Wednesday, February 20, 2013

A Time to Freeze the Renewable Portfolio Standard and Fix the Illinois Power Agency



Part 1:    Wind Needs 20 year Power Purchasing Agreements

I love it when the wind lobbyist and those that jump on their coat tails make contrasting arguments.  The wind industry cried they needed long term Power purchasing Agreements…or the Illinois wind energy industry will just die.  This threat of suicide is a common thread for the wind industry lobbyist.  “We need (fill in the blank) or the industry will wither to nothing. “  This time the wind industry was lobbying Illinois and Governor Quinn for long term wind energy contracts.
Back in 2010 the New York Times ran this story;                 

They industry didn’t like it when the Illinois Power Agency Director, Mark Pruitt, was buying economical Renewable Energy Credits instead of 20 year Power Purchasing Agreements.

            But the byzantine process by which an obscure state agency decides where that wind power comes from has stalled development of new wind farms and threatens to curtail Illinois’s wind generation for years to come, experts said.

So…who were these “experts” back in 2010?  American Wind Energy Association lobbyists is my guess.

Companies say they are caught in a vise. In order to get bank financing to build a wind farm, companies usually need a promise from the Illinois Power Agency — a long-term power purchase agreement — that their electricity will actually be bought for years to come. But the power agency so far has not made guarantees that would facilitate new wind farm construction since it is required to buy electricity from the cheapest sources that will satisfy wind-power mandates.

Why can’t the wind industry compete in a competitive open market with other generators of energy?

The contracts will guarantee the agency’s power purchases, which could prompt construction of new wind farms. But many fear that the contracts will go to existing merchant wind farms, instead of financing new ones.

Again, here is an example where the government creates winners and losers.  The winners are the lobbyist who convinced Governor Quinn the state needs to give sweetheart deals  to new windmills.  The losers are the windfarms who already made a commitment to Illinois.  

A Houston company, Horizon, is ready to build a wind farm near Bloomington that would power 138,000 homes, but it probably needs a long-term contract to secure financing. “The reality is if we don’t have long-term contracts, we won’t get new resources built,” Mr. Deora said.

Again we gave these companies more than everything they wanted.  PURPA to force traditional  energy generators to buy this wind energy.  We abolished PUCHA so more holding companies to get involved with wind energy and power transmission.  The got the Production Tax Credit with a $22 per megawatt hour subsidy from the federal government.  After that, the Obama Administration gave them an Investment Tax Credit to cover 1/3 the cost of new construction of windfarms.

After all that, in 2010 the industry cried they needed long term contracts to lock in a price for the energy.  Howard Lerner of the Illinois Policy and Law Center also advocated these long term Power Purchasing Agreements for the wind industry.  Howard Lerner and the Environmental Policy & Law Center is also a big advocate for the Rock Island Clean Line, but in this NYT article he claimed the industry needs consumers to pay more for their “clean” energy.

Howard Learner, a professor of environmental law at Northwestern University, said this was a make-or-break moment for wind power in Illinois.
“There’s been recognition by everyone involved of the need for long-term contracts for new wind farms to support jobs in the state and also reduce pollution here,” Mr. Learner said.
Mr. Learner is also executive director of the Environmental Law and Policy Center, which released a study this month showing that Illinois is home to more than 100 wind-related companies employing more than 15,000 people.

Part 2: How Power Purchasing Agreements are “Killing” the Wind Industry

So the wind energy industry got what they begged and pleaded and lobbied Governor Quinn for and got their 20year Power Purchasing Agreements.  Crain’s Chicago Busniness did a great article last year  about how Power Purchase Agreements are affecting the wind industry in Illinois….with a little spin by the wind industry lobbyists.  What really caught my attention was Howard Lerner of the Environmental Policy & Law Center was used again in this article as a source.  This time Mr. Lerner, a strong advocate of the Rock Island Clean Line…the powerline for “clean” wind energy from Iowa, was telling the press what a problem these 2o year Power Purchasing Agreements have created.  Actually, while the terms in these 20 year contracts are grossly uncompetitive and unfair to the consumer at $55.18 per megawatt hour, the real root cause of the wind industry’s problem is their greed.  Consumers are willing to pay less for energy regardless of the virtues of wind energy.
An Exelon spokesman gave an excellent comment on the current situation with wind industry in Illinois.

