Renewable Energy Remains an Expensive Proposition for US Electric Utilities
While almost every one says they want more renewable energy, nobody wants to pay more for it, Standard & Poor’s says in a new Q&A on the topic.
Selected excerpts from Q&A: U.S. Utilities Ramp Up Renewable Energy (Premium)
The real challenge for managements at electric utilities is to explain to and help their customers, regulators, and policy makers understand that a shift away from carbon-intensive power production is not going to be fast, it is not going to be easy, and there will probably be substantial cost tradeoffs.
Cost is probably the thing we are most focused on right now. Developments in renewable technology and the subsidies have lowered costs relative to conventional generation, but it is still expensive in most cases. People seem to think that solar is cheap, but it is not. PVs, fully loaded with subsidies and in the best of conditions in terms of sunlight, cost 15 to 25 cents a kilowatt hour. That is more than the average electric retail rate customers pay in the U.S. of about 11 cents. So, it is significantly more expensive, even without the transmission needed to get the renewable energy to the customer.
Related to that, poll after poll shows that customers want greener forms of energy, but they are not paying for it.
Until there is a layer of significant renewable investment, which in most cases is much more expensive than conventional sources, customers will not be tested. But in the best case, customers will someday open their bills and say, “This is a much higher bill, but this has value to me – it is worth it.”
With regard to credit quality, we look at renewables as a very different product. There is no return policy on this. Utilities are making investments with today’s technology, at today’s costs. These investments are going to go on for 20 or 30 years or more, so from our perspective, we are going to focus on utilities’ ability to recoup these costs in rates.
Standard & Poor’s has issued a series of Q&A reports on the utilities industry:
Q&A: Energy Efficiency And “Smart Grid” Initiatives Aren’t Likely To Shock U.S. Electric Utilities
Q&A: What’s Ahead For U.S. Electric Transmission?
Q&A: What’s Ahead For Regulated U.S. Utilities?
Q&A: U.S. Utilities Tackle Rate Challenges
Q&A: U.S. Utilities Tackle Environmental Concerns
Q&A: Energy Legislation And Utilities – What’s In Store?
Q&A: What’s Next For Nuclear Power In The U.S.?
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