Tag Archives: renewable portfolio standards

Who is the renewable power policy “playground bully”?

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Michael Giberson

According to a poll by Fallon Research, “Nearly 60% [of Ohio voters] would pay an extra $3 a month on a $100 dollar energy bill to support the development of electricity from clean sources.” It is an interesting factoid, I suppose. My initial response is to wonder whether state electric power regulations in Ohio somehow prohibit Ohio voters who are so inclined from buying “electricity from clean sources.” If so, the regulations should be revised so that consumers have the opportunity to buy the kind of electric power they want.

Heather Taylor-Miesle, of the NRDC Action Fund, apparently thinks differently. She reads the survey results and thinks, “Great, this is a good reason for state regulators to force everybody to buy clean-sourced electricity, including the more than 40 percent who said they didn’t want to pay as much as 3 percent extra for clean-sourced electricity.”

Can we imagine polling Ohioans on whether they support the Cincinnati Bengals or the Cleveland Browns, and then having state regulators require every consumer buy a T-shirt from the majority-favored team? Why should electricity policy involve state-mandated purchases?

Granted, electric power production involves environmental harms and we might find state and federal policies useful in addressing these harms. But renewable-power purchase mandates are a inefficient way to pursue environmental goals. Granted also, there may well be positive information spillovers from research and development of less-polluting technologies. Renewable-power purchase mandates are an especially ineffective way of promoting the growth and spread of knowledge.

The main point of Taylor-Miesle’s Huffington Post piece was to suggest the conservative, pro-market policy group ALEC was playing the “playground bully” by advocating repeal of state renewable power purchase mandates. I find the suggestion hilariously backward.

So far as I have seen reported in the press, ALEC isn’t out threatening violence for state legislators who refuse to comply with ALEC’s wishes. So far as I know, ALEC operates mostly by distributing policy papers and hosting conferences where people talk a lot. I’ve never heard of a playground bully hosting a public policy conference.

Of course the policy that Taylor-Miesle favors is a policy of coercion: state renewable power purchase mandates simply require electric power retailers to purchase some fraction of their power from government-approved “clean sources.” Should a utility fail to comply, the state will impose penalties. Should a utility fail to pay, the state will seize money in the utility’s bank accounts. If that doesn’t work, the state eventually will close the utility down.

The state is the bully here. Taylor-Miesle is like that kid on the playground hiding behind the bully, egging him on. ALEC, on the other hand, wants to reduce the bully’s reach a little bit.

New Jersey politicians poised to pour more ratepayer money into solar power developer pockets

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Michael Giberson

The bill isn’t signed into law yet, but New Jersey solar installers are probably breathing a little easier given reports that New Jersey Governor Chris Christie is expected to sign a law that would boost the state’s electric utility’s solar power purchase obligation from about one-half of one percent to over two percent of the utilities’ electric power sales. (See related.)

Meanwhile, a New Jersey-based unit of an Italian solar panel maker is calling it quits, saying it couldn’t compete with Chinese solar panel manufacturers. The company, MX Solar USA, LLC, had taken $3.3 million in loans and grants from the state of New Jersey, but apparently it wasn’t enough to enable the solar panel maker located in the countries hottest solar PV market to out compete international solar panel manufacturers. MX Solar was among the U.S. companies that filed the anti-dumping complaint against China that resulted in significant tariffs being imposed on several Chinese manufacturers. The company complains that Chinese manufacturers are evading the tariffs by partnering with companies in other countries.

In an amusing tidbit tossed in right at the end of the article on MX Solar, reportedly the company purchased at least some of the solar cells it used in its solar panels from Chinese solar cell manufacturers. It claimed Chinese solar panels were unfairly subsidized, but when it went shopping for parts, it found Chinese solar cells at prices hard to beat!

New Jersey solar installers seek “Endless Summer” at ratepayer expense

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Michael Giberson

A crisis is coming for the New Jersey solar power installation industry. Stringent solar power purchase requirements imposed on electric utilities (i.e. on electric utility ratepayers) has turned the state into the nation’s second largest for solar power capacity installed, behind only sunny California.

But now that installed capacity is sufficient to meet current requirements, the installation business is expected to drop way off.  (The purchase requirements actually increase each year through 2021, but the rate of growth is slowing.) That expected drop off has lobbyists for both the solar power industry and unionized solar installers descending on the state capital, pleading for imposition of still higher purchase requirements on electric power consumers. The rallying cry has been to “save the jobs” created by the solar power purchase mandate.

