Why switching to a Green New Deal may not make your electric bill spike
Representative Alexandria Ocasio-Cortez, Democrat of New York, and US Senator Ed Markey (R), Democrat of Massachusetts, speak during a press conference to announce Green New Deal legislation to promote clean energy programs outside the US Capitol in Washington, DC, February 7, 2019. Saul Loeb | AFP | Getty Images

It's a nearly religious point among climate-change skeptics, not least among them President Donald Trump: If America moves quickly to reduce carbon emissions, electric bills will spike and business will suffer. But it's not true, and a handful of leading-edge utilities, far from the liberal confines of California and years in advance of the enactment of a Green New Deal like the one proposed by newly elected Rep. Alexandria Ocasio-Cortez, are showing how a green electricity future can work. Already, carbon emissions from electricity are 28 percent lower than in 2007, according to the Edison Electric Institute, a trade group for investor-owned utilities. And inflation in electricity rates has averaged just 1.1 percent since 2010, by Labor Department figures — lower than the overall inflation rate. Now the utility industry is targeting the truly big numbers — reductions of 40 percent to 80 percent by 2030, with leaders like Minneapolis-based Xcel Energy , which serves 3.6 million electric customers in eight states from Minnesota to Texas, saying it's possible to go virtually carbon-free by 2050 with little to no rate impact. The basic notion is that the money used to pay for new wind and solar energy power plants can be financed with cash not spent on coal or natural gas, especially with interest rates so low. "The surprising thing is that when you do the math, it's cheaper to build the wind and not use your coal and gas plants as much," Xcel Energy CEO Ben Fowke said in a speech in Denver last year. "Most of our customers want a cleaner energy product. All of them want an affordable energy product."

On a path to 80 percent renewable by 2030

The first reason coal began going away has been the falling price of natural gas, but the falling price of renewables is now making coal's woes a one-two punch as wind power becomes the nation's fastest-growing electricity source, according to cost estimates from investment bank Lazard. Switching to gas from coal cuts a utility's carbon emissions by about half, and switching to wind, solar, or hydropower cuts them to zero. At Xcel, Fowke said the cost of making wind-based power has fallen to $20/megawatt hour from $65 in 2008, while solar power has dropped to $30 from $180. He noted that electricity has never been cheaper, adjusted for inflation, than it is now, and predicted that Xcel's power will be 55 percent renewable by 2026. It wants to reach 80 percent renewable by 2030. With a picture of stable prices and heavy capital investment, it may be a surprise that Xcel's stock is actually beating other utility shares handily. The company's shares have risen 78 percent over the last five years — and pay a 2.84 percent annual dividend yield. The company says profits are likely to rise 5 percent to 7 percent annually through 2023 as costs decline despite the capital investment. The Utilities Select Sector SPDR exchange-traded fund, the largest tracking the utility industry, has risen about 38 percent in the past five years.

"The reduction in the cost of renewables and especially natural gas has let them do this," said Emily Fisher, general counsel at the Edison Electric Institute. "Going forward, it will be a different suite of technologies. Xcel's plan is the boldest because they're talking about getting to 100 percent. But they're not alone." At Xcel, Fowke is overseeing a plan to spend another $20 billion by 2023 to make the company's goals for 2030 and 2050 happen. The company already has reduced its carbon emissions by 35 percent since 2005, while retiring coal plants that once generated 2,100 megawatts of electricity, enough to power 2.1 million homes. By 2021, Xcel plans to own 11,300 megawatts' worth of wind-powered plants, which is 10 times its 2005 total. As it does so, it will also phase out more expensive renewable power it buys from third parties using earlier-generation technology, another important source of cost savings. In 2012 Fowke characterized many of these moves as a way to get ahead of what he called a "tsunami" of upcoming regulations about mercury, carbon and other pollutants. "We've gotten ahead of the game,'' he said, in part by using tax credits designed to promote wind adoption.

Xcel customer bills are falling

While all this has been happening, the average electric bill at Xcel was falling. The average customer paid $83.52 a month for electricity in 2013, dropping to $81 by 2017. Natural gas bills fell from $61.64 in 2014 to $45.79 in 2017, the company says. "I think we can do it in a way driven by economics that is pragmatic," Fowke said in Denver. Xcel is in a unique position — geographically. "They are blessed with two things unlike any utilities," said Morningstar analyst Travis Miller. "Their territory crosses some of the most wind territories this side of the Himalayas. And that means their cost for wind is substantially less than almost anyone else," he added, cautioning that shares have become richly priced as earnings per share jumped 9.8 percent last year.

Xcel Energy President and CEO Ben Fowke III is leading a plan to make the utility 100 percent renewable-energy electricity generation by 2050. Zach Gibson | Getty Images News | Getty Images

Thomas Edison wouldn't recognize today's energy industry. And he definitely wouldn't recognize it in 10 years. Ben Fowke Xcel Energy CEO