The steep decline in wind and solar generation costs in the past decade opens up new opportunities for electric utilities and their customers. In an increasing number of regions, it can be cheaper to build new solar and wind generators than to operate existing fossil-fired plants. Yet vertically integrated utilities have often been slow to take advantage of low-cost renewables.
Utility regulators can act as a catalyst for translating these market forces into savings for electricity customers and reductions in emissions.
This paper outlines seven practical strategies that public utility commissions can use to reduce obstacles to this technological change and speed utilities’ acquisition of low-cost solar and wind — ensuring just and reasonable rates for consumers.
The seven recommended strategies are:
- Address stranded costs: Provide assurance that stranded costs of retiring generating units displaced by low-cost wind and solar will be recoverable.
- Level the IRP playing field: Update integrated resource plan (IRP) rules on resource evaluation to ensure that renewable resources are evaluated on a consistent and comparable basis with conventional resources.
- Make retirement checkups routine: Provide guidance requiring utilities to regularly and systematically evaluate generator retirements in IRPs.
- Speed up the cycle: Increase the frequency of resource planning and acquisition.
- Go all-source: Require utilities to use all-source competitive solicitations to acquire new resources.
- Revisit the fuel cost pass-through: Give utilities more awareness of the fuel cost risks of fossil-fired generation by reforming fuel cost adjustment mechanisms.
- Think regionally: Encourage utilities to join a regional transmission organization or energy imbalance market.
