With long-term fate of PTC in balance, big utility assesses its relationship with wind industry
Xcel Energy, which provides more electricity from wind than any other investor-owned utility, is evaluating whether to stay with the American Wind Energy Association over a disagreement with the trade association over the best way for the government to create incentives for wind development.
The company supported an extension of the production tax credit — which was enacted this week after an intense lobbying push from AWEA — but also sought to augment the credit with an incentive that would go directly to utilities.
The company has not made any final decision about its future with AWEA but is exploring options that would focus its Washington, D.C., lobbying efforts more on securing benefits for customers. It remains to be seen what the company will decide or whether it will seek to establish a splinter group of like-minded companies.
Xcel provides nearly 3,800 megawatts of wind power, but more than 90 percent of that is under contract through developers.
AWEA said it is continuing to discuss Xcel’s concerns but downplayed the extent to which integrating large amounts of wind power is costly to utilities.
“AWEA continues to greatly value Xcel as a member, and as a national leader on wind energy. That includes long-term price stability for consumers and successful grid integration strategies — for instance, wind reliably providing 50% of power to Xcel’s customers in Colorado several times over the past year,” AWEA spokesman Peter Kelley said in an email.
“We’ve worked with Xcel on their concerns and will continue to,” he added. “The tax credit already flows to utility customers and they also benefit from wind energy’s very low operating costs, but we’re always open to discussion.”
Xcel lobbyist John O’Donnell has previously criticized AWEA as “dominated by developers” as opposed to utilities that purchase and distribute power from wind farms (E&E Daily, Dec. 21, 2012). He told National Journal yesterday that the company is “in the process of reviewing our relationship with AWEA” over concerns that the group places too high a priority on developers’ concerns.
O’Donnell declined to comment for the record when contacted by E&ENews PM today.
The differing views between Xcel and AWEA emerged last month as the trade association furiously lobbied for an extension of the production tax credit, which won a one-year reprieve this week as part of the “fiscal cliff” legislation.
O’Donnell had tried to persuade lawmakers to enfold within the 2.2-cents-per-kilowatt-hour PTC, which developers can claim for the first 10 years a wind farm operates, a “Consumer Renewable Credit” that would provide utilities credits ranging from 0.2 cent per kWh to 0.6 cent per kWh based on how much of their portfolio came from intermittent sources like wind or solar.
The credit is designed to compensate for the cost of transmission and backup generation utilities incur to distribute large amounts of intermittent electricity. A proposal Xcel floated on Capitol Hill would have reduced the PTC to 2.17 cents per kWh for the first year of eligibility to pay for the consumer credit.
The integration credit failed to gain traction, as Congress instead decided to incorporate into the cliff deal a one-year extension and modification to the PTC that previously was endorsed by the Senate Finance Committee (Greenwire, Jan. 2).
Ryan Wiser, a staff scientist at Lawrence Berkeley National Laboratory, said various utility and academic studies have found that the cost of integrating wind into the system is relatively low, about 0.5 cent per kWh.
The long-term fate of the PTC is expected to be a key focus for the industry if Congress embarks on comprehensive tax reform this year. AWEA last month floated a six-year phaseout of the credit, and alternative arrangements such as the integration credit Xcel is championing or proposals that would allow renewable companies to organize as master limited partnerships also are likely to get some attention in that debate.
Marchant Wentworth, the legislative director for the Union of Concerned Scientists’ climate and energy program, acknowledged the tax incentives may benefit developers and not utilities directly. But the tax credits do benefit utilities by helping companies comply with state renewable programs, he said. Going forward, master limited partnerships and real estate investment trusts could serve as alternative ways to boost wind development, Wentworth said.
“I don’t know what the appetite is for a straight-up production tax credit extension beyond what you have right now,” he said. “House Republicans are going to be a tough sell.”