POWER July 2010 - 65

ELECTRIC POWER 2010: WHERE THE GENCOS MEET
Utility Perspectives on Using
Renewable Power
As U.S. utilities increase the percentage of renewable energy in their generation
portfolio, they must deal with a number of key issues related to selecting
specific technologies. Additionally, they must figure out what it
will take to make renewables emerge as a mainstream generating option
in the future.
By Angela Neville, JD
U
.S. utilities are increasingly selecting
renewable energy technologies for
power generation, prompted by state
renewable energy portfolio standards (RPS)
requirements and several other criteria unique
to their generation mix. Reflecting the growing
impact that renewable energy sources are
having on the industry, this year's ELECTRIC
POWER Conference offered a session
titled " Utility Perspectives on Renewable
Power-Panel Discussion, " which featured a
lively exchange about this complex topic.
The speakers included Mike Smith, senior
vice-president of Green Initiatives at Constellation
Energy; Mike Turner, process supervisor
at American Electric Power's (AEP)
Rockport Power Plant; Dr. Sarah Kurtz, principal
scientist with the U.S. Department of
Energy's (DOE) National Renewable Energy
Laboratory (NREL); and Dr. Allen Hoffman,
senior analyst with the DOE's Office
of Energy Efficiency and Renewable Energy.
In addition, Mark Kapner, PE, senior strategy
engineer with Austin Energy in Austin,
Texas, shared his utility's efforts to integrate
renewable energy into its portfolio mix. I
cochaired the session with Vas Choudhry,
strategic marketing program manager, GE
Energy, Global Marketing.
Efforts to Integrate Renewables
" Austin Energy currently has five power
purchase agreements for wind (projects in
operation) and one for solar (project in development), "
Kapner said. " The five wind
projects contribute 10.6% of our total megawatt-hours. "
When
asked how much renewable power
can be accommodated by the existing system
for a given state, region, or utility, Kapner
responded that the answer depends on how
much flexible generating capacity the balancing
area currently has. For example, flexible
generation can be ramped up or down at a
rate equal to the maximum ramping rate of
the wind or solar generating units.
July 2010 | POWER
In contrast to Austin Energy, AEP has
tried cofiring coal and sawdust but still had
some emission issues to deal with. AEP also
has tried different biomass ventures, according
to Turner.
" At AEP, we're also trying carbon sequestration, "
Turner said. " However, the issue is
whether the PUC [Public Utility Commission]
will let you put [it] in your rate base.
We found that you have to get the PUC to let
you put it in your rate base. "
Hoffman, the DOE analyst, focused on
current challenges that are slowing the adoption
of renewable energy by utilities: " At the
present time, the two biggest barriers for renewables
in the U.S. are that we haven't yet
developed successful energy storage technology
and we don't have a national grid. "
Financial Issues Related to
Renewables
Utility customers want to be " green, " but
they also do not want to incur significant additional
costs for their electricity, Smith noted.
" At Constellation Energy, we don't talk
to our customers about saving polar bears, "
he said. " Electricity must be cost-efficient for
our customers. Technologies like microwind
and fuel cells can bring benefits to customers'
backyards. Customers will be able to save
money through distributed energy sources. "
He emphasized that the Constellation Energy
management spends a large amount of
time analyzing political developments in order
to review risks. The company won't build
new facilities unless management thinks the
company will get a good return on investment.
" It's best if the renewable technologies
have a glide path with upfront subsidies, but
ultimately, they have to stand on their own, "
Smith explained.
Along the same lines, Kapner explained
the financial issues that the Austin Energy
management focuses on. " Capital cost and
capacity factor act together along with operations
and maintenance costs and the cost of
www.powermag.com
capital (i.e., financing) to create the levelized
cost of energy-the single most important
factor, " he said. " Intermittency-which we
prefer to call variability-is a lesser factor.
Long term (i.e., 20-year) fuel supply certainty
is, of course, a major factor for biomass. "
AEP's Turner emphasized the impact of
incentives on the integration of renewables
into utilities' generation mix. " Incentive
programs for renewable energy promote the
greenest power at the cheapest price for both
utilities and individuals, " he said.
Turning to another financial issue, Hoffman
focused on the relative costs of different
fuel sources used in generating electricity.
" Our country pays for our energy one way or
another. We're already paying a price to burn
coal, " he said. " In the future, if we put a price
on carbon (such as imposing a tax), we'll see
lots of innovation in the development of renewables. "
He
also had strong views about utilities'
role in educating their customers. " I feel that
we have not had enough public education
about the real costs of energy, " he said. " We
need to educate people about why it's important
to use energy efficiently. "
Dealing with State Renewable
Portfolio Standards
" One of Constellation's biggest questions
is, how do we comply with state renewable
energy portfolio standards [RPS] in the most
cost-effective manner? " Smith said. " We've
determined that fuel mix diversity will help
us get to a sustainable future. "
" State RPSs allow a market approach that
can drive down technology costs. My mantra
is that markets work, " he said. " In contrast,
feed-in tariffs provide no incentives to bring
down costs. "
Smith also emphasized that regulators
need to set rules and keep them stable. Then
utilities can start to take more decisive actions
to incorporate renewable energy into
their operations.
65
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POWER July 2010

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