ORIGINAL REPORTING: New Energy Keeps Winning In The Market
Xcel's record-low-price procurement highlights benefits of all-source competitive solicitations; The utility's Colorado division showed how competitive bidding benefits customers if regulators protect the quality of the process.
Herman K. Trabish, June 1, 2021 (Utility Dive)
Editor’s note: New Energy prices spiked slightly during the pandemic due to supply-demand and supply chain issues, but natural gases are rising even more rapidly.
New data shows Xcel Energy Colorado’s 2016-2017 all-source competitive solicitation (ASCS) secured even lower costs than power sector leaders previously thought, adding momentum to interest in this emerging approach to procurement.
Xcel’s ASCS returned a $0.0017/kWh bid for wind, a $0.023/kWh bid for solar, and a $0.03/kWh bid for solar-plus-storage, according to a February 2021 Xcel presentation to Michigan regulators. These prices, compared to Colorado’s average January 2021 residential electricity price of $0.126/kWh, have other utilities asking how they can use this procurement approach.
ASCSs identify "market-based portfolios that meet utility needs on both cost and risk from the full range of options," said 3rdRail Managing Partner Fredrich Kahrl, lead author of a March 2021 Lawrence Berkeley National Laboratory (LBNL) ASCS study. The study outlines 11 ASCS proceedings from investor-owned utilities from 2011-2019, including Xcel Colorado and Northern Indiana Public Service Company (NIPSCO).
This resource-neutral approach, which can include utility self-build proposals, can be "a valuable strategy for utilities to address uncertainty in a time of rapid technological change," Kahrl said. Unlike single resource requests for proposals (RFPs) to meet planning needs, ASCSs consider all offers that meet a utility’s criteria from all bidders, representatives of Xcel Colorado and NIPSCO added.
Single resource RFPs were the norm when utilities typically chose between hydropower, fossil fuels and nuclear generation and prices were well-known. In the last decade, ASCSs are gaining in use because of the price and availability feedback they provide on emerging technologies like wind and solar.
Xcel Colorado's ASCS showed regulators "carefully regulated competitive planning and solicitations drive quality up and prices down and benefit consumers," added former Colorado Public Utilities Commission (COPUC) Chair Ron Lehr. However, regulators must ensure ASCSs’ "fairness and transparency," beginning with oversight of utility planning, LBNL’s research emphasized. It described regulators' critical role in keeping valuation of the benefits and risks of traditional and renewable generation, distributed energy resources (DERs), energy storage and utility-owned resources open and equitable to protect the process… click here for more