Colorado Springs Utilities’ new wind power program is almost sold out before it delivers its first watt of electricity.
On June 4, Utilities signed a 2-year contract with Xcel Energy for 108,000 megawatt-hours of wind power, beginning Jan. 1, 2013. That sounds like a lot, but it’s small potatoes compared with the 4.2 million megawatt-hours Utilities generates in a year.
Still, it's a big increase in the amount of renewable energy Utilities has on tap. Most of the new power, however, is already spoken for: Large customers such as military bases and universities have tentatively agreed to take 102,730 megawatt-hours, and Utilities’ existing Green Power customers will take another 1,578 megawatt-hours of the pool, leaving 3,800 megawatt-hours up for grabs.
“I think it was pretty successful,” said John Romero, Utilities general manager for energy acquisition said of the initial interest. “If we see much greater demand than what we have excess for, then we’ll look at acquiring small amounts of wind power to meet that demand.”
That’s just what City Council, acting as the Utilities board, asked for in February, when it put the kibosh on a plan for Utilities to buy roughly twice that amount of wind power under a 20-year contract. Council members said they were concerned that Utilities wouldn’t find enough customers willing to pay a premium for renewable energy, leaving other ratepayers to foot the bill, which would have increased bills by as much as 2 percent. The short-term contract with Xcel will be cost-neutral to average ratepayers, Romero said.
“I think we carried out what the board asked us to do,” he said, “and that was to find a renewable resource that would meet the needs of customers interested in renewable power without any impact on the rest of the rate base.”
Not everyone is happy with the compromise, which was presented to the Utilities board on Wednesday. Bryce Carter, with the Sierra Club’s Beyond Coal campaign, said the two-year contract doesn’t afford Utilities a hedge against rising coal and natural gas prices — one of the goals of the earlier program. And, he said, Utilities didn’t line up similar commitments for the earlier, 20-year contract ahead of time, forcing Council to consider a worst-case rate hike.
“The question is, why did they not give enough time for a lot of the major customers to say, ‘Oh yeah, we’ll sign up,’” Carter said.
Romero said many of the likely customers for the new program are interested in long-term contracts and that Utilities will continue to investigate those possibilities. However, he said, with the $22 per megawatt-hour federal production tax credit set to expire at the end of the year, wind power projects are likely to become much more expensive.
“If the production tax credit gets renewed next year, then we have to renew the conversation, because there will be an opportunity for wind power at an affordable price,” he said.
Emily Wright, Colorado College’s sustainability coordinator, said the school has tentatively agreed to buy 1,000 megawatt-hours of wind energy, which would account for about 7 percent of its annual electricity consumption and increase its bill by less than 1 percent.
Wright said the two-year contract isn’t a solution for Colorado College’s goal to be carbon-neutral by 2020 — it’s exploring long-term third-party solar power to meet that target — but that the school supports adding renewables to the local energy supply.
“It is our hope that CSU will work to permanently introduce additional wind and solar resources into the portfolio,” Wright said in an e-mail.
Utilities will pay Xcel $39.25 per megawatt-hour under the deal. That’s less than it pays for its current, 1-megawatt wind power contact, meaning Green Power customers will pay about 30 percent less. Green Power customers buy renewable energy in 100 kilowatt-hour blocks and the program has been sold out for seven years, with more than 400 customers on a waiting list.
Xcel Energy has wind power to spare for now because it’s ahead of pace to meet the state’s requirement that privately owned utilities generate 30 percent of their electricity from renewable sources by 2020. As a public utility, Colorado Springs Utilities is required to generate 10 percent of its power from renewables by 2020.
Xcel currently has about 2,100 megawatts of wind power generation capacity. It’s selling Utilities the equivalent of about 13 megawatts of wind power, but will deliver electricity from several different wind farms, so the power will come steadily instead of dropping when the wind dies. Under Utilities’ earlier wind proposal, it would have bought all of the power coming from a single, 50-megawatt wind farm somewhere in the state.