Renewable Energy: Friend or Foe for the Utility Industry?
The question isn’t easily answered, as Warren Buffett recently indicated to his Berkshire Hathaway investors. While Berkshire Hathaway Energy now owns seven percent of the country’s wind generation and six percent of its solar generation, he singles out private businesses like residential solar companies as a big threat to the steady growth and returns utilities normally generate. “Historically, the survival of a local electric company did not depend on its efficiency,” he writes, adding that, thanks to renewable energy, “that’s all changing.”1
Nearly 60% of all U.S. states now have renewable portfolio standards, as well as Washington, D.C. and three territories. While some apply only to investor-owned utilities (IOUs), many include municipalities and electric cooperatives at some level. Notably:
IOWA passed the first-ever requirements back in 1983, which included 105 MW of generating capacity of IOUs.
HAWAII has standards that are the most aggressive, requiring 100 percent reliance on renewable energy by 2045. The state is currently ahead of its timeline in reaching its goal of becoming 40 percent renewable by 2030.
CALIFORNIA is determined not to be entirely outdone, and will require 33 percent reliance on renewable energy by 2020 and 50 percent by 2030.
TEXAS is the only other state besides Iowa with a requirement based on specific amounts of renewable energy capacity rather than percentages (setting the goal of 10,000 MW by 2025, which has already been achieved).
KANSAS is the first state to set a percentage (20 percent) for peak demand capacity as its requirement for utilities.2
Other states either have less formal renewable energy goals or no standard or target goal in place at all. Mike Dabner, regional VP of utility sales at Anixter, points out that even in states without specific requirements, investing in renewable energy is becoming the thing to do. He adds that the strain of adopting renewable energy practices for utilities depends on several key factors. One, in particular, is the type of alternative energy available. “California, of course, utilizes plenty of wind power. In Arizona, the sun is a top resource,” he says.
The burning question, though, is at what point can utilities expect to start seeing payback for the huge investment moving to alternative energy will cost? Cases from around the country are offering up positive news. Public Service Company of Colorado (PSCo) has shown that wind and solar at utility scale can reduce consumer and utility costs when included in a balanced generation portfolio.3 Ron Binz, former chairman of the Colorado Public Utilities Commission, adds that Colorado utilities have found it’s cheaper to add a natural gas plant plus a wind farm than to add a natural gas plant alone.4
The bottom line, says Dabner, is that renewable energy adoption is not going away. He adds, “We’re continually expanding our capabilities to support utilities in making the transition as smooth as possible.”