The Real Meaning of Kewaunee’s Demise

Immediate release
November 8, 20112

More information
Michael Vickerman
608.225.4044, ext. 2
mvickerman@renewwisconsin.org

The Real Meaning of Kewaunee’s Demise
November 6, 2012
A commentary by Michael Vickerman, Director, Policy and Programs:

Shock waves reverberated across the Upper Midwest when Dominion Resources announced in late October that it would permanently shut down its Kewaunee nuclear generating station in early 2013. Operational since 1974, the Kewaunee station, located along Lake Michigan 30 miles east of Green Bay, currently generates about 5% of the electricity that originates in Wisconsin.

Virginia-based Dominion, which bought the 560-megawatt Kewaunee plant in 2005 from two Wisconsin utilities, attributed its decision to its inability to secure long-term power purchase agreements to keep the plant going. Without securing purchasing commitments from utilities, Dominion would have to sell Kewaunee’s output into the regional wholesale market at prices well below the plant’s cost of production.

While the pricing environment for all bulk power generators is nothing short of brutal these days, Kewaunee carries the additional burden of being an independently owned power plant, since the entities most likely to buy electricity from that generator—utilities--have power plants of their own that compete for the same set of customers. And a growing number of these utility-owned generators burn natural gas, which is currently the least expensive generation source in most areas of the country.

Dominion’s decision comes down to simple economics. Wisconsin utilities believe that over the foreseeable future natural gas will remain cheap and supplies will remain abundant. That would explain their unwillingness to enter into long-term commitments with Dominion, even though Kewaunee recently acquired a 20-year extension to its operating license and does not need expansive retrofits to comply with environmental standards, unlike a host of utility-owned coal plants in Wisconsin.

But even if Dominion’s managers were convinced that natural gas prices have nowhere to go but up in 2013 and beyond, the company, lacking a retail customer base in the Midwest, could not risk producing power below cost while waiting for the turnaround.

Wisconsin utilities have placed heavy bets on natural gas in the expectation that it will remain the price-setting fuel for years to come. Over the last 12 months, they have bought several combined-cycle generators from independent power producers. Buying power plants enables them to pass through their acquisition and operating costs directly to their customers while generating returns to their shareholders. I suspect these utilities are anything but broken up over the impending demise of a nonutility competitor that could have supplied electricity to Wisconsin customers for 20 more years.

But there is another side to this story, which is that the low-price energy future Wisconsin utilities are embracing can only materialize if natural gas extraction companies continue to sell their output below production costs. This expectation is unrealistic, given the massive pain being inflicted on these companies in the form of operating losses, write-downs, and credit rating downgrades.

Don’t just take my word for it, ask Exxon Mobil CEO Rex Tillerson, whose company spent $41 billion during the shale gas boom to acquire XTO, a large gas producer that is now yielding more red ink than methane. As reported in a recent New York Times article, Tillerson minced no words in assessing the impact of its recent misadventures on the company’s bottom line. “We’re all losing our shirts today,” Tillerson said. “We’re making no money. It’s all in the red.”

Much of the industry’s woes are self-inflicted. The lease agreements that drillers eagerly signed during the height of the shale gas boom obligate them to extract the resource by a certain deadline, regardless of whether such activity is profitable. That these companies cannot disengage quickly from existing leases is greatly diminishing their appetite for exploring new natural gas prospects. Until a pricing turnaround occurs, they will refrain from spending money on exploring new resource provinces like Ohio and Michigan.

Sooner or later, this slowdown in exploration activity will tip the supply-demand equation in the opposite direction, resulting in lower-than-average gas storage volumes. Barring a repeat of last winter’s unusually mild weather, the crossover point should occur around January 1st. But with so many balance sheets in tatters from this highly unprofitable market environment, nothing short of a strong and sustained price increase will be required to persuade drillers to start taking risks again.

When this corrective price increase begins rippling through the electricity markets, it will be interesting to observe how the customers will respond. Right now Wisconsin utility managers are convinced that they are making the right call on natural gas. So completely have they swallowed the shale gas “game-changing” mystique that they were willing to let a 560 MW nuclear plant fall out of the supply picture for good. In this brave new world of theirs, gas is the new coal, and resource diversity is passé.

In the aftermath of Dominion’s announcement, a few commentators have defended the impending closure as a textbook example of how markets work. But this view ignores the delusional thinking that sent shale gas extraction into overdrive, causing prices to plunge below the cost of production. The real game-changer, as it turns out, here was not the emergence of “fracking” technology but the industry-generated public relations campaign that implanted the narrative of a nation awash in cheap natural gas into virtually every American cranium. But as we now see, this narrative has boomeranged on the natural gas industry, and they are paying for their current woes in ways that guarantee a pronounced pendulum swing in the direction of higher prices.

