Chu: Look to Mexico to See True Price of U.S. Renewables

by | May 12, 2016

Speaking at a Stanford University conference on May 6 on Setting the Climate Agenda for the Next U.S. President, former U.S. Energy Secretary Steven Chu said that America’s powerbrokers should look to Mexico, if they want to understand the true price of renewable energy.

In late March, Mexico’s state utility, Comisión Federal de Electricidad (CFE), ended nearly 80 years of state-owned monopoly when it invited renewable energy developers to bid in the nation’s first-ever private auction. Wind, solar, hydro, and other alternative energy companies competed for 15-year contracts to produce 1,720 megawatts (MW) of power – with solar producers winning about three-quarters of the awards and wind producers taking the remainder.

The cost was about 4 cents a kilowatt-hour [kWh] without the mandates, in both solar and wind,” Chu said, according to a report in Forbes Magazine, adding, “Four to four-and-a-half cents with no production tax credit, no investment tax credit, no renewable portfolio standard. It’s just money, including profit. This is pretty good news.”

Indeed, Chu pointed out that the price is much lower than most industry authorities would have anticipated renewables would be by this point in time: About a year ago, the U.S. Energy Information Administration (EIA) predicted that solar would cost at least 8.9 cents/kWh in 2020.

To date, it has been challenging to calculate just how much U.S. rates have been affected by such incentives as production tax credits and renewable portfolio standards.

“So I look to the South,” Chu said of Mexico’s auction. “This is the best way to actually back out what the subsidies are. What are other economies doing nearby with great wind and great solar the way that we have?”

The conference, hosted by Stanford’s Woods Institutes for the Environment, drew speakers from the Obama, Bush, Clinton, and Reagan administrations. In addition to Chu, presenters included former former White House Chief of Staff John Podesta, former EPA Administrator William K. Reilly, former Secretary of State George Shultz, former Deputy Secretary of the Interior David Hayes, former Assistant Energy secretaries Andy Karsner and Dan Reicher, former White House Council on Environmental Quality Chairman Jim Connaughton, and former FCC Chairman Reed Hundt.

They joined former Michigan Governor Jennifer Granholm, California Public Utilities Chairman Michael Picker, and other leaders from the energy, investment, and innovation sectors to discuss strategies America’s next President might employ to reduce greenhouse gas emissions and accelerate the United States’ pivot to a clean energy economy.

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