Replacing coal won't break the bank after all
When the Oregon Legislature debated a landmark bill in March to phase out coal power in Oregon and require more renewable energy, Republican lawmakers, business groups and some Public Utility Commission officials predicted it would jack up power costs and harm industry.
But those fears appear to be overblown, based on the first round of solar and wind power deals negotiated by Pacific Power since the bills passage.
The Portland-based electric utility, in a filing last week with the Oregon Public Utility Commission, reported that the new renewable energy mandate would require a negligible 0.1 percent customer rate increase between now and 2028. Thats in sharp contrast to what Pacific Power told the Legislature just five months ago, that it estimated the need to boost electricity rates 0.8 percent each year between now and 2030. Compounded, that annual rate increase would have translated into about a 12 percent rate increase by 2030 to meet the renewable energy mandate, says Ry Schwark, Pacific Power spokesman. Thats more than 100 times the rate increase the utility now forecasts to meet that mandate through 2028.
I think this is a real good example of peoples fears that prove to be unfounded, says state Sen. Lee Beyer, D-Springfield, a former public utility commissioner who helped shape the landmark bill, known as the Oregon Clean Electricity and Coal Transition Plan.
I am not surprised that the numbers are coming in lower, Beyer says.
One of the main reasons: sharply falling costs for building large-scale solar energy plants in Oregon. Utilities also are learning to reap more power from their wind turbines, Beyer says. And Pacific Power has entered a new energy-balancing arrangement with California counterparts; when its windy and sunny here and theres surplus wind and solar power, that can be sold easier in California.
So its a combination of things that is making it work, Beyer says.
Panned by business
Coal plants are the leading source of greenhouse gas emissions in Oregon and a major cause of respiratory disease. But coal is also a relatively cheap form of energy.
Pacific Power and Portland General Electric, which struck a deal with environmental groups to support the coal power phaseout, testified this spring that adding more wind and solar power wouldnt be a big burden on ratepayers because the costs were falling so fast.
But their major clients, many represented by the Industrial Customers of Northwest Utilities, scoffed at that. John Carr, executive director of the trade group, wrote an opinion piece in The Oregonian declaring that the Clean Electricity and Coal Transition Plan wouldnt help the environment because the utilities would just sell their coal outside Oregon. Instead, its biggest impacts would be higher electric rates for customers and larger returns for the investor-owned utilities shareholders, Carr wrote, referring to PGE and Pacific Power. By ratcheting up energy costs, he wrote, this plan would discourage businesses from coming here and encourage them to locate in more carbon-intensive areas.
Theres lots of time before the Oregon Clean Electricity and Coal Transition Plan takes full effect. Pacific Power must stop selling coal power by 2030 and PGE by 2035. The renewable energy mandate is phased in until 2040; by then, half the two utilities electricity must come from renewable energy not counting the share they get from hydro power.
This first round of contracts, which Pacific Power expects to ink by mid-September, suggests the transition wont be as disruptive or expensive as critics predicted.
We said at the time we could do that in a cost-effective way, Schwark says. Its unfortunate people didnt trust us to do our homework.
Carr did not respond to requests for interviews.
But Beyer says the Industrial Customers of Northwest Utilities should be happy with Pacific Powers first round of deals.
Pacific Power put out a request for proposals for new renewable energy projects in April, a month after the Legislature passed Senate Bill 1547, the Clean Electricity and Coal Transition Plan. It got 66 responses, and prices lower than expected.
We were a little startled by it, too, Schwark says.
Pacific Power is poised to buy renewable energy certificates, or RECs, to meet the mandate. Those are issued by developers of 13 renewable energy projects. Of those, 11 are new projects and 10 are in Oregon, Schwark says. Only one is for wind power; the rest are large-scale solar projects.
Were getting a lot of utility-scale solar coming on line in Oregon, Schwark says.
The utility divulged the specific projects to the PUC last week in executive session, but wont reveal them publicly until contracts are signed, he says.
PGE following suit
PGE expects to undergo a similar process, and is under discussions with the PUC about how and when to issue its own request for proposals to provide more renewable energy, says its spokesman Steve Corson.
In March, PGE estimated Senate Bill 1547 would require annual rate increases of 1.5 percent between now and 2040. It doesnt have any newer cost estimates because it hasnt gone to the market yet as Pacific Power did, Corson says.
PGE faces different conditions than Pacific Power, which is primarily a rural electricity provider in Oregon. PGE is strongest in the more rapidly growing Portland area, and needs to provide more new energy in coming years. However, PGE would tap the same market as Pacific Power to provide solar and wind projects, and Pacifics pending deals are a good sign for PGE, Corson says.
Angus Duncan, chairman of the Oregon Global Warming Commission and a prime backer of SB 1547, says it was always assumed the biggest lift from the utilities would come later, when they must replace power from their aging coal plants.
The impacts between now and 2030 were extremely modest, Duncan says.
But if Pacific Power is finding the mandate is not going to cost as much as it projected, that is significant, Duncan says, because of all the naysayers like the Industrial Customers of Northwest Utilities.
Pacific Powers experience confirms the forecast of the environmental advocates when we said the cost of replacing the coal power would be significantly lower than people thought, Duncan says.
Beyer says the lower cost of solar and wind has long been projected. But he figures it took a nudge from Oregon and other states, in the form of mandates known as Renewable Portfolio Standards. Those provided the impetus for the energy industry to keep innovating and drive down costs, knowing there was a growing market for solar and wind.
It actually worked, Beyer says.
Mandating more wind and solar power
Oregons original 2007 Renewable Portfolio Standard required PGE and Pacific Power to boost the share of their energy from renewable sources, not counting existing hydro power, to:
15% by 2016
20% by 2020
25% by 2025
The 2016 law raised the bar to:
27% by 2025
35% by 2030
45% by 2035
50% by 2040