WHY CEOs NEED TO BE THINKING GREEN ENERGY NOW, NOT LATER
By Mark Kapner, PE and Virginia Palmer, Ph.D
Mark Twain once said, “It’s not what you don’t know that gets you in trouble. It’s what you DO KNOW for sure that just ain’t so.” This gem seems to apply to the conventional thinking about renewable energy. There are three myths often repeated about wind and solar power that “just ain’t so.”
Myth One: “These sources are always more expensive than conventional methods of generating electric power.”
Fact: The true cost of wind-generated energy became competitive with natural gas-fueled electric power in Texas a decade ago. Utilities that had the foresight to commit to long-term contracts to purchase wind-generated energy have saved tens of millions of dollars by locking in stable electric prices through these “power purchase agreements.” Large commercial, industrial and institutional purchasers of electric power have begun to do the same thing. This is a critical time to make smart power purchase decisions.
As the cost of solar-generated electricity continues to decline, the worldwide market for solar cell panels has doubled every two years for several decades. Within the next five years, solar will be competitive with conventional power in some parts of Texas.
Myth Two: “Wind and solar require enormous land area – we’d have to cover most of our open spaces to generate a significant amount of power.”
Fact: The land area required for modern wind and solar farms, even if they were to furnish most of our electric energy, is a tiny fraction of our available open space. Wind turbines are widely spaced out; the land between them is still available for grazing, hunting, farming and many other land uses. Wind turbine technology has evolved dramatically since the early 1980s; a single modern turbine can power 900 homes or small businesses and generates as much power as 25 of the older units. Solar power systems installed on building rooftops don’t take up any open space. The reality is that the total land area that would be required for solar farms that could meet all of Texas’ peak electric demand is less than two thousandths of the land area of Texas.
Myth Three: “Wind and solar will never contribute significantly to our energy supply because they are not always available when we need them – i.e. they can’t be scheduled like conventional power.”
Fact: Modern electric power systems currently combine the outputs of wind and solar along with conventional power plants. While wind and solar vary in their output, the conventional power plants are operated so as to take up the slack; therefore supply and demand for electricity are kept in perfect balance. Electric systems with significant wind generation (such as Denmark, Spain, Germany, and Texas) are doing this today. In fact, Texas gets over eight percent of its electricity from wind turbines and this will increase to 20 percent over the next five years. During the windiest hours – typically at night – wind farms will furnish well over half the total electric power required by the state and we don’t have to wait for technological breakthroughs in energy storage to continue growing our renewable energy supply.
Timing is Critical
Because of a temporary natural gas supply glut, electric prices in Texas have declined in the last three years. They will certainly move upward again, but no one knows when or by how much. Forward thinking businesses are seeking ways to hedge against the inevitable rising cost of energy. It’s turned out that locking in a fixed price for electricity through a long-term power purchase agreement with a wind farm is one of the most effective hedging strategies. The best time to do this is now while electricity prices are relatively low. Some wind developers are offering terms of 15 and 20 years in fixed price power purchase agreements. (See fig 1.) Depending on wind output and location, wind energy can be locked in near or below today’s conventional energy prices.
Federal tax incentives for wind farms are likely to expire at the end of 2012, thus driving up wind energy prices to increase for wind projects not already started. Customers that lock in wind energy prices by the end of 2011 will benefit from the current tax breaks.
Beyond the Bottom Line
What are other reasons a business should buy green energy?
For companies in international trade, the environmental and climate protection policies of their customers in Europe and Asia are crucial, and these policies increasingly dictate a company’s vendors buy green energy when available. A low “carbon footprint” will become increasingly important in the future for any company doing business globally. One of the most cost-effective ways to lower a company’s carbon footprint is to obtain a significant portion of power from renewable sources.
A company’s customers and employees will often view the business more favorably when the company commits to purchasing renewable energy. Although this benefit may not seem so obvious, Going Green spotlights a business as a good corporate citizen that looks to the future.
Fig 1. Blue line is expected electric price/red is price of wind-generated electricity
Mark Kapner PE, is an energy consultant and former engineer at Austin Energy. Virginia Palmer, Ph. D., is a leadership and green business consultant based in Austin. www.mvgreenpower.com