Utah and the clean energy boom
Clean energy development is booming. Wind power, for example, grew to provide almost a quarter of Iowa's electricity generation in 2012, and many other states, including Idaho, Colorado and Oregon, now procure 10 percent or more of their electricity from wind. The numbers are expected to rise.
Utility-scale solar in the United States is expected to grow 18 percent by the end of 2013. Solar holds much promise for Utah to meet energy demand on hot summer days during peak air-conditioning use. Already, many businesses in Utah, including eBay and IKEA, are taking advantage of Utah's abundant sunlight.
In short, clean energy works. And it is fast becoming a mainstream resource for America's "all the above" energy strategy.
The key economic benefit of utility-scale clean energy for ratepayers is lower risk and long-term cost-savings. Because clean energy doesn't burn price-volatile and polluting coal and natural gas, it offers long-term price stability and predictability. Utilities typically sign 20-year contracts for clean energy at known prices that can be a hedge against rising prices for fossil fuel.
Additionally, clean energy doesn't face significant environmental compliance and cleanup costs and won't be subject to carbon taxes and restrictions to address climate change. Consequently, Utahns can be further shielded from future energy price shocks.
Across the country, clean energy's rapid development is creating jobs, increasing lease payments for landowners and boosting tax revenues for local communities and schools. Many states are enjoying these benefits because they've established smart policies and incentives to attract clean energy entrepreneurs and investors.
The clean energy economic boom, unfortunately, has largely bypassed Utah. A 2012 PricewaterhouseCoopers' MoneyTree Report noted that Utah attracted only $16 million in clean-tech venture capital last year, while other states in the region averaged almost $35 million each.
Utility regulators have an opportunity to change that. How? By establishing a better market price for renewable energy that takes into account the real cost savings and averted risks that Utahns face due to the state's overreliance on coal and natural gas.
Why do utility regulators need to be more realistic when they set this price?
There's a perception that Utah should let the "free market" drive electricity development and prices. The problem is that electricity is not a free market. Utah utilities are regulated monopolies that have the ability to pass along their higher energy costs rising fossil fuel prices, environmental compliance costs, future carbon taxes to their ratepayers. Consequently, regulators have a duty to consider future risks when encouraging utilities to diversify their electricity sources.
Federal law requires utilities to purchase power from small, independent renewable energy and cogeneration facilities at "avoided cost," or rather the utility's cost to produce the power itself or buy it from another source. Utah regulators have the power to set how that avoided cost for clean energy is calculated to attract energy development.
We believe that avoided cost calculation should take into consideration clean energy's value in averting future risks. A slight price premium today for clean energy is like paying for an insurance policy to escape fossil fuel's price volatility and pollution and carbon costs. This fairer price for clean energy will attract entrepreneurs and investors so Utah can take advantage of clean energy's jobs and rural economic benefits. As power plants fueled by wind, solar, coal and gas typically remain in operation for decades, regulator decisions today could make all the difference for Utah's energy future.
Edwin R. Stafford is a marketing professor at Utah State University. Todd Stevens is co-founder and managing director of RenewableTech Ventures in Salt Lake City.