Real Renewable Power Standard Already Paying Off for Ohio

Unlike WV, with our fake ARPS law, Ohio has a real renewable portfolio standard which actually encourages local investment in solar and wind energy to serve local rate payers.  The Public Utility Commission of Ohio has just published a report on that state’s Alternative Energy Portfolio Standard and its impact on reducing the cost of electricity in Ohio.

The report’s conclusion –

The model simulations indicate that, consistent with theoretical expectations, Ohioans are already benefiting from renewable resource additions through downward pressure on wholesale market prices and reduced emissions. No severe congestion issues or emergency curtailments were observed, even after incorporating all approved projects, which suggests that the electric grid in Ohio is sufficiently robust to support the continued development of utility-scale renewable projects.

The report points out that while the portfolio standard incentives are paid by some small rate increases, the effective reduction of wholesale electricity prices by having more renewable power sources results in a small, but clear, overall rate reduction.

The total load cost benefits that arise from lower wholesale clearing prices are calculated below for each utility transmission area and the state as a whole. For these savings to be ultimately realized by customers, one must assume that retail rates are themselves a function of wholesale prices, an assumption that is consistent with Ohio’s transition towards a competitive model of generation procurement.

These benefits can be considered a partial offset to the costs incurred by utilities to comply with alternative energy mandates. According to data contained within the 2011 Alternative Energy Portfolio Standard Report to the General Assembly, Ohio investor owned utilities procured 518,992 Ohio non-solar renewable MWHs at an average price per REC of $110.55. The price suppression effect therefore offsets 14.7% of the cost of procuring in-state non-solar RECs for investor owned utilities in scenario 1, and 49.8% of the cost of in-state non-solar compliance in scenario 2.

In other words, renewable portfolio standards reduce the cost of electricity for everyone.  The report provides a clear explanation of how this works:

Price suppression is a widely recognized phenomenon by which renewable resources produce lower wholesale market clearing prices. The economic theory that drives price suppression is actually quite simple. Renewable resources such as solar and wind are essentially zero marginal cost generators, as their “fuel” costs (sunlight and wind) are free. As such, they will always be dispatched first by the grid operator, thereby displacing units with higher operating costs. This results in lower wholesale market clearing prices than would have been experienced in the absence of the renewable resources.

The situation in WV is somewhat different from OH, because we have a regulated market.  But WV’s regulated market means that real, effective RPS legislation and PSC action could result in an even bigger rate reduction from expanded renewable investment and incentives than in OH’s unregulated environment.  But the WV Legislature, the Governor and the PSC just don’t care.

Instead, WV has a fake law that actually encourages coal-fired generation and suppresses renewable investment.  Although WV commercial wind farms generate a lot of electricity, almost all of that energy is sold on PJM wholesale markets instead of being sold to WV utilities to reduce WV electric rates, replicating the kind of resource export industry that our state has seen in the fossil fuel industry.

And, both of the Ohio-based holding companies that own almost all of WV’s electrical system, operate under OH’s Alternative Energy Portfolio Standard.  But they fight the same thing here in WV.

OH’s electric rates go down, while WV politicians and regulators do the same power companies’ bidding here in WV to artificially support their coal-fired power plants with WV rate payers’ dollars.

Cross posted to Coalition for Reliable Power

One thought on “Real Renewable Power Standard Already Paying Off for Ohio

  1. It seems like it would make sense to introduce some legislation to revise our WV Portfolio Standards now with the idea it might pass in the future when people understand this process better.

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