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Pew Report on Clean Energy Urges National Policy; IndianaDG Says State Energy Policy Also Needed Like FITs January 24, 2013

Posted by Laura Arnold in Federal energy legislation, Feed-in Tariffs (FiT).
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Report: Lack of consistent policy holding back clean energy industry

Posted on 01/24/2013 by

Workers assemble a wind turbine blade at a factory in Grand Forks, North Dakota, in 2006. (Photo by tuey via Creative Commons)

Workers assemble a wind turbine blade at a factory in Grand Forks, North Dakota, in 2006. (Photo by tuey via Creative Commons)

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The Midwest has the potential for a thriving clean energy industry, but only if coherent policies are enacted at the state and federal level, clean-energy experts say.

Experts on the Midwestern clean-energy sector say the region stands to benefit because of its research universities, strong supply chains and a high level of manufacturing know-how.

But whether it does or not depends largely on policy-makers.

According to a report issued last week by Pew Charitable Trusts, hurdles to an expanded U.S. clean-energy sector include a lack of a national clean-energy standard and longstanding tax breaks for oil, gas and coal producers. Unless these and other issues are addressed, they could lead to billions of dollars of economic activity moving overseas, the analysis concluded.

“The Midwest looks to me like a great place for clean energy,” said Phyllis Cuttino, director of Pew’s Clean Energy Program. But, she added, clean-energy leaders in the Midwest and nationwide “all said the same thing: The thing that makes it really hard for us is that we can’t plan.”

These conclusions come from two lines of investigation Pew undertook to prepare the report. They commissioned a detailed analysis of clean-energy trends by Pike Research, industry analysts who specialize in global clean-technology markets. Pew also conducted five regional roundtables of clean-energy business leaders, including researchers, manufacturers, companies deploying solar and biomass, and investors, as well as one national roundtable, all to get the industry’s take on how current policy was affecting them, and which policy changes would help.

Pew found that the industry was at a tipping point in the United States and globally. Investment is on the rise, prices for clean energy are falling, and more and more clean energy is being deployed.

“Clean energy is here to stay. It’s not niche. It’s quickly becoming cost-competitive and going into the next phase,” Cuttino said.

Indeed, investment rose six-fold between 2004 and 2011 and was projected to continue to rise. Clean-energy installations—installations of solar photovoltaics, onshore and offshore wind, marine and hydrokinetic energy, geothermal, concentrating solar thermal, and biomass—will create $1.9 trillion in revenue globally and $269 billion in the United States between 2012 and 2018, the Pike Research analysis concluded.

“We’re at a moment that looks like the auto industry at the turn of the 20th century or the early days of computers,” Cuttino said. “A whole bunch of actors are rushing in; we have an oversupply of production capacity, and more investments are coming because of the perception it’s going to take off.”

As a result, the race is on between nations seeking to become global leaders in clean energy technology, the Pew analysis concluded. That race will not last forever, business leaders warn, and it’s not yet clear whether the United States in general, and the Midwest in particular, is going to win.

Good news, bad news

There are some encouraging signs for the industry, both in the Midwest and nationally, Pew found. The United States attracted a record $48.1 billion in private clean-energy investments in 2011, and the nation remains a leader in clean-energy innovation.

But the Pew report pointed to signs of trouble. While U.S. solar installations have doubled each year since 2009, both Germany and Italy installed more than three times as much new solar last year. And China installed three times more wind in 2011 than the United States.

“These trends are worrisome because these are technologies that we really invented and we used to manufacture and export,” Cuttino said. “Now we’re finding that we’re not playing at the same levels as other countries. Of the top 10 wind and solar companies in the world, we only have one of each,” she pointed out.

The reasons for this include fierce international competition, including tariffs, tight credit markets, and policies that favor established fossil-fuel-based power over clean energy in the United States.

What’s more, in other nations clean energy has not become the political football it has become here, said Aaron LeMieux, the founder and CEO of Tremont Electric, a six-year-old Cleveland-based company that specializes in harvesting kinetic energy.

“When we go to other countries like Japan, there’s a compelling understanding of what clean energy is and the need to have new [energy] technology alongside existing technology,” LeMieux said. In the United States, in contrast, “renewable energy technology tends to be a partisan argument between Democrats and Republicans.”

