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Where is Xcel Hiding the Cost of Wind Power?

Under Colorado’s Renewable Electricity Standard, investor-owned utilities in Colorado must generate 12 percent of their electricity from renewable energy this year. The requirement was 5 percent last year. By 2020, it is 30 percent.

Renewable energy sources like wind and solar cost more than conventional energy sources like coal and gas, but Colorado lawmakers sought to protect ratepayers by limiting the annual retail rate impact of the green energy mandate to 2 percent of a customer’s bill.

Elsewhere, I’ve described how Xcel has avoided the rate impact limit to date. However, the on-going Solar*Rewards imbroglio presents significant new questions about the permeability of the green energy cost controls.

According to documents filed by Xcel in advance of today’s PUC hearing on the Solar*Rewards program, the utility spent $67 million last year to subsidize the installation of solar panels. That’s about $17 million more than the rate cap, which was roughly $50 million. This year, Xcel expects to spend $97 million on the Solar*Rewards program, which is almost twice the projected Renewable Electricity Standard rate cap.

So, this solar energy costs far more than the 2 percent rate cap, yet it accounts for a small fraction of Xcel’s renewable energy requirement. Indeed, the Solar*Rewards procurement target is only 2 percent of the 2011 Renewable Electricity Standard. About 95 percent of the 2011 standard is to be met with wind power.

These numbers beg a very important question: If 100% of the green energy budget is spent on meeting 2 percent of the green energy target, how does Xcel meet the remaining requirement without grossly exceeding the rate cap?

The Renewable Electricity Standard allows the utility to “bank” green energy credits when it exceeds its annual target. These “banked” credits can be used towards future compliance. And Xcel has outperformed the standard in recent years.

But the math still doesn’t add up. For starters, the Renewable Electricity Standard increases precipitously this year, from 5 percent of electricity sales, to 12 percent. More to the point, as part of the 2009 Request for Proposals, the PUC approved an acquisition portfolio that included 701 megawatts of wind, to be added incrementally from 2010-2015. Xcel already has contracted for 500 megawatts of this wind power. I don’t know whether these wind energy resources have yet come online, but according to the 2009 RES compliance application, 100 megawatts of wind were supposed to become operational in 2010, and 150 megawatts were supposed to come online this year.

I’m trying to get to the bottom of this “missing wind” problem. When I know, you’ll know.

William Yeatman is an energy policy analyst at the Competitive Enterprise Institute