December 17 Colorado Energy Cheat Sheet: Environmental ‘Propaganda’ Agency; electric rate hikes called ‘discrimination’; anti-energy activists promise to ‘ratchet up’ efforts
Filed under: CDPHE, Environmental Protection Agency, Legislation, New Energy Economy, regulations, renewable energy, solar energy, wind energy
Some commodity pricing is giving Colorado Xcel ratepayers a temporary reprieve from escalating energy costs:
Xcel said the new rates will result in “significantly lower bills, particularly for natural gas customers, for the second half of the current winter heating season.
“Compared on a year-to-year basis to better gauge the seasonal impacts of weather, both residential and small-business customers’ (natural gas) bills will be approximately 21 percent lower next quarter, when compared to the first quarter of 2015,” Xcel said.
Electricity bills are expected to drop about 5 percent compared to the current quarter, the utility said.
For the most part, Xcel passes changes in commodity prices, and the change in costs associated with supplying power and natural gas, along to customers on a dollar-per-dollar basis.
Commodity prices fluctuate, but the downward trend will be welcome for as long as it sticks around, or until it is offset by higher energy costs elsewhere, due to expensive replacement of baseload power with exotic, renewable energy sources.
The next legislative session should feature quite a few oil and gas battles, with one Democratic State Representative queueing up a bill to attack natural resource producers:
State Rep. Joe Salazar, D-Thornton, plans to introduce a bill in the upcoming legislative session that would force oil and gas companies to compensate residents for any loss in property value tied to drilling activities, including damage done by earthquakes linked to deep-earth wastewater injection wells. But state Sen. Jerry Sonnenberg, R-Sterling, has vowed to block the measure in the Senate.
“If it comes to my committee, I’d do everything I can to make it go away,” Sonnenberg said. “Quite frankly, it’s another serious attempt to run oil and gas companies out of business in Colorado… Everyone knows the pro- oil-and-gas bills go to the House to die and that the anti- oil-and-gas bills go to die in the Senate.”
That’s the response Salazar said he expected.
“This shouldn’t be a politicized fight,” he said last Saturday at a Thornton town hall he convened on the issue. “I believe we (in state government) need to give up some of the power to local governments. They need to be able to police these industries in their area.”
The benefit of a divided legislature is that extreme bills like this will likely not make it too far in the opposing chamber. But the bill will still be heard, and we expect some rhetorical fireworks over legislation similar to this.
Anti-energy activists in our state plan to “ratchet up” their efforts beyond legal means in the near future:
The leader of a national activist organization behind ban-fracking campaigns in Colorado, Ohio and elsewhere is calling on activists to “ratchet up” civil disobedience and begin “filling up jails.”
The comments are from Thomas Linzey, founder of the Community Environmental Legal Defense Fund (CELDF) in an interview he did with Chris Hedges’ Days of Revolt. From the interview:
HEDGES: “Well, you have talked about it as a kind of military operation. Explain what it would look like.”
LINZEY: “Well, I think it means thinking about civil disobedience differently than we’ve thought about it before. So it’s not just to make a moral or ethical statement; it’s actually aimed at stopping the project itself. And that means, I think, successive days. It means rotating people through. It means bringing people in from other places. It means filling up jails.” (emphasis added)
Linzey went on to suggest that the law isn’t really important here:
“I mean, our resistance has to ratchet up, the opposition has to ratchet up our stuff to a point where it’s actually actively interfering with these projects, because if you don’t do that and you rely entirely on the legal process and the legal process is so stacked against you in terms of what municipalities can and can’t do, that at that point you have no other option but to engage in that type of action.” (emphasis added)
Growing frustration on the part of anti-energy activists seems to be fueling (pun intended) a sense of urgency. We hope this amounts to nothing more than bravado, but hope that Colorado’s natural resource developers–our neighbors–stay out of harm’s way.
