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Report: Ohio renewable energy law cuts costs, emissions

The Wood County wind farm in Ohio. (Photo by Lucas County Choppers via Creative Commons)

The Wood County wind farm in Ohio. (Photo by Lucas County Choppers via Creative Commons)

Five years after Ohio’s renewable energy standard took effect – and a few months before it will be challenged again in the state legislature – an economist with the state’s utility regulator tried to assess how the law was working out.

Tim Benedict’s verdict: “We’re seeing more of the good than of the bad.”

More specifically, his study concludes that the addition of renewable sources of power is modestly pushing down the wholesale cost of power in the state, while also reducing the amount of carbon dioxide produced.

According to Benedict’s calculations, the renewable generators now producing power have reduced the cost of wholesale power by about 0.15 percent. When his study looked at the projected power from all renewable projects that the state has approved, including those not yet operational, the figure is closer to 0.5 percent.

“This confirms what other studies have found,” said Rebecca Stanfield, a deputy director for policy for the Natural Resources Defense Council. “As we add renewables, the wholesale price of electricity goes down.”

And while a wholesale price cut of half a percent may not sound like much, it’s important to keep in mind that only about 1 percent of Ohio’s power currently comes from renewable sources. The renewable standard passed in 2008 requires that that proportion gradually increase to 12.5 percent in 2025. And as the contribution from renewable power grows, so, presumably, will the savings from a falling wholesale price of fuel.

Limitations of the report

The important phrase here is “wholesale price.” The wholesale price is what utilities pay for power, whether that power is generated by coal, natural gas, nuclear fission or the wind or sun. The wholesale cost of power accounts for, very roughly, about two-thirds of a customer’s bill, said Benedict, the report’s author and an economist for the Public Utilities Commission of Ohio. The remainder of the bill, which likely would not be affected by the addition of renewables, reflects administration, capital investment and other costs.

Ohio state Sen. Bill Seitz, who plans to introduce legislation to weaken the renewable standard in the next session, criticized the study for failing to take into account all of the non-fuel costs involved in delivering electricity to customers.

“This is not an overall cost/benefit analysis, and should not be interpreted as such,” he said. “This does not demonstrate any benefit to ratepayers.”

When asked, however, about the study’s finding a slight reduction in the wholesale cost of fuel, Seitz conceded that there might be a “very modest” benefit for customers.

Seitz said he’s concerned that the integration of variable energy sources, such as wind and solar, erodes the efficiency of fossil-fuel powered plants by requiring them to cycle up and down more frequently.

“We need to look down the road,” Seitz said. “These requirements are ramping up as time goes on.”

Benedict agreed that the vacillating demands on coal- and gas-fired plants do tend to decrease their efficiency, but not to a significant degree given the small amount of renewable power used in Ohio at this point.

Similar outcomes in other states

There is evidence elsewhere that the introduction of renewable sources pushes down the wholesale price of power. A study done earlier this year by the Illinois Power Agency found that the integration of renewable-sourced power in 2011 reduced the fuel cost component of the typical residential customer’s bill by between 0.1 percent and 1.2 percent.

In Minnesota, most utilities have reported little to no rate impact from that state’s renewable energy standard, and Michigan’s largest utilities have recently eliminated a surcharge intended to pay for the costs of new renewable sources.

Studies of the price impact of energy efficiency have produced similar results, according to Stanfield of the NRDC. As demand decreases, due to more efficient use of power, the wholesale cost of each unit of power falls, she said.

Although the upfront installation costs of wind and solar power are relatively high, those units then produce power practically for free, Benedict explained. The regional grid operator, who decides which power sources to tap to meet the demand at any given moment, always turns to the cheapest source first. And that’s almost always wind or solar, according to Benedict. These nearly-free sources end up displacing sources at the costly end of the continuum, meaning that the overall cost of power is reduced.

In his study, Benedict found that the introduction of renewables has produced other benefits. His analysis found that in Ohio, the currently-operating renewable generators are reducing carbon dioxide emissions by 0.17 percent. When facilities now under development are included, the reduction is about 0.5 percent.

Benedict also said that while solar and wind resources can put a strain on transmission systems, he found little evidence that this is a problem in Ohio.

“We didn’t see congestion issues or problems incorporating that energy” into the regional transmission system, known as PJM, he said.  “PJM is sufficiently robust to incorporate an increasing percentage of intermittent resources, at least at the rate we’re using renewables today.”

The NRDC is a member of RE-AMP, which also published Midwest Energy News.

Comments (9)

Ohio’s renewable energy standard needs repealed. Regardless of what rate payers may or may not save, we need to protect and truly preserve our farmland. With the current standards in place, the floodgates have been opened and we are now calling 500 ft industrial wind turbines neighbors. Wind developers are taking advantage of our current energy standard and quite effectively decimating our welfare. And speaking of welfare, wind complexes are heavily subsidized and wouldn’t even be a topic of discussion if it weren’t for the corporate welfare that has been propping the industry up for 20+ years! Stand on your own or fall down already! Our utilities should not be forced into going into business with this inefficient industry.

By Aboggs on Sep 5, 2013

Of course wind brings down the wholesale cost of electricity in the short term. With the federal production tax credit for wind paying $23 per MWH, wind producers can bid negative and still achieve a positive cash flow. The problem is that in the longer term, intermittent wind is scarcely available on hot summer afternoons when demand for electricity reaches its annual peaks. That means wind can’t replace conventional power PLANTS – only a bit of the fuel they would otherwise burn. Eventually the fixed costs of our dispatchable fleet must be covered or we will have a shortage of dependable, dispatchable electricity when we need it most.

