Six states enacted ambitious laws requiring them to be at or near 100% renewables and zero emissions by mid-century.
Opponents claimed mandates in Hawaii, California, Washington, Colorado, New Mexico and New York would drive up electricity rates, but ample evidence in today's falling renewables prices led to lawmaker approval. Now, utilities and policymakers are trying to determine what the full costs of a high renewables power system will ultimately be.
"There was plenty of opposition from people reluctant to believe the marketplace prices reported by Lazard and Xcel Energy," Colorado Rep. Chris Hansen, D, co-sponsor of a bill requiring "100% clean energy by 2050, told Utility Dive. "Real world data shows renewables' costs today make clean energy the lowest cost option. When we get to the 2030s, they will still be cheaper and better for the planet."
"Early concerns about renewables increasing customer costs were overstated."
V. John White
Executive Director, Center for Energy Efficiency and Renewable Technologies
But cost impacts cannot be certain until technologies protecting reliability are in place, Washington and New York utilities told Utility Dive. In contrast, Colorado and New Mexico were able to use utilities' expectations of lower costs to bolster political support. There are still many unknowns about the mandates' costs, advocates acknowledged. But that is not a reason to prevent enacting them, they added.
Bills and backers
The six mandates share a goal of very high levels of renewables and much lower greenhouse gas emissions than any state has achieved today. But their policies differ in detail.
Hawaii
Hawaii was the first state to make the commitment. Its 2015 Act 97 requires 100% of its electricity to come from renewables by 2045. The state had reached 15% at the end of 2018, according to U.S. Energy Department and research data compiled by Natural Resources Defense Council (NRDC) Policy Analyst Amanda Levin.
The transition's cost was part of the Act 97 debate but a 2014 report from the Hawaii Public Utilities Commission (HPUC) found "renewables were already saving Hawaii customers tens of millions of dollars," University of Hawaii at Manoa Assistant Professor of Law Richard Wallsgrove, who worked on the bill with advocacy group Blue Planet, told Utility Dive in an email.
Lawmakers included two bill provisions to "ameliorate" cost concerns, he said. Utilities are required "to show that any fossil fuels included in planning are economically favorable over renewables, and the HPUC is empowered to monitor costs and waive requirements if needed."
Reports in 2018 from the University of Hawaii and the Rhodium Group confirmed the net savings expectation. Rapidly falling costs of renewables and storage have "substantially busted" any "myth of expensive renewables," Wallsgrove said. "The better question is how much renewables can save over the status quo."
California
California's Senate Bill 100 mandated 60% renewables by 2030 and net zero emissions economy-wide by 2045. The power sector was at 27% at the end of 2018, NRDC's Levin found.
"Early concerns about renewables increasing customer costs were overstated," Center for Energy Efficiency and Renewable Technologies (CEERT) Executive Director V. John White told Utility Dive. With renewables cheaper than natural gas and innovations in distribution system management emerging, the cost of "very high levels of renewables" may be "far less than we originally imagined."
Colorado
Colorado's Senate Bill 236 mandates that the state generate 100% of its power from clean energy resources and cut power sector emissions 80% below 2005 levels by 2050. Gov. Jared Polis signed the bill into law at the end of May.
"Technology is changing very fast," Hansen said. "Xcel Energy, Colorado's dominant electricity supplier, has moved to high levels of renewables over the last few years and reduced customer bills in real terms."
There will be other costs in this transition, Hansen acknowledged. "But the legislation allows utilities to securitize stranded coal assets. That drastically lowers the carrying cost of those assets and the savings more than cover transition costs like assisting affected communities and retraining coal industry workers."
Securitization is expected to replace the typical 7% interest rate on financed coal assets with a 3% interest on bonds secured by utility cash flows, Hansen said. "Customer savings work out to about $40 million per $100 million financed which, on a $500 million coal plant, means $200 million in customer savings, just on the bonding. There are also operations and maintenance and fuel cost savings."
New Mexico
New Mexico's Energy Transition Act mandates 100% of the state's electricity come from "zero carbon resources" by 2045. It got 11.6% of its electricity from renewables last year, according to Levin.
"Because of expenditures for new solar and wind, rate increases cannot be ruled out, but they would be much steadier, slower, more manageable."
Nathan Small
Democratic Representative, New Mexico
Cost was not a major challenge in New Mexico because data from financial analysts and the state's electric utilities support overcame doubt, Rep. Nathan Small, D, the Act's House sponsor, told Utility Dive. The state's dominant electricity provider PNM "has been saying for several years that the cost of coal is bad for customers and El Paso Electric chose several years ago not to extend its coal contracts."
New Mexicans "have seen rate increases with fossil fuel-heavy portfolios," he added. "Because of expenditures for new solar and wind, rate increases cannot be ruled out, but they would be much steadier, slower, more manageable. And, with securitization for coal plant closures, rate increases will be lower than they would have been."
Rising electricity rates "demanded responsible action and the data showing the cost of renewables is competitive and will become more competitive gave us the confidence to act," Small said. "The securitization cost savings will provide $40 million to help affected communities."
Washington
Washington state got 7.5% of its electricity from non-hydropower renewables in 2018, Levin reported. Senate Bill 5116, signed into law May 7, mandates net zero power sector emissions by 2045 using at least 80% renewables and net zero emissions alternatives, including hydropower.
