US utility chooses wind and solar – ‘cheaper and more reliable’

Well, there goes the myth that cheap shale gas would price renewables out of the US electricity market. Xcel Energy, one of the country’s biggest utilities, has just announced a planned major expansion of its solar and wind investments – because they are “cheaper and more reliable” than natural gas.

In a filing to the public utilities commission in the state of Colorado, Xcel Energy requested permission to include 170MW of new, utility-scale solar capacity and 450MW of wind energy capacity in the state.

The reason, Xcel Energy said, was not to meet renewable energy targets (which in Colorado happen to be 30 per cent by 2020), but because these technologies were best placed to fill basic generation needs. Solar and wind, it said, were competitive with the cost of gas-fired generation.

“Based on generation needs, the most reliable and most cost-effective resources happen to be solar and wind,” Xcel Energy spokeswoman Michelle Aguayo told the online publication SRN. “We are not taking on solar because we have to, but because it is cost-effective and economical.”

A lot has been written about the shale gas boom in the US and its apparent impact on other technologies, particularly renewables such as wind and solar. But its principal victims in the short term appear to be coal-fired generation and nuclear, with neither able to compete on cost – particularly with the additional burden of emissions and/or safety regulations.

Part of Xcel Energy’s plan out to 2018 include the closure of a 108MW coal facility and the switching of another to natural gas.

Wind is now priced at less than $50/MWh in the US, and the proposed build out of wind will take Xcel’s total wind capacity to 2,650MW – nearly equivalent to Australia’s entire capacity.

In an earlier filing, Xcel Energy had wanted to install 550MW of wind capacity, but the PUC only allowed 200MW because it was not sure it would be cost-effective. Excel insisted it would be, and is now pushing for the allowance to be lifted to 450MW.

The cost of utility-scale solar is also falling fast. A recent auction in Palo Alto saw the local utility contract 80MW of utility-scale solar at a price of just under $70/MWh, and public utilities have recently contracted large-scale projects at around $90/MWh. The prevailing market price in that market is about $100/MWh.

Xcel Energy already has 80MW of utility-scale solar and 160MW of rooftop solar from residential customers. It is now seeing utility-scale solar coming down – and from Xcel’s point of view – building large-scale solar, with single-axis tracking, would be a much cheaper option than rooftop solar.

“For the first time ever, we are adding cost competitive utility-scale solar to the system,” said David Eves, the head of an Xcel subsidiary that deals with regulatory matters. “The 170 MW we recommend would triple Xcel Energy’s current utility-scale solar in Colorado and it equates to all of the customer-sited solar in the state of Colorado, at about one half of the cost.” It recommends around 42.5MW of additional rooftop solar.

As John Farrell, from the Institute of Energy Self Reliance, writes in a blog on the same subject, even rooftop solar is meeting peak demand in the state of Colorado, at less than half the cost of peaking gas plant.

“Solar not only meets this peak need at a lower per kilowatt-hour cost, but also without the harmful emissions from running a power plant on standby (or fracking its fuel out of the ground),” he writes.

“What’s important to keep in mind when talking about solar and electricity prices is that solar energy production tends to align very well with the highest energy demand on a utility’s system.

“It doesn’t have to be cheaper than a nuclear power plant built in 1965, it just has to be cheaper than the next kilowatt-hour the utility needs at 4pm on a hot, July afternoon. For many utilities (like Xcel, one of the 10 biggest in the US), it is.  For many others, it will be soon, without subsidies.

“And don’t forget, utilities buy power plants for 30, 40, or 50 years. With costs dropping by 10% per year, if solar power’s not cheaper now, it will be long before a new fossil fuel power plant is paid off.”

Farrell also makes another point about the move by Xcel to embrace utility-scale solar: they are in fact competing with their own customers, because as more consumers add rooftop solar, that means lower revenues for the utilities. This is especially relevant in Colorado, where the community in Boulder (currently being hit by “biblical floods) has been trying to “break away” and establish its own municipal utility, on the basis that it can provide cheaper and greener electricity than a centralized utility.

“Xcel’s Colorado plans suggest the utility is wising up, and that the era of customer-owned solar only lasts as long as people are willing to raise holy hell or legislatures are willing to tell them to do the right thing,” O’Farrell writes.

“So the utility shift to solar is both bad and good. The bad news is that locally owned solar pours piles of cash into local economies, and utility-owned solar is going to suck it right back out again. The good is that even an anachronistic, monopoly utility can figure out the financial advantages to clean energy, and we need a lot of it to save the climate.”

“Game on.”

(Editor’s note: John Farrell writes another thought-provoking analysis on the death of utilities. See it here).