The California Public Utilities Commission (CPUC) released a report this month on the costs of California’s progress in generating more electricity from renewable power, and there was good news.
Prices of new contract bids submitted to utilities last year were about 30 percent lower than in 2009, according to the report, signaling a more competitive future for the renewable power industry in California.
Until now, the CPUC has released quarterly reports on the number of contracts signed by utilities toward meeting California’s goal of getting 33 percent of its retail electricity sales from clean, renewable sources by 2020.
The new report is the first time that the actual costs that utilities have paid for renewables since 2003—and expect to pay in the future—have been made public, due to a new legislative mandate requiring an annual report on how much is being spent to obtain renewable energy.
While the current report shows that renewable power continues to be more expensive than the costs of burning fossil fuels to generate electricity, it also points to a more affordable future for clean energy.
Renewables serving us now
The weighted average utility cost of delivered renewable electricity (that is, electrons delivering to the grid now) in 2011 ranged from 5 to 8.6 cents per kilowatt hour (kWh). That’s pretty price competitive considering that I paid an average of 14 cents per kWh on my January electricity bill.
So why so cheap? It’s important to remember that these prices are by and large from renewable energy facilities that were built way before the Renewables Portfolio Standard (RPS) program got started. These are the costs to run a facility, not build it from the ground up. In most cases, these projects are so old that many of their capital costs have been paid off. Small hydropower, geothermal, and biomass facilities are a hearty portion of this mix.
Renewables in the works
The report shows that the weighted average cost of contracts signed and approved by the CPUC to meet future RPS requirements ranged from 12.1 to 13.3 cents per kWh in 2011. Now remember, these are mostly the costs to build new renewable energy facilities (not just to buy power from existing ones), including a lot more wind farms and solar plants. The 2011 prices reflect negotiations that likely began in 2009, which means that they do not reflect the significant price reductions we’ve seen in the renewable energy market since then, particularly in the cost of building photovoltaic power plants due to the steep drop in solar panel prices globally.
The increased costs of renewables between 2003 and 2011 should be consumed with a grain of salt. Building new renewable energy projects in California is challenging and many of the approved projects will never actually get built. As the market has matured, more developers are competing for projects and they have a better understanding of what it takes to get the job done. I would not be surprised if we saw several of the more expensive contracts signed in previous years replaced by newer projects that are priced more competitively.
As San Francisco Chronicle business reporter David Baker writes in his article “Renewable energy costs are starting to come down:” ”New contract bids submitted to the utilities last year were about 30 percent lower than in 2009, according to the report. Those contracts haven’t been signed yet, so they weren’t included in the 2011 average.”
It’s a most promising sign that California’s ambitious blueprint for the future relies on greater use of clean energy which not only mitigates climate change, but is developing an industry poised to deliver more affordable rates to consumers.