The Environmental Protection Agency? How about the Environmental Propaganda Agency–says the Government Accountability Office:
Yesterday the Government Accountability Office issued a report concluding that the Environmental Protection Agency (EPA) violated federal law in its use of social media to promote its controversial “WOTUS rule,” redefining the scope of the “waters of the United States” subject to federal regulation under the Clean Water Act. Specifically, the GAO concluded that the EPA violated express limits on the use of appropriations for indirect or grassroots lobbying, and that in doing so, the agency violated the Antideficiency Act.
According to the GAO, the EPA used various social media platforms, including Thunderclap, to develop support for its proposal to expand and clarify the scope of its own regulatory jurisdiction and combat opposition to the rule. The EPA also used social media communications to promote materials supporting the WOTUS rule by environmentalist advocacy groups, including materials that were clearly designed to oppose legislative efforts to limit or block the rule. The GAO labeled these efforts “covert propaganda.” The New York Times had previously documented some of the EPA’s actions.
Good legislation is often larded with bad–pork, paybacks, and wheeling-dealing that makes the whole thing a whole lot less palatable–and the proposed extension of the wind production tax credit and the investment tax credit for solar has the renewable industry singing the praises of the proposed lifting of the oil export ban:
Michael Zarin — head of external communications for Vestas — said via email that the company is “pleased” by the proposed extension.
“As currently structured, the extension and phase-out plan would give the industry the longer-term certainty that we’ve been seeking,” Zarin said. “Together with wind energy’s natural competitiveness against other power generation sources, the PTC extension agreement would help ensure a solid future for wind energy in the U.S.”
The solar industry’s investment tax credit, currently a 30 percent credit for commercial, residential and utility-scale solar power systems, also would be extended and phased down through 2022 under the proposal.
The credit, as proposed, would stay at 30 percent through 2019, and then fall to 26 percent in 2020. It would drop to 22 percent in 2021 and 10 percent in 2022. The bill also offers a commence-construction clause that would extend the credit to any project in development started before the end of 2021 and be finished before the end of 2023.
“We are delighted a five-year extension of the Investment Tax Credit has been included in the omnibus bill,” said Rebecca Cantwell, executive director of the Colorado Solar Energy Industries Association. “We worked hard to get it included, and are working hard to make sure it passes.”
Mining for a photo-op to discuss the fallout of the EPA’s Gold King Mine spill:
IDAHO SPRINGS – The first-ever congressional hearing inside a mine was held Monday, offering a dramatic image of the impact the Gold King Mine spill has had on policy talks.
The Subcommittee on Energy and Mineral Resources held its field hearing inside the Edgar Mine in Idaho Springs, where the panel discussed legislation aimed at training and recruiting engineers to work on mining reclamation efforts.
“This is weird,” said U.S. Rep. Rob Bishop, R-Utah, chairman of the House Committee on Natural Resources, who made his remarks while wearing a hard hat and looking up at rock formations inside the mine, which is used for training by the Colorado School of Mines.
Discussions around mining reform gained momentum after the August Gold King Mine spill, in which an estimated 3 million gallons of old mining sludge poured into the Animas River, turning it a mustard-yellow. The river tested for initial spikes in heavy metals.
Efforts to increase electricity rates in the southwest part of the state were sustained, as a measure to push back failed, with opponents of the rate hike calling the residential-focused increases “discrimination”:
An effort to reverse a decision last month to increase residential electric base rates failed at the La Plata Electric Association’s meeting on Tuesday with a split 6-6 vote.
In November, the board approved on a 6-5 vote a new rate structure that will cost local residents about $5.25 more per month on their electric bills, based on usage. Commercial and industrial users will see an estimated 4 percent decrease on next year’s bills.
However, Tuesday’s main point of contention was last month’s decision to raise the residential base rate from $20.50 to $21.50 a month, which had several board members concerned that the increase would “exacerbate inequality” in the region.
