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Bonneville Environmental Foundation announced that due to high customer demand for clean energy, Puget Sound Energy will increase its purchase of BEF's solar power Green Tags. PSE, Washington state's largest energy company, offers its customers a renewable energy option on their service, and currently has more than 13,000 green power clients.
"PSE's green power program is one of the region's leading environmental energy programs," said BEF vice president for renewable programs Rob Harmon. "PSE's dedication to this program will help us support existing and future systems for years to come." PSE had contracted for 450,000 kilowatt-hours of Green Tags over three years, starting this year. BEF said the increased PSE purchase will allow it to add 75 kilowatts of solar power to its program. Contact: Bill Jeppesen, BEF, phone 916-941-7553. Source: EIN Renewable Energy Today, 9/1/2004.
The Long Island Power Authority, a municipal utility that serves nearly 1.1 million electricity customers on Long Island in New York, announced that its 'LIPA Green Choice Program' is now open for enrollment. Under the program, LIPA customers can purchase renewable energy attributes through one of the three participating green power marketers-Community Energy, EnviroGen, or Sterling Planet. The green power options are supplied from sources such as wind, hydro and biomass and range in price from 1¢/kWh to 2¢/kWh above standard electricity rates. LIPA will apply the green power surcharge to the standard monthly electricity bills of participating customers.
Participants can change their initial selections or discontinue participation in the program at any time. LIPA will be supporting the program with a public education campaign that will include inserts in monthly billing statements, a Web page, and newspaper advertisements. Source: Green Power Marketing Monthly Update - August 2004.
UniSource Energy Services, an investor-owned utility providing electric service to about 77,000 customers in Arizona, announced the launch of its 'GreenWatts' program. Customer participants can sponsor one watt (20 kWh) of solar power generation by contributing $2 each month, or 10¢/kWh. Each additional watt or 20-kWh block of green power is priced at $1.50 per month, or 7.5¢/kWh. Proceeds from the 'GreenWatts' program will be used to build new solar power projects in communities served by UES. Until UES can establish its own sources of renewable energy, a portion of the customer contributions will be used to purchase green power "credits," or renewable energy certificates, from other sources.
The utility intends to use both the green power credits and the energy generated from the solar systems to meet Arizona's Environmental Portfolio Standard, which requires the state's utilities to derive a percentage of their total retail energy sales from solar and other renewable energy sources. Under a separate program, UES is offering incentives of up to $3,000 per kilowatt for residential or business customers who install new grid-connected photovoltaic systems. Source: Green Power Marketing Monthly Update - August 2004.
Portland General Electric announced that its green power program has reached a major milestone: 30,000 of the utility's customers are now purchasing renewable electricity, which ranks among the top utility programs in the nation for number of customer participants. To commemorate the milestone, PGE designated a part of inner southeast Portland with the highest concentration of renewable power purchasers as the "Greenest Neighborhood." One out of every seven customers in this area has purchased a renewable power product, representing more than four times the program participation average. Source: Green Power Marketing Monthly Update - August 2004.
Utah Power, a subsidiary of PacifiCorp, introduced a new version of its 'Blue Sky' renewable power option that lowers the cost of wind energy for large purchasers. Under the "traditional" 'Blue Sky' option, businesses and residential customers can purchase wind energy in 100-kWh increments for $1.95 each, or a premium of 1.95¢/kWh.
Under the new 'Blue Sky QS' (quantity savings) program, commercial customers that purchase more than 10,000 kWh of wind energy each month for at least one year can obtain a volume purchase discount. The cost is based on a downward sliding scale. For example, a commercial customer who purchases 150, 100-kWh blocks (or 15,000 kWh) of wind energy per month will pay 1.53¢/kWh, while a customer who buys 30,000 kWh per month will pay 1.12¢/kWh. The utility has developed an online calculator to help commercial customers determine the cost of their purchase. Source: Green Power Marketing Monthly Update - August 2004.
An off-shore wind project in Nantucket Sound got a kick start. Now that
a U.S. appeals court and the U.S. Department of Energy have weighed-in and
removed some obstacles, proponents of the proposed site say that the region
will be unburdened of dirtier fossil fuels and provide much needed clean power
to nearby demand centers with the $700 million
facility.
The specific site has been under contention, with opponents arguing that
it requires state approval in addition to federal authorization. But, a recent
decision by the U.S. Circuit Court of Appeals for the First Circuit in Boston
has said that the state's jurisdiction does not extend beyond a three-mile
radius—where the Cape Wind project would be located,
or five miles outside that perimeter. The decision allows Cape Wind Associates
to keep a test tower that tracks wind speed, wind direction and wave heights.
