Daily Archives: August 9, 2012

Losing the race to sound conclusions on the Production Tax Credit

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Michael Giberson

When I worked on public policy issues in Washington, DC, I used to read the National Journal. It tended a bit toward Washington-establishment thinking, but at least it gave evidence of thinking. Now much farther from the daily fray, I only occasionally come across the National Journal, and usually just the so-called Energy Experts Blog. I’m less impressed with the National Journal than I used to be.

Recently they’ve posted a bundle of energy “experts” on the production tax credit. I mentioned the other day that one of the “experts” thought the PTC paid $2,200 per megawatt (actually it pays $22 per megawatt-hour). I just noticed another “expert” reporting that the PTC is set to expire at the end of 2013 (oops, off by 365 days). I guess we’re getting raw, unvarnished expertise on the Energy Experts Blog, nothing subjected to the indignities of editorial review.

But worse than these little slip ups is the general lack of depth to many of the arguments. For “Ms. 2013,” who works for the Pew Clean Energy Program, whether or not we continue the Production Tax Credit is apparently about being at the top of the world in building “clean energy.”

Really? This is your policy criteria? Whether we can wear the “#1 Clean Energy Nation” T-shirts and wave the big “We’re #1″ green energy foam fingers? I thought these kinds of public policy decisions should be informed by considerations of costs and benefits, not a bunch of cheesy cheerleading routines.

Quoted, so you can see what I’m talking about:

In 2011, for the first time in several years, the United States led the world by investing more than $48 billion in clean energy. The clean energy sector represents one of the fastest-growing industries globally, with investment increasing more than 600 percent between 2004 and 2011 (excluding research and development).

We’re in danger of losing our place at the top, however. To maintain our lead amid fierce international competition and to continue to attract private capital, there must be policy certainty. While other nations have national policies to encourage the adoption of clean energy, we rely on a patchwork of state policies and cyclical federal tax incentives, one of the most important of which is to end in a year.

The production tax credit (PTC) is an effective tool to keep electricity prices low and encourage the development of proven clean energy projects. While not large–about 2.2 cents per kilowatt hour–it gives American businesses the certainty they need to continue to invest, build, and deploy. But it’s set to expire at the end of 2013. Uncertainty about whether Congress will act to extend the PTC has already resulted in a sharp drop in investments in wind energy production, threatening the livelihoods of the more than 78,000 people nationwide who are in wind-supported jobs.

When Congress has allowed the PTC to expire in the past, wind installations declined by 73 to 93 percent.

“Wind-supported jobs”? Funny phrase, given the context. Apparently they are 73 to 93 percent tax-break supported jobs. The wind-supported jobs are the ones that would be left in the business after the tax break goes away.

Something not-so-funny happened on the way to the smart grid: Xcel, Boulder and the Colorado PUC

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Michael Giberson

Four-and-a-half years ago I relayed on these pages Xcel’s announcement of its Smart Grid City project. It was exciting stuff, I thought, and I said it “should prove to be a very useful project.” (See also Lynne’s post on a NYT‘s article discussing the project.)

It has proven useful, but not entirely in the way it was intended.

A Wall Street Journal article from 2008 noted one bold move by Xcel: “Departing from the norm, Xcel isn’t seeking permission from regulators to recover its costs in advance, but will wait until ‘we have proven the benefits,’ says Mike Carlson, Xcel’s chief information officer.”

Suffice to say all has not gone as hoped in Xcel’s effort to turn Boulder into a Smart Grid City.

The Denver Post provides a current update. In brief: the company has spent about $45 million on the project, regulators have approved recovery of $28 million and the city, other Colorado ratepayers, and the utility are battling before the CPUC over responsibility for the remaining $17 million in expenses.

Oh, and voters in Boulder approved (just barely) two ballot issues last November in an effort to municipalize electric utility service in the city (and see the utility comments here).

ALSO from the Denver Post: “Changing energy policy rules keep Colorado guessing in election year.”

Newspaper report implicates politicians, industry insiders in attempt to manipulate renewable credits market

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Michael Giberson

Consumers remain wary of attempts to manipulate energy markets, but it can be hard for consumers to tell when markets are being manipulated. For example, JP Morgan has been accused of manipulating the California ISO power market, but the company denies the accusation. The markets are complicated, the regulatory filings in the complaint are less than transparent to non-specialists and not always public, and the disputes can go without final resolution for years.

So much easier for consumers when public officials get involved in market manipulation, because they can be counted on to brag about the manipulation and word gets out. For example, in New Jersey, as the Star-Ledger reports, Gov. Christie held a news conference to publicize his energy market manipulation efforts:

Yesterday, Gov. Chris Christie signed a law to revive the [state's solar power] industry, which ranks only behind California’s in terms of total solar-energy projects.

The market works because electric companies must buy solar credits, called SRECs, from panel owners on a state-planned market, or produce their own.

But the subsidy plus a federal incentive led to a huge buildup of projects in the state and a glut of SRECs. That drove prices down sharply, leading to fears of solar layoffs.

So legislators and the governor stepped in to dramatically increase the number of solar credits that New Jersey’s electric utilities must buy, a move meant to increase prices.

See also the Renewable+Law blog, “Bill to stabilize New Jersey Solar Market Signed into Law.”

It is clear from these descriptions that politicians, working with industry insiders, are working the rules in order to push market prices up. Smells like manipulation to me.