“If we continue to do this, we are harming and discriminating more and more against our members,” said board member Jeff Berman in reference to the 60 percent increase in base charges over the last five years. “I cannot support a base charge increase that exacerbates inequality and discrimination.”
Growing transmission costs for wind-generated electricity have prompted Xcel Energy to seek approval for rate hikes to smaller utilities using Xcel’s transmission lines to reach their consumers:
Xcel wants the utilities to pay for its costs associated with having supplies of reserve power ready to go in case the wind suddenly dies, said Terri Eaton, Xcel’s director of federal regulatory and compliance efforts.
Currently, those costs are paid by Xcel’s business and residential customers, Eaton said.
If the transmission lines customers can supply their own back-up power supplies, they wouldn’t be charged under the proposed rates, she said.
Readily available, back-up power supplies are critical to keep the transmission grid in balance and avoid blackouts that can occur when a big source of power suddenly disappears, Eaton said.
Xcel’s hikes would hit rural cooperatives and other utilities should the Federal Energy Regulatory Commission approve the rate hike at the beginning of 2015.
But what, exactly, does Eaton mean when she refers to “reserve power ready to go in case the wind suddenly dies”?
“We’ve seen some dramatic wind fall-offs in really short periods of time,” Eaton said.
Xcel has already experienced such falls offs, when “several hundreds of megawatts of wind” drops dramatically — and swiftly — due to changes in the wind, she said.
“Sometimes the wind is just howling, and an hour later the wind has calmed — and it’s in those circumstances that we need to have reserves available to pick up the load,” Eaton said.
In such cases, backup power supplies typically come from natural gas-fueled power plants, she said.
The tariff proposed by Xcel would help cover the costs when the wind “suddenly dies.”
The intermittency of wind has been widely discussed, and no amount of forecasting or improved efficiency will spin a wind turbine’s blades if the wind isn’t blowing.
In 2012, a study examined wind generation in Illinois at the height of a summer heat wave, when energy demands rise to yearly highs. The author found that just 5 percent of installed wind capacity was available during that outbreak of record temperatures, and at times, “virtually nonexistent.”
Earlier this year, wind energy proponents touted the example provided in Texas–wind had saved the day. But a closer examination of the figures from the Electric Reliability Council of Texas (ERCOT) demonstrated that contrary to claims that wind had bailed out conventional sources of electricity by ensuring grid reliability, wind had actually fallen so substantially that Texas turned to other sources to meet the extra 1,000 megawatts of demand on January 6. Both scheduled and unscheduled plant closure elsewhere had left Texas with a gap during a record cold snap, a gap that wind was unable to fill.
As the Institute for Energy Research wrote in January, only 3.2 percent of the energy needs of the Texas grid operated by ERCOT came from wind, while 83 percent of Texas wind turbines “were unavailable during peak demand.”
ERCOT itself continues to rate its “wind power at 8.7 percent of its installed capacity” for 2014 during the periods of highest demands, which typically occur in mid-to-late summer. For nearly 12,000 megawatts of installed wind capacity, only 990 megawatts are considered reliable for forecasts computed by ERCOT for 2014. That’s like having the equivalent of 12 1,000 megawatt power plants built and only 1 online when summer energy demand spikes.
As a percentage, ERCOT figures wind to provide just 1.3 percent of the total amount of energy it needs this summer, rising to 2.2 percent by 2017 according to its own projections.
As for Colorado, under Senate Bill 252, rural cooperatives must reach 20 percent renewable energy by 2020.
Tri-State Generation and Transmission Association spokesman Lee Boughey acknowledged the rising costs of integrating ever-greater amounts of intermittent energy supplies like wind.
“As more intermittent resources are added in the region, we understand the need to address the higher costs of integrating and balancing power,” Boughey told the Denver Business Journal.