Meantime, the Energy Department along with the Massachusetts' Energy Facilities
Siting Board have released a study showing that the New England region is
in desperate need of new energy sources and that wind farms would be a good
alternative. Not only would they ease the area's growing reliance on natural
gas, but renewable energy would also allow
the region to hedge against those high prices. The switch is needed: In 1980,
Massachusetts produced less than 1 percent of its energy needs from natural
gas but now that number is about 41 percent, and is expected to be 49 percent
by 2010.
That analysis is being used by the U.S. Army Corps of Engineers, which is
the main permitting agency for the Cape Wind deal. Still to go: An examination
of the precise location that would be used and an environmental impact statement
as it relates to birds, fish and recreational boating, as well as scenic views
and navigation. If the harm can be mitigated or avoided altogether, “the
power from the wind farm is needed on reliability and economic grounds,”
says staff of the
state's siting board.
But, getting the environmental thumbs-up is not a given. Sixteen sites have been identified as those that could suffer aesthetically from the project, says Pawtucket, R.I.-based Public Archaeology. It is not just a “not-in-my-backyard” issue but one that would destroy marine resources and impede commercial and residential activities, say opponents. Many business groups, furthermore, view the undertaking skeptically, noting that the waterway is inextricably linked to the local economy and quality of life there.
According to the Alliance to Protect Nantucket Sound, there is no national
off-shore permitting process. A program should be in place that provides a
road map, it adds, noting that the ad hoc basis by which the Cape Wind project
is functioning will set a dangerous precedent for future deals. It wants the
National Oceanic and Atmospheric Administration or the Environmental Protection
Agency to have final say—not the U.S. Army Corps of Engineers.
Source: By Ken Silverstein, Director, Energy Industry Analysis, ©2004,
UtiliPoint International, Inc., 8/26/2004.
Tucson Electric Power Co. has sweetened its SunShare subsidy program, hoping to make solar power add up for more Tucson- area residents. And TEP's sister utility, UniSource Energy Services, has begun offering SunShare solar-power subsidies to its 200,000 customers in rural Southern and Northern Arizona.
Under SunShare, TEP has offered an incentive of up to $2,000 per kilowatt of verified AC, or alternating current power output, from a home solar electric system or a $2,000 "buy-down" credit on a $6,000 system purchased through TEP. State tax credits of $1,000 per system also are available.
The average air-conditioned home in the Arizona desert needs about 4 kilowatts of energy on the hottest day of the year. In addition to the subsidies, SunShare customers get credits on their monthly power bills for the energy their solar systems produce.
Despite these incentives, as of the end of 2003, only 56 of TEP's roughly 360,000 electric ratepayers had taken advantage of the 3- year-old SunShare program, according to TEP. "We've increased the subsidy to attract more participation," TEP spokesman Joe Salkowski said, referring to the expanded incentive, which was approved Aug. 3 by the Arizona Corporation Commission.
Experts say the relatively high cost of the equipment is the main factor keeping customers from installing solar electric, or photovoltaic, systems. Even a modest-sized system can take more than 10 years to pay for itself. Most SunShare customers cite their desire to foster solar energy as an environmental benefit.
Under the two existing options, customers would qualify for the full subsidy only if TEP verified the AC output of an installed system. AC is the type of current supplied to household outlets. The third, new SunShare option offers subsidies of up to $3,000 per kilowatt, based on the solar system's DC capacity rating, to TEP customers who buy, install and maintain their own equipment.
Basing the subsidy on the manufacturers' DC power ratings will allow customers to get a higher subsidy than they might based on actual AC output, Salkowski said. A typical, 1.5-kilowatt DC solar system produces about 1 kilowatt of AC power, he said.
To qualify for the new option, customers must complete their SunShare agreement with TEP by the end of 2004, and the system must be running within 180 days thereafter. This year, a typical 1.5-kilowatt DC home system producing about 2,000 AC kilowatts annually would be eligible for a subsidy of up to $4,500. The program is limited to subsidizing up to 50 kilowatts of solar capacity per year.
The subsidy will decline to up to $2,700 in 2005 and up to $2,400 in 2006. Local solar system installers said the new SunShare option is a good step, but the program needs more promotion. "It's the price, but it's also awareness levels," said Jim Cooley, owner and general manager of Progressive Solar and a 30- year industry veteran.
There is much more awareness of solar power in California, which has suffered skyrocketing energy prices in recent years, Cooley said. Jerry Samaniego, owner of Tucson-based Expert Solar, agreed. "It will certainly create a lot more people out there looking at solar, with the new option available," he said, noting the verification of AC power output was something of a deterrent for some customers.
