A major selling point for renewable energy is the initial promise of cheaper rates for customers. However, many consumers experience their utility rates become more expensive over time.
The increase of renewable energy through policy such as net metering has shown that rooftop solar energy is still in developing stages. The grid is not equipped to handle the distribution of solar energy. This causes an increase in utility bills to pay for infrastructure to better distribute energy to consumers. Promoting cheaper rates is a good strategy to convince consumers to go green, but not always accurate due to frequent policy change and infrastructure projects.
If Renewable Energy Is So Cheap, Why Are Utility Rates Going Up?
By Steve Hanley
In a recent story about renewable energy initiatives in the Midwest, we quoted David Lundy, head of the Path To 100 Coalition in Illinois, who said a bill before that state’s legislature to expand its renewable energy programs would add “a couple of bucks a month” to the average customer’s utility bill. That got a response from CleanTechnica reader Bob Meyer, who wrote,
“An issue I have been wondering about came up in this article. The comment by David Lundy about renewable energy expansion will add “a couple of bucks a month” to the average customer’s utility bill. What I am confused about is that wholesale renewable power is becoming the lowest cost form of generation, but I do not see any mention of these apparent cost savings translating into ratepayer rate reductions. Rather, there are occasional mentions of increased utility consumer costs. So my question is where are these “savings” going? Someone must be pocketing them. Does the ratepayer ever get to participate in these savings?”
Meyer continues, “I am a big supporter of renewable energy and enjoy the many excellent articles on CleanTechnica. But I am worried that if the general public keeps hearing about renewable energy and at the same time see their utility bill going up and up, how can we expect broad support? The traditional utility model uses its rate payers as cash cows. With the build out of renewable energy, are we going down the same path?”
Those are excellent questions. One of the biggest arguments against the initiative to increase Arizona’s renewable energy standard last fall was that ever since California started mandating more renewable energy, utility rates have gone up significantly. Of course, opponents were careful not to research why those rate increases occurred, as the standard for debate in America today is to lie through your teeth as often as necessary to “win.” But Bob Meyer raises a good point and I promised to look into his concerns.
Coincidentally, I recently found an article by CNBC stating that utility customers in Germany can expect bigger utility bills as more renewable energy is brought online in that country. By some estimates, German transmission system operators expect to spend upwards of €80 billion over the next 12 years to build new transmission infrastructure to move all that new renewable energy from where it is created to where it is needed.
Up to half of the demand for power in German’s industrial south will need to come from renewable sources located in the north. Already three new underground trunks are planned for completion by 2025 and the TSOs say two more may be needed in addition. They also say another €52 billion may be needed to connect offshore wind farms to the mainland.
Add it all up and it comes to some seriously big money. The upshot is that even if the wind and the sun are free, the interconnections that get all that power to where it is needed will cost beaucoup bucks. So the answer to Bob Meyer’s question is, generating solar and wind power is getting cheaper all the time, but connecting them to the traditional grid is getting more expensive.
Approximately one quarter of all utility bills go to paying for infrastructure. As those costs go up, so do our electric bills. Finding ways to deliver zero emissions electricity to end users more economically would go along way toward lowering them, which would help get more people interested in renewables. That, in turn, would be good for us, our nation, and our world.