The question going forward is, will this narrative also boomerang on Wisconsin electricity users, especially after the last employee leaving Kewaunee turns out the lights?
END
Michael Vickerman is program and policy director of RENEW Wisconsin, a sustainable energy advocacy organization. For more information on the global and national petroleum and natural gas supply picture, visit "The End of Cheap Oil" section in RENEW Wisconsin's web site: www.renewwisconsin.org. These commentaries also posted on RENEW’s blog: http://renewwisconsinblog.org and Madison Peak Oil Group’s blog: http://www.madisonpeakoil-blog.blogspot.com

We Energies Gets Lowest Score on Renewable Energy Report Card

More information
Don Wichert
Executive Director
608.255.4044, ext. 1
dwichert@renewwisconsin.org

We Energies Gets Lowest Score on Renewable Energy Report Card
Churches and other nonprofits in We Energies’ service area will have difficulty following the renewable-energy example of the Unitarian Universalist Church West in Brookfield, because the utility unilaterally ended the incentive program which helped the church absorb the cost of a solar system installed in 2008.

The end of the utility program resulted in WE receiving a C on a renewable energy report card issued by RENEW Wisconsin, a statewide renewable energy advocacy organization.

“We Energies agreed with RENEW and other groups to spend $6 million/year over 10 years to encourage the use of renewable energy in its service area. As part of the program, over 100 nonprofit organizations installed renewable energy systems.

In 2011, however, WE simply announced the end of the program after only five years,” said Don Wichert, RENEW’s executive director and the report card director, at a news conference in front of the church.

“The money was critically important to our ability to install a solar system and was needed because nonprofits are not eligible for the federal tax credits” said Amy Taivalkoski, a congregation member who headed up the project along with Dennis Briley, another member. “The grant of $27,500 covered about a third of the total cost.”

“We were very thankful to receive the grant, which allowed us to show other congregations how to fulfill a vision for a just, sustainable world. It’s unfortunate that the WE program won’t be there to help them as it helped us,” added Rev. Suzelle Lynch, minister of the more than 700-person congregation.

WE earned a C (2.4 out of 5) overall on the report card for its renewable energy efforts in 2011, but had the lowest score of all utilities graded. The state’s other major utilities’ grades ranged from C to B/C -- Alliant, C (2.6); Madison Gas & Electric, B/C (3.0); Wisconsin Public Service Corporation, C (2.7); and Xcel, B/C (3.0).

“2011 was a year in which Wisconsin’s investor owned utilities cut back on their previous good performance supporting renewable energy,” said Wichert. “At this point in 2012 it appears that this poor performance trend continues.”

“It’s surprising and disappointing because recent opinion surveys indicate that the vast majority of Wisconsin’s population, including utilities ratepayers and stockholders, prefer renewable energy,” according to Wichert.

RENEW graded utilities on six criteria: amount of renewable electricity sold; green energy purchasing programs; ease of connecting to the utility system; prices paid for renewable electricity; legislative activities; and other programs offered voluntarily to customers.

Wisconsin utilities performed best in meeting the state’s renewable electricity standard. All of the utilities already meet or expect to meet the 10% standard by 2015, although some have the majority of the power coming from out of Wisconsin.

RENEW scored gave WE the following grades for 2011:
B Amount of renewable electricity sold (also called renewable energy standard)
B Green energy purchasing program for customers
B Ease of interconnecting to the utility system
F Price paid for electricity purchased from renewable energy systems
F Legislative activities on renewable energy policy
C- Other programs offered voluntarily to customers.

This was the first time RENEW conducted a grading system, but RENEW plans to continue the process in the future because people are interested in how well their utilities support renewable energy.

“The annual survey can be used by Wisconsin utilities and others to see which areas are lacking and how they can improve their grades. Adoption of renewable energy supports local jobs, lower emissions of pollutants, and energy security. These are attributes everybody wants. There is no reason that Wisconsin utilities should be performing at average levels in clean energy,” said Wichert.

-END-
RENEW Wisconsin is an independent, nonprofit 501(c)(3) organization that leads and represents businesses, organizations, and individuals who seek more clean renewable energy in Wisconsin. More information on RENEW’s Web site at www.renewwisconsin.org.

Utilities Get C on Renewable Energy Report Card

More information
Don Wichert
Executive Director
608.255.4044, ext. 1
dwichert@renewwisconsin.org
 

Utilities Get C on Renewable Energy Report Card 

No Wisconsin utility graded higher than a B/C on a report card issued by a renewable energy advocacy group, and C was the overall average for the state’s five major utilities.

We Energies, headquartered in Milwaukee, earned a C (2.4 out of 5) on the report card for its renewable energy efforts in 2011 and had the lowest score of all utilities graded. The state’s other major utilities received similar or slightly higher grades: Alliant (aka Wisconsin Power and Light), C (2.6); Madison Gas & Electric, B/C (3.0); Wisconsin Public Service Corporation, C (2.7); and Xcel Energy, B/C (3.0).

“2011 was a year in which Wisconsin’s investor owned utilities cut back on their previous good performance supporting renewable energy,” said Don Wichert, RENEW Wisconsin’s executive director and the report card director. “At this point in 2012, it appears that this poor performance trend continues.”