In addition to offering SunShare, UniSource also is offering its customers GreenWatts, which lets customers subsidize new, grid- level solar projects by adding $2 or more to their monthly power bills. That money funds such grid-connected solar generation as the Springerville Generating Station Solar System in Northeastern Arizona, which generates enough electricity to power 700 homes annually. Source: The Arizona Daily Star, Tucson, David Wichner, 8/24/2004.
The AES Corporation announced today that it is making an equity investment in US Wind Force, LLC as its first step into the U.S. wind market. US Wind Force is a private company that focuses on developing wind energy projects in the fast-growing Eastern United States.
US Wind Force is an independent, privately held developer of wind energy projects. It was an early entrant in the Eastern United States, with projects underway in West Virginia, Maryland and Pennsylvania. The company focuses on the fast-growing, largely untapped East Coast renewable energy market, which is expected to triple over the next 10 years. US Wind Force handles all aspects of "wind farm" development, including site selection and leasing, data collection and surveying of sites, wind turbine selection, permitting, transmission grid interconnection and project construction management.
"We see a lot of potential in wind as a new and expanding source of electricity here in the United States and in other OECD countries," said AES President and Chief Executive Officer Paul Hanrahan. "This is a natural extension of our existing generation business. It provides a good opportunity for AES to enter the U.S. wind energy sector in the highly attractive East Coast market through a company that has good sites, a good market and a good management team. We look forward to working with US Wind Force to bring people a clean alternative source of electricity."
"We are delighted with our new relationship with AES. We see an alignment of our strategic interests in wind and renewables and believe the management and business culture of both our companies are well suited to achieving a common success in the eastern U.S. market," said US Wind Force Chief Executive Officer David McAnally. "We have over 1200 MWs of wind development assets in various stages of progress. This is a win-win for both AES and US Wind Force."
US Wind Force is currently accepting proposals and negotiating power off-take contracts for the first three Mid-Atlantic projects in its project portfolio. All three of these projects could be slated for construction as early as 2005. US Wind Force is seeing strong demand in the newly developing renewable energy market on the East Coast and predicts a high level of sustained growth over the next ten years.
World electricity production from wind is growing rapidly. The U.S. ranks second in the world in wind-driven capacity with more than 6,200 MW. Over the next ten years, wind generating capacity is expected to exceed 10,000 MW in the Northeast U.S. alone.
For more information, contact AES media relations. Source: Sep 02 - Business Wire
The Oil & Gas Journal recently reported that New Iberia, LA-based Wind Energy Systems Technologies, LLC is looking to install wind turbines on retired oil and natural gas platforms in the Gulf of Mexico in an attempt to utilize the existing electric power grid for renewable energy production.
According to OGJ, while WEST wants to provide power from the wind farms to utility customers in Louisiana, Mississippi and Texas, state and federal regulatory issues have yet to be resolved.
OGJ said WEST president Herman Schellstede hopes to start construction on a $50-million, 50-megawatt wind farm in 2005, with the Louisiana Public Service Commission expected to consider next month WEST's request to use the existing electrical power grid. Source: OGJ, 8/31/2004 via EIN Renewable Energy Today, 9/2/2004.
IID Energy was honored with the Geothermal Excellence Award by the Geothermal Energy Association and the Geothermal Resources Council at their Trade Show and Annual Meeting here on Sept. 1. The GEA and GRC cited IID Energy's outstanding efforts to promote geothermal energy use as the basis to award the sixth largest energy provider in California.
"This is a unique honor-an independent power producer honoring a public energy provider," said Glenn Steiger, manager of IID Energy. IID Energy promotes its substantial 1,300-mile transmission network as the "Green Path" to export renewable resources from its service area to energy providers throughout the Western United States. 'The Green Path currently wheels energy for CalEnergy and Ormat, two geothermal producers with a combined output of approximately 1,000 megawatts from multiple projects in the Imperial Valley.
To further boost the use of renewable resources, IID Energy voluntarily adopted a Renewable Portfolio Standard in May 2004. 'The Standard establishes a 20 percent minimum use of green energy resources by the utility. Senate Bill 1079, passed in 2002 by the California legislature, mandated investor-owned utilities to maintain a minimum portfolio level of 20 percent in renewable energy. Public utilities, like IID Energy, are exempt from the order.
To meet the standard and the growing energy demands of its customers, IID Energy is negotiating with CalEnergy to purchase approximately 200 megawatts of energy from its Salton Sea Unit 6, now under construction. 'The geothermal resource, combined with IID Energy's existing hydro energy, would exceed IID Energy's 20 percent Renewable Portfolio Standard.
