WITH MILLIONS OF EXISTING AND NEW SOLAR WIND INSTALLATIONS IN THE WORLD, THEY WILL ALL NEED BATTERY BACK UP SYSTEMS TO MAXIMIZE THE RETURN ON INVESTMENT OF ALL SUCH SYSTEMS UTILIZING NEW EXERGONIX MODULE CASSETTE EXPANDING STORAGE SYSTEMS
NEW GREEN ENERGY XECOIN EARNING WHILE LEARNING INCOME OPTION
WAKE UP AMERICA
As you know, the long awaited patent issues are now uncovered and we are about to be have delay resolved according to latest communication from U.S.P.O. The wait has been difficult on all of us as we have had to enter a quiet period after many attacks and a few instances of site hacking. We have received more than the usual delay excuses this past year. We used the Freedom of Information Act, (FOIA) along with dozens of other frustrated technology developers who have also been jerked around by poitics od current administration. This means that the legal pressure applied is working. We believe we were targeted just like we have now all seen with IRS, EPA, ATF, DOJ, SEC, OSHA and NSA have been targeting conservative organizations. This would explain all the baseless delays in issuing our patent. At this point, we got request for more technical details, which we are complying with, so stay tuned. In addition, as a plan B, we also filed for a patent on Electronic Control Unit (ECU) under unrelated name and new company without defining what we are controlling which should avoid similar non approval, so stay tuned. With thousands of other companies now aware of the patent office corruption, you might find the above video interesting.
With Hurricane Sandy destroying everything in its path and millions without power, imagine if everyone had our alternative energy technology. With Katrina and now Sandy, no one will ever forget these horrific events, especially those of us who lost electric for several days or weeks. We have the solution to provide individual home owners electric power when no else can. The market is ready for a new clean safe zero emission energy technology and we will soon be ready to meet the demand.
Our first technology application will focus on home electric generation units which will produce adequate KWH output for any type or size of home, either off grid or on the gird which in 27 states will provide a FIT (Feed In Tariff) benefit where the utility companies will pay for excess electricity we generate.
The form is to be used to allow us to update you privately as we get closer to having final units available in a quantity to satisfy those on my list first and foremost. We have started to develop future applications and will notify you of these new markets to apply this technology to along with the progress of several new patents submitted to cover these larger units.
We have been requested to submit a revised patent to include all the most recent enhancements which were researched and changed over the past two years awaiting original application to be processed. More delaying tactics for sure, but never the less, we are preparing the latest technological changes and will re-submit, as well as submit third patent on ECU electronic control unit in addition to changes.
Great news! The global warming bill we've told you so much about over the past few weeks has made it past the first obstacle. Recently, the House's Energy and Commerce Committee passed this landmark legislation.
But now an even bigger challenge stands before us – the passage of the bill by the entire House of Representatives. We truly appreciate all that you have done in this fight, but we need your support now more than ever!
Millions of pounds of man-made global warming pollution are emitted into the Earth's atmosphere each year with devastating effects. Our planet is experiencing increased droughts, more frequent and more powerful hurricanes and floods, and crop failures, among other tragedies. But it's not too late for us to change all this.
The American Clean Energy and Security Act, introduced last month, will cut the "greenhouse gases" that contribute to global warming, while increasing the use of renewable energy and the production of low-carbon transportation fuels.
If passed, this bill will usher in a clean energy future that will revitalize our economy and hold polluters accountable.
We've come close to passing global warming legislation before. But it's been crushed by powerful and well-funded special interests (namely, the oil and coal industries) who put their profits over the health of the planet. With the passage of this bill from the committee, Big Oil and Coal have surely increased their efforts to block progress yet again.
Once you've sent a letter, please help us make an even bigger impact by spreading the word to your friends and family and asking them to join you.
Thanks so much for your help with this important campaign. Our planet needs our help now, and this is our opportunity to truly make an impact.
Campaign Director, SaveOurEnvironment.org
While significant progress has been made in government funding and support of solar power in the United States, the most effective renewable energy policy and solar incentive available -- the feed-in tariff -- has yet to receive major attention outside of the Europe Union.
Photovoltaic (PV) energy conversion is based on semiconductor technology, and the experience of the last decades has shown that the cost of PV electricity is reduced by 20% with each doubling of the total installed volume. Thus, it is necessary to design market incentives that allow for a rapid increase of the market size in order to quickly reach production volumes with the accompanying cost reductions to first reach parity with household electricity rates, and later with production costs of fossil and nuclear energy.
The feed-in tariff, or FIT, has proven to be a powerful tool to create managed economic incentives that yield meaningful results in system deployments, job creation, cost reduction and market development — yet many policy makers, especially in the U.S., continue to rely upon renewable portfolio standards, investment tax credits, low interest loan guarantees and other mechanisms to reduce fossil fuel dependency. The solar industry in the U.S. should take pride in achieving recent legislative and funding victories, but also must recognize the powerful role that FITs can bring to rational and responsible energy policy.
Simply speaking, a capless FIT offers any producer of solar power a pre-determined rate for any kWh of electricity produced, regardless of the own consumption. If this rate is guaranteed for e.g. 20 years, and set in order to allow a decent return on investment for the owner of the system, it mobilizes powerful market forces towards rapid implementation of growing amounts of solar energy.
