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Renewable energy mandate spikes cost for customers

The Emporia Gazette|Ben Fitch|July 28, 2012
KansasEnergy Policy

KPI President Dave Trabert said subsidized wind farms hurt the state's economy, that business investment in the state will be $191 million less than without the mandate. "It's easy to see windmills going up or an employer moving into town as a good thing," Trabert said in a KPI press release. "But it is often overlooked that they received a subsidy or incentive.


According to the Kansas Policy Institute, new renewable energy mandates in Kansas will cause energy rates for residents to spike considerably in the coming years.

In 2009, Kansas legislature passed the Renewable Energy Standards Act, which required major utilities to derive 10 percent of their energy capacity from renewable sources. The government mandate was intended to ensure the purchase of more renewable energy, as it is often more expensive than conventional energy sources.

In Kansas, the most typical renewable energy source is wind.

A study, "The Economic Impact of the Kansas Renewable Portfolio Standard," by the KPI, estimates that electricity prices will increase 45 percent in 2020, and the renewable energy mandates will …

... more [truncated due to possible copyright]

According to the Kansas Policy Institute, new renewable energy mandates in Kansas will cause energy rates for residents to spike considerably in the coming years.

In 2009, Kansas legislature passed the Renewable Energy Standards Act, which required major utilities to derive 10 percent of their energy capacity from renewable sources. The government mandate was intended to ensure the purchase of more renewable energy, as it is often more expensive than conventional energy sources.

In Kansas, the most typical renewable energy source is wind.

A study, "The Economic Impact of the Kansas Renewable Portfolio Standard," by the KPI, estimates that electricity prices will increase 45 percent in 2020, and the renewable energy mandates will cost households an average of $660 per year.

Dick Rohlff, director of retail rates for Westar Energy, said the mandates will indeed affect energy rates, and the rates for residential customers.

How the shift to renewable energy affects rates is determined by several factors: One is the cost of purchasing the energy source, which will spike rates initially, depending on the source.

"When we go out there and look for renewable resources, we put out a request for proposal," Rohlff said. "We do not discriminate against the type of renewable, but we do ask for bids, and the winning bids have always been wind resources."

The high plains and western Kansas are considered to be some of the best areas for wind resource in the country. The wind that comes down from the Rocky Mountain Range and the desert South West as well as northerly flows makes Kansas ideal from a resource stand-point.

Westar disperses its wind resources throughout the state. There are wind farms in Cloud County and Wichita County, and a flat ridge wind facility in Comanche County. Westar is also acquiring wind resources in Ford and Rush counties - more centralized locations - and the facilities will be annexed later this year.

Rohlff said the building of more wind farms was a direct result of the mandates, the Renewable Energy Standards Act.

KPI President Dave Trabert said subsidized wind farms hurt the state's economy, that business investment in the state will be $191 million less than without the mandate.

"It's easy to see windmills going up or an employer moving into town as a good thing," Trabert said in a KPI press release. "But it is often overlooked that they received a subsidy or incentive. No matter how well-intended these programs may be, taxpayers lose in the long run when government picks winners. We need a clean environment and diversified sources of energy will no doubt someday be an affordable alternative as entrepreneurs are free to experiment and invest in new technologies."

Rohlff said that when Westar issued requests for proposals from wind vendors in 2007 and 2008 in anticipation of coming legislation, the cost manifested itself in energy prices that Westar considered to be far too high.

"We rejected all the bids," Rohlff said. "But we knew that the mandate was coming, so a year later we went out and issued another request for proposal. Those prices that came in were substantially lower."

Rohlff said rates will go up, slightly, and over an extended period of time as a result, but that he believes - in the big picture - it is worth it.

Westar estimated that rates would increase by 1 to 1.5 percent per year when they first turned to renewable resources in 2009. Rohlff said the effect that would likely occur, spiking rates the most, would be the expiration of the federal Renewable Electricity Production Tax Credit at the end of the year.

"For wind, if it's not renewed by the federal government, that tax credit will go away to the developer or the owner of the wind farm," Rohlff said. "That currently has a value of around $23 a megawatt hour."

The tax credit lowers the overall cost to the purchaser - in this case Westar - which is eventually reflected in a customer's bill.

"Mandates and subsidies aren't typically viewed as political handouts, but they impact individual decisions the same way," Trabert said. "No matter where these types of things originate or how well intended they may be, too often the best-laid plans end up hurting the people they are trying to help through fewer jobs and higher indirect costs."

For Westar, the cheapest energy resource will continue to be the Wolf Creek Generating Station, a nuclear power plan near Burlington. The second cheapest energy source will continue to be coal generated energy.


Source:http://www.emporiagazette.com…

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