"No other entity has transmitted more clean geothermal energy within the U.S. than IID Energy," said Vince Signorotti, GEA representative for CalEnergy Operating Corporation. In 1979, IID Energy began transmitting energy for Magma Energy, now known as CalEnergy. IID Energy's resource portfolio also includes natural gas, coal, nuclear and fossil fuels. Source: IID release, 9/1/2004.
The Utility Wind Interest Group Fall Technical Workshop - Wind Integration: Focus on the Northeast, will be held October 27-28, 2004 at the Crowne Plaza Albany - City Center in Albany, NY. The latest information on this event, as well as online registration, can be found on the UWIG Web site. UWIG has secured a block of rooms at the Crowne Plaze for $120 a night. Please call (800) 227-6963 or (518) 462-6611. The cutoff date to get the guaranteed rate is September 26. The deadline for advance registration and payment is September 30. Contact Sandy Smith at 865-691-5540, ext. 141 if you have any questions or encounter any problems with online registration or payment.
The California Energy Commission's Integrated Energy Policy Report Committee and Renewables Committee will conduct a workshop on renewable transmission planning to review statewide transmission and distributed generation modeling approaches and results related to renewable resources in California. Source: CEC Release, 9/2/2004.
Congress returns to work this week with two major unfinished energy bills still on its plate: comprehensive energy legislation and a corporate tax bill that includes $19.4 billion in tax breaks.
Whether either will be completed by the time Congress completes its shortened legislative session during which lawmakers still must complete nearly all the FY '05 spending bills is unclear. Staunch supporters of both bills are hopeful lawmakers can address their issues, but given the tight schedule and the politically charged atmosphere on Capitol Hill, speculation points to the two bills having to wait until a post-election lame duck session of Congress before anything happens.
Comprehensive energy legislation: Aside from the issue of rising oil costs, which with the end of the summer driving season are not likely to have much of an effect on gasoline pump prices, there has been little urgency to the call for comprehensive energy legislation. Indeed, there was some expectation that a midsummer power outage along the lines of the massive Northeast-Midwest blackout last year could help spur action on the energy bill, but electricity markets this summer have been relatively stable.
So energy bill supporters have had to look elsewhere. They got a boost in mid-July when Senate Appropriations Committee Chairman Ted Stevens (R-Alaska) said he was trying to negotiate a compromise on the controversial fuel additive liability waiver that has kept the energy bill under a nearly yearlong Senate filibuster, causing many to leave the bill for dead. During the August recess, Stevens told reporters that negotiations were continuing but did not provide any details about what they entail.
Stevens' motivation to solve the energy bill impasse stems from his desire to see Congress approve a natural gas pipeline from Alaska's North Slope to lower 48 state markets, which is included in H.R. 6, the energy conference report that has been stuck in the Senate since November 2003.
An industry source said last week that Justice Department legal teams have been asked to draw up alternatives on compromise language that would allow for the creation of a Superfund-style program for cleanup of fuel additives such as methyl tertiary butyl ether that have leaked from storage tanks into groundwater in many places around the country.
And another industry source said the speculation is that if such a plan is amenable to House Majority Leader Tom DeLay (R-Texas), a key supporter of the MTBE liability waiver, then the push would be on to get Senate Republicans who now oppose the energy bill to change their votes.
The idea is that energy bill supporters would go after the handful of Senate Republicans who opposed the original MTBE provisions to get them to change their votes. The thinking is that in a close presidential campaign, the appeal to party loyalty to boost President Bush's re-election prospects would be difficult to resist.
Such a move could force the Democrats' hand on the matter. Senate Minority Leader Tom Daschle (D-S.D.) is in a pitched re-election battle of his own and would gain from passing the energy bill, as it contains key ethanol market mandates that would boost the economy of his state. However, many other Senate Democrats, wary of giving President Bush anything resembling a political victory, are likely to try to avert such a deal on the bill.
Corporate tax legislation: There is no such partisan squabbling on the corporate tax bill, H.R. 4520, which went to a House-Senate conference committee shortly before Congress broke for the summer recess in July. Instead, the dispute has been between House Ways and Means Committee Chairman Bill Thomas (R-Calif.) and Senate Finance Committee Chairman Chuck Grassley (R-Iowa) over who will lead the conference, under what conditions it will take place, and which of the many "Christmas tree" tax-related provisions added to it at the last minute will be part of the final bill.
The bill, called the "Jumpstart our Business Strength" Act, is considered "must-pass" this year because it repeals the Foreign Services Corporation/Extraterritorial Income Act, a law the World Trade Organization declared illegal, leading European nations this spring to impose rising tariffs on U.S. goods.
