Appalachian Power Proposes Green Power Tariff

west_virginia_turbinesby James A. Bacon

Appalachian Power has proposed an alternative rate for customers who want to purchase 100 percent of their electricity from renewable sources. A rider attached to the company’s Virginia tariff bundles the energy output of renewable generators to provide around-the-clock, carbon-free generation.

The company, whose service territory encompasses the southwestern third of the state, designed the green tariff so that subscribing customers would not be subject to charges relating to fossil-fuel energy generation, and standard retail customers would not subsidize renewable energy.

“We are increasing the amount of renewable energy in our generation portfolio and developing programs to help our customers meet their energy needs with renewables,” said James Fawcett, Appalachian’s manager for energy efficiency and alternative energy initiatives in a press release yesterday.  “The proposed Rider REO is the latest addition to our renewables strategy.”

Initially, the portfolio will consist of 423 megawatts of Appalachian’s current wind and hydroelectric resources. As new renewable resources—including wind and solar—are added, the subscribed portion of those resources will be assigned to Rider REO.

Who will buy this product? Appalachian suggested that the main appeal may be to industry. Said Fawcett: “We expect that the ability to deliver 100 percent renewable energy will also provide economic development benefits to potential commercial and industrial customers seeking that requirement.”

Bacon’s bottom line: If one overlaid Appalachian Power’s territory with an electoral map, it would skew heavily Republican red, with a Trumpian tint. Buchanan County, once a major coal producing county, was recently profiled in the Wall Street Journal for the highest percentage of votes cast for Donald Trump anywhere in the country. I can’t imagine that the company anticipates a surge in retail demand for higher-priced green energy.

The real play is for industry. Just as Amazon Web Services and other data center providers in Northern Virginia are being pressured to use more solar electricity, so are many of the industrial and warehousing companies (think Walmart) that might consider investing in western Virginia. Thus, Appalachian is converting the liability of higher cost electricity into an economic development asset. Very clever. It will be interesting to see what kind of issues arise in the SCC deliberations.

One issue, I expect, would focus on how Appalachian allocates the cost (if any) of (a) upgrading the transmission and distribution grid and (b) maintaining fossil fuel backup capacity for when the wind isn’t blowing and the sun isn’t shining. The accounting discussions, I expect, could get very arcane. Another question is what happens if Appalachian can’t find subscribers for 423 MW of pure-play renewable energy. Do regular ratepayers shoulder the costs, as they undoubtedly would if the green tariff didn’t exist?

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4 responses to “Appalachian Power Proposes Green Power Tariff

  1. Perhaps now is the time to fairly allocate the costs of coal – i.e. put the costs of re-mediating blasted off mountain tops, coal ash , mercury and SOx pollution on those who “prefer” coal. Perhaps for those that “prefer” nukes -the longer term capital and insurance costs. And perhaps those who want peak load electricity -a surtax to cover the extra costs for that.

    so if people actually had to pay the actual costs of each fuel type – would people still willingly choose coal over solar?

  2. This looks like a ploy by the utility to lock in a premium price for resources that are declining in cost. Rather than “Appalachian is converting the liability of higher cost electricity into an economic development asset” – hydro and wind have long been cheaper than other forms of generation. Solar is on equal footing now and is on course for a 50% decline in cost.

    A residential customer might be willing to pay extra to offset the externalites of most existing generation. But why would an industrial customer pay more? The data center solar PPA’s are not only attractive to socially conscious customers and investors, but they usually come in below a company’s existing commercial rate from the utility.

    The way this proposal is presented the customer would pay for their regular share of distribution and transmission costs. There would be no cross-subsidies as sometimes can occur with net-metering. This power is already flowing reliably through the existing system with no extra grid expense, so I am not certain why you say that other ratepayers would “shoulder the costs” of the renewable sources without this tariff. It seems that these renewable supplies are purchased at wholesale through the PJM system. No one is paying extra for them. They are likely displacing more expensive traditional generation whenever they are available. Depending on the design, most hydro is “dispatchable” being a very low cost of power often used during peak usage for a high profit to the utility as hydro would offset far more expensive fossil-fired peaking units. Solar does the same during the daytime intermediate and peak use periods. Small to moderate amounts of solar actually reduce the use of fossil fired peakers. But a much higher percentage of solar generation (many times more than proposed here) could require added peaking capacity (or storage). Their current use is saving all Appalachian ratepayers money (or making more profit for the utility). Charging more for them is like paying more for jeans because of a designer label.

    • Outside a PR play, I would also think most businesses would purchase what is least expensive and most reliable (and reliability would be the same because the same company is distributing the power however sourced). Some residential consumers would pay more because they believe in renewables or are on a guilt trip. I expect AEP is well aware of that and, as you suggest, may well be locking in customers at higher prices.

  3. Why would anyone pay a premium to Appalachian Power for solar they could themselves install on their own site for less?

    Take WalMart for instance –

    http://www.forbes.com/sites/christopherhelman/2015/11/04/walmarts-everyday-renewable-energy/#406e827f4894

    this is the real problem the utilities face.

    The “skeptics” including Mr Bacon keep reiterating how the utilities will have to modify the grid for solar and will pass that cost on to those who would want to buy solar – but why buy solar from the utilities to begin with ?

    So then – you’re going to have utilities like Dominion wanting to put a surcharge on Walmart for putting solar on it’s roof?

    I’d say that’s going to be interesting General Assembly session with Dominion lobby folks going up against Walmart lobby folks.

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