“At our business roundtables, they were kind of shocked that this had become a politicized issue,” Cuttino added. “They’d seen government engage in support for new and emerging industries—computers, trains, railroads and others. They couldn’t understand why not this sector.”

Investment without rewards?

As a result of our policy confusion, “we continue to innovate, but we don’t necessarily reap the rewards of our innovation and risk taking,” LeMieux said. “That’s passed to other countries to be able to build, manufacture, and deploy these technologies.”

In Pew’s roundtables, business leaders like LeMieux named the U.S. clean-energy industry’s biggest obstacles as policy uncertainty, global oversupply, international competition, access to credit and private investment, and the uneven playing field with established fossil-fuel-based energy.

But new national policies would create opportunity as well. A national Clean Energy Standard could stimulate demand for renewable energy. Such a standard would be broader than state renewable energy standards in that it might include natural gas and nuclear. The nation could invest more in basic energy research, which lags dramatically behind comparable investments in the health-care and defense sectors, Cuttino said.

Effective policies to facilitate private sector investment in the industry could help, business leaders told Pew.

For example, the Advanced Energy Manufacturing Tax Credit, which was established as part of the 2009 Recovery Act, provided a 30 percent tax incentive for investments of clean energy manufacturing. Far more companies applied than received funds, and it was documented to create 17,000 jobs at 180 facilities in 43 states, Cuttino said. The tax credit has expired but could be renewed.

Clean-energy business leaders also suggested such measures as getting rid of special tax credits for oil and gas industries. Some suggested getting rid of all subsidies, or taxing the health and environmental costs incurred by burning gas, oil and coal, Cuttino said.

“Now is the time for our policy makers to really level the playing field so that entrepreneurs and business leaders can compete with our competitors throughout the world,” LeMieux said.

We also need a clear national policy aimed at phasing in more clean energy, LeMieux said. “Quite a few other countries are leading the charge in terms of clean energy. All have a national energy strategy.”

That strategy should include a clean energy standard, the business leaders assembled by Pew concluded. Although 33 states have renewable portfolio standards, the lack of a federal standard harms the industry and keeps it from growing, LeMieux said.

“We’re trying to tell people in Washington, D.C., that this is a big issue.”

A manufacturing powerhouse

With effective policy changes, the Midwest could become a national leader in clean energy manufacturing, technology and R&D, LeMieux said.

“The Midwest is the manufacturing powerhouse of the nation. It always has been,” he said.

And more clean energy could mean more good jobs in the region, said Laura Arnold, president of the Indiana Distributed Energy Alliance, an Indianapolis-based nonprofit that promotes distributed renewable energy.

The real economic development potential is not just building wind farms, Arnold said. “The real potential is in the manufacturing, not just buying and installing and producing renewable electricity. That’s where the middle-class manufacturing jobs come from.”

Companies producing those jobs could make renewable energy components for export as well as domestic markets, Arnold said. Abound Solar, a Colorado-based company, was planning to create 800 jobs in Tipton, Indiana, to manufacture solar photovoltaic panels and they were planning to export 90 percent of what they made. In that case the plans were canceled, but they showed what’s possible, Arnold said.

The United States in general, and the Midwest in particular, “has the manufacturing know-how to put out a quality product,” Arnold said.

States matter, too

The policy changes Pew suggests could go a long way, but changes at the state level are also essential, Arnold said.

Germany and Italy, for example, have feed-in tariffs, which reward people for installing solar panels by ensuring a long-term, steady, and high price for the electricity they generate. If Midwestern states chose to establish such policies, markets would grow, helping the region’s clean-energy industry flourish, Arnold said.

In Indiana, in contrast, “you can’t buy electricity from anyone other than your friendly electric utility,” she said. Policies that allow more choice would grow the market for renewable energy, she emphasized.

Other state and local policies could spur demand for renewable energy in the region. Today, there are people in urban neighborhoods who might want to install solar panels but don’t have good exposure to the sun. If a church in the neighborhood has an annex with a great rooftop, they could provide solar power to their neighbors, but only if local and state policies allow for community energy systems, Arnold said.

“I’m not sure how to do that with national legislation. I think it has to be done at the state level to permit more creative ways for people to own a piece of a small distributed system,” she said.

“Yes, there’s an overriding need for national policy, Arnold concluded. “but the real nitty-gritty work still has to take place at the state level.”

