Too Much of a Good Thing? Researcher Says Electric Utilities Companies Overinvest in Unreliable Renewable Energy

By Ed Moorhouse

Wind turbines and solar panels generate electricity.

Wind turbines and solar panels generate electricity.

When it comes to weighing the positives of renewable energy, there is little debate: it helps improve the environment while reducing electricity usage and cost. But can there be too much of a good thing? According to a Rutgers University–Camden utilities expert, the answer is yes.

“I’ve been promoting and writing articles about renewable energy for 30 years, but the bottom line is that utilities companies have spent more time investing in efficiency to the detriment of reliability,” says Richard Michelfelder, a clinical associate professor of finance at the Rutgers School of Business–Camden.

In his research paper “Electric Utility Regulation and Investment in Green Energy Resources,” recently published in the Journal of Sustainable Finance and Investment, Michelfelder explains that renewable resources are much less reliable than conventional base load power plants because “they do not produce output when the weather is cloudy or at night or when there is no wind.”

“Generally speaking, throughout the last few decades, electric utilities companies have been getting a rate of return below their capital costs,” Michelfelder says. “When that happens, they abandon investing in their traditional assets and instead invest in energy efficiency and renewable energy. That’s not a bad thing, but they tend to overinvest in these renewables.”

Therefore, the companies are counting on a less reliable source of electricity.

Richard Michelfelder

Richard Michelfelder

“Renewables have a place in solving our energy needs, but they don’t play a primary role,” Michelfelder says. “Utilities still have to rely on traditional methods.”

He says based on current utilities regulations, 22.5 percent of New Jersey’s power must come from renewable sources by 2021, but “there aren’t enough renewables in the state that will come close to that.”

Furthermore, there is a far greater risk for problems like blackouts when failing to build new base load power plants and instead depending on an unreliable source of electricity.

Michelfelder is calling for wholesale changes in electric utility regulatory policy to address the underinvestment in conventional electricity generation.

“Otherwise, reliability will erode along with economic output,” he says. “At this point, I do not think that we should bet the productivity of the United States and world economy on research of bulk power storage from batteries. The productivity of the United States is already trending low.”

“Consumers want to pay the lowest price, but they also want the utilities to continue to provide 99 percent reliability,” he says. “Until we can come up with better technology, the only thing that will give us the 99 percent reliability that we come to expect is an electric utility plant.”

Michelfelder is a former president and chief executive officer of a national public utilities consulting firm. He is the author of numerous articles on energy and public utilities. A Brigantine resident, the Rutgers–Camden professor has testified before many state utility regulatory jurisdictions and the Federal Energy Regulatory Commission on matters involving the cost of capital for public utilities, energy efficiency, and water utility demands.

Michelfelder earned his bachelor’s degree from Holy Family College (now University), and his master’s and doctoral degrees from Fordham University.

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