By MATTHEW L. WALD
Published: March 28, 2009
WASHINGTON — Windmills and solar panel arrays have become symbols of America’s growing interest in alternative energy. Yet as Congress begins debating new rules to restrict carbon dioxide emissions and promote electricity produced from renewable sources, an underlying question is how much more Americans will be willing to pay to harness the wind and the sun.
Curbing carbon dioxide emissions — a central part of tackling climate change — will almost certainly raise electricity prices, experts say. And increasing the nation’s reliance on renewable energy will in itself raise costs.
Fifteen months into a recession, that prospect does not sit well in some quarters.
“Consumers right now are extremely price-sensitive,” said Barry Moline, executive director of the Florida Municipal Electric Association, whose member utilities serve about three million people.
Federal efforts to rein in carbon dioxide emissions are starting to seem inevitable. The Environmental Protection Agency last week moved to regulate heat-trapping gases as harmful pollutants. And the Obama administration and Democratic leaders in Congress are hoping to push through a cap-and-trade bill that would force polluters to curb their emissions or buy permits from cleaner producers. Congress is also discussing whether to require that a certain percentage of the nation’s electricity come from renewable sources.
The effect of any these measures will be to increase the cost of electricity. Regulation of carbon dioxide emissions will increase the cost of burning coal, a carbon-heavy energy source and currently the cheapest form of fossil fuel. Higher production costs will result in higher electricity rates.
A quota for renewable energy sources will also raise rates because utilities will pass on increased costs to consumers.
And wind and solar power are generally more expensive than the fossil fuels they are meant to supplant. If carbon dioxide penalties made coal power more expensive, as some environmentalists argue is inevitable, the relative cost of renewable energy might decrease. But consumers will still pay more.
One big question is how much it currently costs companies to produce coal-fired energy, and the answers are often colored by ideology or self-interest. Companies that sell coal or rely on coal-fired electricity often pick a low number; environmentalists cite the indirect costs to society, like strip mining or spills of coal ash. And since the electricity industry became more competitive, the utilities, even municipal ones, have become more secretive about their costs.
Some experts not aligned with either camp estimate that wind power is currently more than 50 percent more expensive than power generated by a traditional coal plant. Built into the calculation is the need for utilities that rely heavily on wind power to build backup plants fired by natural gas to meet electricity demand when winds are calm.
Another obstacle to nailing the numbers is that prices for coal and natural gas go through market swings. If the price of natural gas gets high enough, wind could look cheap by comparison, but right now natural gas is down sharply — a sign that the recession will not be kind to renewable energy. Organizations that profess to be neutral about what new technology gets built suggest that renewable energy probably has a steep hill to climb.
For example, the Electric Power Research Institute, a nonprofit consortium financed by investor- and publicly-owned utilities, predicted in November that even for plants coming on line in 2015, wind energy would cost nearly one-third more than coal and about 14 percent more than natural gas. The cost of solar thermal electricity, made by using the sun’s heat to boil water and spin a turbine, would be nearly three times that of coal and more than twice that of natural gas. (It would be almost double the cost of wind energy, too.)
The institute’s study looked only at utility-scale power plants, not the solar photovoltaic cells used in far smaller rooftop installations. Power from photovoltaic cells is generally more expensive than solar thermal power.
At Black & Veatch, a company based in Overland Park, Kan., that has been involved in the construction of coal, gas and wind plants, analysts recently compared the costs per kilowatt-hour of different energy sources for the big energy competitors. A kilowatt-hour is the unit of energy that the utilities use to bill homeowners, with the current retail cost averaging around 11 cents.
A modern coal plant of conventional design, without technology to capture carbon dioxide before it reaches the air, produces at about 7.8 cents a kilowatt-hour; a high-efficiency natural gas plant, 10.6 cents; and a new nuclear reactor, 10.8 cents. A wind plant in a favorable location would cost 9.9 cents per kilowatt hour. But if a utility relied on a great many wind machines, it would need to back them up with conventional generators in places where demand tends to peak on hot summer days with no breeze. That pushes the price up to just over 12 cents, making it more than 50 percent more expensive than a kilowatt-hour for coal.
No one likes higher bills. But the pain might not be shared equally: despite modest rate breaks for low-income customers, poor people spend a higher portion of their income on electricity than the rich.
“There are great benefits to the use of alternative energy,” said Jonathan Mir, co-head of the North American power utilities group at the investment bank Lazard.
But if Congress neglects the social issue, Mr. Mir said, a change in policy could fall hardest on those without a safety net.
“If it is deployed in an uneconomic way,” he said, “it is quite regressive in nature.”