Wind inevitably raises costs for manufacturers and households alike, and uses our own tax dollars to do it. That’s far worse than wasteful government spending.

It is true wind will save some emissions that some see as harmful. But the study fails to consider that far more emissions could be mitigated by investing the same taxpayer dollars in natural gas fired electricity generation to replace our oldest and dirtiest coal plants – something wind can never do alone. Or better yet – let the free market determine which power plants are built, and free up our tax dollars for education, reducing national debt and vital public services. Interested readers and voters should undertake comprehension of the report “Hidden Costs of Wind Electricity” by Dr. George Taylor and Thomas Tanton. The report is available at the website of the American Tradition Institute.

By Tom Stacy on Sep 5, 2013

Terribly sad to see tens of thousands of acres covered with machines that will be in disrepair in less than 2 decades. Yes, it is true that Ohio is adding a tremendous amount of wind “capacity” onto our grid, but at what value is this to us? When you look at their actual production stats, Ohio’s turbines produce electricity at a dismal 27% of their capacity. Seriously? What business, other than one that is subsidized by our taxdollars, can be rewarded billions in perks, for having such poor production numbers? Our taxdollars are better spent elsewhere…

By saveourskylineohio on Sep 7, 2013

Amazing how uninformed these anti wind people are. If you think adding a steady additional revenue to LOCAL farmers by having turbines on there property is bad for your economy then you need to take some economic courses. If you don’t think it lower wholesale prices then you have never looked at electric markets.

By midwestener on Sep 10, 2013

There have been 25 recent studies that show the US can meet most-or-all of its energy needs using high value energy efficiency and the entire portfolio of renewable energy. Only two of the five renewables are variable, but add capacity for midday energy peaks (solar) and evening energy peaks (wind). In either case, when added load is required for air-conditioning (solar) or evenings (wind) for cities and 2nd shift manufacturing – electric utilities have to bring on older peaker plants (higher cost, higher repairs, and more polluting) or wheel-in electric power from other states (higher cost). All large wind turbines are financed under power purchase agreements (PPAs) which only allows payment if power is produced, so the owners keep them in repair (and usually at a higher rate than peak electric power plants). And finally, all energy is subsidize in the United States of America at $80 billion of taxpayer money per year including coal, oil, nuclear (the highest) and natural gas, as well as renewables and some energy efficiency. Wind is not only a lower cost option, good for the Ohio economy, lowest in emissions (including greenhouse gases). Scott Sklar, Adjunct Professor, The George Washington University and President of The Stella Group, Ltd.

By Scott Sklar on Sep 10, 2013

Ohio is ignoring the major stakeholder in this experiment. The non-participating homeowners. These citizens will find there homes unmarketable and for many unlivable. The mind truncates the true size of the industrial wind towers. A whirling object 500 to 600 hundred feet high will need to be fifteen miles away to equal what most think will be the modern windmill in the back 40. When driving into Columbus on I71 picture when you first see the skyscrapers. Yet virtually all industry handouts and websites display a skewed perspective. The horizons are manipulated. Near ground objects are artistically placed to trick the eye with illusions. Never a home in sight. Maybe a power line that appears a fourth as high as the wind mill. Maybe a split rail fence. You trust these lobbyists to your own undoing. Your rent per “turbine” will not pay for a daily Columbus parking place. For this you sell your neighbors life work down the river. And your own. Turn and fight this and you may still be able to reclaim you reputation.

By John Warrington on Sep 10, 2013

@midwesterner

If I might rephrase your objection thusly:

“If you think adding a steady additional revenue to LOCAL farmers by seizing money from other American citizens’ income against their will and then depositing it into my farm account alongside my deficiency payments, CRP payments and the additional business advantages I receive like not paying road tax on my diesel fuel, paying little or no property tax and in many cases being paid for not producing, then you need to take some economic courses.”

And the last line is a gem. How would good ole boy Midwesterner (Farmer Bob) feel if Michigan subsidized corn production so that it could be profitably delivered to market at 50 cents a bushel while the true costs might be $2.00? That would lower wholesale prices but good ole Farmer Bob, being stuck in OH, would no longer be able to compete. Would we get lower wholesale prices? Yup, right up until OH Farmer Bob had to call in the auctioneer to sell of his assets and the supply of corn collapsed because MI cannot meet the demand alone.

Back to school Farmer Bob!

By Kevon Martis on Sep 10, 2013

Although very liberal on these issue and a very concerned about global warming I would agree with the analysis in these posts about wind generation. I agree that we need to let the free market determine the best choices based on real exonomics for future power generation. That said it needw to include all the externalities associated with each power generation source and it need to consider the impact of leaking tracking natural gas wells. So what this means is that we need to phase out the wind production tax credit, add cost to coal plant cost for the impact of the demonstrated health impacts and add much stiffer regulation and testing of all gas wells. What I think we will find then is many more combined cycle (CC) gas turbine plants, continued wind generation installations, some specific solar plants where peak peak power is required and hopefully a phasing out of old simple cycle coal plant . Coal has got to go but the market need to pick the better options. What we will also see is higher electric costs and more emphasis on energy efficiency which will result in more employment. both in the installation of cc gas plants and energy efficiency retrofits. More employment is the real problem with our serious deficit problem not lower electric costs.

By Paul Jorgensen on Sep 17, 2013

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Sep 5, 2013: EIA shows higher wind power output cutting into baseload power generation | Knowledge Problem