DBL Report Assesses the Costs of Renewable Energy and Electricity

hThe argument that an increase in renewable energy in the United States means more expensive electricity has pervaded the debate on renewables versus fossil fuels for decades. A new report by DBL Investors, “Renewables Are Driving Up Electricity Prices. Wait, What?,” examines the 100-year-old utility business model by looking at the top and bottom 10 states that derive electricity from renewable sources.

The report reveals that over the last ten years greater generation from renewables did not equate to skyrocketing electricity prices. In fact, states generating more electricity from renewables often experienced average retail electricity prices well below states producing less electricity from renewables. The average annual rate of change in prices has been lower in leading renewable states. And from the perspective of Renewable Portfolio Standards, criticism of RPS states has been overblown.

Among the Report’s key findings:

  • The Top 10 Renewable States have experienced low retail prices for a variety of reasons, including, in many cases, abundant wind resources.
  • Deployments of clean and renewable sources of energy are taking off at breakneck speed, and represent a growing percentage of new U.S. electricity generation capacity. In 2013, U.S. electricity generation capacity increased 15,886 megawatts (MW). Wind and solar supplied 35 percent of this increase, while natural gas and coal provided 56 percent. In 2014, U.S. electricity generation capacity increased 15,384 MW. The share of wind and solar additions grew to 47 percent of new capacity, while the share of natural gas and coal fell to 49 percent.
  • The 10 states with the greatest share of generation from renewables averaged a retail electricity price of 9.79 cents/kWh in 2013. The 10 states with the least share of generation from renewables averaged 10.28 cents/kWh in 2013. In 2013, the national average price of retail electricity was 10.14 cents/kWh.
  • A similar trend has emerged over time. In 2001, in the 10 states with the greatest share of electricity from renewable sources, retail electricity prices, on average, were slightly more expensive than in the 10 states with the smallest share of generation from renewable sources. However, by 2013, these states had switched places: the 10 states relying most on renewables experienced average retail electricity prices slightly cheaper than the 10 states relying least on renewables.
  • Electricity in states with Renewable Portfolio Standards( RPS) was more expensive than electricity in non-RPS states before many of these policies were enacted, and above this baseline difference, average retail electricity in 2013 was cheaper in non-RPS states than in RPS states by less than a penny per kWh.
  • Many consumers have not, therefore, borne outsized hardship in their electricity bills as their states have transitioned to a cleaner energy future.
  • According to Deutsche Bank, 36 states are poised to reach grid parity by 2016. This means that consumers in well over half of the U.S. will have the opportunity to purchase clean solar electricity at a cheaper price than traditional grid-provided electricity.
  • Power Purchase Agreement (PPA) prices for utility-scale solar have fallen since 2007.
  • On average, more jobs are created per unit of electricity from renewables, as compared to fossil fuels. In 2014, the solar industry alone provided more than 173,000 jobs, up from 100,000 in 2011.

“Looking ahead, retail electricity prices and the entire electricity market are ripe for change,” said Nancy Pfund, Managing Partner, DBL Investors and report co-author. “Your grandfather’s electricity system, a government-sponsored monopoly reliant on conventional and centralized energy sources, is entering the 21st century. Reliance on renewables will continue to grow as their costs decline, and as states shift away from a fossil fuels focus and move towards a cleaner energy future.”

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