Federal Efforts a Travesty

“‘We’ve ensured a role for coal,” said Rick Boucher, Democratic Congressman from West Virginia, regarding the federal climate change “mitigation” bill that recently passed the House. I’m forced to use quotation marks around “mitigation” because this “deal with the devil,” as Ted Nordhaus, of the Breakthrough Institute, described it, confirmed my worst suspicions: even under a progressive and popular President the chance of an effective federal climate change mitigation bill passing through Congress is minimal to none.

This is the case because the primary requirement of any federal approach to climate change mitigation is that it phase out coal — quickly. Coal power is the largest source of greenhouse gas emissions in the United States and no attempt to reduce net emissions will succeed if coal emissions are not reduced. And yet the federal bill (Waxman/Markey) will, according to the Environmental Protection Agency’s recent analysis, actually allow an expansion of coal emissions until 2020.

The federal bill is, in short, a travesty that highlights the need to shift from any federal focus on climate mitigation to aggressive state and local action. (To be fair, President Obama’s recently-passed tax credits and R&D funding for energy efficiency and renewable energy, totaling approximately $80 billion over the next couple of years, and up to US $150 billion over ten years, will do far more than any faux cap and trade system. These funds are on their way to every state and represent an order of magnitude or two higher level of funding than under President Bush. I’ve written in the past about a carbon tax as a better approach than cap and trade and I still feel that a carbon tax would be far more effective than cap and trade — particularly a faux cap and trade).

Even at the state and local level, it’s a mixed bag, but there are many promising efforts, as I’ve also written about in numerous previous columns. The enormity of the twin crises — climate change and peak oil — have only become worse, despite a lull over the last year in terms of oil and gas prices. These twin crises demand rapid change on the ground. Luckily, some states are taking action in addition to finding the right rhetoric.

Ironically, the nation’s leader in renewable energy is now Texas, which has more than tripled the installed wind power of California, the wind power leader for two decades. As of early 2009, Texas had almost 8,000 megawatts of wind power online, compared to California’s 2,500 megawatts. Perhaps even more surprisingly, relatively small Iowa has also surpassed California in wind power capacity!

In the U.S., 29 states now have a renewable energy requirement of some sort in place. But a little known fact is that most — perhaps all — of these “mandates” have a major catch: renewable energy projects must be as cheap or cheaper than the fossil fuel alternatives. For example, in California, with one of the most ambitious mandates, the investor-owned utilities must achieve 20 percent renewable energy by 2010 — but only if these renewable energy resources can be brought online without costing ratepayers a set amount above the “market price” cost of electricity from a new natural gas power plant (the “above market” fund is about $800 million through 2012, which amounts to a tiny subsidy for these renewable energy projects, and much of which is already exhausted by existing contracts).

So if the utilities can show that they can’t procure renewable energy within the relatively small “above market” fund, their renewable energy obligation at that point melts away. Sacramento is considering increasing this “mandate” to 33 percent by 2020 — but it will probably include similar loopholes, and perhaps others.

These cost-effectiveness requirements are generally good for ratepayers in the short-term — but in the mid-term and long-term, ratepayers stand to save more money through vigorous investments in renewable energy technologies even if these investments result in short-term relatively small rate increases. (For example, a recent draft report from the California Public Utilities Commission found that achieving the 33% renewable energy standard by 2020 will cost ratepayers 7.1% above business as usual; but the report also suggests that ratepayers may save money over the longer term due to “market transformation” of the renewable energy market). 

As with the federal situation, all is not lost at the state and local level — while California has been almost stagnant over the last seven years regarding new in-state renewable energy projects, there is cause for optimism due to the sheer number of projects expected to come online over the next few years. But nothing is ever easy. The large majority of these new projects require major new transmission lines to be completed — and there’s almost nothing more difficult than building new transmission lines.

For renewable energy projects there are generally at least a few neighbors in opposition. For new transmission lines there are usually hundreds of neighbors in opposition — and as transmission lines become longer and longer, to transfer power from huge wind and solar projects to population centers, it’s likely to get even more difficult to build these new lines. I fully support large renewable energy projects, in principle, but also respect the choice of those who prefer small or medium-scale projects. These problems, however, highlight the difficulty in relying solely or primarily on large utility-scale projects.

Community-scale energy is thriving in parts of the U.S. This is one of the truly encouraging trends over the last few years. What I call the Danish Model for wind power has been successfully transferred to the U.S., with Minnesota taking the lead. The Danish Model focuses on numerous medium-scale wind projects dotted around the landscape, in rural and urban environments. Feed-in tariffs play a large role in the Danish Model, as does local ownership of projects. Hawaii, Vermont, Ontario, Canada, Gainesville, Florida, and other jurisdictions are also exploring robust feed-in tariffs. The trend is promising.

California is slowly bringing the Danish Model to life on the West Coast, with a limited feed-in tariff now in place (AB 1969). The CPUC has proposed expanding this to 10 megawatts, from the current limit of 1.5 megawatts per project. Pricing is key for community-scale projects and the current “market price” offered can work for wind, landfill gas and biomass projects, but it’s quite challenging for solar projects to be economical at this level. AB 1106 (Fuentes), a bill pending in Sacramento, is very encouraging, however, because it will provide better pricing for renewable energy projects five megawatts and below (as low as 250 kilowatts). I encourage all interested parties to submit a letter to Fuentes and other key members of the Legislature expressing support for this highly important bill.

California also has significant incentives in place for net-metered community-scale projects, including the Self-Generation Incentive program (wind, fuel cells and advanced storage) and the California Solar Initiative. The SGIP program provides up to $1.80/watt for wind projects. Project size is capped at five megawatts per project. The CSI provides a declining rebate for solar projects, for smaller projects, and a performance-based incentive payment, for larger projects, which also declines over time.

Incentives are currently about $1.90/watt or $0.22/kWh, depending on the utility territory. When we add federal tax credits — soon to be available as a cash grant that doesn’t require any tax liability — much of a community-scale wind project can be paid for upon completion of the project. Solar incentives aren’t quite as favorable because solar still costs considerably more than wind power, but costs are declining for solar even faster than the state incentives are declining.

I recently switched from non-profit policy advocate to private sector consultant and renewable energy project developer. My new company is now part of the energy revolution that must happen. I’ll continue these columns because I want to spread the knowledge necessary to replicate the models I’m using for my projects — there’s more than enough community energy potential around California, other states and other nations, to keep hundreds of small companies like mine busy for decades.

We need this scale of effort to solve the twin crises we’re facing. Stay tuned for more details on the community-energy model my company and other similar companies are developing. It just may be the case that the community energy model will achieve the emissions reductions federal efforts are seeking — and failing to find.

Tam Hunt is president of Community Renewable Solutions LLC, and a Lecturer in climate change law and policy at the UC Santa Barbara Bren School of Environmental Science & Management.

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