Innovation, Renewable Energy, and State Investment

Over the last several years, many U.S. states have established clean energy funds to help support the growth of renewable energy markets. Most often funded by system-benefits charges (SBC), the 15 states that have established such funds are slated to collect nearly US$3.5 billion from 1998 to 2012 for renewable energy investments.

RE Insider – March 3, 2003 These clean energy funds are expected to have a sizable impact on the energy future of the states in which the funds are being collected and used. For many of the organizations tapped to administer these funds, however, this is a relatively new role that presents the challenge of using public funds in the most effective and innovative fashion possible. Fortunately, each state is not alone in its efforts; many other U.S. states and a number of countries are undertaking similar efforts. Early lessons are beginning to be learned by clean energy funds about how to effectively target public funds towards creating and building renewable energy markets. A number of innovative programs have already been developed that show significant leadership by U.S. states in supporting renewable energy. It is important that clean energy fund administrators learn from this emerging experience. Report Content This report contributes to that learning by compiling, in a case study format, information on innovative renewable energy programs and administrative practices from U.S. and international clean energy funds. These innovative programs and practices are those that have worked – or that promise to work – effectively for similar organizations in the U.S. and worldwide, and that might therefore merit further investigation, adaptation, or emulation by other clean energy fund administrators. This report was originally funded by and prepared for the Energy Trust of Oregon (Energy Trust), a nonprofit organization created in part to invest SBC funds into renewable energy projects in Oregon. The Energy Trust was seeking to identify innovative renewable energy programs and administrative practices from other jurisdictions. (The Energy Trust was also interested in identifying the organizational and programmatic “pitfalls” that other funds had experienced; these results will be provided in a separate report.) Though originally prepared for the Energy Trust, the contents of this report have been altered and updated somewhat to make it broadly applicable to other state clean energy funds. Accordingly, this report is intended as a reference document for clean energy fund administrators, state and federal policymakers, and other renewable energy stakeholders. The study contains two principal components: • Chapter 2 summarizes, in a case study format, sixteen innovative renewable energy program cases from the U.S. and abroad, funded by clean energy funds. This information is intended to assist state clean energy funds in considering the various programmatic options at their disposal in the near- and longer-term. • Chapter 3 highlights five innovative administrative practice cases from U.S. clean energy fund experience. Because effective program administration and management are critical for the success of any organization, the intent of these administrative cases is to identify how clean energy funds have effectively managed their programs. Prepared in a case study format, each case provides an overview of the program or administrative issue, and the results and lessons learned from the effort. Each case also lists contact information and data sources such that readers can easily obtain more detailed information. Our approach in this work was not to describe every innovative program or administrative practice in existence, but rather to focus on a broad selection of innovative efforts that may be useful to clean energy funds broadly (and the Energy Trust specifically). We acknowledge that a certain amount of judgment was required in making these selections. The purpose of this document is therefore not to make prescriptive statements on how to best meet the objectives of any individual clean energy fund. Instead, the intent is to inform clean energy funds and others about the innovative programs and administrative practices that are being put to use in other jurisdictions, and to emphasize descriptive findings. We hope to continue this work and provide additional innovative program cases in the future. Selection of Innovative Programmatic Cases The 16 programmatic cases described in this report primarily come from recent activity by U.S. state clean energy funds and international experiences. We sought to identify cases that represent a wide spectrum of program and technology types: large-scale renewable projects, photovoltaics and small wind, biogas systems, the customer-driven green power market, project facilitation, training and infrastructure, and green buildings. Several of the selected cases simultaneously explore the programs of multiple clean energy funds to show how the experience of one state has resulted in program tweaks and improvements in another state. The selected cases include: • Production Incentive Auctions to Support Large-Scale Renewables Projects in California and Pennsylvania; • The U.K. NFFO and Ireland AER Competitive Bidding Systems; • An Open-Ended Renewables RFP in Minnesota Funds Biomass and Innovative Wind Applications; • Use of Low-Interest, Subordinated Debt to Finance a Wind Project in Pennsylvania; • The Use of Capital- and Performance-Based Buy-Down Programs for PV in California, Pennsylvania, and Massachusetts; • Support for PV in Japan and Germany; • Using Bulk Purchase Commitments to Foster Sustained Orderly Development and Commercialization of PV; • A Multi-Faceted Approach to Supporting PV in New York; • A Targeted Approach to Support PV and Small Wind in Montana; • PV (and Small Wind) Pricing Programs that Link Supply with Demand; • Quality Assurance for Photovoltaic Systems; • Two Different Approaches to Funding Farm-Based Biogas Projects in Wisconsin and California; • Using Customer Credits to Stimulate Green Power Sales in California, Rhode Island, and New York; • Information, Training, Education, Project Facilitation, and Technical Assistance in Wisconsin; • Renewable Energy Loan Programs; • Massachusetts’ Green Buildings Program Selection of Innovative Administrative Cases The five administrative cases cover issues such as: collaborative program design, program