“It’s surprising because recent opinion surveys indicate that the vast majority of Wisconsin’s population, including utilities ratepayers and stockholders, prefer renewable energy,” according to Wichert.

RENEW graded utilities on six criteria: amount of renewable electricity sold; green energy purchasing programs; ease of connecting to the utility system; prices paid for renewable electricity; legislative activities; and other programs offered voluntarily to customers.

Wisconsin utilities performed best in meeting the state’s renewable electricity standard, the amount of renewable electricity sold to its customers. All of the utilities already meet or expect to meet the 10% standard by 2015, although some have the majority of the power coming from out of Wisconsin.

We Energies scored at the bottom, because it had “agreed with RENEW and other groups to spend $6 million/year over 10 years to encourage the use of renewable energy in its service area. As part of the program, over 100 nonprofit organizations installed renewable energy systems. In 2011, however, WE simply announced the end of the program after only five years,” said Wichert at a news conference in from of a Milwaukee church that had a solar electric system installed as party of We Energies now-discontinued program.

RENEW gave the state’s investor owned utilities the following grades: C Alliant, Madison; B/C Madison Gas & Electric, Madison; C We Energies, Milwaukee; C Wisconsin Public Service Corporation, Green Bay; B/C Xcel Energy, Eau Claire.

This was the first time RENEW conducted a grading system, but RENEW plans to continue the process in the future because people are interested in how well their utilities support renewable energy.

“The annual survey can be used by Wisconsin utilities and others to see which areas are lacking and how they can improve their grades. Adoption of renewable energy supports local jobs, lower emissions of pollutants, and energy security. These are attributes everybody wants. There is no reason that Wisconsin has to lag the rest of the country in clean energy,” said Wichert.

-END-
RENEW Wisconsin is an independent, nonprofit 501(c)(3) organization that leads and represents businesses, organizations, and individuals who seek more clean renewable energy in Wisconsin. More information on RENEW’s Web site at www.renewwisconsin.org.

RENEW Rips WPS’s Net Metering Proposal

For immediate release
May 23, 2012

More information
Michael Vickerman
608.255.4044, ext. 2  

Another example of company backsliding on renewables 

In documents filed in conjunction with its pending rate case, Green Bay-based Wisconsin Public Service Corporation (WPS) proposed several rollbacks to its net metering service that would, if approved, sharply restrict a customer’s ability to generate electricity from renewable energy resources and sell a portion of it back to the utility.

Net metering allows customers to sell the unused output from their solar electric or other renewable energy system back to the utility at the full retail rate from month to month, so long as the surplus electricity is less than or equal to the customers’ usage in a 12-month period.

Currently, WPS customers may install solar or wind energy systems on their premises up to 100 kilowatts (kW). Beginning in January 2013, WPS would roll back that capacity limit to 20 kW.

WPS has also proposed to cap the overall size of its net metering offering at one-half of one percent of 2011 summer peak. No other Wisconsin utility has ever sought to impose capacity-based limits to its net metering service.

“What WPS proposes would be a really bad deal for customers installing small renewable energy systems serving their homes or businesses,” said Michael Vickerman, program and policy director for RENEW Wisconsin, a nonprofit advocacy organization promoting renewable energy use in Wisconsin.

“These service changes are clearly intended to discourage its customers from investing in solar and small wind energy systems,” Vickerman said. “If WPS gets its way, the renewable energy marketplace in that part of Wisconsin will slow down significantly.”

“At a time when the customers and communities in WPS territory are looking to renewable energy to support new jobs and manage their energy costs, the company is doing its level best to take that option away from them,” Vickerman said.

As an intervenor in WPS’s rate case, RENEW Wisconsin will ask the Public Service Commission to:
• Reject WPS’s proposal to impose a system-wide cap on net metering service;
• Maintain the current maximum system size at 100 kW; and
• Base WPS’s calculation of net energy on annual usage instead of monthly usage.

“What we will ask for is a standard of service that is already offered by two Wisconsin utilities: Madison Gas & Electric (MGE) and Xcel Energy,” Vickerman said. “WPS’s proposal is a particularly egregious example of company backsliding.”

Vickerman noted that MGE, which also has a pending rate proceeding before the Public Service Commission, did not propose any changes to its net metering service for 2013 and 2014.

 “We urge the PSC to work toward a uniform net metering policy for the state using MGE’s and Xcel’s service as a template,” Vickerman said.

Vickerman added: “WPS, it should be remembered, was the driving force behind the “Outsource Renewable Energy to Canada Act,” which was signed into law in 2011. That law lets utilities apply the energy they purchase from large Canadian hydropower sources toward their renewable energy requirements, at the expense of in-state renewable energy providers. Within that context, WPS’s net metering proposal constitutes another slight to Wisconsin’s renewable energy marketplace.”

END 

RENEW Wisconsin is an independent, nonprofit 501(c)(3) that leads and represents businesses and individuals who seek more clean, renewable energy in Wisconsin. More information on RENEW’s Web site at www.renewwisconsin.org.