The German Solar Miracle
FITs are the highly-effective policy engine behind the German solar miracle. Recognizing that return-on-investment is the principle barrier to wider market penetration for renewable energy alternatives (not lowering up-front costs), German policy makers required utilities to pay a rate of between €0.32/kWh and €0.43/kWh for solar electricity from newly installed PV systems. The German FIT program authorizes the utilities to pass on this extra cost, spread equally, to all electricity consumers through their electricity bill. In this way, the feed-in program works through market incentives independent of government budgets and subsidies.
In Germany, the share of renewable energy on the electricity supply grew from 5% in 1998 to 15% in 2008. The monthly extra cost per household due to the feed-in rates for solar electricity is in the average only €3 in 2008. The result is that every electricity consumer contributes to the restructuring of the national electricity supply network. Equally important, by assuring a rate of return over a sufficient period, the German FIT has proven to be an excellent accelerator for private financing. To encourage cost reduction and the eventual elimination of tariffs, the feed-in rate in Germany is reduced each year by 5% (increased to 8 -10 % starting 2009), but only for newly-installed PV systems. Once a PV system is connected to the grid, the guaranteed feed-in rate remains constant over a 20-year period. This approach allows solar customers to easily calculate the return on investment in their PV system, while exerting price pressure on the industry to continuously reduce costs to remain in the market.
A remarkable feature of a FIT is the built-in sunset clause: With the annual degression of the feed-in rate offered to new customers this rate will in only a few years dip below the rate of household electricity, and later compete with conventional power. Thus, the financial burden on today’s rate payers remains limited, and it provides the basis for more stable energy prices in the future, based on a larger fraction of secure, domestically produced electricity.
FITs have been implemented throughout the world with enormously successful results. In Spain’s widely reported experience, nearly 3 GW in 2008 of solar power projects were deployed last year after generous tariffs were adopted. The result was that Spain briefly became the largest solar power market on the world, adding more than 45% of the world’s new installations and three times more than analysts expected. Today, in response to the impact on utility rate payers, Spain has capped its FIT at 500 MW, an amount still larger than all newly installed systems the in the U.S. last year. While Spain’s FIT is often cited as what not to do in solar policy, and this is partly true, the case clearly demonstrates the effectiveness of FITs to quickly establish a viable solar market.
Part of the confusion and controversy surrounding feed-in tariff is the wide variety of incentive schemes proposed and implemented across the world. In addition to the German example, classic tariffs or premium pricing schemes can be used; FITs can be technology targeted or neutral; capped or uncapped; generation cost based or value based.
FITs Enacted in ROW
FITs have been enacted with varying degrees of success in Australia, Brazil, Greece, Portugal, Korea, Singapore, and in some states in the U.S. South Korea adopted feed-in tariffs for solar PV in 2006 that distinguishes between systems >30kWp and systems <30kWp. Feed-in rates are quite generous, but necessary when considering the countries’ low solar irradiance profile. The result has been that South Korea’s solar demand now rivals Japan’s as Asia’s largest market (the country has set a goal of installing 1,300MWp by 2012).
By using relatively simple market incentives implemented through regulated utility monopolies, feed-in tariffs have proven effective at overcoming thorny downstream barriers such as financing, market education, distribution and sales, installation support, permitting and zoning fears and environmental regulations. Energy investors with resources, experience and entrepreneurial zeal can quickly make markets when they understand the risk and have confidence in reasonable rates of return.
Policy makers can target residential, commercial and power generation solar markets for development and choose tariff rates or caps to achieve the level of solar penetration desired. Successful fossil fuel reduction — with ancillary beneFITs of job creation, peak management, stable fuel supplies, and more — can be achieved more efficiently, more accurately and more cost effectively than any other policy instrument. In addition, the considerable cost of red tape that is necessary to administrate complicated support schemes like the ones we got used to in the U.S. to prevent fraud can almost be completely eliminated, as the PV system operator will take care to have the system run in the optimum way in order to ensure its profitability.
Reliance on Subsidies
So, why the reliance on tax credits, loans, subsidies and solar energy standards in the U.S. and China, to name two countries, to achieve desired policy outcomes? For one, tax credits have been the traditional incentive instruments in the United States for a variety of worthy goals such as home ownership, R&D, education and more. It is an instrument that is familiar and politically expedient.
Confusion over the term “feed-in tariff” has also been cited as a barrier. In fact, a FIT scheme is not a tax; it just offers a certain rate to be paid for the production of power. Therefore, some advocates prefer the term “feed-in rates,” “performance-based incentives,” “advanced renewable incentives” or “clean energy buy back” mechanisms.
Most solar policies today rely upon hard or soft mandates on utilities and electrical power providers to establish renewable energy production targets. The American Clean Energy and Security Act of 2009, as passed by the U.S. House of Representatives in June, relies upon the Renewable Portfolio Standards (RPS) to place an obligation on electricity supply companies to produce a specified fraction of their electricity from renewable energy sources. A majority of U.S. states also use RPS policies to achieve favorable renewable energy outcomes. Advocates of RPS mechanisms claim they will result in competition, efficiency and innovation that will deliver renewable energy at the lowest possible cost.
Barriers to FITs
The barriers to FITs in the United States are also related to the state and local control over
electric utilities and the widely decentralized structure of the electrical generation and distribution system. The U.S. is a labyrinth of 3,100 public utilities, 2,100 non-utility power producers and a not-so-smart transmission system. Despite the complexity, movement is underway to use FITs as an instrument of state, local and national energy policy. In May, Vermont joined California as the only states to pass feed-in tariffs for renewable energy. Several other states, including Michigan, Minnesota, New York, Indiana, and Wisconsin are considering FITs.
