Friday, February 11, 2011

The green jobs policy Colorado needs

News updates:

Feb 28 - Colorado Independent:  Xcel Energy blasted for burying bill to up small-scale renewable energy projects: State's largest utility accused of unhealthy obsession with fossil fuels, full-scale centralized energy facilities, by David O. Williams

Feb 24 - Ecopolitology: Colorado Republicans Kill 'No-Brainer' Renewable Energy Study, by Timothy B. Hurst

"Smaller projects that can get us there fast with no transmission lines and deliver 5% ratepayer savings. This is the most effective policy in the world for getting cost-effective renewable energy online. It's simple, fair and effective."
                                                           Ted Ko, Associate Executive Director, CLEAN Coalition

Should small renewable energy producers get the same deal as big corporate producers?  The Clean Local Energy/Feed-in Tariff (FiT) policy is designed to do just that by insuring a fair financial return to investors in local, decentralized rooftop PV, wind and other renewable generation.

New bill introduced

A new bill introduced by Senator Schwartz and Representatives Vigil and Massey (HB 11-1228) in Colorado would promote economic development through the use of distributed renewable energy generation. The bill directs the office of economic development to commission a study of the potential benefits of adopting incentives, such as a FiT style policy, to "increase the amount of distributed generation included in utilities' portfolios for the purpose of job creation and economic development".

According to the recently released Community Power report, installing thousands of decentralized solar PV and other renewables at the point of use in urban areas, created significantly more jobs in California than remotely controlled central-station solar and wind power plants.
From Community Power by Al Weinrub                   
The bill requires the study to look at the potential for job creation in Colorado by region, type of renewable energy source, attraction of new businesses and new capital, expansion of revenue streams for farmers, ranchers, and retirees, and creation of additional tax revenue for the state.

And it won't cost taxpayers because the study will be conducted by an independent entity and funded through gifts, grants, and private donations.

FiTS have spurred a virtual explosion in renewable energy installations in Germany, Spain, the United Kingdom and now Canada.  Germany installed a record 8 Gigawatts in solar power in 2010 alone.

Adoption of local, decentralized renewable energy incentives have been much slower in the US, due to strong resistance from investor-owned utilities, including Xcel Energy.

At a 2009 renewable energy conference in Minneapolis, Xcel Energy representatives told the audience, "the honest truth is we earn our returns by building plants and putting them into rate base and making profits on them.  A feed-in tariff takes away that opportunity of utilities to earn on their investments."

Name change

The name, "feed-in tariff" has also led some to misunderstand the policy.  FiTs are not a tax but rather a redistribution of utility funds to provide a fair return to small energy producers. 

Local renewable energy advocates in the US are grappling with a new name for FiTs, because of the vulnerability of the term "tariff" to attack from anti-tax activists and others who either don't understand, or outright oppose parity for small energy producers.

According to John Farrell, with the Institute for Local Self-Reliance, those who oppose FiTs, "will say this is going to be very expensive.  They'll say you're going to pay 10 times more for electricity", thus feeding misconceptions of costly taxation.

The alternative term, "Clean Local Energy Accessible Now" (CLEAN), has been adopted by some policy proponents in an attempt to avoid these pitfalls and describe the policy more accurately.

By avoiding expected increases in electricity rates for new transmission, power plants and built in utility profits, the policy tool is likely to save ratepayers plenty, whatever its name. 

Overly studied

The study won't be Colorado's first study on CLEAN/FiT incentives.  In fact, FiTs have been studied extensively in the US. Some would say almost to death.

Earlier this year the Los Angeles Business Council released a study on how to design an effective FiT based on its application throughout Europe and in a growing number of US communities to accelerate renewable energy development and Co2 reductions.

Unbeknown to many, our own Colorado Public Utilities Commission (PUC) Staff prepared a report on FiTS in 2009 that concluded:

"A FiT can be used to accomplish the legal and policy goals of an RPS and can be the driving mechanism enabling utilities to meet their renewable requirements". 

The report also concludes that an effective FiT could create jobs, benefit rural areas through community-based renewable energy development, and avoid the need for costly new transmission.

Not to be outdone, the National Renewable Energy Lab (NREL) in Golden, Colorado also has a lot to say about FiTs.  See: NREL Analysts Dig FiTs

Despite utility opposition, the policy is catching on in a growing number of municipalities and states in the US.

By any name, if Colorado gets it right, the State could finally have the policy incentive it needs to ignite a real renewable energy revolution that includes all renewable energy producers, large and small and fulfills the green job promise we've all been waiting for.

More about HB 1228 here

6 comments:

Scotty said...

I would be interested in sharing any news on FIT for my readers... I agree: Stick together against Electric Companies.

Ceal said...

Thanks Scotty - I try to keep our PACE/FITs page regularly updated, check it out: xhttp://slvrenewablecommunities.blogspot.com/p/pace-fits.html

JP Dolphin said...

If you want to learn more about CLEAN policy, including an expansive study done by the University of California Berkeley, please visit http://www.clean-coalition.org/

Anonymous said...

Comment by Richard Mignogna on 17 February 2011:
Unfortunately, this article presents only the alleged upside of feed-in tariffs (by whatever name you wish to call them) without presenting a balanced view. As stated in the article, the Colorado PUC did engage a study of FiTs that was published in September 2009. And, yes, the report did state “A FiT can be used to accomplish the legal and policy goals of an RPS and can be the driving mechanism enabling utilities to meet their renewable requirements”. However, the author of this article fails to state that the very same paragraph goes on to note that the California PUC Staff recommended a reverse auction mechanism that has since been adopted by California in lieu of a FiT because it is more protective of consumer rate increases.