Here is one report, “NJ looking to rescue ailing solar industry“:

New Jersey has long been known as the Garden State, but during the last five years, it could have easily been known as the Solar State from all the sunlight-absorbing panels that have cropped up nearly everywhere.

They’re on the roofs of schools, churches, municipal buildings and sewage treatment plants. They’re in farm fields and attached to utility poles. Even one of New Jersey’s trademark diners recently went green and installed panels.

But all is not well with New Jersey’s once-thriving solar industry, which has grown so big, so fast, that it’s now in danger of collapsing on top of itself.

The industry’s future could hinge on the work of the state Legislature during the next several months as lawmakers look to craft a bailout bill that rescues the solar market and the thousands of jobs it created.

A bailout bill was approved by the Senate Environment and Energy Committee on Thursday, but Bill S 1925’s chances of becoming law are far from certain as it relies largely on making power companies buy more electricity from solar generators.

Critics warn that doing so could mean higher bills for the state’s ratepayers. Supporters say without government help the entire industry will likely collapse.

“We have a crisis, and the crisis is this: If the market stays the way it is, there will be no new projects in the future, and the ones out there now will fail,” Sen. Robert Smith, D-17th of Piscataway, said Thursday at the onset of the lengthy hearing on the bill, which drew hundreds to the Statehouse, many of them union members who work in the industry.

At issue is the market for the electricity that solar panels produce, which has crashed during the last year because of an oversupply of solar development.

Under state law, utilities must obtain part of their electricity from solar generation. To do so, most must buy solar renewable energy credits, or SRECs, from solar panel owners.

The market for the credits originally boomed and helped New Jersey become the nation’s second-largest solar power producer behind California. All that development caused a glut in the market that has seen SREC prices decline from $650 or more in 2010 to less than $100 at times this year.

“We’ve become a victim of our own success,” Smith said. “We’ve had so much solar built in New Jersey that the market for SRECs has crashed.”

Historical SREC values are charted at the Flett Exchange.

The crash in the value of an SREC has cut into revenues projected for private businesses and public schools that have had solar panels installed. Banks have become less willing to loan for solar projects as subsidy revenues have dropped off.

A bill circulating to bail out the industry would both increase the mandated purchases, cap the size of solar projects built, and require projects gain approval from state regulators before they are built. The bill has failed, or at least stalled, on the issue of regulator review – the industry wants all existing projects exempted from regulatory review while the Governor’s office and some others insisted on no exemption.

All hope is not lost for the industry, even should the legislature fail to raise the cost imposed on ratepayers in order to bail out the New Jersey solar industry. The chairman of the New Jersey Board of Public Utilities has said if legislators don’t act then the BPU might simply impose a higher solar mandate on its own authority.

BACKGROUND: For an extended assessment of solar power incentives in state Renewable Portfolio Standards see Ryan Wiser, Galen Barbose, and Edward Holt, “Supporting Solar Power in Renewable Portfolio Standards: Experience from the United States,” Lawrence Berkeley National Laboratory, Berkeley CA, October 2010. LBNL-3984E.

Pat Wood: The Texas Tribune Interview

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Michael Giberson

Pat Wood, the former FERC chairman and former Texas PUC chairman, was interviewed recently by The Texas Tribune. Wood is surely one of KP‘s favorite ex-regulators, so of course we’re linking to the interview. Here’s just one bit:

Wood: … There is also a lot that can be done, particularly on the energy demand side. By that I mean more aggressive conservation programs where you let market signals encourage customers that have the ability to shut down for a certain small amount of hours in the day to get paid to do so.

TT: Do you mean even individual consumers can potentially do more — or be helped to do more — to save energy?

Wood: They could, but if you went from the current penetration we have today, which is focused on the largest customers, to then focus on the medium-sized customers  — and by that I mean grocery stores, shopping centers, Target, customers like that — you can pick up a whole lot more responsive load before you need to get to the residential customer. The residential customers comprise about 40 percent of the [electrical] load at peak. Industrial and commercial are each about 30 percent. That’s a lot of lower-hanging fruit to pick before you get to residential.

And in discussing this, I’m not saying that Target would have to bid to shut down a store to get paid; it would maybe curtail 20 percent of its demand from 4 to 6 pm [when electricity usage peaks].

This capacity tightening may force that day to come sooner rather than later, which I think is a great thing for Texas, to latch onto this smart-grid investment that we’ve been making statewide over the past couple of years into a level of demand responsiveness that really moves our grid to 21st century capability well ahead of the other states.

