Living in Boulder, it’s difficult to miss the community’s commitment to clean energy. It seems like half of my neighbors have solar panels on their roofs and hybrids in their driveways. I’d bet that Boulder has the only Target in the nation that had to install more bike racks to deal with the overflow of two-wheeled shoppers.
But I worry that the commitment may not always translate into wise action. Next week, voters here will decide whether or not to split from Xcel Energy and form a municipal utility. Ballot issues 2B and 2C are backed by good people with good intentions. Unfortunately, the rush to go green here may be misguided: the good intentions lost in the implementation.
My Boulder-based company, Ascend Analytics, has no business ties to Xcel but we’ve helped dozens of utilities build the analytic software infrastructure to manage energy portfolios for lower costs and risks. I know energy markets and risk management and when I look at 2B and 2C, I see operational and financial hurdles that could keep the City from finding cleaner and greener energy at comparable costs. Four key issues emerge:
Getting the Power to Boulder—Transmission Rights
Unfortunately, availability on the lines between Boulder and the wind farms of Wyoming and Colorado’s eastern plains is extremely constrained, and, when it does become available, the seller garnishes a large premium. Assuming the City could procure transmission, these premiums could add 20 percent or more to the cost of wind energy.
Balancing Supply and Demand--Ancillary Services
With the introduction of wind generation, the value of ancillary services rose dramatically with market prices averaging about 10 percent of energy costs. Ancillary service costs are not included in the City’s analysis and the City’s small portfolio would be less able to absorb shifts in wind or a parting of clouds that could incur proportionately larger costs to ramp-up generation and keep the system in balance. That disadvantage becomes more acute as the City moves to exceed Xcel’s planned mandate of 30 percent renewables.
Buying Power in Bulk on the Wholesale Market
Boulder is a small 200 megawatt system and the City would be shopping for power in a system trading in 50 megawatt blocks. Our needs don’t match the serving sizes – a single person living alone buys milk by the pint, not by the gallon. We’d end up buying power we couldn’t use or paying premiums for non-standard tranches.
Climate Impact
Natural gas generators emit less CO2 than burning coal, and replacing coal with gas is part of the municipalization plan, theoretically lessening the City’s climate impact. It may not be that simple. A National Center for Atmospheric Research (NCAR) study published this month found that methane leaks during natural gas production and other factors could negate the CO2 benefit of gas over coal. Renewable energy does provide definitive benefits. However, current portfolios considered by the City may require a smaller share of renewables than Xcel’s to maintain comparable rates and instead rely on a dubious shift in energy production from coal to natural gas.
Phrases like “ancillary services” and “indentured transmission rights” are not simple or symbolic concepts. They don’t fit well on a bumper sticker. But they are very much the reality of the power industry. Examining the issues 2B and 2C at this level of complexity makes it clear the the hypothetical benefits could come at much higher-than-expected costs.
I suggest an alternative plan.
Instead of spending another $10 million studying the issue and battling Xcel, the City could allocate that money to a solar subsidy program and get more panels on more roofs. Boulder already garners 15 percent of Xcel’s Solar Rewards, while representing just 3.4 percent of the company’s Colorado customer load. Xcel has granted $38.5 million in solar rebates to Boulder since 2006, with the contributions from local utility bills accounting for just $8.5 million. Xcel ratepayers outside Boulder are essentially paying for solar energy here. Combining City, private and government resources would bolster that return. The $10 million in municipalization costs could translate into $1,000 solar credits to 10,000 homes, enough to tip the investment for many households from marginal to cost-effective. That would mean even more Xcel subsidies and a bigger share of what everybody in Boulder is seeking: cleaner energy at lower cost.
Confronted with the uncertainty and risk in transmission costs, ancillary services, wholesale power transactions and climate change, I cannot support 2B and 2C - not when the good intentions can be realized with less cost.
Boulder doesn’t have to go it alone to be a leader in green ethics and clean energy. Working with Xcel and getting the most out of the partnership may be the better way to lead.