Failure to act on the bill has been costly. The European tariffs rise by 1 percent each month, providing an incentive for quick action on the part of Congress; the tariffs started at the 5 percent level in March, have since risen to 11 percent and can top out at 17 percent next April. However, several lobbyists contend that at this point, Democrats will be loath to give Bush a Rose Garden bill-signing ceremony on something called the "JOBS Act" before the November election.
Nevertheless, the energy industry has seen this as the best hope for any energy-related legislation this year. The Senate-supported version of the bill contains $19.4 billion in tax breaks aimed at oil and gas, coal, nuclear, renewable energy companies and energy efficiency programs.
The House only supported extenders for oil and gas and wind energy production tax credits but included nuclear import-related measures targeted at the industry's need for steam generators and reactor vessel heads for nuclear power plants.
Lobbyists insist the Senate energy package is essential to final passage of a corporate tax agreement and say the chances of its staying intact are better if Grassley heads the conference. However, it is widely expected that Thomas will chair the conference, leaving many to wonder what the cost of keeping the energy tax provisions will be. Source: Mary O'Driscoll, Environment and Energy Daily, 9/7/2004
Prospects remain uncertain that climate change legislation targeting greenhouse gas emissions will see a Senate vote before the end of the year. But proponents of the measure offered by Sens. John McCain (R-Ariz.) and Joe Lieberman (D-Conn.) continue to hope that the measure could be attached to a bill dealing with class action lawsuits.
McCain and Lieberman have been seeking a second vote on the climate change bill, S. 139, that would force major energy, transportation and manufacturing companies to cut their greenhouse gas emissions to year 2000 levels by 2010. The measure was defeated last October on a 43-55 vote.
McCain has repeatedly said he will push the climate change bill until it is signed by the president. At least one Democrat who voted against the bill last year, Sen. Mary Landrieu (D-La.), has indicated she may vote in favor of the measure the next time the bill comes before the Senate.
Prior to recess, the senators filed their bill as an amendment to an unrelated class action lawsuit bill, S. 2062, but supporters failed to obtain the 60 votes needed to end debate on the bill. The class action bill would give federal courts more jurisdiction over such lawsuits, which some have said are resulting in excessive jury awards in state courts.
The class action bill was hampered by a flood of amendments as lawmakers, including McCain and Lieberman, eyed it as a last opportunity to take care of unfinished business before the summer recess. Congressional aides and outside observers said they do not expect the class action bill to be brought to the floor again this session.
"It will be very difficult to bring it up given the time constraints in September," said one Senate staffer. A spokeswoman for Senate Majority Leader Bill Frist (R-Tenn.) did not return calls seeking comment on the upcoming Senate floor schedule.
McCain has said he will not offer the climate change bill as an amendment to a defense, national security or spending bill, leaving little in the way of potential legislative vehicles for the rest of this year. Congress is expected to spend much of the remaining session grappling with appropriations bills and intelligence reforms stemming from the recommendations of the Sept. 11 Commission. "I don't know if we will have a chance to have a second vote on it or not," a McCain staff member said of the climate change bill.
Even so, Lieberman spokeswoman Casey Aden-Wansbury said the bill remains a priority for the senators this session. "We are definitely still focused on it," she said. "We are looking for the appropriate vehicle."
A key wild card is whether McCain will seek to transfer his new clout with the Bush administration to Congress, where Republican leadership has been lukewarm about climate change legislation. McCain, a 2000 presidential primary rival to Bush, has been campaigning for the president and gave a prime-time address at the Republican National Convention in New York.
Also, in late August the administration sent a report to Congress detailing climate change research activities, citing studies firmly linking rising temperatures to human activities. Jeremy Symons, head of the National Wildlife Federation's climate change program, said the report could help persuade senators to support the bill. "I think that definitely opens the door to Sen. McCain reaching out to other members," he said.
In addition, last week utility giant American Electric Power Co. issued a report showing it would not incur significant losses under the McCain-Lieberman bill's emission reduction requirements as compared to other emission reduction scenarios. The report, requested by shareholders, states the McCain-Lieberman requirements would likely cost the company between $500 million and $900 million by 2030. AEP spokeswoman Melissa McHenry said the costs, while not insignificant, would be "manageable."
The report stated the bill would not strand $3.5 billion the company is investing in emission reduction technologies at current plants, since those plants would continue to operate. It also found the new regulations would lead to greater reliance on integrated gasification combined cycle technologies, as well as wind power. "That puts to rest any notion that the McCain-Liebemerman bill would severely hinder the coal industry," Symons said. Source: Andrew Freedman, Greenwire, 9/7/2004.