Those costs were highlighted in a March post that examined the integration of wind and other intermittent energy sources to the reliability of the grid operated by Public Service and regulated by the Public Utilities Commission (PUC), under the state’s preferred energy mandate:
The concern over infrastructure costs and the cost to ratepayers, as well as the challenge of incorporating ever-larger amounts of intermittent generation sources like solar and wind, is not a new topic at the PUC.
In June 2012 comments by PUC staff engineer Inez Dominguez indicated that off-peak load and wind generation in particular was “alarming.”
The integration of intermittent sources like wind would overwhelm the system, either with higher costs or decreased reliability. Bringing in wind and curtailing conventional, coal-fired generation during off-peak periods would result “in an economic penalty to the Public Service customers because more expensive wind generation would be supplying their load.”
Cutting off the wind, however, would also penalize ratepayers, as the “take or pay” agreements give wind first priority.
But the Public Service engineer also highlighted reliability concerns. “In its simplest terms as it concerns the customers, reliability deals with keeping the lights on. This reliability issue may occur when the wind suddenly stops blowing and a significant amount of wind generation is lost to the balancing authority,” Dominguez said.
“When this event happens, the balancing authority needs to replace the lost generation quickly enough to keep from tripping off the load. This means that the generation in reserve to cover such an event has to be quick enough in its response to cover the lost generation,” Dominguez continued.
For Colorado ratepayers, this backup generation comes from “gas fired combustion turbine generation reserves” that displace “more economic base load coal fired generation,” only adding to the cost, and “complexity” of the load balancing requirements.
According to Dominguez, these examples suggested a “flag that Public Service may have too much wind generation.”
Vestas Wind Systems A/S and 1,700 Colorado employees could see a takeover bid by one of the two largest Chinese wind manufacturers:
Danish newspaper Jyllands-Posten, citing unnamed sources, reports that Sinovel Wind Group and Xinjiang Goldwind Science & Technology, the No. 1 and 2 Chinese wind-turbine makers respectively, have discussed takeover bids with bankers.
Reuters, in a report Monday, quoted an analyst as saying that both companies are state-backed and have adequate financial capacity to acquire Vestas.
“Vestas would be a strong acquisition target for either Sinovel or Goldwind,” Keith Li, analyst at CIMB research, told Reuters.
Aarhus, Denmark-based Vestas (DK: VWS) — facing stiff competition from China and slackening demand in debt-plagued Europe — has seen its share value sink more than 50 percent since October. It posted a bigger-than-expected 2011 loss of $218.4 million.
Vestas stock soared on the news of the possible Chinese acquisition.
Other analysts, citing the difficulty of a purchase of the company by either of its two Chinese competitors, point to a potential partnership instead.
It’s unclear what effect the news will have on Vestas’ push for an extension of the wind production tax credits or the support for such a push in Congress, especially from Colorado’s delegation, should the company become wholly or partly owned by Chinese companies and possibly the Chinese government.
Greeley Tribune reporter Nate Miller interviewed me as the voice of opposition about the wind “Production Tax Credit” (PTC). Miller does a good job of presenting both sides of the argument:
Supporters of the wind production tax credit, which began in 1992, contend failure to extend it will result in layoffs for workers from good, high-paying manufacturing jobs, many of which are located in northern Colorado. It will also make the country more dependent on foreign oil, they say. Those opposed to the credit say wind energy is inefficient and the government shouldn’t subsidize it. It’s simply wrong, they say, to believe there would be no jobs without the tax credit.
“If you look at economic modeling in the dynamic sense, the private sector would spend that money in a much more cost-effective way and those people would likely be employed,” said Amy Oliver Cooke, director of the energy policy center at the Denver-based Independence Institute, a free-market think tank “Maybe not in the wind industry, but in some other industry.”
Shocking that Big Wind and its green enablers want to extend the $3.5 billion annual tax credit. My question to them is why should the rest of the country have to pay for Colorado to indulge its green fantasies? Read the rest of the story here.