Wood also addresses the lack of incentives to build new plants in Texas, the prospects for wind and solar in the state, energy storage, and among other things the role of the Public Utility Commission after the state “moved the dial from 10 to 4 in terms of regulation.”

Is subsidising renewable energy is a good way to wean the world off fossil fuels?

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Michael Giberson

The Economist is hosting an online debate on the motion, “This house believes that subsidising renewable energy is a good way to wean the world off fossil fuels.” Matthew Fripp of the Environmental Change Institute at Oxford University has presented the affirmative case for the motion, Robert Bradley, Jr., of the Institute for Energy Research has argued the negative.

In closing arguments, Fripp makes what seems to be the best possible case for a combination of directed renewable energy subsidy (either renewable portfolio standards or feed-in tariffs) and gradually increasing carbon tax. While actual policy is unlikely to be as gradual, certain, and efficient as Fripp suggests, it seems desirable for policymakers to at least try, right?

That is, it seems desirable for policymakers to aim for gradual, certain, and efficient policy support for renewable energy assuming we accept the goal of weaning the world off fossil fuels. Bradley doesn’t.

Against a proposition that is formally about the means to an end, Bradley closes by arguing against the end. He argues cheap energy is good energy:

Good public-policy intentions are not enough …. Higher-quality, less-expensive energy enhances living …. This fossil-fuel dividend, if you will, enables a variety of lifestyle enhancements, including those for better health. Wealth is health, and human health should be at the core of environmentalism.

To me Fripp’s polished policy scenario is unappealing in part because of how appealing he makes it seem. (!) I’m not at all ready to turn the energy industry over to a central planning bureau, even Fripp’s ideal which would limit its interventions to minimally intrusive ways of promoting renewable power while a carbon tax was phased in and then disappear. Government attempts to manage the economy tend to destroy economic value; Fripp hasn’t convinced me government has overcome the knowledge problems and coordination problems inherent in economics action.

When renewable energy sources earn a place at the “high-quality, less-expensive” table, we’ll all be wealthier and healthier for it. In the meantime, in a world with significant problems of poverty and disease, wasting resources to install inefficient technology on large scale is destructive of wealth and health.

NOTE: At the moment I’m posting, the reader voting shows 49% in agreement with the motion and 51% opposed. Today, November 17, 2011, is the last day for reader voting. My recommendation: if you like government planning for the energy economy, vote Yes; if you prefer wealth and health, vote No.

California regulators approve generous contract to multinational corporation at California ratepayer expense

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Michael Giberson

Discovering that renewable power mandates can be expensive, California-style: “California Approves Solar Contract Despite High Cost“:

Ultimately, the commissioners voted for Abengoa’s contract mainly because Abengoa already has spent five years and $70 million to develop Mojave Solar and has gotten all the permits and financing to start construction. They noted that getting permits and financing are so tough that many other renewable energy projects had floundered as a result.”

This is their reasoning? So the high-cost contract is sort of a bailout for Abengoa because otherwise they’d take a loss?

A few details about the project are included in the California PUC staff’s recommendation to deny PG&E’s request to stick its customers with this bill. The staff concluded: “approving the PPA would have PG&E’s ratepayers incur significantly higher costs than might otherwise be necessary to meet PG&E’s RPS targets. [PG&E's own assessment] clearly shows that the contract is not competitive.”

Abengoa takes in billions of Euros in revenue every year – we don’t need to feel bad that a project or two they’ve pursued have turned out to be uneconomic. The company doesn’t need charity from California ratepayers.

Solar PV prices are at least temporarily down sharply from a few years back, but the Mojave Solar project is a concentrating solar power (i.e. solar thermal) project. While other solar thermal projects have switched technologies to reduce cost, not Mojave Solar. Many of the CPUC commissioners viewed this additional technological diversity a reason to make consumers pay extra:

“It’s worthwhile to spend a little more on projects like the Mojave Solar so the (state’s) renewable portfolio doesn’t rely heavily on a single technology. In other words it’ll be more balanced,” said Michael Peevey, the commission president who led the effort to approve the Mojave Solar contract.

Every once in a while I think, “Gee, wouldn’t it be nice to find some small California college near the coast to work for?” And then I go spoil the fantasy by reading about California energy policy.

