Friday, February 15, 2013

The Cost of the Illinois Renewable Portfolio Standard

How much does “clean” energy cost the Illinois consumers? 

When Clean Line Energy first introduced the Illinois residents to the Rock Island Clean Line project, the powerline for Iowa windmills, this one question keeps being asked without an answer from Clean Line Energy. 

Hans Detweiler, the Illinois project developer, Jimmy Glotfelty the company’s second in command, or Michael Skelly, the company’s president, refuse to answer this basic question.  How much will this additional “clean” energy cost Illinois consumers? 

Projected“saving” is irrelevant.  Show me an economist for the wind energy industry who projected today’s current energy prices, supply and demand six years ago.

The more that is learned about energy industry, the more the “clean” energy industry looks to be a bunch of greedy little children of the energy industry.  There is one common theme coming from the wind industry, whether it’s the American Wind Energy Association, Howard Learner at the Environmental Policy and Law Center, or actual wind energy companies, like Invenergy or Horizon Wind Energy.   These companies and their lobbyists will always cry the industry is in jeopardy of going under unless they have everything their way with everything, and it is always the consumers who suffer for this “clean energy” industry’s profit.

The “clean energy” industry says it will just die if they don’t get a continuation of the Production Tax Credit with its $22per Megawatt hour (MWh) premium.  So, on January 4, 2013, the wind industry was granted a one year reprieve with an extension to the PTC.  This still doesn’t answer how much wind energy costs, but there is this additional $22/MWh for any new wind energy constructed for this powerline.  

So anyway, how much does wind energy cost?

Wind energy is sold a couple different ways.  The energy goes from a powerline and enters “the grid” where it is sold at the wholesale “locational marginal price” (LMP), like coal energy, energy made by natural gas turbines, or nuclear energy.  The LMP is basically a price determined by constant changes in supply and demand.  You can go to and see the price for Northern Illinois Hub.  Right now the price of electricity on the wholesale market for the Northern Illinois Hub is $34.18 per Megawatt Hour (MWh).  This price fluctuates but $30-$35/MWh is a good average number for a rule of thumb.  The LMP price is the price of the open market.  It’s the benchmark of a fair market price for comparison to “clean” wind energy.

Energy retail suppliers can also buy Renewable Energy Credits (REC’s) from wind companies as proof they are purchasing “clean” energy on the open market.  PJM has a website where REC’s can be bought and sold.  It has been well documented REC’s are a very economical way to comply with a state’s Renewable Portfolio Standard.  Mark Pruitt, the original director of the Illinois Power Agency,  preferred REC’s over long term contracts.  According to the Illinois Wind Energy Association;

Pruitt's procurement process favored cheap renewable energy credits to fulfill the state's renewable portfolio standards for the procurement of renewable energy like wind and solar over the more costly long-term power purchase agreements preferred by developers and Quinn.

Renewable Portfolio Standard
As many of you know, Illinois has a Renewable Portfolio Standard (RPS) is a policy passed by the state legislature that mandates a certain percentage of power is supplied by “clean” renewable energy.  By the year 2025, Illinois is supposed to ramp up to 25% renewable energy.  The question is often asked “Who is counting the renewable energy and how are energy companies complying with the RPS” 

That responsibility falls on the Illinois Power Agency (IPA).  The IPA is a 1 man operation (literally) who is looking to hire a director.  They no staff, no accountant, and a temporary director who wants out but Governor Quinn can’t find a “qualified” replacement.   So if you know anybody with 15 years of experience buying energy (and is desperate for a job) have them send a resume (and a political donation) to Governor Quinn.

The way Springfield set up the Renewable Portfolio Standard, the Illinois Power Agency is responsible to buy the “clean” renewable energy for Ameren and ComEd (real energy companies).  Back in 2010 the Illinois Power Agency, at the urging of Governor Quinn) entered into long term Power Purchasing Agreements with wind energy companies.   These Power Purchasing Agreements are 20 year contracts!  According to Crain’s Chicago Business in 2009;

In a budding battle over Illinois' energy future, Gov. Pat Quinn is throwing his political weight behind wind power — even if it means higher electric bills.
Despite protests that wind power is too expensive, Mr. Quinn has persuaded the state agency that buys power for Illinois customers to negotiate 20-year contracts with wind developers for up to 4% of the power supplied by Commonwealth Edison Co. and Ameren Corp.

Wind Companies lobbied Governor Quinn  claiming 20 year contracts were needed to secure financing to build more windmills and Governor Quinn lobbied the Illinois Power Agency director Mark Pruitt to sign these contracts that went into effect in July 2012. Illinois is no locked into buying this energy from wind companies for 20 years.   The IPA then turns around and more or less sells the energy to Ameren or ComEd.  