"The feed-in tariff has proven to be the best way to get quick movement in renewable energy development and create a lot of jobs," said state Rep. Matt Pierce (D), who has introduced a feed-in tariff proposal in Indiana. (New York Times)
In Florida, the Gainesville Regional Utilities adopted a feed-in tariff with a rate of $0.32 per kilowatt-hour guaranteed for the next 20 years. The program is modeled closely after European systems and reached its self-imposed cap of 4 MW in minutes after accepting applications. In comparison, the U.S. Department of Energy took over three years to award the first loan guarantee for solar after the Energy Policy Act passage in 2005.
Perhaps similar to the problems in using European benchmarks in the current U.S. healthcare debate, FITs are still seen by some as some strange, exotic policy not applicable to the U.S. market. Some observers have even claimed that that the type of incentives does not matter, just the amount. One solar lobbyist even said about Germany, "They've been handing out bags of money and calling it a feed-in tariff. People think that they want a feed-in tariff, but what they really want is those bags of money.”
“A lot of the charm of the feed-in tariff is solid, take-it-to-the-bank security and confidence for the investing community," said U.S. Representative Jay Inslee (D-Wash), a sponsor of legislation that would establish a nationwide FIT. His bill was introduced in Congress last year and would use FITs to incent small projects up to 20 MW and help streamline grid interconnections.
An analysis by the National Renewable Energy Laboratory (NREL) also confirmed that countries with feed-in tariffs have cheaper renewable electricity than those with renewable energy credits, the mechanism behind RPS. The tariff system is less risky, and investors are willing to accept lower profits for long-term stability, according to the report.
"We deal with data and the evidence is very clear," said Toby Couture, a researcher with the NREL in a report by the Sarasota Herald-Tribune (March 22, 2009). "Feed-in tariffs have consistently proven to be cheaper for consumers. That's the bottom line."
Increasingly, FITs are seen as complimentary to well-crafted RPS policies. One report concluded, “RPS policies appear to be converging with some of the design characteristics typically associated with feed-in tariffs. As a result, it could become increasingly possible to incorporate elements of feed-in tariffs into RPS policy making,” (Feed-in Tariffs and Renewable Energy in the USA – a Policy Update, May 2008). A similar conclusion was made in a March 2009 report by the NREL that concluded: “FIT policies…can be used in parallel and wholly separate from RPS policies, they can replace a part of the current mechanism (perhaps to support a solar carve-out, or distributed generation), or they can be used to entirely replace RPS mechanisms. Of course, they can also be used by states with voluntary renewable energy goals to advance renewable energy development (Technical Report, NREL/TP-6A2 45549 March 2009).
Despite their proven effectiveness and ability to work in conjunction with RPS policies, national, state and regional FIT legislation has been a grass roots affair, not supported by national environmental or renewable energy associations. Rhone Resch of the Solar Energy Industries Association said in January, “What you are also going to see is a focus by industry to create feed-in tariffs at the state level. Creating these programs at the state level will provide a laboratory that shows the federal government how this kind of incentive program stimulates the market. So we are probably a couple years away from a major push on feed-in tariffs at the federal level.”
Call them what you will, but feed-in tariffs or performance-based incentives need to be seriously considered by every country and every policy maker in the world looking to expand the contribution of solar energy. They will be required to reach meaningful national climate goals and achieve significant job creation and economic stimulus. Elimination or marginalization of FITs by many policy makers in the U.S. cannot be a healthy sign for optimal legislation in the future. While near-term legislative action needs to focus on winnable, achievable victories, long-term success will require effective instruments grounded in solid economics.
BioCycle July 2009, Vol. 50, No. 7, p. 53
Ontario and Vermont adopt policies that provide long-term contracts with guaranteed fixed-prices to renewable energy producers.
IN MAY, Ontario and Vermont passed landmark legislation to jump-start renewable energy development. Key provisions of Ontario’s Green Energy and Green Economy Act (GEA) and the Vermont Energy Act of 2009 call for the development of Feed-in Tariffs (FITs), which significantly change how electric utilities procure and price power from renewable sources.
FITs, also known as Advanced Renewable Tariffs, are not a new concept. European countries, most notably Germany and Spain, are successfully employing the policies to spur renewable energy projects. (See March 2008, “Renewable Gas and California’s New Feed-in Tariffs.”) Effective European FIT policies provide long-term contracts with guaranteed fixed-prices to renewable energy producers supplying power to the grid. Prices paid under the programs differ based on the type of renewable technology, the size of the project and its location. Rates are calculated to provide a reasonable rate of return on investment given capital, operating and maintenance costs over the life of the investment.
Several studies reviewing FIT implementations in Europe are finding that properly implemented FITs may be a less expensive means of developing renewable sources than renewable portfolio policies (RPS) that require utilities to purchase a specified amount of power from renewable sources. In the U.S., Gainesville, Florida, California and several electric utilities have implemented policies that borrow design elements from European FITs. Numerous states have or are currently considering FIT legislation (see sidebar.)
But the Ontario and Vermont policies represent the first time that full European style FITs will be implemented in North America, explains Paul Gipe, an advisor to the Ontario Sustainable Energy Association and wind power expert. “It’s revolutionary.”
