A couple of days ago, I made an argument that we might be able to restructure our capital investment schedule to make the 100% renewable option more affordable. Brian Daskam with Denton Municipal Electric wrote to me today with a reply and I’d like to share it here. So, here is his note to me:
In your recent blog post you wrote about, “How Denton Can Afford 100% Renewable Energy.” As always, I appreciate your interest in this project, as well as the humility you bring to the discussion. In your final paragraph you say, “Now, if I am wrong, someone please let me know how.” In fact, the post does make a mistake about how electric transmission infrastructure projects are funded in Texas, and this mistake makes a real difference to your analysis.
DME invests in electrical infrastructure to meet new growth in the city as well as to replace aging infrastructure. Reviewing these activities, you make an analogy:
“It’s as if we have an old house and we decided to remodel it and at the same time build an addition on the west side.”
It would certainly cost money for a homeowner to remodel and expand their house, and you claim that DME’s capital investment projects also, “makes for a bigger mortgage.” You push the analogy further by saying that we should install solar panels as part of the remodel (i.e. go 100% renewable) and hold off on some of the other improvements as a way to save money. Perhaps this would be a way to achieve 100% renewable energy without raising rates.
It’s worth mentioning that, like all analogies, this one can only go so far. Families often remodel their homes for reasons of comfort and aesthetics. As such, we think of these as non-essential expenditures. Electrical infrastructure is different. New housing developments are being built in Denton and the downtown area continues to experience infill development. Those homes and business expect power, and are not likely to view electric service as non-essential. As our infrastructure ages, it needs to be replaced for the sake of the safety of Denton’s residents. Neglecting this duty would be unacceptable.
Furthermore, even if we decided to be irresponsible, the Federal Energy Regulatory Commission (FERC) would not allow us to be. FERC is the federal agency with regulatory oversight of our transmission system, and DME’s capital improvement plans are developed to be in compliance with FERC requirements.
But imagine that both DME and FERC decided to neglect their duties. The analogy still has a major flaw which has to do with how transmission infrastructure projects are financed in Texas. We can generally presume that a family would save money by reducing or delaying a home renovation. Not only is this different from how DME’s electric transmission infrastructure projects work, it is exactly the opposite.
All rate payers in ERCOT share the cost of transmission infrastructure projects. If a new transmission line is built in San Antonio or a new substation is energized in Dallas, rate payers across the state reimburse the entity for the cost of constructing those projects. Because Denton rate payers are funding the transmission projects of others in ERCOT, we need a different analogy. It’s as if we live in a large apartment complex. Each tenant is able to make approved improvements to their apartment, and each renter shares the cost of those improvements. It’s worth noting here that solar panels (i.e. going 100% renewable) would not qualify for these funds, since they are considered generation rather than transmission.
Even this analogy doesn’t go far enough. You might think that reducing our own costs related to infrastructure improvement would still reduce our costs, however modestly, since they are being shared with the entire state. But in fact, given how the Transmission Cost Recovery Factor works, if we reduced our own infrastructure spending while the rest of the state did not, we would see an increase in our costs.
So am I saying that Denton cannot afford to go 100% renewable? That is not my determination to make. DME presented estimated rate impacts of various scenarios, including 100% renewable. The City Council has repeatedly given DME direction to increase renewables while protecting rates and reliability. The Renewable Denton Plan is still the best plan that I have heard to meet that direction.
Thanks again for your continued interest and dialogue on this topic,
Manager of External Affairs
Denton Municipal Electric