If we had our way, there would be no tax subsidies of any kind for any energy resource. Since the wind production tax credit (PTC) is what’s currently being debated in Congress and on editorial pages across Colorado, we’ll address it. Below is our column that appeared originally in the Pueblo Chieftain on Sunday, March 4. We thank the Chieftain for publishing our opinion.
Time to retire the wind PTC
By Amy Oliver Cooke and Michael Sandoval
Colorado’s newspapers are loaded with pleas to extend the current 2.2 cents per kilowatt-hour Production Tax Credit (PTC) for wind energy. With the exception of Republican Representative Doug Lamborn, the entire Colorado congressional delegation signed a letter urging Congress to continue the PTC at a cost of $3.5 billion annually.
We disagree with the majority and wonder why Americans should subsidize Colorado’s green fantasy and a resource that is neither practical nor economically viable.
Former Xcel Energy CEO Wayne Brunetti outlined the real limits of wind power production when he told an audience in 2004 that at the utility company “we’re a big supporter of wind.”
“But at the time when customers have the greatest needs, it’s typically not available,” he lamented, acknowledging the most critical shortcoming of the alternative energy source.
Plus, he added, the intermittency of wind drastically reduced a given installation’s capacity by a factor of 10-to-1, making fossil power plants a necessity for backup.
Of course, this was before environmental activist turned former Public Utilities Commissioner Chairman Ron Binz convinced Colorado voters to mandate a Renewable Portfolio Standard (RPS) that Binz estimated would be 96 percent wind.
Binz actually wrote that the impact of the then 10 percent proposed RPS on ratepayers’ bill would “vary by utility, but the most likely outcome is that state-wide electric rates will be virtually unchanged,” thanks in part to the PTC.
During the 2004 RPS campaign, Binz reported that Colorado retail residential electric rates were 7.37 cents per KWh in 2002. Fast forward a decade with a 30 percent renewable mandate that is heavily weighted towards wind, Colorado’s residential electric rates have skyrocketed 50 percent to 11.04 per KWh. Based on Department of Energy statistics, states with an RPS endure 30 percent higher electric rates, and the rest of the country pays as well through the PTC.
On the practical side, available wind is never near load centers—where the people actually live—and, as Brunetti told the U.S. Senate Energy & Natural Resources committee in 2005, transmission costs from remote areas often exceeded the price tag of the wind project itself.
But the RPS and PTC made Brunetti a proponent of wind in less than a year.
In the same Senate committee testimony, Brunetti called for a “wide diversity of power generation resources” supported by mandatory RPS programs at the state level. In order to ensure that wind retained “economic viability compared to fossil or nuclear generation,” he called for an extension of the Production Tax Credit. While wind was the most competitive renewable resource, according to Brunetti, “even that would not be true without the Production Tax Credit.”
Xcel concedes this point today in its current Renewable Energy Resource Compliance Plan. As does physicist Dr. Kelvin Kemm who wrote, “The problem is that large-scale wind power fed into a national grid is just not viable – either economically or practically – from an engineering stand point.”
But perverse tax incentives such as the PTC serve only as an encouragement for Colorado’s green fantasies and wind profiteers.
Vestas, with a substantial presence in Colorado, stands to benefit greatly from the PTC extension. Marth Wyrsch, president of Vestas-American Wind Technology, told the U.S. Senate Finance Subcommittee, “An extension of the PTC is necessary for the continued employment of 80,000 people working in the U.S. wind industry.” The impact in Colorado has been estimated at 1,600 jobs.
Vestas is no stranger to other recent Federal tax credits and incentives. As part of the $2.3 billion Advanced Energy Manufacturing Tax Credit (aka 48C), Vestas received $21.6 million for its Pueblo plant, and $30.2 million for its facility in Brighton in 2010.
Colorado officials also eagerly incentivized Vestas. The Pueblo and Windsor plants received roughly $34 million in various state and local tax incentives and rebates. Taxpayer dependent Vestas claims the PTC is necessary to maintain the 1,600 jobs taxpayers “created” in the first place.