The GEA requires the Ontario Power Authority (OPA) to developa procurement program that provides for standard rules and fixed-price contracts for solar, wind, hydropower, biomass and biogas projects. Pricing for each renewable source is further subdivided by project size and technology. Higher prices are paid for smaller projects, which have higher initial capital and ongoing operation and maintenance costs. The pricing policy serves to spur smaller projects with regional economic benefits such as job creation.
FIT rates for 20-year contracts proposed by the OPA range from $0.16 CAD/kWh (Canadian dollars) for biogas projects less than 500 kW to $0.104 CAD/kWh for projects over 10 MW. Solar projects will receive $0.443-0.802 CAD/kWh depending on the project size and technology. OPA’s full FIT pricing schedule is shown in Table 1.
Vermont’s program, which Gipe calls a “pilot” due to a low program cap of 50 MW, has all “the essential elements” of the successful European FITs. “It is a serious commitment for a state the size of Vermont,” he says. Vermont tariffs are based on the cost of generation plus a profit, as defined by a reasonable rate of return, and are differentiated by type and size of the resource. Contract terms are for 20 years. Under both the Vermont and the Ontario program, rates will be reset based on regular program reviews.
Initial program rates in Vermont are $0.12/kWh for landfill and biogas projects and $0.30/kWh for solar. The Vermont Public Service Board will start regulatory examination of the rates in September and set new rates based on costs plus profit no later than January 2010.
Obtaining project financing is one of the biggest challenges facing renewable energy projects. FITs facilitate project financing by providing a predictable revenue stream at levels offering reasonable rates of return to investors. “FITs provide a guarantee of payment that project developers and their investors can count on since it is tied back to the ratepayer,” explains Karlynn Cory, senior energy and finance analyst with the National Renewable Energy Laboratory (NREL). “It provides a project developer and their investors with the certainty of having a revenue stream for any project meeting eligibility requirements.”
Pricing electrical generation at levels required to raise capital is hardly a new concept, Gipe says. “This is the way electricity was priced for generations. Prior to the deregulation craze in the 1990s, we had regulatory authorities in every state and province who would price electricity based on the cost of generation plus a reasonable profit.”
Toronto-based StormFisher Biogas sees Ontario’s FIT as vital in securing financing for its renewable energy projects currently under development in the province. This summer the company will break ground on a $15 million anaerobic digestion plant in London, Ontario. The system will codigest 140,000 tons/year manure and food processing wastes to produce 210,000 MMbtu of biogas to generate 2.85 MW of power.
Investors view long term fixed price contracts as an essential element of project financing, explains Ryan Little, StormFisher’s Vice President of Business Development. “They see it as the starting point. If you do not have that you have bigger problems.”
Guaranteed fixed-price contracts also remove a large piece of the risks inherent in any privately owned and operated (merchant plant) biogas project, adds Little. “You are not going to get 100 percent of your feedstock under a 20-year contract.” Nor is the project likely to obtain long term contracts to sell the nutrient by-products from the digester. “Having one piece [of the revenue stream] that is locked down removes merchant risk from a big piece of the pie.”
ACCESS TO THE GRID
Grid capacity and access are other hurdles faced by renewable developers. GEA mandates that electricity transmission and distribution systems connect renewable generation facilities to the grid as long as the projects meet the technical, economic and regulatory criteria. System operators are also required to plan and invest in system upgrades and expansion to accommodate renewable generators.
“A guarantee of interconnection to the grid is not typically provided in the U.S. right now,” Cory says. It is something that has to be negotiated on a project by project basis, which can be challenging for smaller projects.”
Little has run into grid limitations in Listowel, Ontario, where StormFisher is developing a second anaerobic digestion facility. “The agricultural heartland lines up pretty closely with the major grid constraints,” he explains. But expanding grid capacity will not happen overnight. “Adding new transmission capacity can take anywhere from 5 to 10 years from start to finish,” Cory notes.
In the interim, project developers are looking for innovative solutions. “In our Listowel facility we are aiming to clean up the gas to pipeline grade natural gas and then wheel it to another location where the grid is not constrained to create electricity,” Little says. “It is more expensive because of the gas clean up and the wheeling but some government groups have expressed interest in the approach as a pilot project to solve existing distribution issues.”
POLICY DESIGN MATTERS
California created a state-wide feed-in tariff in 2006, targeted at water and wastewater plants. The program was expanded to a wider range of renewable sources in 2007. Under the policy, sellers of renewable power receive fixed rate contracts ranging from 10 to 25 years based on the utilities avoided costs as defined by the current Market Price Referent (MPR). The MPR price is based on the average cost of producing electricity for a combined-cycle natural gas fired generation facility.
To date, less than 10 MW of generation capacity has been added to the grid, with the majority of contracts for hydropower and landfill gas. “It is an ineffective program,” Gipe says.
Gegg Morris, director of the Oakland-based Green Power Institute, refers to the program as an “underwhelming success, with virtually no response from project developers.” By keeping the tariff rates at the MPR, they are trying to keep the program cost free, Morris explains. “It really comes down to the simple question of are we willing to pay for renewables and accept the fact that they are not the cheapest options on the grid but they provide important benefits.”
The California Public Utility Commission (CPUC) is proposing changes to the program. CPUC staff recommendations call for expanding the program to projects between 1.5 MW and 10 MW. The current program applies to projects up to 1.5MW. Price would remain the same, pegged to the MPR.