Editor’s note: An earlier version of this story misidentified the solar company that had planned to locate in Tipton, Indiana.

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Indy airport’s planned solar farm would be the largest in the state February 20, 2011

Posted by Laura Arnold in Uncategorized.
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Original story: http://www.indystar.com/apps/pbcs.dll/article?AID=2011102190328
1:01 AM, Feb. 19, 2011  |  108Comments
Written by Bruce C. Smith
Solar panels like the ones planned at Indianapolis International Airport are already making money outside the Denver airport. / HYOUNG CHANG / The Denver Post

The warm rays of the sun may be the next big thing to make money for Indianapolis International Airport.

The airport is looking for a developer to build what would be the largest solar energy farm in the state on 30 acres of airport-owned land near the end of a runway.

It would generate 10 megawatts of electricity an hour — enough to power up to 6,000 homes — and that electricity would be sold to Indianapolis Power & Light. The airport would make money by leasing the property to a company that would build and operate the array of thousands of solar panels.

Other airports, including Denver and Fresno, Calif., have put money-making solar farms near runways on property not suitable for other types of developments.

It was not known how much revenue the solar farm would generate for the airport. The move is part of a larger plan approved by the airport Friday to generate more than $190 million over the next 30 years from hundreds of acres of its undeveloped land.

Industry experts estimate that a developer would have to spend $30 million to build the solar farm and that the equipment could generate electricity for at least 30 years.

“Solar power isn’t just a hippie dream anymore,” said Travis Murphy, who worked in the state’s renewable energy agency and now sells solar systems for Johnson Melloh Solutions. “Solar energy is not just something that environmentalists will do anymore, but it has become an opportunity for businesses and homes.”

The airport’s solar farm would send a highly visible message of public support for renewable energy, said Mark Hedegard, the airport’s senior business development director.

Thousands of solar panels — tinted black so the glare doesn’t blind airplane pilots — would be planted next to the airport’s front door. Millions of airplane passengers going to the Col. H. Weir Cook terminal building each year and millions more motorists on I-70 would pass the solar farm.

The site is tucked next to a long, circular ramp that is used by vehicles getting off the interstate and heading onto the road to the new terminal.

By far, it would be the biggest single solar power site in the state, according to Murphy. He said a survey last year conservatively estimated about 750 kilowatts of solar power had been built in Indiana.

An additional 1.76 megawatt array of 5,700 solar panels is being built on the roof of the Emmett J. Bean Federal Center, the military’s finance facility in Lawrence.

Andrew Crocox, project manger for electric contractor Ermco, said the Bean array should be making electricity for the IPL grid by April.

Several industry insiders said federal tax credits and accelerated depreciation on the equipment have sparked a national rush to invest in solar power, along with methane gas, wind turbines and other renewable sources of energy.

Locally, IPL’s interest in developing alternative energy sources has triggered a stampede of solar developers quietly swarming over Indianapolis the past year, looking for good sites and workable financing for solar power farms.

IPL was the first Indiana electric power company to receive approval from the Indiana Utility Regulatory Commission to provide a rate incentive to solar energy suppliers to feed power into its network.

IPL’s website indicates it would pay up to 24 cents per kilowatt hour for solar energy, which is several times the rate paid for other forms of electricity. There also is a national market for energy generated from renewable sources. And some states — not including Indiana — set a quota of energy from renewable sources that their utilities are to sell.

IPL spokeswoman Crystal Livers-Powers said IPL’s goal is to generate electricity from all forms of renewable sources equal to 1 percent of its 2010 sales, or roughly 150,000 megawatt hours of power.

However, even as the solar power industry gets into gear, IPL has flashed a red light.

Livers-Powers said IPL has filed a notice with the IURC to temporarily suspend its offer of the rate normally paid for solar electricity “until we present changes that limit the participation in the program to existing IPL customers.”

IPL’s rate was so attractive that out-of-state solar developers have been considering very large projects that would have used all of its capacity for renewable-source electricity, leaving none for IPL’s current customers such as the airport.

She said, “We just want to give our current customers an opportunity to participate.”

Call Star reporter Bruce C. Smith at (317) 444-6081.

