The American Renewable Energy Boom Is Looking More Like A 'National Kamikaze Mission'

A new note from Alliance Bernstein's Hugh Wynne and Francois Broquin asks at what price you're willing to pay to convert the country's power generators to renewables.

At the current rate, they write, we are now on a "national kamikaze mission."

According to their calculations, America's renewables surge - of which we've recently turned up our coverage - is actually costing American consumers $50 to $80 per Megawatt hour.

"Renewable energy counts among the most expensive sources of electricity in the United States, yet it is the only source that is growing...When we consider both their electricity and tax bills, therefore, U.S. citizens are being dunned an extra $50 to $80 MWh for each MWh of renewable generation they consume, relative to the cost of purchasing electricity in the wholesale market, and an extra $35 to $70/MWh relative to the all-in cost of electricity from a new [conventional combined gas turbine]."

The boom in renewables has been pretty impressive.

The analysts say that from 2007 through 2012...

• Renewables grew 40%
• Coal, gas (and nuclear) output fell 6.5%
• Power demand fell 100 Megawatt hours (no percentage given)

Here's the chart:

The trend will only accelerate, they say.

Through 2015 conventional fuel is forecast to have declined 8.5%. And renewables are directly eating into conventional generation:

So what's driving the surge? States' renewable portfolio standards:

"Why is the U.S. incurring billions of dollars of incremental power supply costs even as electricity consumption declines? Because state laws require it. Currently, 29 states and the District of Columbia have adopted renewable portfolio standards (RPS), mandatory obligations on electric utilities to supply a stipulated fraction of their retail electricity sales from renewable resources.

"Together, these jurisdictions account for ~65% of total U.S. power demand. Another eight states, accounting for a further 10% of retail electricity sales, have adopted renewable energy goals, which set target levels of renewable generation but impose no mandatory requirement."

It's not clear whether that extra $50 to $80 is per person or in aggregate; if it's the latter, one might argue that does not exactly amount to a "national kamikaze mission."

What the analysts appear to be referring to is the impact this will have on utilities.

They zero in on power providers represented in three regions - the upper Midwest (MISO), Texas (ERCOT) and the mid-Atlantic (PJM) - to see how increased renewables are cutting into utilities' bottom lines. The figures are not insignificant:

Given that 29 states plus Washington DC now have renewable portfolio standards, lots of people seem willing to accept this mission.