evaluation, public education and marketing, organizational structure, and solicitation approaches. Selection of the five innovative administrative practice cases was informed by our understanding of the administrative issues that are most pertinent to the Energy Trust, but the issues discussed are broadly relevant to all clean energy funds. In writing these cases, we benefited greatly from our own work with the state funds and our close observations of their activity. The cases include: • Massachusetts’ Solar-To-Market Initiative: Using a Collaborative Approach to Create PV Programs: This case describes a novel collaboration between the Massachusetts Renewable Energy Trust and the in-state PV industry that has resulted in a new industry group and a consensus set of PV programs. • Wisconsin’s Use of Program Evaluation: Consistent and frequent program evaluation has been a significant component of Wisconsin’s renewable energy efforts, and has lead to several real-time changes in program offerings. • Public Education, Marketing, and Consumer Action: The Multi-Party Programs of Connecticut and Pennsylvania: This case describes two of the first large-scale renewable energy education and marketing efforts in the nation, funded and supported not only by state clean energy funds, but also by a variety of other organizations. • Organizational Structure: The Sustainable Development Fund of Southeastern Pennsylvania: This case study focuses on three key elements of organizational structure that have enabled this fund to design and administer innovative and effective programs, despite limited staffing. • Competitive Solicitations and Unsolicited Proposals: Examples from Several State Funds on How to Balance and Refine the Process: This case describes how a number of states have balanced a preference for competitive solicitations with the flexibility to consider unsolicited proposals. Thematic Findings While the purpose of this report is not to offer prescriptive findings, but rather to provide a resource document for clean energy funds, state and federal policymakers and other renewable energy stakeholders, several broad themes do emerge from the chapters that follow: • Clean Energy Funds Are Aggressively Developing Innovative Programs: Perhaps the most obvious observation from this study in that a large number of innovative renewable energy programs have already been developed by clean energy funds. It is also evident from the cases described in this study that clean energy fund administrators are learning from their own experiences, and the experiences of others, and that program re-designs have therefore been common in many states. • No Single Program Panacea Is Apparent: The renewable energy market is a diverse and complex one, with a variety of technologies and applications vying for market share. These diverse technologies and markets have driven states to design an equally diverse set of Case Studies of Leading Clean Energy Funds Page programs, with incentives targeted to specific renewable energy markets. Moreover, even among the policy approaches used to target individual technologies and applications, frequently no single program stands out as optimal. This suggests that multiple program designs, careful use of professional judgment, and a willingness to experiment with a variety of program options will be keys to the success of a renewable energy fund. • Programmatic Goals Should Drive Program Designs: Experience with clean energy funds illustrates the need to tie program design and fund allocation to the more fundamental mission, goals, and objectives of the fund. For example, with articulate mission statements, goals, and objectives, it may be easier to select among the multiple options for supporting photovoltaic markets. Similarly, allocation of funds across technology types (e.g., lower cost wind vs. higher-cost PV) and incentive structures (e.g., grants vs. loans) must be driven by an initial set of goals and objectives. • Discretion and Flexibility in Program Design Can Enhance Success: Fund managers are continuing to experiment with new program designs and innovations, and knowledge of how best to support renewable energy markets is rapidly being gained. To capitalize on this learning process, flexible program designs and ample use of discretion by fund managers in designing programs and selecting projects appear to be essential. • Sustainable Markets for Smaller, Distributed Projects Have Proven Harder to Build: Several states have successfully encouraged the construction of larger-scale renewable energy projects at reasonably low incentive levels. Customer-sited, distributed renewable projects have typically required far more aggressive funding levels on a per-kWh basis. States continue to experiment with a variety of program types to enhance the success of their efforts towards customer-sited installations, and significant lessons are expected to continue to be learned based on this experimentation. • Working Closely With Electricity Suppliers Can Prove Critical to Fund Success: Electric utilities and other electricity suppliers will continue to have a significant role in the renewable energy market. Utilities will retain responsibility for the interconnection of customer-sited renewable generation. Utilities and other electricity suppliers will also remain the primary purchasers of renewable electricity through long-term power purchase agreements. Experience in several states shows that the success of renewable energy funds will be strongly influenced by the actions of these utilities and competitive electricity suppliers. The interaction between state clean energy fund support for renewable energy projects and the availability of long-term power purchase agreements for renewable generators deserves special attention. About the Authors Ryan Wiser, Ph. D., is a scientist in the Electricity Markets and Policy Group at the Ernest Orlando Lawrence Berkeley National Laboratory. He leads research in the planning, design, and evaluation of Renewable Energy policies, green power marketing opportunities, Renewable Energy economics, and electricity industry restructuring. He can be reached at Mark Bolinger is a principal Research Associate in the Electricity Markets and Policy Group, where his work focuses on Renewable Energy program design and review, green power markets, and Renewable Energy economics. He can be reached at
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