A Win-Wind Situation?
How will wind power and renewable energy impact us?
In recent months, the Kansas and Missouri voters each passed a renewable-energy standard that will require utilities in each state to obtain a specified percentage of electricity from renewable energy resources such as wind, solar, biomass, geothermal or certain hydropower.
None of the advocates of those standards claims that wind power can replace existing nuclear and coal plants, but wind and renewable energy can be an important and viable part of the electric power portfolio for new generation sources and should add to the quality of life in our region.
Kansas’ and Missouri’s renewable-energy standards will gradually increase over time, putting the electricity industry in both states on a path toward increased sustainability. The goal of such energy standards is to stimulate market and technology development so that, ultimately, renewable energy will be economically competitive with conventional forms of electric power. States create energy-standard programs because of the environmental and economic benefits of renewable energy.
The policy benefits numerous, and as noted by the Environmental Protection Agency:
- Environmental improvement (for example, avoided air pollution, global climate change litigation, waste reduction, habitat preservation, conservation of valuable natural resources).
- Increased diversity and security of energy supply.
- Lower natural gas prices due to displacement of some gas-fired generation, or a more efficient use of natural gas due to significantly increased fuel conversion efficiencies.
- Reduced volatility of power prices, given stable or non-existent fuel costs for renewables.
- Local economic development resulting from new jobs, taxes, and revenue associated with new renewable capacity.
- More competitive electricity markets.
According to the American Wind Energy Association, a renewable energy standard is necessary because of the economic imperfections facing the energy market, which include:
Externalities: Fossil-fuel generators pollute the air but do not have to pay for the local, regional, and global damage caused by their emissions. Renewable energy does not pollute but, in unregulated markets, will receive no credit for the damages it prevents.
Public Goods: The price stability, environmental, and economic benefits of renewable energy resources are ones that accrue to the public at large, not directly to the purchasing consumer. This "free rider" phenomenon can be expected to deter consumers from volunteering to pay a little more for renewables since their purchase will benefit other, non-contributing consumers as much as it will them.
Transactions Costs: Under retail competition, there will be high transactions costs associated with reaching consumers who are willing to pay for the public benefits of renewables.
Renewable energy standards are sensible and practical for our region. Kansas has some of the best wind resources in the country, and Missouri’s wind resources are also viable. It is socially beneficial to allow Kansas and Missouri to utilize those wind resources and develop them for use in our region, as well as potentially export to regions to the East and South.
Background on the Kansas RES. On May 22, 2009, Gov. Mark Parkinson signed into law the Senate Substitute for H.B. 2369, which includes a renewable-energy standard, net metering provisions and various other energy efficiency and energy-related provisions. The Kansas RES mandates that electric utilities (excluding municipal utilities) obtain 10 percent of their energy from renewable sources by 2011, 15 percent by 2016, and 20 percent by 2020.
Background on the Missouri RES. In November 2008, voters enacted Proposition C, a ballot initiative that repealed the state’s existing voluntary renewable energy and energy efficiency objective and replaced it with an expanded, mandatory renewable-electricity standard of 15 percent by 2021. The Missouri standard mandates that electric utilities (not including municipal utilities and electric cooperatives) obtain 2 percent of their energy from renewable sources from 2011 to 2013; 5 percent from 2014 to 2017; 10 percent from 2018 to 2020; and 15 percent in 2021 and thereafter.
Electric consumers are searching for a balanced approach for reliable electric power, renewable and green energy, and continued low-cost electric service. Both the Kansas and Missouri RES provisions strive for that balance. Clearly, the region and both states should benefit from the establishment of a renewable energy industry, a commitment and policy goal that was demonstrated by both states’ recent enactment of a renewable-energy standard.
Return to Ingram's August 2009
Frank A. Caro, Jr.
Of Polsinelli Shugart, PC.has more than 20 years experience in the electric, gas, and telecommunications industries. Before joining Polsinelli Shughart PC, he served as the general counsel for the Kansas Corporation Commission.
P | 913.451.8788
E | fcaro@polsinelli.com