Portugal Sets Renewable Energy Example

The Portuguese initiative has been a smashing success, dramatically increasing the country’s domestic, renewable energy production in a few short years. The Times article generally acknowledged this, but raised concerns about its cost. AWEA Manager of Transmission Policy Michael Goggin has this reaction:

I enjoyed this article highlighting the environmental, energy security, and job creation benefits Portugal has achieved by enacting strong policies to support renewable energy.

However, the claim in paragraph 5, repeated later in the article, that renewable energy has led to increased energy costs for consumers because Portugal’s "electricity prices have increased 15% in the last 5 years" isn’t very convincing, considering that average U.S. electricity prices increased 30% from 2004 to 2009 (U.S. Department of Energy data).

The conclusion I would draw is that if the U.S. had gotten more of its electricity from renewables like Portugal did, our consumers would have been better protected like Portugal’s were as the price of fossil fuels skyrocketed.

These savings occur because wind farm displace the highest-cost power plants on the power system. Because wind turbines has no fuel costs and very low operating costs, it is able to produce electricity more cheaply than nearly all other sources of electricity.

The supply curve for electricity is typically quite steep, so even modest additions of renewable generation to the power system can drastically reduce power prices by forcing expensive generators offline and lowering the market clearing price for electricity.

Recent studies in the U.S. have verified that wind energy reduces consumers’ electricity prices. A 2006 report in Colorado found that the wind energy already acquired by the Public Service Company of Colorado at that point would save consumers on net more than $250 million over the lifetimes of the wind plants.
A 2009 analysis for the New York State Energy Research and Development Authority (NYSERDA) found that each megawatt-hour (MWh) of renewable energy produced resulted in $100 worth of consumer savings on electric bills alone, far more than the $15/MWh average value of a renewable energy credit.

The Joint Coordinated System Plan, a study conducted by many of the grid operators in the Eastern U.S., similarly found that obtaining 20% of the region’s electricity from wind and building the transmission infrastructure necessary to do so would save consumers over $40 billion per year, or $30 billion once the cost of the transmission was factored in.

Recent analyses from ERCOT and PJM, the utility system operators in Texas and the MidAtlantic/Great Lakes regions respectively, have verified that, under a cap-and-trade bill, building additional wind would save each household $3 to $5 per month on their electric bill.

Another study by Bernstein Research, a Wall Street analysis firm, has found that regions of the country that have experienced significant growth in wind energy over the last several years have also seen significant declines in wholesale power prices.

Other U.S. studies have found similar results. The consulting firm CRA International examined the costs and benefits for consumers of building major wind developments and associated transmission infrastructure in two analyses in 2009.

In a study looking at 14,000 megawatts (MW) of wind energy development in the Lower Plains, CRA concluded the investment would provide economic benefits of around $2 billion per year. $900 million of these benefits would be in the form of direct consumer savings on electric bills.

Renewable requirements make consumers better off through less direct means as well. The Department of Energy’s 2008 report, "20% Wind Energy by 2030," found that producing 20% of the nation’s electricity from wind energy by 2030 would reduce consumers’ natural gas costs by a cumulative $150 billion by reducing electric sector demand for natural gas and thus reducing the price for all natural gas consumers.

By offsetting fossil fuel generation, renewable requirements also reduce the cost passed on to consumers for compliance with other environmental regulations, like sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions regulations. Many of the job creation, tax revenue growth, and other economic development benefits of wind deployment also accrue to consumers through direct and indirect ways.

By Michael Goggin, www.awea.org/blog/