Renewable energy has an important role in our national energy portfolio, but like anything else, must be pursued carefully. If states do their due diligence, they can design programs to support renewable energy without degrading the safety or reliability of electric service, or raising prices unreasonably for any class of electric consumers.
Recent dramatic increases in the price of natural gas and increasing questions about the adequacy of gas resources clearly demonstrate the need for a comprehensive, long-range national energy policy that encourages fuel diversity, including renewable energy. The use of renewable resources can also be beneficial to our environment and assist rural economies throughout much of the United States.
The challenge is to find a way to realize the promises of renewable energy while protecting consumers and communities from adverse impacts. States can accomplish this by Grafting renewable energy policies in light of realistic estimates of available renewable resources, the operation of the electric system, and the allocation of the policies' costs and benefits.
The Key: Although renewable energy policies can serve many goals, the design of those policies must be consistent with a single overriding principle: every consumer has a right to expect safe, reliable and affordable electric energy. Renewable energy policies must not undermine utilities' efforts to provide high quality, reasonably priced electric service.
Electricity is an essential service that underlies our economy and quality of life. States rely on utilities to design and operate the electric system to bring that service to consumers safely, reliably and affordably. And, as many parts of the nation can testify, when the electric system fails or prices rise significantly, it can have a devastating impact.
Renewable resources need to be treated as an integral part of that system. Most renewable generators will be interconnected to the electric grid. They will rely on that grid both to serve some on- site load and to deliver power to wholesale customers. Every interconnected renewable generator has a physical impact on the operation of the grid, and competes for limited grid capacity. The utilities to whom renewable generators look for energy and wheeling service have legal obligations to serve other consumers as well.
Due Diligence: How can a state determine the best way to promote renewable energy consistent with safety, reliability and reasonable electricity prices? Start with some basic questions:
• What renewable resources are available in my state?
• How much renewable energy can I reasonably expect to be produced in
my state?
• How much will the renewable energy actually cost?
• What benefits can I reasonably expect will accrue to those consumers
that have to pay the costs?
Availability of Renewable Resources: Not all states have access to the same renewable resources. North Dakota has more wind than Florida. Nebraska has more manure than Rhode Island. The Department of Energy and others offer a number of good tools that can help states determine the nature and extent of renewable resources available to them. Consultants and stakeholders can also help provide states with a more detailed understanding of the renewable resources available to them.1
The Florida Public Service Commission, for example, held a series of technical conferences for that purpose in 2002. They learned a great deal about the renewable energy resources available in Florida and the cost of acquiring those resources. Without that information, the state may have pursued a renewable energy program whose goals were not achievable at a reasonable cost, if at all.
The Cost of Renewable Energy: States will next want to consider cost - that is, how much renewable power will they get for their money. The unfortunate fact is that renewable resources are more expensive in most applications than fossil fuels, at least without subsidies.2 How expensive they are depends on a variety of factors, such as the type of resource, the availability of the resource, and the size of the generator. It also changes regularly. The National Rural Electric Cooperative Association's Cooperative Research Network, generator manufacturers, and others track the costs of renewable generators and can be a good resource to states.
Most sources of cost information include only data concerning the capital cost of renewable generators, the cost of operation and maintenance, and the cost of fuel. While important, this information is incomplete, as it does not reveal all of the reasonable and ordinary costs of installing a generator and delivering the power to consumers.
What are these other costs? First, there are the interconnection facilities, including the switching, power quality, and other control equipment designed to ensure that the generator does not degrade the safety and reliability of the electric grid. The electric transmission and distribution grid operates as a single complicated machine. Every generator and load interconnected with the grid has an impact on its operation. Even those generators that will never export power to the grid can affect the grid's voltage, frequency, fault current and harmonics.3
To protect public safety, the equipment must ensure that the generator disconnects from the grid when the grid experiences a fault, such as a downed power line. The equipment must also prevent the generator from adversely impacting the system.
The Institute of Electrical and Electronics Engineers recently approved a new standard, IEEE 1547, for the interconnection of generators with a capacity of up to 10 megawatts to the grid. That standard should simplify and speed the process of interconnection. It is not, however, a panacea. It neither eliminates the cost of interconnection nor answers all questions about interconnection. It is not adequate to ensure safety and reliability in all cases.4 Utility engineers continue to need the flexibility to analyze the impact that individual generators will have on their system and to adopt individualized interconnection solutions to ensure safety and reliability.