The state has largely eliminated coal, Rep. Joe Fitzgibbon, D, co-sponsor of the House bill, told Utility Dive. "With renewables costs now competitive with natural gas generation, we saw the opportunity to prevent more use of natural gas. The bill includes a 2% annual cap on rate increases and gives our commission the authority to use it to protect customers."
New York
With hydropower, New York state's power sector was 29.3% renewables by the end of 2018, according to Levin. Senate Bill 6599, which became law June 18 of this year, mandates 100% carbon-free electricity, excluding new hydropower, by 2040 and requires regulators to create a path to net zero emissions economy-wide.
"Cost and consumer impacts are important, but the status quo of reliance on natural gas generation is unsustainable and not cheap."
Jackson Morris
Eastern Regional Director for Climate and Clean Energy, NRDC
Modeling New York's previous 50% renewables by 2030 mandate showed a net benefit to customers, NRDC Eastern Regional Director for Climate and Clean Energy Jackson Morris told Utility Dive. The new bill orders regulatory proceedings to determine costs and benefits for the new aspirations.
"Cost and consumer impacts are important, but the status quo of reliance on natural gas generation is unsustainable and not cheap," Morris said. "New York can get incremental near-term reductions by switching to natural gas, but in 2030 it will hit a brick wall because it will have stranded fossil fuel infrastructure in place for decades. That is not the way to get to the 2040 goals."
Renewables costs have consistently dropped as mandates have increased and, to keep this transition politically viable, "policies must ensure that trend continues," he added. "But the starting premise must be that a clean, dynamic and resilient grid is worth investing in. The question is no longer how much a transition will cost, but how to make it in the most cost-effective way possible."
The utility perspective
Utilities in these states don't have definitive formulas for achieving the long-term goals or a final calculation of costs. But New Mexico's legislation provides one cost certainty — securitization.
Reduced interest rates will allow a $4.7 billion investment in wind, solar, storage and natural gas replacement resources and potentially save the average residential customer over $7 per month, according to PNM's July 1 regulatory filing.
Washington's 2% rate increase cap also offers some certainty, Puget Sound Energy spokesperson Janet Kim told Utility Dive in an email. Its protection for customers, along with "declining costs, improved technology, and regulatory support" can make Washington's transition "cost-effective for utilities to implement," Avista spokesperson Casey Fielder agreed.
Some New York costs and benefits will go up and others will go down, Consolidated Edison spokesperson Allan Drury told Utility Dive in an email.
A "significantly higher peak" could increase "electric delivery charges," but more fuel-cost-free renewables "could push supply costs down." Renewables would bring "quality-of-life benefits," but "economic benefits" are "harder to forecast."
The six states' utilities all see overall increased cost uncertainty.
It is "too early to tell" if there will be "undue cost impacts" because "the range of implementation details that have yet to take shape," PacifiCorp spokesperson Bob Gravely told Utility Dive in an email.
"Precise cost-benefit forecasts put the cart before the horse. 100% laws are designed to establish norms and vision, not to have legislators engineer the electricity system."
Richard Wallsgrove
Assistant Professor of Law, University of Hawaii at Manoa
California's investor-owned utilities face the greatest uncertainty. The customer choice movement is shifting customer load and responsibility for meeting mandate goals to new load serving entities (LSEs), primarily community choice aggregators and municipal utilities. But all LSEs are working on new system management strategies to accommodate the mandate aspirations, they told Utility Dive.
Hawaiian Electric Companies' (HECO) effort at planning for a high renewables future perfectly demonstrated the unavoidable long-term uncertainty.
After three revisions of its long-term Power Supply Improvement Plan (PSIP), Hawaii regulators and stakeholders accepted HECO's detailed plan through 2030 and resigned themselves to known unknowns for the 2045 goal and its costs. But "the commission continues to be concerned with the affordability of the Companies' plans," its ruling on the third PSIP reported.
The known unknowns
The transition to a fully decarbonized U.S. power system using currently available technologies would cost $4.5 trillion, according June's Wood Mackenzie analysis. That could mean nearly $2,000 per U.S. household per year for 20 years. But it is uncertain how much of the cost would fall on shareholders, companies or customers.
Although wind, solar, and storage will make up the bulk of California's high renewables power supply, the need for "firm" generation creates another unknown, Arne Olson, senior partner with resource mix modeling specialist Energy + Environmental Economics (E3), told Utility Dive.
Even with large supplies of solar and battery storage, "the least-cost electricity portfolio" for 2050 will require natural gas generation "for reliability," E3 found.
Alternative technologies that could replace natural gas in all these states, like advanced nuclear, carbon capture, and long duration energy storage, are not proven, Olson said. But "the cost curve with only wind and solar is very steep above 80% to 90% emissions reductions. The last million metric tons to zero carbon emissions costs about $100 billion dollars per year and would double rates."
"It is not a question of if they can make the transition, it is a question of how," Olson said. "They can all go a long way with wind and solar, a lot farther than we once thought, but at some point technologies that aren't commercial today will be needed. The good news is that we can get most of the way there at a very reasonable cost. But we don't know today what that cost will be."
"Precise cost-benefit forecasts put the cart before the horse," Wallsgrove said. "100% laws are designed to establish norms and vision, not to have legislators engineer the electricity system. If leaders establish a vision, engineers and advocates can work on the resource mix and technologies necessary to achieve that vision and to optimize social benefits."