NIPSCO Net Metering and Feed-in Tariff (FIT) Case Schedule Revised; NIPSCO Spreadsheet Analysis for FIT Rates Revealed October 6, 2010

Posted by Laura Arnold in Feed-in Tariffs (FiT), Indiana Utility Regulatory Commission (IURC), Uncategorized.
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The second Technical Conference  in the NIPSCO net metering and feed-in tariff case in Cause No. 43922 was conducted Monday afternoon October 4th. 

Most of the Technical Conference was devoted to a spreadsheet analysis presented by NIPSCO supporting its proposed feed-in tariff rates.

See NIPSCO Feed-in Model Spreadsheets

For a general overview, please see the PowerPoint NIPSCO presented at the first Technical Conference.

Net Metering and Feed in Tariff Tech FINAL_9.20.10[1]

One change to the procedural schedule for this case was made which affects the intervention of Indiana Distributed Energy Advocates (IDEA) as well as the Public  or the Office of the Utility Consumer Counselor (OUCC) and Intervenors. The date for the Public and Intervenors to pre-file their testimony has been changed from October 15th to November 10th, however, the other filing dates remain the same. 

If a settlement is not reached amongst the parties to the proceeding, Evidentiary Hearings will commence on December 16th beginning at 1:00 pm and continue on December 17th.

The Indiana Utility Regulatory Commission (IURC) also granted a petition to intervene on behalf of Bio Town Ag which is proposing to build a 2.8 MW anaerobic digester in Reynolds, Indiana.  The other intervenors now include the Citizens Action Coalition (CAC) and the Hoosier Chapter of the Sierra Club.

IDEA is still seeking individuals and companies to financially support intervention in this proceeding. For more information or details on how to support this intervention, please contact Laura Arnold at (317) 635-1701 or Laura.Arnold@indianaDG.org.

Presentation on Feed-in Tariffs to WISER on 9/22/2010 in Delphi, Indiana September 20, 2010

Posted by Laura Arnold in Feed-in Tariffs (FiT), Indiana Utility Regulatory Commission (IURC), Uncategorized.
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WISER Indiana Public Forums
 return on
Wednesday, September 22, 2010
at the
Wabash & Erie Canal Interpretive Center
Delphi, Indiana
 
 
What is the next step in the sustainable/renewable energy saga for Indiana?
 
Laura Arnold from Indiana Distributed Energy Advocates (IDEA)
will be presenting on a recently approved renewable energy incentive,
including the new Indianapolis Power & Light (IPL) Feed-in Tariff, called Rate REP and the proposed Feed-in Tariff by Northern Indiana Public Service Company (NIPSCO) called Experimental Rate 849.
 
What does this mean and how could it benefit you? 
 
Come join us to learn about this and other
WISER Public Forums
scheduled for this fall.
 
 
Please RSVP by clicking the link below:
http://www.wiserindiana
 
 
Date:           Wednesday, September 22, 2010
 
Time:          Doors open at 12:30 p.m. EDT
                    Forum starts at 1:00 p.m. EDT
 
Location:    Wabash & Erie Canal Interpretive Center
                     1030 N. Washington St.
                     Delphi, IN 46923
 
Speaker/Topic:    Laura Arnold – Renewable Energy Incentives (Feed-in Tariffs)
 
 
Questions?  Email our WISER intern, Tyler Cotterman at Tyler@wiserindiana.org
 
Also visit the WISER web site www.wiserindiana.org for news and updates.

New NREL Report: A Policymaker’s Guide to Feed-in Tariff Policy Design August 9, 2010

Posted by Laura Arnold in Feed-in Tariffs (FiT).
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From our friend Paul Gipe pgipe@igc.org, www.wind-works.org 

Download the new report HERE: http://www.nrel.gov/docs/fy10osti/44849.pdf
Authors: Toby D. Couture (E3 Analytics);
Karlynn Cory (NREL);
Claire Kreycik (NREL);
Emily Williams (U.S. Department of State)
Abstract:
Feed-in tariffs (FITs) are the most widely used renewable energy
policy in the world for driving accelerating renewable energy (RE)
deployment, accounting for a greater share of RE development than
either tax incentives or renewable portfolio standard (RPS) policies.
FITs have generated significant RE deployment, helping bring the
countries that have implemented them successfully to the forefront of
the global RE industry. In the European Union (EU), FIT policies have
led to the deployment of more than 15,000 MW of solar photovoltaic
(PV) power and more than 55,000 MW of wind power between 2000 and the
end of 2009. In total, FITs are responsible for approximately 75% of
global PV and 45% of global wind deployment. Countries such as
Germany, in particular, have demonstrated that FITs can be used as a
powerful policy tool to drive RE deployment and help meet combined
energy security and emissions reductions objectives. This
policymaker’s guide provides a detailed analysis of FIT policy design
and implementation and identifies a set of best practices that have
been effective at quickly stimulating the deployment of large amounts
of RE generation. Although the discussion is aimed primarily at
decision makers who have decided that a FIT policy best suits their
needs, exploration of FIT policies can also help inform a choice among
alternative renewable energy policies.