The problems with FiTs have become nearly legendary. Even Germany, which as this article alludes has become the poster child for feed-in tariffs, has recently slashed its FiT compensation because it is unsustainable. And that is an example of the best run program. Other nations and local jurisdictions have not been so lucky. The Colorado report also states that “careless FIT design can lead to boom-and-bust cycles… leading to fraud, ratepayer outrage, and a PV market glut that leads to depressed prices.”

No one argues that a FiT is not the most effective incentive mechanism for rapidly increasing PV capacity. But, at what cost? Proponents of FiTs appear totally unconcerned with who is paying the bill. In Colorado, it has been argued that both regulated utilities are already exceeding the rate cap imposed by the Renewable Energy Standard. If that is true, how would a FiT enable any additional capacity over that which is already being added? The competitive acquisition process employed by these utilities for their larger systems at least allows them to acquire the most bang for the ratepayer’s buck. Moreover, the acquisition programs of these utilities have been remarkably successful in terms of adding as much capacity as can be built under the rate cap (and then some). So what problem would a FiT solve?

Feed-in tariffs fail to impose any market discipline on project developers and incentivizes poor projects the same as good ones. Spain’s FiT was a disaster. Germany and Italy, the two most recent “success stories” have now determined that their FiT programs are unsustainable. The widely touted Gainesville, FL program was a flash and crash. We don’t need to do that in Colorado.
Unspoken in all of these debates is what the proper policy goal of a renewable energy incentive program should be. Is it to provide a guaranteed profit to developers, large and small, who wish to feed at the public trough and capitalize on the guaranteed rate of return built into FiTs at the expense of consumers, or is it to compensate those utility customers for their above market costs of doing the right thing and merely keep them whole in the process? I would argue that the latter approach is more appropriate, especially in hard economic times, and far more considerate of those who are paying the bill.

Ceal Smith said...

Richard, in response to your comment, you state:

“The author of this article fails to state that the very same paragraph goes on to note that the California PUC Staff recommended a reverse auction mechanism that has since been adopted by California in lieu of a FiT because it is more protective of consumer rate increases”.

My response:
You quote the PUC report out of context. If you continue on, the PUC report applies the Reverse Auction Mechanism (RAM) to larger, utility-scale installations…

“The Staff of the California PUC has recently proposed a reverse auction market… for generators with a capacity of 1 MW-20 MW……this proposal, if adopted, would likely retain the FIT for systems smaller than 1 MW installed, ….the PUC Staff argues that the reverse auction would protect consumer rates by selecting the lowest-cost renewable generators that would add up to 1,000 MW installed renewable capacity”.

While I don’t agree that reverse auctions always lead to the selection of the “most bang for the ratepayer’s buck”, the mechanism does work well for large solar installations. The PUC agrees that FiTs should apply to “systems smaller than 1 MW”.

Large solar developers are already getting a good deal. For example, BrightSource Energy Inc. was awarded a 30% cash grant from the Recovery Act and a $1.4 billion federal loan guarantee from the US Department of Energy to build a 370 MW solar power plant in the Mojave Desert. The PUC agrees with me that FiTS are a fair and effective policy tool for small producers.

Furthermore, you state, “Even Germany, which as this article alludes has become the poster child for feed-in tariffs, has recently slashed its FiT compensation because it is unsustainable”.

My response: Germany was able to slash its FiT precisely because of its overwhelming success. As a result of increased demand for solar PV from Germany, China and other countries revved up production which in turn caused (and is continuing to cause) the price of solar PV to plummet. The policy is working exactly like it was designed to. Germany’s FiTS were reduced because those cost barriers no longer exist.

As I say above, John Farrell predicts that FiT opponents will try to make the case that FiTS cost too much. Again, the facts don’t support the claim. In 2008, Germany’s FiT cost roughly 3.2 billion Euros, or $5 billion - less than two-tenths of 1 percent of the German economy, hardly a significant price tag to encourage a technology that delivers 15 percent of the nation’s electricity. Furthermore, the cost is spread across the entire ratepayer base. In 2007, the added cost per household was 3 to 4 Euros per month, about the price of a latte.

The Gainesville, Florida solar FIT was indeed a flash, but it was not a crash. The only problem with the Florida program is that it was too small and didn’t limit the program to small producers. A single company bought the entire 4 MW annual allotment as soon as it was released. Adjustments have been made and the program redesigned to pay PV-system owners US $0.32 per kWh with an estimated cost to ratepayers of about $1.30/month.

Other US cities have begun implementing similar programs because, the return on investment – green jobs, energy savings, reduced consumption and CO2 emissions, and avoided cost of new transmission and utility infrastructure - make FiTs a very good deal indeed, for Main Street communities.

A significant problem with the Renewable Energy Standard (RES), that is often overlooked, is its failure to require equivalent reductions in dirty energy production. Thus, industry is using the RES to grow a bigger energy pie while justifying costly new transmission for remote renewable energy generation. This drives the cost of renewable energy up while failing to accomplish the intended goal – to reduce CO2 emissions. By offering a profit motive for ratepayer/producers to reduce consumption at the point of use, FiTs provide a built in incentive for conservation. This makes them a far more effective tool for reducing C02 emissions.

Fangyaya said...
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