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Renewable Energy Faces Power Problems

All U.S. presidents want to leave a legacy from their time in power.

For President Obama, I suspect most people would say his main mission in this regard is creating universal, affordable healthcare. Hence the term “Obamacare.”

But his energy and climate change efforts are equally ambitious.

Take his Clean Power Plan, for example, which sets a very aggressive goal for the United States to source 28% of its power from renewable sources by 2030.

I’m not going to get into the scientific arguments over climate change. Rather, let’s look at the unforeseen effects that the Clean Power Plan is already having on many Americans.

Two controversies have already bubbled to the surface…

Controversy #1: Renewable Energy Transmission Lines

The bottom line with any kind of power is that it needs to get from where it’s generated to the people who need it.

That requires transmission lines. Lots of them.

Earlier this year, a report from Edison Electric Institute, the utility trade group, found that of the almost $48 billion in U.S. transmission projects through 2025, 46% of them are aimed at getting renewable power to the masses.

But some of them are already stirring up a hornet’s nest.

For example, Texas-based Clean Line Energy Partners has riled landowners in Arkansas and Missouri. The company builds transmission lines to carry solar- and wind-generated power… but who wants an electric transmission line running through their property?

Naturally, environmental groups that oppose the Keystone XL oil pipeline and other conventional energy projects firmly support these clean energy transmission line projects.

As it is, “NIMBY” is coming back to bite these environmental groups, with the proposals receiving pushback from landowners and state governments alike.

So the companies behind such projects are turning to the federal government. They want the Feds to use eminent domain to override private property rights and just seize the necessary land to build the clean power transmission network.

Controversy #2: Higher Electric Rates

The current U.S. electric grid is a real feat of engineering. More than 3,200 utilities come together to make up the grid, distributing power over 2.7 million miles of power lines.

With greater use of renewable power, such as rooftop solar systems and increased energy conservation, the end result has been lower electric usage.

Great, right?

Well, not if you’re an electric utility and your main source of income is what you charge customers for usage!

That damage is starting to get real for many utilities. Their decades-long business model is shorting out.

So much so, in fact, that the system of utilities charging customers based on electric usage is actually being phased out.

Instead, utilities are increasingly turning towards the use of fixed monthly fees, no matter how much power customers use.

And they’re raising these fees by double-digit percentages – to $25 or more per month.

The vice president of the non-profit Edison Foundation, Lisa Wood, told The Wall Street Journal, “The [electricity] grid is becoming a more complex machine, and there needs to be an equitable sharing of its costs.”

Uh-oh.

Every time I hear the words “fair share” or “equitable share,” I know it means more money out of my pocket.

But there’s no denying that most of an electric utility’s costs are fixed. They need a certain amount of income to survive. Industry analysts believe utilities need to raise sales volume by 1% annually just to maintain the grid system.

But sales are decreasing, not increasing. So now we have rapidly rising “service availability” fees to pay every month in order to maintain our electric grid system.

If you think it’s unfair that you conserve energy, or use less by yourself than a family of four, yet still be forced to pay a fixed fee, you’re not alone. Turns out maintaining a “legacy” is expensive.

Good investing,

Tim Maverick

Tim Maverick

, Senior Correspondent

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