Second, costs may be incurred if it is necessary to upgrade the grid to enable the interconnection and/or the export of power from the generator. Most existing distribution systems were designed solely to move power one direction, from substation to retail consumers. Thus, the control equipment and protective devices were not designed to export power from local generation. Moreover, the capacity of the distribution system was designed to meet the needs of existing and planned loads, without the expectation that generation would be sited on the lines.5 Transmission facilities were also designed to meet the demands of existing and anticipated loads. They may lack the capacity required to wheel power from new generators that had not been included in the original plan. The problem will be particularly acute where developers have failed to ensure that their generation project is located in a portion of the grid with adequate capacity. These capacity problems can all be overcome, but it can involve considerable costs.
Third, states should factor in the cost of standby power. Utilities' rates have traditionally been designed to recover both variable and fixed costs through a volumetric (kWh) rate.6 The rate is set at a level that is adequate to cover each consumer's share of the system's fixed costs given the average demand of consumers within their customer class. Consumer generators, however, generally use considerably less energy (kWh), because they are meeting all or part of their requirements with their own generation. The consumer generators impose the same fixed costs on the system, because their potential contribution to the system peaks has not changed, but the amount they pay towards those costs drops considerably. Standby or other fixed charges are designed to make up that shortfall and to protect other consumers on the system from subsidizing consumer-generators.
Finally, there are some other common business costs that renewable generators and decision makers should factor into their calculations, such as insurance and the metering and communications required to measure the output of the generator.
Benefits of Renewable Generation: Renewable power can, in the right circumstances, provide significant benefits to individual consumers, communities, and the environment. To determine how much benefit, states should ask:
• How much do consumers in the state value renewable energy?
• Who will receive the economic benefits of the renewable generators?
• How much are the capacity and energy worth?
• Will the generator benefit the grid?
Consumer Interest: When utilities have asked consumers if they are willing to pay extra for renewable energy, the response has been overwhelmingly positive. When utilities have given consumers the actual opportunity to pay more for renewable energy, the response has been considerably less dramatic. The interest is there, but the numbers are much smaller than initial polls suggested. States may want to test the value that consumers truly place on renewable energy with phased in programs.
Distribution of Benefits: Some have described wind power as a cash crop, and have suggested that wind will bring large amounts of money into rural communities. States need to examine these claims. Not all developments provide the sa\me local benefit. For example, the lease contracts that some wind developers have offered farmers have been far less generous than others.
States will also want to determine how many individuals in rural communities will be able to profit from wind. Because wind strength varies considerably even within a small community, comparatively few consumers in each region are likely to own land suitable for wind generation. Benefits may not be spread evenly.
Federal law also makes it difficult today for the benefits of wind generators to stay in rural communities. The federal government has offered tax incentives for wind development that have been unavailable to local not-for-profit utilities. To build wind projects, these entities have to partner with a for-profit company. Much of the value, therefore, leaves the rural community. States will want to determine how best to design their programs to maximize the ability of individuals and local companies to receive those federal benefits.
Value of the Capacity and Energy: As states weigh the costs and benefits of a renewable energy program, they will want to determine what price the capacity and energy produced by renewable generators will be able to command.
First, the capacity value of some renewable generators such as wind and solar is significantly discounted. A well maintained fossil generator could have a capacity factor of over 90 percent. That means that when a consumer calls on the generator, it will be able to produce the. requested power almost all the time. On the other hand, a well maintained wind generator is likely to have a capacity factor of only about 30 percent, simply because the wind is frequently too light or too strong to allow the generator to reach its full capacity.
Second, states will want to look at the need for power and the presence of other competing resources in their region. The upper Midwest is windy, but it is also the home of numerous low-cost coal resources and relatively few consumers. Thus, the price that any new generators can command will be fairly low.
Renewable resources could charge more if their output could reach regions with higher wholesale power prices. Unfortunately, the transmission system between rural areas with ample renewable resources and urban areas with high wholesale power prices is often inadequate. There is little capacity available to move new wind power resources from the Dakotas to Chicago or from Western Texas to Dallas.7
System Benefits: In certain circumstances, renewable generation can provide benefits to the utility grid by providing support on an overburdened line or by permitting a utility to delay upgrades to a circuit. Though some argue that all new generation should be credited for these benefits, the value is highly situational. Generators must be located at the right spot, operated in cooperation with the local utility, and capable of providing power at the times needed. Intermittent generators such as wind and solar are poorly suited to meet those needs. Other renewable generators may be able to provide benefit if the conditions are right, but they must be willing to operate appropriately when called on by their utility.
Best Approaches to Promoting Renewable Power: Subsidies Should Be Broad-Based; as noted above, renewable energy is seldom able to command high enough prices to cover its cost. Nevertheless, because of the other benefits that renewable energy may provide to communities and the environment, states may wish to provide economic assistance. That assistance should be designed to ensure that the subsidies do not cause rural or other communities more harm than good.