IURC Approves 1st IPL Feed-in Tariff Contract Under Rate REP August 4, 2010

Posted by Laura Arnold in Feed-in Tariffs (FiT), Indiana Utility Regulatory Commission (IURC), Uncategorized.
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At its regularly scheduled weekly conference on 07/28/10, the Indiana Utility Regulatory Commission (IURC) approved the first Indianapolis Power and Light Co. (IPL) feed-in tariff contract under Rate REP. The 30-day Filing ID No. 2725 pursuant to IURC Order in Cause No. 43623 was filed 06/24/10 for the agreement between IPL and the Time Factory.

The Engineering Minutes describe the customer impact as follows:

“Although the costs of power purchased via this agreement will be recovered by IPL through its fuel rider, customers’ bills will not be significantly impacted.”

For those interested or thinking about installing a renewable energy system in the IPL service territory, you might want to take a look at the paperwork IPL filed under Rate REP.  Although renewable energy advocates would have preferred that this additional step was not required, it appears that the first contract approval proceeded without a hitch.

IPL 30 Day Filing_Rate REP_Time Factory_06.24.10[1]

HOORAY!

Congratulations to the Time Factory on becoming the first IPL customer to be approved under Rate REP.

Final IPL Feed-in Tariff Effective March 30, 2010 April 1, 2010

Posted by Laura Arnold in Feed-in Tariffs (FiT), Indiana Utility Regulatory Commission (IURC), Uncategorized.
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Earlier this year, the Indiana Utility Regulatory Commission (IURC) approved the DSM order for IPL that contained a Feed-in Tariff (FiT) or Rate REP (Renewable Energy Production)  

See https://indianadg.wordpress.com/2010/02/11/iurc-approves-ipl-feed-in-tariff-or-rate-rep-renewable-energy-production/

Summary of Rate REP (Renewable Energy Production)

by John Haselden, IPL,  john.haselden@aes.com

 IPL’s new Rate REP, approved by the Indiana Utility Regulatory Commission (“IURC”) in Cause No. 43623, authorizes IPL to purchase renewable energy produced by wind, solar and biomass generated by its customers’ projects connected to IPL’s distribution system in Indianapolis, Indiana. It also offers the option for customers to contract the production for up to 10 years which will provide pricing certainty over the long term. The rates are tailored to the size and technology of the production and vary from 7.5 ¢/kWh for large wind turbines to 24 ¢/kWh for solar projects up to 100 kW of nameplate capacity.

Sometimes called an “Advanced Renewable Contract” or a renewable energy “Feed-in Tariff,” Rate REP is another step taken by IPL to help develop renewable energy investments in Indiana for the benefit of its customers. In an agreement previously approved by the IURC, IPL currently purchases the power from the 106 MW Hoosier Wind Farm located in Benton County, Indiana.

IPL is a low cost provider of electricity which has made it difficult for alternative energy technologies, which typically have high capital costs, to compete on an economic basis. However, with the current federal tax incentives coupled with IPL’s Rate REP compensation, such projects can be economically viable.

A key requirement of Rate REP is that all of the renewable energy production is separately metered and purchased by IPL. The customer continues to purchase all of their electrical energy requirements from IPL. IPL retains all environmental attributes such as Renewable Energy Credits (“RECs”), Greenhouse Gas (“GHG”) Offsets, etc. to be used or sold for the benefit of its customers.  For those customers who wish to purchase renewable energy, IPL offers this product through its Green Power program at one of the lowest costs in the US.

Getting Started:

The first step is to obtain approval for interconnection to IPL’s electric system and enter into an interconnection agreement. Standard forms for this process are available at www.iplpower.com under the Business tab or by calling IPL.