Renewable power generators would also be required to sell all the power generated to the grid, as opposed to just excess power. “It makes sense if you are a utility company and you want all the RECs [renewable energy certificates],” Morris says. But it does not make sense for projects, like farm-based anaerobic digestion systems, that would be better off economically to use some of the power onsite to offset retail rates.
The California Energy Commission (CEC) is also recommending changes to the program, which include the development of cost-based feed-in tariffs differentiated by technology for generators of 20 MW and below, explains Wilson Rickerson, executive vice president at Meister Consultants Group in Boston. The CPUC and CEC proceedings are moving forward on parallel tracks. “It remains uncertain as to how they will be reconciled,” he says.
FEED-IN TARIFF ECONOMICS
In the U.S., California’s policy of pegging renewable pricing to avoided costs is fairly standard. Current regulations seek to foster a competitive environment to produce electricity at the least cost for ratepayers. Purchasing electricity at rates above avoided costs would produce higher electricity rates.
Many states seek to encourage renewable development within the competitive framework created by renewable portfolio standards (RPS) that specify a minimum percentage of electricity supplied from retail entities be produced from renewable energy. To comply with the policy, retail entities can either build renewable generation capacity themselves or purchase power from renewable energy developers.
“Typically, utilities are using competitive bidding processes to meet their RPS standards,” Cory says. ”Utilities issue a request for proposals and select the projects that offer the most promising package of siting, operational expertise and cost.”
Europe’s experience with FITs is starting to show that properly designed FITs may be more cost-effective than RPS’s that employ competitive solicitations, Cory explains. Although these results may seem counter-intuitive, research studies and analysis are starting to provide some explanations.
Two studies, one by Dexia, a large European bank, and the other by the International Energy Agency entitled, “Policy Instrument Design to Reduce Financing Costs in Renewable Energy Technology Projects,” found one of the most important elements of FIT schemes is the removal of market risks for the project over fixed periods. “The longer the period of guaranteed prices, the lower the cost of capital.”
Several European studies found the average purchase prices per kWh for onshore wind in Germany and Spain, which operate under FITs, to be less expensive than in the United Kingdom and Italy, which operate under RPS regimes with tradable energy certificates.
John Farrell, research associate at the Institute for Local Self Reliance’s Minnesota office, found countries with FITs, like Germany, Denmark and Spain, may have lower electricity prices due to the “merit order effect.” “Utilities must buy and feed-in renewable power to the grid first,” he explains.
This “merit order effect” replaces expensive fossil fuel-fired “peaking plants,” which generally run only when demand is high, with renewable sources. In many cases renewable electricity under a FIT is less expensive than electricity generated by the peaking plants, which lowers overall electricity costs.
“In Germany, the merit order savings from renewables exceeds the premium price paid under the feed-in tariff,” Farrell explains. It is estimated that Denmark and Spain recoup over 80 percent of the higher tariff costs. He also cites the relative volatility of REC pricing under RPS schemes. In the case of wind power, for example, uncertainty associated with REC pricing and revenues increases financing costs, which in turn increases the cost of wind power for ratepayers, Farrell explains.
European experience is also showing that FITs result in more installed renewable capacity. Wind power deployment in European countries with wind FITs is over seven times higher than countries with alternative policy support. The total number of local jobs created is also substantially higher.
Evidence also suggests that competitive bidding processes under RPS schemes may contribute to lower installed capacity. “There have been assertions that with a competitive bidding process, sometimes projects try to win at all costs,” Cory explains. Developers seek to win bidding competitions by pricing projects at unrealistic levels compared to actual costs. “This creates a queue of what could be considered paper projects that tie up the queue for renewable developments.”
However Cory is quick to point out that FITs can work effectively with RPS mandates. FITs can be used as an alternative procurement mechanism, in place of a competitive bidding process, to supply renewable power to meet RPS goals, she explains.
Diane Greer is a Contributing Editor to BioCycle.
Sidebar, page 56
FEED-IN TARIFF DEVELOPMENTS
BEYOND Vermont and California, feed-in tariff legislation and regulations are making inroads in several states and municipalities. For example, Gainesville, Florida and Washington State offer solar feed-in tariff programs. Gainesville is providing 20-year contracts at $0.32/kWh with program caps of 4 MW in 2009 and 2010. In February 2009, the Gainesville Regional Utilities announced it had already received sufficient applications to fulfill the 2009 cap.
Washington’s solar feed-in tariffs are less generous, paying only $0.15/kWh for 10-year contracts. Payments increase to $0.54/kWh if the panels are manufactured in state. The Washington State legislature is considering a full system of feed-in tariffs covering solar, wind, wave, tidal, biomass, biogas, geothermal and hydropower projects.
In Wisconsin, the Public Service Commission approved solar feed-in tariffs ranging from $0.30/kWh to $0.061/kWh, based on the utility. The Commission also opened an investigation into a broader system of Advanced Renewable Tariffs in January 2009. Meanwhile, several legislators have expressed in interest in sponsoring legislation, but are waiting for the summary and recommendations from the commission, says Larry Krom, program manager for biogas at Wisconsin Focus on Energy. “I think our next step is to find funding to do a better rate impact study.”
Feed-in tariff legislation in Minnesota is “dead for this year, but was held over by the committee chair for consideration next year,” says John Farrell, research associate at the Institute for Local Self Reliance in St. Paul. The current version of the bill is more of a pilot project for community-owned energy projects that would apply to about 20 percent of the state’s RPS standards.