Arizona regulators can require utilities to buy renewable power even if it raises consumer rates

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Michael Giberson

The Arizona Court of Appeals has ruled that the Arizona Corporation Commission was acting within its authority when it decided to require utilities to secure a portion of their electric power from renewable resources. The Goldwater Institute had argued that the Commission’s authority was limited to setting rates and that the renewables mandate involved the Commission in decisions appropriately left to company management. Energy policy decisions such as renewable energy mandates should be made in the state legislature, Goldwater said.

In reaching the renewable power mandate the Commission suggested the decision protected consumers by diversifying the state’s energy sources away from fossil fuels, the prices of which are sometimes variable and which sometimes lead to rate increases. The Court concluded, therefore, that the Commission was considering rates when it mandated renewable power purchases.

The court “also brushed aside complaints by Goldwater”, in the words of the news article, that the Commission was meddling in decisions that should be left to management. From the court decision:

The managerial interference doctrine is a judicial construct designed to protect regulated corporations from overreaching and micro-management of their internal affairs by the Commission. It would be anomalous, to say the least, to allow APS customers to claim interference with managerial prerogative when APS itself disavows, and even embraces, the alleged “interference” by the Commission.

This part of the Goldwater complaint was always a long shot. Regulated electric companies have long learned that the state’s ability to regulate rates meant the state had the ability to regulate other terms and conditions of service, which meant that the state could regulate just about whatever it wanted. Regulated utilities generally find it advisable to work with, rather than against, their regulators.

NOTES:

We don’t need a geothermal portfolio standard

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Michael Giberson

The new Jan./Feb. 2011 issue of the Electricity Journal is now available, and it contains the usual range of interesting things to consider.

Take, for instance, the article “Redefining Renewable Portfolio Standards: The Value of Installed Renewable Capacity.” The article observes, reasonably so, that some sources of renewable power can dependably generate power around the clock, while others are somewhat less dependable. And we can all agree that dependable power is somewhat more useful that less dependable power, other things being equal. But soon enough we depart this firm foundation and begin speculation on how we can rig power markets and renewable power policies to increase the role played by geothermal energy.

To which the appropriate response is: “Say what?”

It is as if the article does not realize that their are broader environmental goals at issue in renewable power policy. In fact, the only mention of the word “environment” in the article is in reference to “creat[ing] a suitable investment environment for developers” (p. 15; the article does mention greenhouse gases two times on p. 17).

By the end of the article the author is asserting that “States with geothermal resources should tailor their renewable portfolio targets to encourage geothermal development to the extent possible.” I guess I missed the benefit-cost analysis earlier in the paper, but when did anyone besides the geothermal power industry conclude it was in the public interest to encourage geothermal development “to the extent possible”? Actually, the author is a bit more generous, allowing that his ideas would equally apply to other dependable renewable resources like biomass and landfill gas.

We’d be better off if our environmental policy was more focused on solving environmental problems and less focused on boosting one segment of the power industry at the expense of other segments of the industry (and, ultimately, power consumers).

 

 

The differences between renewable energy and renewable power in North Carolina

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Michael Giberson

Under North Carolina’s Renewable Energy and Energy Efficiency Portfolio Standard, poultry waste burned to boil water to generate steam to turn a turbine generating electricity will earn RECs which can be sold to electric utilities needing to meet the state’s new renewable energy standard. Also under the law, poultry waste burned to boil water to generate steam to be used directly as process heat in factories does not qualify to earn RECs. The distinction may frustrate plans to use the poultry waste as an industrial fuel.

The Raliegh, N.C. News-Observer reports:

An energy company that wants to burn poultry waste for fuel has lost its bid to use the bird droppings as a green energy resource because of a quirk in North Carolina law.

A ruling by the N.C. Utilities Commission means that Peregrine Biomass Development will scrap plans for now to build several industrial boilers in the state. The company had planned to burn chicken droppings as an organic fuel to generate steam for factories and other industrial applications….

Peregrine’s business model had counted on a dual revenue stream. The company had planned to sell steam to industrial customers and at the same time sell renewable energy certificates from the projects to Progress Energy, Duke Energy or regional power agencies. The renewable certificates are a subsidy to encourage development of the state’s renewable sector. Electric companies and power agencies are required to buy a certain amount of the certificates to meet the state’s renewable energy targets.

The state’s 2007 renewable energy law considers poultry waste a type of renewable resource – but only as long as the poultry waste is used to generate electricity. Peregrine’s use of poultry litter didn’t qualify as a renewable, the utilities commission ruled Friday, because the company planned to generate steam or boiling water, not electricity.

An irony here is that Peregrine’s projects would qualify for the REEEPS subsidy if they planned to boil water to generate electric power and then use the electric power to boil water, even though the extra step would involve significant additional up-front cost and be a much less efficient use of the energy source.

