States Fire up Renewable Standards

Are utilities buying into them?

Bill Opalka | Mar 08, 2012

Share/Save  

Renewable energy mandates have been around for about 10 years, pioneered by the states with important milestones coming due in the next few years.

The faint hope for a national renewable energy standard persists, but the states are really where the action is. And with waning federal support for renewables, that will not change anytime soon.

The topic was discussed in the recent American Council on Renewable Energy webinar “State Renewables Policies – Lessons Learned After A Decade of Success.”

The small incremental increases in renewable portfolio standards (RPS) in 29 states have created a multi-billion industry. But the percentages for green power are increasing.

“2010 was one of the first large compliance years that we saw and many are expected to ramp up over time. Many are expected to ramp up in 2015 to 2020,” said Lori Bird, Senior Analyst, National Renewable Energy Laboratory (NREL). “We have a lot of experience with these policies but some have just begun to be implemented.”

A key issue is whether resources are developed locally or can be traded across state borders. Resource definitions have been broadened to include energy efficiency or combined heat and power. Solar carve-outs have been popular ways to motivate that resource, though there have been some questions.

“There has been concern with large projects coming in and swamping the market, which could push out some of the residential and smaller commercial scale projects,” Bird said.

Carve-outs have been on means to support renewables, but funding sources are always a question, especially if federal support lapses.

But there’s an element of public support that was absent when states started on the path to cleaner energy, said Lewis Milford, President, Clean Energy Group (CEG).

“Politically, they represent a very significant change in the way we view energy policy at the state level. Ten years ago (RPS) was solely the province of the public utility commissions, but now the legislatures are fully involved in these decisions,” he said. “Not only do they see the environmental benefits, but also the economic benefits, so there has been a democratization of renewables policy.”

To gain further traction, and to replace the tax equity markets that have proved insufficient for project finance since the recession, new models must be found.

"We have discussed infrastructure finance for years, but I think it’s now time to take this seriously, and to look at the thousands of state and local government authorities that used tax-exempt bonds to invest in the U.S. infrastructure for everything from roads to bridges to airports and to consider how to use that infrastructure finance to support the clean energy industry,” he added.

A utility industry representative worried that the RPS mandates were getting ahead of the industry’s ability to deliver clean power cost effectively.

“From a utility perspective, the RPS standards are so aggressive as to raise questions about their feasibility,” said Eric Ackerman, Director, Alternative Regulation, Edison Electric Institute (EEI).

Renewable power has to be incorporated into the utilities’ mix to make it a viable fixture, not just a way to satisfy state rules.

“The challenge has been to change how we deal with renewables, to build it into our business so we make it into a profitable business for our shareholders,” he said. 
Another challenge utilities will face as they comply with increasing mandates is the need for increased capital spending in an era of slow revenue growth, Ackerman said.





Industry thought leaders will be discussing this topic and more at the upcoming EnergyBiz Leadership Forum, Harnessing Disruption, taking place in Washington D.C., March 19-21, 2012. Review full conference details by visiting www.energybizforum.com


Related Topics

Comments

"...have created multi-billion industry..."

It is all well and good to say that the small increases in renewable portfolio standards have created a multi-billion dollar industry but not without saying at what cost.  The vast majority of the MWs dictated by these RPSs are being filled by wind.  In the ERCOT region where I reside, that wind is typically available at the wrong time to have the most significant impact on fossil-fuel generation.  It is in fact, most available during the hours from midnight to about 6AM or 7AM according to the latest plots.  Past summer plots of wind generation show that in summer, that period is shortened and the amount available is lower.  Further addition of wind will significantly interfere with the base load in the midnight to 6AM timeframe, interfering with full load operation of coal-fired plants.  Interfering with that operation will compromise the heat rate and emissions of the plants BUT, the variability of wind and the need for frequency regulation that wind typically jacks with will mean some fossil-power will have to remain on line at low load to pick up for winds failings.

It has already been documented by reports from the Civitas group in the UK and by Dutch physicist C. le Pair that heavy integration of wind in those countries has not resulted in the supposed green benefits projected.  The Civitas report contains information from a study by consultants Mott MacDonald which show that, when all costs are considered off-shore wind is by far the most expensive power technology and on-shore wind the second-most expensive technology on a levelized cost of power basis even more expensive than nuclear.  (Solar was not considered.)  That same report and the le Pair report indicate that wind has done nothing to decrease CO2 emissions in either country--in fact le Pair's report indicates wind has resulted in a 3% increase in CO2 emissions because of having to run fossil-fuel backup for wind.

The adoption of RPSs in this country as well as in Europe is a function of subsidies, either by feed-in-tariffs, tax credits, and cash grants of federal funds.  However, those funds come from taxpayers not involved in the renewable energy field.  Whether we pay by FITs or by the injection of funds confiscated from taxpayers, the net result is higher power costs with no CO2 reductions.

RPSs are a really dumb path because the rising costs will send manufacturing to China, who despite all the ballyhoo about their green investments, are investing much more heavily in coal-fired power and hydro power than in any wind or solar.  (If you feel that hydro power is "green", perhaps you should ask the displaced people, the drowned animals, and the innundated plant life in the area of the reservoir.)

The same billions that have gone into fulfilling RPS requirements could have constructed newer, more efficient, lower polluting power plants that would have truly cut CO2 emissions on a #/MWh basis while delivering reliably dispatchable electrical energy at lower cost, whereas RPSs have effectively raised the price of electricity overall, resulted in the deployment of techonolgy that has not cut CO2 emissions, and is not dispatchable much less reliable.

Mark Wooldridge