Next, contact IPL about participation in Rate REP. One or more IPL meters will be required and located in an acceptable location in order to meter the output of the renewable energy generator. IPL must have clear access to meters. This can be determined in the interconnection design process.

Choose Your Pricing Method:

Pricing shown on the current approved Rate REP is not fixed. IPL may, with IURC approval, change pricing as cost variables significantly change. Such variables include tax effects, system costs, efficiency improvements, etc. To mitigate the risk of changing prices, a customer may enter into a pricing contract with IPL for up to ten years. Such contracts will generally allow customers to lock in pricing which will include an annual price escalation (fixed percentage) and includes other terms and conditions. There are no financial penalties for performance or quotas for energy production. All long-term contracts require the approval of the IURC.

Potential participants should be aware that IPL is only authorized to offer Rate REP and long-term contracts for a period of three years. Nine months prior to that time, IPL is required to present recommendations to the IURC for approval to continue the rate, modify I, or possibly terminate the rate, if appropriate.

IPL Rate REP_Effective_Mar 30 2010

NREL: Feed-in Tariffs Legal in USA When Certain Conditions Met; Report Charts Path through Regulatory Minefield February 4, 2010

Posted by Laura Arnold in Feed-in Tariffs (FiT), Uncategorized.
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February 4, 2010

By Paul Gipe
661 325 9590, 661 472 1657 mobile
pgipe@igc.org, www.wind-works.org

The National Renewable Energy Laboratory (NREL) has issued a long-awaited legal analysis of how states could implement feed-in tariffs and still comply with federal law.

The January 2010 report, Renewable Energy Prices in State-Level Feed-in Tariffs: Federal Law Constraints and Possible Solutions, was written principally by Scott Hempling with the National Regulatory Research Institute (NRRI) under contract to NREL.

Hempling treads ground that others have tread before him, including California’s Attorney General, Edmund G. (Jerry) Brown. The Attorney General filed comments on who has jurisdiction to set feed-in tariffs with California’s Public Utility Commission in August of 2009 . Brown concluded that the state could set feed-in tariffs sufficient to pay for renewable energy development while complying with federal law.

NRRI’s Hempling, like Brown, concludes that states can offer feed-in tariffs, but the programs creating the feed-in tariffs must be structured in a way that meets federal requirements.

There’s ample ammunition in the Hempling report to stoke either side in the feed-in tariff debate.

Opponents have long argued that feed-in tariffs are illegal in the US. They will find ample solace in the report that the European or Canadian approach of setting specific tariffs directly won’t comply with current federal law or its interpretation. Hempling says, in essence, that states can’t set specific tariffs above “avoided cost” under the Public Utility Regulatory Policies Act (PURPA) of 1978.

However, Hempling goes on to chart a path to implementing feed-in tariffs that avoids the regulatory minefield under PURPA and the Federal Power Act. Hempling describes how states can set total payments, or equivalent feed-in tariffs, above avoided cost in compliance with federal law. The path may appear more circuitous, in comparison to that in other countries, but it is, nevertheless, clear.

Feed-in tariff programs work best, that is, they quickly develop a significant amount of renewable energy, when the tariffs are based on the cost of generation plus a reasonable profit. In these programs, there are a suite of tariffs for solar PV, another set for wind energy, and so on. The tariffs for solar PV in these programs are much higher than the “avoided cost” of a conventional natural gas-fired power plant in the US.

California’s largely ineffective feed-in tariff introduced at the end of 2008 pays $0.096 USD/kWh for projects installed in 2010. The tariff, there is only one tariff, is based on the Market Price Referent, California’s term of art for the avoided cost of a natural gas-fired plant. By mid 2009 the tariff had resulted in only 17 MW of generation. Even with generous federal subsidies, this tariff is insufficient for most technologies, but especially for solar PV, the most expensive of the new renewable energy technologies.

There are two paths to lawful feed-in tariffs argues Hempling: the PURPA path, and the Federal Energy Regulatory Commission (FERC) path.

The PURPA Path

Feed-in tariffs can be lawful under PURPA if the feed-in tariffs are “voluntarily” offered by the utility, or if the tariffs are based on “avoided cost” and any additional payments necessary to make workable tariffs are derived from

  • Renewable Energy Credits (or certificates),
  • Subsidies (cash grants), or
  • Utility tax credits equivalent to the amount of the additional payment (as in Washington State).