“Right now, you have an excess of supply to meet the demand that's out there,” says David Fein, Chicago-based Exelon's vice president of state government affairs. “The market has spoken. It's obviously not economic to build. A 20-year contract . . . doesn't make sense.”

Yes, 20 year contracts at 180% the current market price still do not make sense.  The market has too much supply and too little demand with the poor economic condition of the nation.  At this time we don’t need more energy generation, powerlines from Iowa for more wind energy, or 20 year contracts signed by the Illinois Power Agency.
Howard Lerner of the Environmental Policy and Low Center was actually a bit more diplomatic for his friends at wind energy.

Howard Learner, executive director of the Chicago-based Environmental Law and Policy Center and an advocate for more clean-energy construction in Illinois, says the political hurdles are surmountable.   “Renewable energy is strongly supported by the Illinois public,” he says. “This is a problem for people of good will to solve.”

Another Crain’s Chicago Business article explains consumers and cities are moving away from ComEd because of these long term Power Purchasing Agreements.  Alternative Energy Retail Suppliers like  Constellation, ComEd parent Exelon Corp.'s retail power supply unit,  Integrys Energy Services, sister company to Chicago natural gas utility Peoples Gas,  or  Akron, Ohio-based FirstEnergy Solutions,  are able to offer cities electricity at lower prices than ComEd because these companies are not forced to buy “clean” renewable energy from the Illinois Power Agency. 

It seems a bit ironic that because of good old fashion corporate greed the wind energy industry lobbied and claimed they NEEDED these 20 year contracts.  Now after consumers are leaving ComEd, this corporate greed is hurting the companies.  So many cities are leaving ComEd and moving to cheaper suppliers that the Illinois Power Agency has purchased far more power than it knows what to do with it.

Who’s going to buy this excess “clean” energy at over 180% the market price?  Will the few remaining consumers of ComEd be forced to pay for Governor Quinn’s screwup?   Is this fair to force consumers to pay for the Governor’s mistake.   Will the state just eat the cost of this extra high priced energy where there are no captive consumers to force it on?  Will the Illinois Power Agency attempt to sell this power in the market at a discount and just attempt to cut its losses?

There are reports the Wind Industry now is lobbying Springfield to force the Alternative Energy Suppliers to buy the overpriced energy from the Illinois Power Agency.  Will the state just buy this excess energy and eat it?  Illinois is broke.  We have no money to waste on unwanted “clean” energy.

It’s not surprising Howard Learner at the Environmental Law & Policy Center supports the Rock Island Clean Line.  He’s a paid lobbyist under a non-government organization name and been nothing but a tool for the wind energy lobbyists.   His advice and recommendations have led Illinois to a broken Illinois Power Agency and a dysfunctional Renewable Portfolio Standard.  His bias is clear and his support for the Rock Island Clean Line deserves questioning for those who search beyond the name. 

With the current low prices, only the wind energy industry says we need more energy.  Exelon understands now is not the time for additional energy construction in Illinois.  Andrew Ott at PJM even questioned the wisdom of 20 year contracts for wind energy.  

“'A 20-year fixed-price contract (for renewable resources)? I'm not seeing a lot of that.”  Andrew Ott, senior vice-president of markets, PJM.

It’s time to freeze the Illinois Renewable Portfolio Standard and fix the Illinois Power Agency before we create a bigger mess with more unregulated wind energy in Illinois.  The last thing we need to do right now is import more "clean" wind energy into Illinois  with Clean Line Energy and the Rock Island Clean Line.  Let's fix the problems we have first.  Lets do what is best for Illinois consumers and not what the wind industry lobbyists claim they now "need".

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