Lindsay Morris, Associate Editor, Power Engineering
November 27, 2012 | 0 Comments
Gawell: I think that if wind is the poster child of policy uncertainty, then policymakers both at the federal and state level need to understand that the rest of us are in the same picture. I think that’s what the rest of us are alluding to. They can understand what happens when the wind industry faces its tax credit going away at the end of the year, when suddenly you get suppliers and equipment manufacturers starting to shut down operations and lay people off. Well, we’re all facing the same types of policy cliffs at the federal and state level. Policies don’t support the type of continuous development and growth of these industries that you need, and if you want to achieve the potential of these industries, you need longer time frames both at the state level with contracts going forward for new projects, and for federal incentives supporting project development and capital investment. That’s a fundamental message that’s been said in Washington for a decade or more, but the message doesn’t seem to get through to the policymakers and law writers who develop policies and laws. So, it’s a policy roller coaster for these industries trying to survive, which are growing and still fairly young industries.
PE: Is there anything renewable energy proponents can do better to encourage utilities to integrate more renewable resources?
Gawell: I think there are some issues here which the utilities may not be totally responsible for, but have a huge impact on what they can do. We need to have better transmission policies that really lay out what’s going to happen with transmission interconnection over time so that people who are developing projects can bid knowing whether or not they can get their power to market. And state policies on procurement have got to be harmonized with longer term policies on transmission. I think that probably affects most of our technologies. I think that transmission policies and state procurement policies need to be addressed as problem areas right now that create real limitations on what people can do in terms of bidding and supply. What we’d like to see from the geothermal perspective, and I think would help everybody, is for the states – who are really the drivers in the power policies – look at developing a full portfolio of renewable technologies. Picking one technology over the other I think is the wrong approach. Utilities should want to see growth in all of these technologies. It doesn’t have to be equal one-to-one, but I think we’re going to want to see all of the clean power technologies that we can build moving forward if we’re going to achieve the kind of goals that for instance California has set with respect to climate change. And I expect at some point, we will have a national climate change policy to achieve as well. So policies that support a portfolio of renewables, clean technologies, and policies which fit together transmission and the need to get this to market are critical to expanding what utilities can do.
Gramlich: The main thing renewable energy proponents can do is to show the hedge value and insurance value that renewables can offer utilities. There is great value in the certainty, as a number of us have discussed today – being able to lock-in 20 year + contracts with no fuel price variability is of great value to utilities and their end users that they serve. But that value has not been very well integrated into public policy around the country, particularly in traditional states with vertically integrated utilities, with public utility commissions who regulate the reliability and rates of that service. There’s certainly economic value that utilities should be incorporating because it’s of great benefit to consumers and rate-payers, but it’s generally not incorporated. And the utilities may want to buy or build more renewables, but their PUCs (public utility commissions) don’t give them any clear pathway to take that value into account.
The second issue is the power system operation area of integration, where it’s striking the amount of difference between some of the advanced power grids in the country and very antiquated systems elsewhere in the country. We have 120 different balancing areas, many of them are very small, where the system is very balkanized, there are 500+ owners of the transmission grid and the coordination is highly imperfect. So when a power system operator is trying to keep generation and load in balance in real time 24/7, many of them have very limited tools to be able to do that, and those tools need to be improved to be able to integrate more renewables.
Burkhart: I’d only emphasize, in addition to what’s been said, the importance of least-cost renewable solutions, market outcomes that end up favorable to rate-payers, and those things which lead to lower-cost renewable portfolios. Today that might mean disproportionate amounts of photovoltaics out here in the West. That will ultimately be best for the renewables industry, because that will mean the most public acceptance.
PE: How has competition from solar and wind manufacturers outside the U.S. over the last couple years challenged renewable energy momentum? What lessons have been learned?
Gramlich: In the case of wind energy manufacturing, the growth has been steady and strong here in the U.S., with nearly 500 manufacturing facilities, going from nearly 25 percent to 70 percent domestic content. So those are pretty strong numbers for an industry that suffers from policy uncertainty. It does illustrate the opportunities and the great market and wind resource we have in this country, that manufacturers are so willing to bring their technologies and their know-how to this country and build wind turbines, towers and blade here in the U.S. So the only problem for those manufacturers is the uncertainty, and if they want to build and at this point, reopen some of the shuttered facilities, they need to see what the market looks like.
Resch: In the last few years, solar has seen a significant ramp-up in manufacturing, in the photovoltaic industry in particular. As we’ve increased manufacturing in the U.S., Europe, and Asia, the industry overbuilt itself, so we had excess supply, which led in large part to the significant decline in prices that has occurred in the photovoltaic industry. The benefit to solar energy deployment in the U.S. is that our product is significantly less expensive than it was two years ago, as I pointed out – down by 50 percent on an installed cost basis, which is something that took us almost 15 years to achieve previously. So the scale of manufacturing that’s occurred globally has greatly benefitted the deployment of solar.