The simplest approach is to permit consumers who value renewable energy to pay higher rates for "green power." Cooperatives and other utilities are operating many successful programs today. These programs directly monetize the value that consumers place on the environmental benefits of renewable energy.8
Other subsidies should be carefully tied to the value they seek to attain. If, for example, a state wants to reduce emissions, it should not subsidize all consumer-owned generation. Most of that generation is diesel-fired and has more emissions than central- station generation. It could instead target support to wind and solar energy.
It is also critical that the cost of subsidies be spread broadly to everyone in a state. Some proponents of renewable energy would provide support by requiring utilities to absorb some of the costs caused by renewable generators, such as the cost of system upgrades or standby service. Others would require utilities to purchase renewable energy at a price that exceeds the value of the power.9
These proposals all shift costs to other consumers on the system. The cost shift may not be serious for a large utility that serves over 1 million customers. But, such cost shifts could be unduly burdensome for customers of the small utilities that serve the rural communities where most renewable energy projects will be located. Rather than spreading the cost of a subsidy across over 1 million consumers, the cost might have to be borne by just a few thousand.10
Instead of requiring rural consumers to pay costs attributable to renewable projects, state policies should instead provide taxpayer- funded subsidies such as production incentives. If all consumers in a state benefit from an improved environment, all consumers in the state should be asked to contribute, not just a few consumers in often economically depressed rural areas.
Reduce Transaction Costs: The best support states can give to renewable energy is to bring down its cost for all stakeholders. State-funded research and development can bring down the high capital costs of renewable generators that make them uneconomic. States can also support IEEE's efforts to refine IEEE 1547 and to develop ancillary standards and documents that will simplify and lower the cost of interconnection.
In addition, states can support balanced education for all stakeholders. One of the largest "barriers" to new generating technologies is lack of experience. Utility engineers are uncomfortable interconnecting to unknown technologies. Electrical and gas inspectors are uncomfortable approving them as well. Insurance companies need more information before they will insure renewable generators affordably. States should also review their current permitting requirements to ensure that they do not unnecessarily burden newer renewable generation technologies.
Finally, states can help their citizens compete for Department of Energy, Department of Agriculture and other federal funds for renewable energy. And, states can promote federal incentives for renewable energy that are available to all segments of the industry on an equitable basis, such as tradable tax credits.
Conclusion: Renewable energy has an important role in our national energy portfolio, but like anything else, must be pursued carefully. If states do their due diligence, they can design programs to support renewable energy without degrading the safety or reliability of electric service, or raising prices unreasonably for any class of electric consumers. The more questions states ask, the wiser their policies will likely be.
Endnotes:
Grants, RFPs & Other Funding News
XCEL Awards $22 Million In Renewable Grants
Xcel Energy announced on Tuesday that it had selected 25 renewable energy projects to receive more than $22 million in grants from its Renewable Development Fund. The projects represent both energy production and research projects for hydroelectric, biomass, wind, solar, and biofuel technologies.More than 200 renewable energy project proposals were considered, three times the number submitted in the program’s first funding cycle in 2001. An advisory board with representatives from Xcel Energy, environmental groups and the Prairie Island Indian Community were responsible for reviewing the projects and making recommendations to the Minnesota Public Utilities Commission.
“We’re delighted with the high level of interest shown in renewable energy through this program,” said Bill Grant, associate executive director of the Izaak Walton League and Renewable Development Fund advisory board member. “These projects reflect an increasing awareness that renewable energy is a reality, not just a possibility.”Xcel Energy was required to create the RDF in 1999 as an outcome of 1994 legislation concerning spent fuel storage at its Prairie Island Nuclear plant. Each year the company collects around $16 million for the fund from a small surcharge on customers’ bills. This is the second funding cycle. In the first, 19 projects covering a broad spectrum of renewable energy projects and research projects won grants for a total of $16 million.“The energy production projects will benefit Minnesota consumers by providing economic sources of renewable energy,” said Dave Sparby, Xcel Energy vice president of regulatory services and government affairs. “Likewise, the research and development projects will allow us to continue to provide environmentally sound and reasonably-priced energy in the future.”
Xcel reported that nearly $10 million would be awarded to projects for energy production and $12.8 million for research and development projects. All selected projects are subject to final approval by the Minnesota Public Utilities Commission.Winners of grant funding for wind energy projects include the following:
Winners of funding for research and development projects for wind energy include the following:
This news item comes to you as a service of Western's Renewable Resources Program.
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