These “supplemental” forms of payment fall outside FERC’s jurisdiction.

Voluntary Tariffs

Feed-in tariffs, whether above avoided cost or not, are permissible if a utility proposes them “voluntarily” as in Indiana where Indianapolis Power & Light (IP&L) has a suite of proposed tariffs before the state’s Utility Regulatory Commission. IP&L has proposed a solar PV tariff for systems from 20 kW to 100 kW of $0.24 USD/kWh-a tariff clearly above the current avoided cost of gas-fired plants.

This provision is less useful than it first appears. In states where earnings are not decoupled from investments in generation, it is not in the self-interest of utilities to offer functional feed-in tariffs that supplant their own generation with non-utility generation.

Additional Payments

Both Hempling’s report and Brown’s PUC filing argue PURPA stipulates the payment of “avoided cost”. This restriction doesn’t preclude other forms of payment that “tops up” or adds to the avoided cost. Thus, the total payment, or total tariff, can be based on the cost of generation. These top up payments can come from many sources: Renewable Energy Credits, subsidies or other payments, and state tax credits.

Renewable Energy Credits

In states with Renewable Portfolio Standards (RPS), or renewable energy mandates, utilities are required to produce a certain portion of their generation with renewable energy. Regulators track the amount of renewable energy generated by issuing “credits” for units of renewable energy. These credits can be traded, and the trades establish a value that can be added to the avoided cost. However, it is not necessary to trade the credits to establish their value.

The value of the credits can be established administratively for any of a host of reasons: environmental values, climate change avoidance, distributed benefits, and so on. Thus, the total tariff can include a Renewable Energy Credit designed to reach the total cost of generation plus a reasonable profit when added to the “avoided cost”.

Other Payments

Similarly, other forms of payments can be added to the avoided cost. Hempling suggests subsidies or cash grants as the top up payment, but it need not be limited to taxpayer subsidies.

Swiss feed-in tariffs, for example, pay a tariff that is comprised of two parts: the wholesale cost, and a top up payment. In the Swiss system, the top up payment is paid out of a Systems Benefit Charge, a pool of money collected from ratepayers for a public good, in this case the development of renewable energy.

Creating a pool of funds to pay for the portion of tariffs that exceed the avoided cost through a Systems Benefit Charge can work, but the policy must be designed with care. Such charges create a defined and, therefore potentially limited, pool of funds. These pools can, depending upon design, effectively place a monetary cap on renewable energy programs separate from the physical targets in RPS programs. While this defined pool of funds might be appealing to timid politicians wanting to limit the perceived cost of renewable energy, it often leads to a boom and bust cycle so characteristic of US renewable energy policy.

However, successful feed-in tariff programs, such as in Germany, use what is in essence a Systems Benefit Charge. The charge, and hence the size of the pool, is “flexible” and is applied to ratepayers after-the-fact, that is, the pool is sized to pay for the renewables on the system. Unlike pools where the charge is fixed and the pool of funds to pay for renewable generation is limited, Germany’s pool adjusts annually to pay for the actual amount of renewable generation. The pool expands as more renewables are added and the charge to ratepayers adjusts accordingly.

The German strategy of flexible or annually adjusted charges make sense because it is not inconceivable that as more renewables are added to the system, and as fossil fuels become more expensive, the charges, or “overcost” as the French call them, will actually decrease.

French bank Caisse des Dépôts examined the overcost of French feed-in tariffs in late 2008. Their findings flew in the face of conventional wisdom: as more renewables were added to the system, especially wind, the overcost declined.

State Utility Tax Credits

Washington State’s net-metering policy was built around a top up payment that utilities could offset with state tax credits. The total payments, while attractive, have only been modestly successful because of numerous restrictions on the program to limit the program’s cost to the state treasury.

FERC Path

Feed-in tariffs can also be lawful under the Federal Power Act if the tariffs are

  • Cost-based, or
  • Market-based.

If the tariffs are cost-based, each contract must be reviewed by FERC, says Hempling. Thus, if a homeowner installs a 5 kW solar system and signs a contract with a utility, it must have the contract reviewed by FERC. This is a nightmare scenario for small power producers.

If the tariffs are market-based, such as through an “auction”, the “seller” must issue a “market-power” report to FERC every three years. Again, compliance through this route is too cumbersome for widespread adoption.