In Hawaii, the Public Utilities Commission held hearings to consider feed-in tariffs in April 2009. Feed-in tariff legislation is also under consideration in a number of state legislatures including Maine, Indiana and Michigan.
In the US, some 27 states and Washington DC have renewable energy portfolios and mandates, but not the federal government. Meanwhile, countries like Germany, Spain, and Japan have spurred far more alternate energy installations. That may soon change, based on reports from an array of speakers at PV America, held last week (June 7-12, 2009) in Philadelphia, in association with the 34th IEEE PV Specialists conference.
"The states have a Governator," quipped Rhone Resch, president/CEO of the Solar Energy Industries Association (SEIA), which organized the first PV America exhibit and conference, "And now we have a Cabinet filled with clean energy leaders."
The new approach is apparent in the huge economic stimulus bill, which has 19 provisions supporting solar, Resch explained. He also pointed out that solar has potential far beyond sun-bathed regions like California and Arizona. In fact, he pointed out, policy initiatives have pushed NJ into 2nd place in the US in solar behind California.
To emphasize his point, he said that Germany, a world leader in solar installations, has a solar profile like Alaska, but it has 5× the solar installations of the US, while Spain, with a solar profile like Idaho, has 30×.
"Political leaders put in policies," he said, "and innovators create new industries."
NJ has a mandate for 22% renewable energy by 2022, while PA is mandating 18% by 2020, with 0.5% of its electricity from photovoltaics. Resch said many states in the north-Atlantic region, as well as the Midwest, have solar set-aside programs with ambitious targets for the next decade or so, totaling 5077MW-7077MW [see table, below — note that PA is still negotiating a final goal].
Gov. Edward G. Rendell of PA said that his state, in 2004, was the 24th to pass renewable energy legislation in the absence of any federal program. State tax credit could provide up to $0.30/kWh for solar. The recent stimulus bill now has provided a $650M energy fund to PA, and $180M of that will go to solar, he said, $100M to homeowners and small businesses, and $80M to foster solar industries.
"The race is on for who can create the most resourceful, innovative, alternative energy," he said, citing work in solar, wind, and geothermal technology as well as fuel cells and batteries for electric cars.
The US needs to catch up with countries like Germany, he believes, while renewable energy industries are in a formative stage.
"We want the US to be the dominant solar manufacturer in the world, and to become a leading exporter," he added.
To foster innovation in his state, grants from the Pennsylvania Energy Development Authority (PEDA) are offered, with $20M available in the latest round, about $10M of that from the federal American Recovery and Reinvestment Act and more than 300 applications have been received. Already, Plextronics, a western-PA company making thin-film solar devices, has received three PEDA grants, he said, growing to 70 employees and aiming for large-scale production.
He explained that PA, like a number of other states, now has a net-metering program where solar facilities can get credit from the local utility for feeding excess electricity back into the grid. But each state has its own quirks in the rules and limits, so a federal standard would help provide some uniformity. Rendell said that federal tax credits for renewable energy (RE) need to be made permanent, and a federal mandate for future RE targets, setting the bar even higher than the scattered state goals, is needed to nurture new industries.
"We need to focus with laser-like dedication," Rendell said, urging attendees to become advocates pushing Congress to quick action on renewable energy programs. For the US to achieve a strong economic turnaround, he believes two major programs are needed. One is a massive, 5-10 year infrastructure effort on roads and bridges as well as a smart electric grid, the other is green energy.
The innovators are eager to get to work, he suggested. Energy secretary Steven Chu recently told him that Washington has been flooded by renewable energy grant applications just like the PEDA program in his state.
Sam Baldwin, chief technology officer for the DOE's Office of Energy Efficiency and Renewable Energy, cited President Obama's May 27 announcement that $117.6M will be available for solar energy projects, including $51.5M for development and $40.5M for deployment.
Meanwhile, two renewable energy bills are making their way through the US House and Senate. But SEIA CEO Resch suggested some important points that should be included. One is renewable energy grants making up to 30% of installation cost for those who can't take advantage of tax credits. Another is an RE loan guarantee program that jointly covers manufacturers and installers. He also urged a 30% tax credit for new RE manufacturing investment, similar to what Germany and Japan have had for several years. Penalties should be removed where federal grants overlap state and municipal benefits.
Resch also called for a $3.1B for states to use for renewable energy and energy efficiency grants. This could create 110,000 new jobs over the next two years. The renewable energy portfolio should designate 2% for distributed generation installations for private dwellings and businesses, which would still leave the major share for utilities, he added.
Resch also called for a national standard on net metering, as well as uniform national standards for interconnecting to the grid. It doesn't make sense, for example, to require a 4-prong plug in PA, while MD allows a 2-prong plug, he said.
Another program urged by several speakers is a clean energy bank (CEB), providing lines of credit, low-interest loans, loan guarantees, and other benefits for renewable energy and energy efficiency projects.
Lower interest rates can greatly speed the march of solar technology to grid parity, Resch stated. If rates are pushed from 6% down to 2%, he suggested, over 80% of the US would quickly reach grid parity.
The availability and cost of capital are two factors that could hold back solar even if grid parity is reached, according to John Byrne, director of the Center for Energy and Environmental Policy at the U. Delaware. He proposed that a tax-exempt bond process be established for renewable energy. He pointed out that in the 20th century, this is how the US was able to build up its transportation system and housing.
