Tuesday, December 3, 2013

Illinois and a "Willingness to Pay for Renewables"

“In Europe there’s uhm a pretty high willingness to pay for renewables.”  Michael Skelly

This is going to be the challenge for Clean Line Energy as it presents it’s case to the Illinois Commerse Commission.  They are going to have to show a benefit to Illinois.  To show a benefit, RICL is going to have to show a need and in Illinois there is clearly NOT a high willingness to pay a premium for renewable energy. 

Illinois’ Renewable Portfolio Standard is about the most impotent RPS in the nation due to aggregation and communities willing to leave ComEd for Alternate Retail Energy Suppliers who are not bound to the RPS mandates of buying wind energy.   I didn’t have time to write about it, but there was another “fix” to the Illinois RPS being floated around Springfield last September.  Steve Daniels at Chicago Crain’s Business was about the only one to report this “fix” 

The “fix” had something in it for the wind industry and was also touted as having some incentives and attractions for ComEd.  I’m not sure who really was behind the “fix”, most likely the American Wind Energy Association (AWEA) though their extension at the Environmental Law & Policy Center, but like all the other proposed “fixes” to the Illinois Renewable Portfolio Standard, the bill died in Springfield. 

Opponents to the “fix” were lists as the other power suppliers, but nowhere in this “fix” was a benefit for consumers listed and this is probably why the bill died.  An aid for a State representative explained it to me in simple terms this last summer.  Aggregation happens to be very popular with Illinois ratepayers. 

Illinois residents like the deregulated power to choose their energy suppliers and we like the ability to choose economical energy over high priced renewable energy.   While the Illinois RPS and Illinois Power Agency is in disarray, state legislatures know they had better not screw up and mess with aggregation.   A vote to limit aggregation will be seen negatively by voters at the next election.

It’s simple logic but it makes sense.  Rule #1 in Illinois energy is “Don’t screw up aggregation.” 

So getting back to RICL and the ICC.   Like the General Assembly, I suspect the ICC knows how popular economically priced energy is to Illinois residents.   The ICC also knows Rule #1 is “Don’t screw up aggregation.”

Wind energy consigned over RICL needs an actual buyer at a contracted price, probably around $55 per megawatt hour (MWH).  Off the top of my head, I think this is about what Governor Quinn had Illinois sign for 20 year Power Purchasing Agreements.  It might have been as high as $58.  From best inferences, RICL will probably charge about $25 per MWH.  Therefore, wind energy generators in Iowa consigned over RICL will need a guaranteed price pushing $80/MWH.

The retail price of energy in Illinois is closer to $30 than $80.  Like Steve Daniels has reported at Crain’s, wind companies who signed 20 year PPA agreements with Governor Quinn and the Illinois Power Agency are not getting paid as intended because so many consumers have left ComEd.  So, the question remains, how is RICL going to persuade the ICC that energy wheeled over RICL at $80 is a good thing for Illinois ratepayers?

RICL can’t claim to the ICC there are buyers for wind energy out east who are willing to pay $80/MWH.  First, this argument doesn’t show a benefit to Illinois ratepayers.  Second, there aren’t any potential buyers standing in line willing to pay $80 for Iowa wind energy.   If RICL had even one potential buyer signed up, Clean Line Energy would be parading the new poster child to every news outlet willing to listen. 

In spite of what Michael Skelly may say about Europeans, there just isn’t a “pretty high willingness to pay for renewables” in the United States. 

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