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Utilities: What are renewables' strengths, weaknesses, opportunities and threats?
A SWOT analysis turns up some definitive answers from Xcel, DTE, and NPPD.
By Herman K. Trabish
May 12, 2014 | Print:
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Execs from three influential utilities did a SWOT analysis on renewable energy, assessing its Strengths,
Weaknesses, Opportunities, and Threats for their companies at WindPower 2014, the just-concluded
annual industry conference.
SWOT analysis
The utilities were quick to define the strengths.
Renewables' strengths
We get 9.5% of our power from renewables, mostly wind, so we are one project, one PPA, away from
Michigan’s 10% by 2015 requirement, said DTE Energy Wind Development Program Manager Michael
Serafin.
Xcel Energy has deployed wind and solar when and where it is the best resource, said Public Affairs VP
Doug Benvenuto. “At 1 AM on May 24, 2013, we got over 60% of our power from wind. Wind has saved
us over $37 million in fuel costs. We are also a major utility solar provider.”
Both serve to meet state mandates and standards, Benvenuto said, but “markets need to learn that
wind is the best economic and environmental choice.”
With its current price approaching $0.021 per kilowatt-hour across much of the Midwest where Xcel
serves 3.5 million electricity customers, Benvenuto said, “it is the most cost efficient choice and a hedge
against gas prices and environmental regulations.”
Credit: From Ryan Wiser, et. al., Lawrence Berkeley National Laboratory
Despite not having a state mandate, Nebraska Public Power District (NPPD) is at 500 megawatts of wind
on the resource strength and the utility’s 10% renewables target, explained Sustainable Energy Manager
Dave Rich. But its mix is 55% “old coal” that new wind and natural gas can’t compete with. “Coming EPA
regulations may change that,” he said.
Requirements that existing coal plants be retrofitted with scrubbers could cost NPPD a billion dollars,
Rich said. That would force serious consideration of natural gas and wind. “We’re waiting for the final
rulings to see what EPA does and how much it will cost.”
Rate basing wind would make it more attractive for DTE, Serafin said, but with a full portfolio of
committed old coal, that is presently not an option. “But with EPA regulations, older generation will
have to come out of the rate base and wind can go in.”
Meanwhile, it is “a very effective hedge against gas price volatility,” Serafin added, and was an
“important buffer” during this past winter’s cold, when gas prices spiked.
Renewables' weaknesses
They agreed renewables’ grid integration cost is a weakness but disagreed about how big the weakness
is.
“The grid is now becoming comfortable with variability,” Serafin said. “It is not as onerous as we
thought.”
“Since we joined the Southwest Power Pool, the costs have decreased significantly,” Rich agreed, citing
SPP’s bigger and more varied resources spread across a wider region.
Xcel is currently engaged with rooftop solar advocates in Minnesota and Colorado who argue solar
brings more value to the grid than costs.
Xcel believes utility-scale solar is “a better choice,” Benvenuto said. “We have enabled the rooftop solar
choice. But it shifts the cost for the grid, it is not the best way to cut emissions, and it competes against
wind.”
Integrating wind adds grid stresses and costs that should be allocated. But improved supply, load, and
resource forecasting has reduced those costs. “For Xcel, getting the costs of rooftop solar and the other
renewables properly allocated is the most important question,” Benvenuto said. “Rooftop solar has
certain advantages. We proposed a renewables integration tax credit for utilities, not as a money-maker
but to make sure the costs of integration are carried by all customers.”
Credit: from Xcel Energy
Renewables' opportunities
Renewables also offer opportunities, Rich said. In a rural state like Nebraska, solar and wind can shift the
load imposed by irrigation from peak hours to when the wind blows and the sun shines because farmers
want to take advantage of low cost electricity.
A corporate NPPD customer that obtained a PPA for a 60 megawatt wind project was able to pass
through the costs of integration, Rich added. “They were lower than expected and wind did not impact
reliability.”
Rooftop solar is not an opportunity or a threat in Michigan because “it is not the best deal for our
customers,” Serafin said. The EPA regulations make wind and natural gas opportunities. “But we
remember the 1980s, when gas prices were very low and then spiked. So wind is an excellent hedge
even where it doesn’t beat the cost of gas.”
“There is a story to be told about the synergy between wind and natural gas, Benvenuto agreed. “It is to
the benefit of the wind industry to have a strong natural gas industry.”
Credit: from Environment New Hampshire
Renewables' threat
There was no debate on the threat.
“Our concern is the boom-bust cycles caused by the politics of the production tax credit,” Serafin said.
“Whether the PTC is extended, extended with a phase out, or phased out, it will be better than what we
have now, the boom-bust cycles,” agreed Benvenuto. “If the Republicans win the Senate as well as the
House, wind may have to take what it can get.”
The big picture
When the discussion ended, moderator and OwnEnergy Founder/CEO Jake Susman polled the audience
for a SWOT analysis:
Strengths: Low cost, RPS compliance
Weaknesses: Integration costs
Opportunities: Hedge against natural gas price and environmental regulation
Threats: PTC expiration, DG’s negative impact on load, EPA regulations