But two decades of the PTC is long enough.
Even Colorado Democrat Senator Michael Bennet argues in a Chieftain guest column that the PTC “should not go on forever. At a certain point every business has to sink or swim based on its merits.”
But then he claims wind energy needs more, “we are incredibly close to the tipping point with wind energy, and pulling the rug out from under it now would deal the industry and our economy and enormous blow.”
We disagree. It’s time to retire the PTC. The choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or wind profiteers.
Vestas, Green Energy Sold Short
By Jon Nicholas
Colorado has become a leader in government subsidizing green jobs. A major beneficiary of those state and local subsidies has been a Danish company, Vestas Wind Systems A/S. Vestas operates four manufacturing facilities in Colorado in Windsor, Brighton and Pueblo.
Democrats accuse Republicans of selling green energy short. Turns out they might be right. As of December 26, short sales of Vestas stock reached 17.6% of outstanding shares. In a short sale, an investor borrows stock, sells it, and then hopes to buy the stock later at a lower price. Short-sellers have no theoretical limit on their losses. That unlimited risk means that short sellers must be highly certain in their pessimism.
On Thursday, Vestas announced a major sale to Brazil, but the order still left Vestas short of earlier 2011 sales estimates. Vestas still has until Saturday to reach its annual estimate, but the shorts appear skeptical. Earlier this month, Vestas testified in the U.S. Senate in favor of extending a U.S. Production Tax Credit beyond the end of 2012. Wind energy benefits from a 2.1 cent per kilowatt-hour tax credit. Vestas claims that if the tax credit expires, 80,000 U.S. jobs are at risk, including thousands in Colorado.
Some investors doubt the value of other green energy stocks as well. The solar panel company Solyndra has received lots of press attention. The Department of Energy provided the company massive loans despite the likelihood of a business failure. Political considerations apparently trumped common sense. Solyndra is just the tip of the melting iceberg.
Vestas doesn’t even make the top fifty stocks in terms of short interest as a percentage of the total stock float. Consider some of the other stocks subjected to short interest. Number two on the list is Tesla Motors, Inc. As of Tuesday, short interest in the stock was 52.1%. Tesla plans to release its Tesla Model S Sedan in the summer of 2012 at a net base price of $49,900—after deducting a $7,500 federal tax credit.
A stock analyst recently reduced estimates of the global market for electric cars. By 2025, the analyst expects electric cars to be just 4.5% of the global car market, instead of 8.6%. That has huge implications for Tesla, as well as the whole notion of government subsidies re-inventing the auto market. The Department of Energy extended $465 million in loans to Tesla as part of the Advanced Technology Vehicle Manufacturing Program. Every car sold will also benefit from that federal tax credit.
Lithium battery maker Ener1 was one of thirty electric car battery makers to receive a DOE grant. In 2009, Ener1 was scheduled to receive $118.5 million in stimulus money, but only receive about half. In January, Vice-President Biden visited an Ener1 plant in Indiana to highlight the administration’s commitment to electric cars. Indiana Republicans shared the Obama Administration’s commitment, and the company had received over $10 million in DOE and Defense Department research grants during the Bush Administration. In October, NASDAQ de-listed the stock. A Bloomberg stock analyst believes Japan and South Korea will dominate the electric car battery market. That’s bad news for taxpayers.
Number 18 on the list of short interests on Tuesday was First Solar, Inc., with 35% of its outstanding shares shorted. First Solar is approaching its all-time low and still hasn’t cleared out the short sellers. GreenStocksCentral.com reported in Mid-December that the company is in “serious disarray” after being a “darling” among green energy stocks.
First Solar now plans to flee the U.S. market for other countries that do not depend on subsidies. Selling stocks short is risky business. First Solar concluded that depending upon government subsidies for success is a far greater risk.
None of the above should be construed as investment advice.