The migration of the solar industry toward commercialization is evidenced by the change in the nature of the IEEE's PV Specialist conference. Years ago, this was the venue for detailed reports on materials and device developments in photovoltaics. While these topics are still covered, it is often by means of poster sessions for those interested in technology specifics. Meanwhile, many of the oral sessions deal with broader system-level issues, including government policies, markets, and lessons to be learned from other countries across Europe and Asia. Many of the engineers and scientists who have come to this meeting for years — or even decades — are now either starting companies or are involved in innovative new ventures. Solar is moving onto a new track.
Bob Haavind is editor-at-large for Photovoltaics World magazine and SST.
This article was republished with permission from Photovoltaics World. PV World is part of the Renewable Energy World network.
Vermont is the first U.S. state to establish a full system of renewable energy feed-in tariffs.
Legislation went into effect at the end of business on May 27, 2009.
H. 446 creates tariff rates for renewable energy based on the cost of generation, plus a reasonable profit. Costs will be covered by ratepayers.
Several other U.S. states are considering similar legislation, which has proven effective in boosting solar energy in Germany and Gainesville, Florida. The legislation is similar to Ontario, Canada's Green Energy Act.
The program is capped relatively low, at 50 megawatts (MW). And individual projects are capped at 2.2 MW. But the tariff levels are generous--differentiated by technology and size.
The legislation also creates a specific tariff for small wind turbines of less than 15 kW capacity. That tariff mandates payments of $0.20/kWh to owners of grid-connected small wind turbines.
Other tariff levels include:
Republican Governor James Douglas allowed the bill to become law without his signature, as is allowable by Vermont law.
In a letter summarizing his concerns with the bill, Douglas said he supports the development of renewable energy, but believes the bill "fails to recognize the current viability of renewable energy in a competitive setting and will needlessly increase costs to Vermont consumer so as to subsidize this one favored business sector."
He said he would not veto the bill, because the Vermont Public Service Board is required to revisit the rates within the next four months and periodically thereafter to determine whether the prices are appropriate.
May 27, 2009
If the Green Energy and Green Economy Act (Bill 150) is passed as expected in May 2009, Ontario will become the first North American jurisdiction with an incentive system modeled after German feed-in tariffs (FITs), according to incentive expert Paul Gipe. With proposed tariffs of up to 80.2 CAN cents/kWh (US$0.64/kWh, €0.47/kWh) for solar power generation, fixed and guaranteed for 20 years, the province would have the most favorable incentives currently available worldwide for roof-mounted systems below 100 kW. More lucrative, even, than current German incentives under the Renewable Energy Sources Act (EEG).
Ontario’s proposed Green Energy Act passed a second reading in March and was ordered to the Standing Committee on General Government for public comment, ending as REW goes to press. Changes to both the Act and the feed-in tariffs may still occur, but as it is almost certain to pass (the Act is supported by the Ontario Liberal Party, which controls 71 of the 107 seats in the Legislative Assembly), the Ontario government started a parallel process in February to work out the deployment details.
In a separate initiative, the Ontario government will also launch a C$250 million (€150 million) Emerging Technologies Fund, which should be operational on 1 July 2009. This fund will match investments from private sources, such as venture capital firms, in Ontario-based technology companies, including cleantech firms. It might, for example, be leveraged by innovative solar companies seeking to establish a broader presence in Ontario by developing technologies locally.
We believe that the combination of the Green Energy Act and the Emerging Technologies Fund will dramatically improve the business conditions for cleantech endeavours in Ontario. Combined with the province’s integration into the North American Free Trade Agreement (NAFTA) space, traditionally low manufacturing costs and abundant skilled workforce, this Act may actually turn Ontario into the most attractive beachhead for European and Asian renewable energy technology companies seeking to expand into North America.
This fund seems to be making a difference already. For instance, Nicolas Morgan, co-founder and vice president of Business Development at Morgan Solar, a Toronto-based venture developing a concentrating photovoltaic panel, observed: ‘For a while, it looked like Morgan Solar would have to move to the US to attract investments. As a young company with two products to commercialize in the next 12 months, we have been talking to a number of investors and have received offers of financing on condition that we move to the US. Ontario’s Green Energy Act and the Emerging Technology Fund may change all that. We are now hopeful that we can launch our venture in Ontario.’
Note: the Green Communities Act has significantly changed net metering. See this excerpt on net metering (section 78 beginning on line 2057).
The DPU has initiated a process (D.P.U. 08-75) to develop regulations to implement the new net metering provisions: enter 08-75 at the DPU Enhanced Fileroom.
All distributed generation projects with capacity of 60 kW or less and interconnected to the local utility are eligible for net metering, or sale of electricity back to the utility. In addition, solar and wind projects up to 2 MW in size will be eligible for a range of net metering arrangements.
A separate application for net metering is required in addition to an interconnection application.
Subject to future changes pursuant to the Green Communities Act, the availability of net metering is required through the Code of Massachusetts Regulations, CMR 220 11.04 7(c) as follows:
"A Customer of a Distribution Company with an on-site Generation Facility of 60 kilowatts or less in size has the option to run the meter backward and may choose to receive a credit from the Distribution Company equal to the average monthly market price of generation per kilowatthour, as determined by the Department, in any month during which there was a positive net difference between kilowatthours generated and consumed. Such credit shall appear on the following month's bill. Distribution Companies shall be prohibited from imposing special fees on net metering Customers, such as backup charges and demand charges, or additional controls, or liability insurance, as long as the Generation Facility meets the Interconnection Standards and all relevant safety and power quality standards. Net metering customers must still pay the minimum charge for Distribution Service (as shown in an appropriate rate schedule on file with the Department) and all other charges for each net kilowatthour delivered by the Distribution Company in each billing period." Source: CMR 220 11, pages 13-14
Each customer should review net metering options with the local utility.