Pruitt's procurement process favored cheap renewable energy credits to fulfill the state's renewable portfolio standards for the procurement of renewable energy like wind and solar over the more costly long-term power purchase agreements preferred by developers and Quinn.

Assumptions were made at the creation of the IPA that the state knows what’s best for its residents and will seek better deals than industry that has captive customers.  Unfortunately, this is Illinois where PAY-TO-PLAY reins.  Governor Quinn and the IPA did not seek out the best deal for Illinois consumers.  The politicians gave in to the lobbyists.  

One Illinois Power Purchase Agreement for Springfield governmental offices shows a $19/MWh surcharge above the market price was added to the price of the energy.  This is $19 over the market price of $30-$35.  So Springfield government is paying $49 to $54 for $30 energy. 

The 20 year PPA for Ameren started in the third quarter of 2012 at $50.44 per megawatt hour.  GO HERE TO SEE THE CURRENT MISO ENERGY PRICE

Comed’s PPA negotiated by the Illinois Power Agency under the leverage of Governor Quinn average price is $55.18 per Megawatt hour.  GO HERE TO SEE THE CURRENT PJM ENERGY PRICE (far right)

The average price of energy in the spot market in the Northern Illinois is about  $30-$35 per Megawatt hour. 

So ComEd’s customers are paying 184% of the market price for renewable “clean” energy.

Thanks Governor Quinn! 

Way to go! 

We appreciate you looking out for us….politics as usual in Illinois….yuck!

Do we really need to pay $55.18 for $30 energy?  Don’t forget we are also paying another $22 through the federal subsidy called the Production Tax Credit.  There were warnings.  Even from PJM!

"I'm seeing five-year and 10-year contracts" for renewables, says Andrew Ott, senior vice-president of markets at PJM, the Pennsylvania-based operator of the power grid stretching from Northern Illinois to the mid-Atlantic. "But a 20-year fixed-price contract? I'm not seeing a lot of that."

Is the state really looking out for what is best for consumers or what is best for wind energy companies? 

What ever happened to the concept of the most economically priced energy?

You don't know what's going to happen over 20 years," says Kevin Wright, president of the Illinois Competitive Energy Assn.   "It's saddling ratepayers with above-market rates for power when all of this should be procured in a competitive marketplace."

I thought Governor Patrick Quinn was a champion for economically priced energy for consumers?  What happened?  Is this politics as usual in Illinois?  Is over paying for energy bad when it’s a mega-nuclear company but perfectly acceptable when Governor Quinn “negotiates” for “clean” energy?

Now, I am a simple farmboy from Prairie Center, but it looks like the Illinois Power Agency is a failure.  It’s a one man show and no one wants the job.  The acting director resigned in October is waiting for ANYONE to replace her (another drama story here).  The Renewable Portfolio Standard is clearly politicalized.  The best interest of consumers is only being considered after the best interest of the wind energy companies and the best interest of the politicians and friends of the Governor.

The last thing Illinois needs to go know is build a powerline from Iowa and add 3,500 megawatts of more “clean” energy from the Rock Island Clean Line powerline at these ridiculous prices.  As consumers, we can’t afford more Power Purchase Agreements and shouldn’t be forced to pay 84% above the current energy costs.  Before we start building grandiose powerlines across the state for more “clean” energy, Illinois needs to stop the nonsense.

Illinois needs to straighten out the IPA & RPS mess before moving forward promoting more renewable energy and powerline for windmills.  Our legislature needs to reform the Illinois Power Agency, hire a true nonpartisan director, and a staff, or perhaps just scrap the IPA altogether.  Our legislature needs to review these 20 year Power Purchase Agreements.  A freeze on the state’s Renewable Portfolio Standard needs to be put in place.  The last thing Illinois needs to do is promote a policy for more high priced wind energy.  Consumers are being gouged enough. 

After we freeze the RPS, then Illinois needs open hearing to determine what is best for Illinois consumers and ratepayers. 

How many more powerlines do we really “need” for windmills?   

Heck, do we really want more windmills in Illinois?  

Are Illinois consumers suffering enough with the current economy?  

Do we really need to overpay for electricity? 

It's time to freeze theIllinois RPS.

Again, lets keep asking Mike Skelly at Clean Line Energy and Illinois’ Governor Quinn critical questions.

How much is this “clean” energy from Rock Island Clean Line going to cost ?

1 comment:

  1. Apparently it's going to cost however much Clean Line's bribes to purchase the advocacy of counties, school boards, businesses, etc. eventually add up to. With a hefty profit for the Dirty Line Energy execs. added in.