power – are also on track to meet the 2016 goal.
The 2020 targets set the target at 20 percent of power generation.
According to the KCC documents, four of the six utilities are projected to hit their 2020 targets by 2016.
Westar will still be about 160 megawatts short of its 2020 target when the Apex wind farm opens, which means it would have to buy from another wind farm or two in the second half of the decade, or develop other projects.
If Kansas City Power & Light achieves its projected 2016 wind energy capacity of 280 megawatts, it is projected to need about another 40 megawatts to reach its 2020 Kansas mandate.
And that needs to stop now, say several senior conservative leaders in the Kansas Legislature.
Senate President Susan Wagle, R-Wichita, said she doesn’t like the mandate.
“Clearly repeal of the RPS is on the table,” she said. “Under former Gov. Parkinson there was a grand compromise for energy for the future of Kansas and many legislators voted for a coal plant – a clean coal plant – at Holcomb with the plan for escalating usage of renewable energy.”
“Since then,” she said, “two things have happened: First, we didn’t get the coal plant, and the second thing is there has been an abundance of domestic natural gas which is unbelievably cheap, far less than renewable energy. And it is our responsibility to see that our citizens have the most reliable and affordable energy possible. Renewable energy is very expensive.”
House Speaker Ray Merrick, R-Stilwell, said during a speech in Wichita last month that the Legislature will repeal the RPS in the coming session.
Hedke last week repeated that message, and said he expects to resurrect HB 2241, a bill that would eliminate the 20-percent-by-2020 requirement and allow the KCC to waive the 15 percent requirement for good cause.
Hedke referred last week to an analysis by the U.S. Energy Information Agency that put the average levelized cost of wind power – which is the total cost to build and operate a wind farm – at $145.50 per megawatt hour. That doesn’t include the federal production tax credit that lowers the cost of wind power by $22 per megawatt hour.
In a separate 2012 study, the Kansas Policy Institute, a conservative think tank, placed the average total cost of wind power at $97 per megawatt hour vs. $66 for natural gas, and said the higher expense is costing Kansas thousands of jobs and hundreds of millions of dollars.
“Anybody who wants to continue to build can do so, they’re just not mandated to do so,” Hedke said.
Figuring wind’s cost
But that view could be out of date, or at least not quite clear cut.
Wind proponents have long said their technology is rapidly improving and falling in cost. The most recent analysis by the U.S. Energy Information Agency, released in January, put the average total cost of wind power at $86.60 per megawatt hour, not including the tax credits. A low-cost wind farm – such as those in Kansas with its more consistent wind and lower land and labor costs – was $73.50 per megawatt hour.
The lowest-cost conventional gas plants was $62.50 per megawatt hour.
With the federal production tax credit, the cost of wind power falls to $51.5 per megawatt hours, making it the new low-cost energy source and nearly 20 percent below the gas-fired power plant.
Hedke acknowledged this week that the newer analysis caused him to pause.
“I would want want to look at it more carefully before I decide whether I’m more favorable to it or not,” he said, of the RPS.
The KCC also did an analysis last year to study what factors were driving electric rates.
The biggest reason for rate increases, the agency said, is the EPA’s demand that Kansas utilities clean up their older coal-fired power plants. The RPS contributed less than 2 percent to the cost of the retail electric rate, the KCC said.
Beyond the cost argument, wind power proponents say there are a host of reasons to support wind power.
The utilities, such as Westar, have said they like the fact that wind energy is a cost set by 20-year contract. The contract price acts as a long-term hedge on the wild gyrations of fossil fuel prices. Natural gas prices are low now, but may rise in a few years to become less competitive.
Wind farms also helps build the state’s industry and serves as a signal that the state is friendly to the wind industry as it parlays the demand from in-state utilities to build its presence to become a large wind power exporter to out-of-state utilities, to become, in Brownback’s words, “the Saudi Arabia of wind.”
In one example, a private company is on track to build the $2 billion Grainbelt Express, a direct current line from western Kansas to Indiana to ship 3,500 megawatts of wind power to utilities further east.
“The RPS has been a strong signal to the wind energy industry that Kansas is open for business,” Matt Riley, CEO of wind farm developer Infinity Wind Power of Santa Barbara, Calif., wrote in an e-mail. “Repealing the RPS would do little more than send a strong negative signal that the wind industry should focus on investing in surrounding states with strong policies that encourage wind energy development, both for in-state use and for energy export.”