John Whitehead at Environmental Economics wonders what “bureaucratic-political rent seeking led to this decision” by regulators, but I suspect it is just an example of how hard it is to provide simple incentives in a complex world. State lawmakers were trying to encourage the electric power industry to rely more on renewable energy sources, so they wrote a law about electric power.  Peregrine’s approach was outside their immediate scope of interest at the time. Perhaps Peregrine can incorporate a cogeneration component to their projects, and claim a subsidy that way, or if the projects will reduce overall energy consumption they might qualify as energy efficiency programs.

By the way, the energy efficiency component seems to me to be a – what is a nice way to say “scam” – in the making. In the regulatory rule-making process at the state utility commission, Duke Energy argued that because it will take time to measure and verify energy efficiency results the utilities should be able to rely on estimates of reduced energy consumption in annual compliance reports, with “actual results” incorporated into subsequent reports. The commission added the following language to the regulations: “REPS Credits for energy efficiency may be based on estimates of reduced energy consumption through the implementation of energy efficiency measures, to the extent approved by the Commission.” (p. 60 in this NCUC order).

So essentially, a utility can get credit for its estimated reductions in energy consumption due to energy efficiency plans implemented, and maybe (though the changes to the regulations say nothing about this) eventually, a subsequent report will list “actual results.” At the least this mechanism allows a way for the utility to borrow credits from future years (by over estimating results now and then over-complying later to make up for the post-verification adjustment), but nothing in the rule governs this potentially significant program component other than the phrase “to the extent approved by the Commission.”

The whole thing is a mess, and not just because of the poultry waste.  Better policy pursues the externalities associated with electric power production – the law here mentions diversity among energy resources and improved air quality as among the policy goals – and let producers and consumers sort out the complexities.  Sure, implementing Pigovian taxes and Coasian bargains can be messy, too, but then sorting out the mess seems to be more about identifying and solving problems rather than about how to fit nicely into the economic framework imagined by lawmakers and regulators.

Texas wind power: It isn’t about the RPS

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Michael Giberson

Texas did it again, it achieved it’s target for new renewable power generation capacity years ahead of schedule. And so, of course, as it becomes increasingly obvious that the Texas Renewable Portfolio Standard (RPS) is essentially irrelevant to growth in wind power, the Texas RPS is increasingly held up as a success and model for other states and the federal government.

From Brighterenergy.org:

The State of Texas exceeded its 2025 renewable energy target 15 years early last year.

The Electric Reliability Council of Texas (ERCOT) said on Friday that there was a record increase in voluntary participation in the state’s renewable energy certificate program in 2009.

Nearly 15 million renewable energy credits [RECs] were retired last year, with just 6.79 million needed by retail electricity providers to satisfy the state’s renewable portfolio standard for the year.

A further 8.14 million RECs were voluntarily retired, surpassing 2008’s record of 6.77 million.

The figures came as ERCOT submitted its annual report on the scheme to the Texas Public Utility Commission.

With more than 10,000 megawatts of renewable energy capacity on the Texas grid – mostly wind power – the state has reached its 2025 target 15 years early, and has doubled the target set for 2015.

The original mandate for 2009 was just 2,000MW, which was achieved three years early.

“Successful”

ERCOT interim CEO Trip Doggett said: “The Texas program was the first of its kind in the nation when it began in 2001, and it is now recognized as one of the most effective and successful in the nation.

“It’s also one of the biggest influences on the rapid growth of wind energy in Texas,” added Mr Doggett.

Other than the popular but faulty post hoc ergo propter hoc logic, what is the evidence?

Sort of like the 45 mph minimum speed limits on some Texas highways, the constraints are so far from binding that it is hard to see how they are relevant.

I think a better explanation of the growth of wind power in Texas (and about 95% of the Texas REC-qualifying renewable power capacity is wind power) is the combination of federal Production Tax Credit subsidies + reasonably good quality wind resources near transmission lines.  The CREZ transmission expansion plan is likely the next most important factor.  REC monies along with other state and local tax exemptions are far smaller considerations, perhaps tipping the balance in favor of development for a few projects.

What is my evidence? Oh, actually, what I have is more of an inference and interpretation drawn from a number of mostly anecdotal sources.  Nothing really reliable to show.  But given the lobbying for a national RPS, it makes a difference whether or not the Texas law is the model it is held out to be.

I’m sure someone has put together the story somewhere.  Anyone know of anything?