A key CRI goal is to lower electricity bills in the
state to make our economy more competitive to encourage job
growth. Working against that goal has been an increasing cost for green
energy programs. State policy requires an increasing percentage of
our power come from wind mills and solar cells. Electric generators must
also buy permits at auction to emit carbon dioxide with the number of
permits gradually decreasing over time forcing permit prices
higher. This year these requirements will add a $90 million premium to
electric bills in the state. The premium will grow to a job killing $275
million by 2022 and add almost $300 a year (12.5%) for an average
residential customer.
Adding electric generation will be critical to
maintaining reliable service as coal plants shut down in response to
federal policy. Wind farms produce electricity at roughly a 50% higher
cost than conventional natural gas facilities (according to the US
Energy Information Agency) with about the same impact on the
environment. Several natural gas generators are scheduled for
construction in the state and will add both construction and permanent
jobs while lowering electric rates by as much as $240 a year for a
typical residential customer. Meanwhile, we will be obtaining almost 20%
of our power from out-of-state wind farms by 2025 with no construction
or permanent jobs created. In fact, jobs will be lost because of the
higher cost of electricity diverting money from discretionary income.
By 2025 about 2.5% of our power will come from
solar electric systems and the power will cost two and half times the
cost of conventional power. However, about 500 Delaware jobs are created
at a solar manufacturing plant in Newark and by solar system installers
around the state. At the current cost we project two jobs will be lost
because of higher electricity costs for every job created. There is some
indication installed cost for solar will continue to decline.
Meanwhile, the Delaware Department of Natural Resources
and Environmental Control (DNREC) is accelerating the cost of the
carbon auction program. DNREC is using a regulatory change to extend the
carbon reduction goal from 10% to 53% while raising the maximum
allowable cost of the permits. The program was costing about $5 million a
year in 2011 and 2012 but will cost over $16 million in 2013 rising to
as much as $38 million by 2017. The Delaware Constitution requires any
fee increase be approved by the legislature with a 3/5 majority but
DNREC is ignoring the Constitution.
Germany, with 40% of the world’s installed solar energy
capacity, started down this same path a decade before Delaware. The
green premium to electricity rates has reached 20% of the bill. The cost
continues to grow despite a dozen reductions in subsidy rates over the
last few years. Falling subsidies have led to lower wind and solar
project costs as renewable energy suppliers try to remain
competitive. New subsidized projects continue to be built although at a
lower premium power cost rate. The German electorate is rebelling at the
cost so more subsidy cuts are planned.
It is not too late for corrective action by our state
government. To reducing energy cost for the First State Delaware should:
· - Continue
to encourage construction of natural gas pipelines and power plants to
reduce net greenhouse gas emission while lowering power cost.
·
- Require
3/5 legislative approval of changes to the carbon dioxide permitting
program known as the Regional Greenhouse Gas Initiative and remove the
higher emission targets (Delaware has already lowered GHG by 45%
compared to only 9% for the entire country).
·
-Delay
implementation of the increasing requirements of the Renewable
Portfolio Standard particularly as it drives added use of out-of state
wind farms. Gradually eliminate state subsidies for wind and solar projects to encourage lower installed prices.
·
-Cap the fuel cell project
with Delmarva Power at 30 megawatts as power cost for fuel cells is the
most expensive in Delaware at almost four times the cost of conventional
natural gas generation and 60% higher than solar.
David T. Stevenson
Director, Center for Energy Competitiveness
Caesar Rodney Institute
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