Less than 20 MW Exemption

However, Hempling notes that these onerous conditions could be superseded if FERC took one of several actions. Most importantly, FERC has granted “exemptions” from PURPA for generators less than 20 MW. These generators can sell at any price without seeking FERC approval. Hempling suggests that state regulatory commissions could ask FERC for a “clarification” that above avoided-cost tariffs would qualify automatically for the less than 20 MW exemptions if they met certain conditions. This is a promising near-term fix that would allow compliance with PURPA and the Federal Power Act without relying on a two-tiered tariff made up of avoided cost and some form of additional payment.

The California Energy Commission in its 2009 Integrated Energy Policy Report recommends that the state seek “clarification of federal law to ensure that states can implement cost-based feed-in tariffs”.

Other Exemptions

Hempling notes that Hawaii, Alaska, and most of Texas are exempt from the Federal Power Act.

Long-Term Solutions

While the use of RECs or SBC funds to pay for the portion of feed-in tariffs above avoided cost is administratively more complex and consequently more costly than simply setting a tariff and putting the cost in the rate base, it can be done. Regulatory commissions and the utilities themselves are fully capable of and in fact do administer such funds in several states.

While such a system can work, and in the US legal system since the Civil War, it may be necessary, such an approach treats renewable energy differently than utility-owned conventional generation that is put into the rate base. It treats renewables as a cost to the system and to ratepayers not as an integral part of the utility system as in Ontario and Germany.

That the principle federal law governing renewable energy, PURPA, treats renewable energy in this second-class way shouldn’t be surprising, considering that the law passed more than three decades ago. Even then the first major wind farms were not erected in California until several years later when the PUC created the world’s first feed-in tariff, California’s famous Interim Standard Offer Contract No. 4.

The bigger question of whether US law will continue to treat renewable energy as a burdensome addition to the existing utility system remains. Unless these legal precedents in the US are clarified or revised, the US’ competitive position will continue to erode in comparison to such states as China, India, Germany, and Japan that look at renewable energy differently.

Germany confronted just such a question of how to treat renewable energy in the late 1990s and the Bundestag, Germany’s parliament, acted. The result is the now famous Renewable Energy Sources Act, also known as the law on granting renewable energy priority access to the grid. In the Act, renewable energy is treated not only as a necessary and integral part of the electricity system, it was given preference and the payments needed to profitably develop renewable energy, even costly solar PV, were deemed desirable and the costs put in the rate base.

While every German consumer pays out of pocket for renewable energy development on their utility bill, study after study has consistently shown that the benefits to both German consumers and German citizens as a whole outweigh the monetary costs. In fact, the monetary benefits of offsetting conventional generation from plants on the margin, the so-called merit-order effect, alone outweighs the full cost of the tariffs, including the payments to Germany’s massive development of solar PV.

Congressmen Jay Inslee and his co-sponsors have proposed fixes to PURPA in the Waxman-Markey climate change bill. This may be the best that can be hoped for from the currently dysfunctional US Congress. But even this well-meaning effort falls short of the re-orientation of US renewable policy that is called for.

For now, the Hempling report clarifies for states that want to act how to do so. For those that want to act, it points them in the direction they need to go to meet FERC’s constraints. For those states that don’t want to act or are afraid of doing so, the report gives them sufficient legal cover to avoid taking the steps necessary.

To paraphrase a 68-page legal opinion: “Yes, we can implement feed-in tariffs in the US under existing law, we just have to do it differently than everywhere else in the world”.

The path forward is clear for those states that want to aggressively develop renewable energy in an equitable manner. The choice is theirs to make.

-End-

Advanced Renewable Energy Contracts Needed in Indiana January 27, 2010

Posted by Laura Arnold in Advanced renewable energy contracts (AREC's), Uncategorized.
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Net metering is not the only issue that Indiana Distributed Energy Advocates (IDEA) is supporting.  HB 1190 to create advanced renewable energy contracts (AREC) or feed-in tariffs (FiT) is supported by IDEA.

The IDEA member leading this campaign is Chris Striebeck.  Chris has developed a working draft PowerPoint presentation for discussion. He is also finalizing a narrative for this presentation so that it is essentially self-contained.

Check it out here Why Feed-in Tariffs are Right for Indiana?