Now that the 2014 Kansas legislative session is complete and the media is offering its commentary with respect to energy policy, we feel compelled to offer a couple of clarifications.
First, let us be clear that we in no way are opposed to renewable energy resources, but rather are opposed to the market distortions that certain policies have produced.
Mandates on Kansas’s electric utilities were passed by the Kansas Legislature in 2009, requiring that 15 percent of nameplate electric generation capacity be from renewable resources by 2015, and 20 percent by 2020.
The federal government put into play production tax credits amounting to 2.2 cents per kilowatt-hour — on average, about 45 percent of the wholesale cost of electricity in Kansas.
This direct federal subsidy to the wind industry — amounting to more than $12 billion nationwide last year and hundreds of millions of dollars in Kansas — together with state subsidies, is what has built the wind industry.
However, on Dec. 31, 2013, those federal tax credits “expired,” leaving ratepayers to cover future costs of meeting the mandate.
There is a 10-year lifetime for the credit on all existing systems and on those “in construction.”
Present renewable developments still will have that significant advantage until Dec. 31, 2023.
Kansas has given further subsidies to this industry as a result of the lifetime exemption from ad valorem property taxes, which last year amounted to a tax advantage, as measured against Payments in Lieu of Taxes, of more than $117 million across the state. No other industry ever has been granted a lifetime exemption from those property taxes.
The claim is made that the Kansas Corporation Commission (KCC) only sees an approximately 2-percent rate impact due to the Renewable Portfolio Standard (RPS).
There is a question, however, of whether KCC is taking into account all costs.
We are working with KCC to drill down and fully examine all costs associated with the mandates.
Multiple studies demonstrate that the true “levelized cost” of wind power is substantially higher than what is estimated based on Energy Information Agency figures.
One such study released in late 2012 (American Tradition Institute, Taylor & Tanton) shows that the true cost of wind measured against coal on standby is approximately twice as expensive as dispatchable coal, and approximately 50 percent higher than natural gas on standby.
You cannot deliver wind energy standalone — rather, it must “merge” into existing base load, whatever the source. That merging and “demerging,” when the wind dies suddenly, presents special grid-balancing challenges to base-load providers, which adds to the cost of electricity.
Kansas ratepayers across a blended spectrum of delivery by Westar have seen electricity prices escalate by 41 percent since 2008.
We certainly have been hearing from the business community, the fixed-income community and others who simply have been astounded by those rate increases.
The claim that RPS only accounts for a small portion of that increase simply does not stand against the facts.
RPS, according to numbers Westar provided, actually nearly matches the rate impact related to U.S. Environmental Protection Agency regulations, which have been substantial — many billions of dollars over that period mentioned.
Additionally, moving the power from turbine to the electrical outlet is not cheap.
Newly added transmission costs in the Westar case are very significant in that 41-percent price run-up.
We feel more strongly than ever that RPS has no place in the economy of electricity delivery.
If renewable power is so effective and cheap, then why should it have to be mandated?
Editor’s note: This column was co-written by 99th District Rep. Dennis Hedke, chairman of the House Energy and Environment Committee.
Sen. Forrest Knox, R-Altoona, represents the 14th District of the Kansas Senate, which includes part of Cowley County. He is the acting chairman of the Senate Utilities Committee. Knox can be contacted at firstname.lastname@example.org, email@example.com, (785) 296-7678 or (620) 636-0051.