Some facilities may be eligible to establish power purchase agreements with the local utility. One way to do so at present is by following the qualifying facility (QF) process at the federal level. Under QF regulations, once a facility is certified as a QF the utility is required to purchase power from the facility. Each QF must work with the utility to establish a power purchase agreement. More on QF requirements and power purchase options is available here.
Note: these issues are also addressed in the DOER Renewable Energy and
Distributed Generation Guidebook.
Average Revenue per Kilowatthour by State
|Rank||State||Average Electricity Rate for
(Cents per Kilowatthour)
|43||District of Columbia||14.22|
Here are more interesting articles on why large alternative energy strategies will take years to bring online since there are massive shortages of power lines to support the proposed solar or wind farms placed in rurual mid western plains, as it is being discussed by congress. With home generation units a far more practical solution, combined with cost efficient HVAC systems and Power-Save units which further reduce electric consumption, by combining these technologies, as a turnkey package, we can further enhance the net returns expected from new regulations on Net Metering, and now, Feed In Tariff. When this is voted on in congress next month, we will know what output range of generator to manufacture to maximize potential returns for each home owner.
Feed In Tariff (TIF) is starting to gain momentum over current Net Metering which was mandated to be offered by all utility companies statewide by end of 2008. This slow progress is main reason why solar which has been well proven for decades has not penetrated markets, so maybe with pressure from industry and consumers, congress might finally get it right. This was a step in the right direction, but it was still allowing utility companies to dictate terms, so consumers were not getting enough of an incentive to encourage them to invest in solar or wind for their homes. With so many lobbyists padding the pockets of congress, I was begining to think nothing would change.
Well, now there is finally positive progress, and it comes from Germany and Denmarks success who introduced Feed In Tariff several years ago. It is similar to Net Metering, but with Feed In Tariff, we will see an increase the the rate of return utulity companies will pay to home owners. The recent article with Canada introduction to FIT will show you what the potential rate of return utility companies will be paying home owners for investing in clean energy systems like solar and wind, as well as our hydrogen plasma generation system.
To learn more on this, look how CAN is already leading NA advancing this well proven alternative energy incentive for home owners and small businesses. The below article will better explain why this is the best approach to cutting our foreign oil depencency, never mind dirty coal which lobbyists have also protected over the years. There is no such thing as clean coal, and with Obama proposal to force power companies to clean up coal, it will cost billions, which will be passed on to consumers and commercial entities. This is not the solution, and another example how congress has dragged their feet to force clean coal years ago, but no, we only saw stack sediment scrubbers installed which was never the real issue of polution, so again, citizens were duped.
Now if U.S. can do what Germany, Denmark and now Canada is doing, and get it done, then we are all going to see a huge advance in clean home energy systems such as current solar, wind and our hydrogen plasma
home and commercial generation system. More advances have been made, and if we can expect the CAN FIT to be model for U.S. to follow, then we will all see real progress. Read over the below articles and keep an eye on congress as this is finally being considered under the new stimulus plan. Sooner or later they have to come to realize that spending billions on remote solar or wind farms is not the answer, so hopefully we will see a voice of reason influencing congresses decisions on these critical issues. Stay tuned, we have more news on development of our home generation system coming soon.
If Ontario's Bill 150 (the Green Energy and Green Economy Act) is passed as expected in May, Ontario will become the first North American jurisdiction with an incentive system modeled after the German feed-in tariffs (FITs), according to incentive expert Paul Gipe. With proposed tariffs of up to CAN $0.802 (~US $0.64, EUR €0.47) for every kilowatt-hour of solar-power generated, fixed and guaranteed for 20 years, the province would have the most favorable incentives currently available worldwide for systems below 100 kilowatts (kW). More lucrative, even, than current German incentives under the Renewable Energy Sources Act (EEG).
Ontario’s proposed Green Energy Act passed a second reading on March 11 and was ordered to the Standing Committee on General Government for public comment, ending May 5. Changes to both the act and the feed-in tariffs may still occur, but as it is almost certain to pass (the Act is supported by the Ontario Liberal Party, which controls 71 of the 107 seats in the Legislative Assembly), the Ontario government started a parallel process on February 10 to work out the deployment details.
Credit: Jon Worren, Riverdale Partners
In a separate initiative, the Ontario government will also launch a CAN $250M (~US $200M, EUR €150M) Emerging Technologies Fund, which should be operational on July 1st, 2009. This fund will match investments from private sources such as venture capital firms in Ontario-based technology companies, including cleantech firms. It might be leveraged by innovative solar companies seeking to establish a broader presence in Ontario by developing technologies locally.
Based on our experience in helping renewable energy companies to model the economics of their technologies and scale their businesses across markets, we believe that the combination of the Green Energy Act and the Emerging Technologies Fund will dramatically improve the business conditions for cleantech endeavours in Ontario. Combined with the province’s integration into the NAFTA space, traditionally low manufacturing costs, and abundant skilled workforce, this Act may actually turn Ontario into the most attractive beachhead for European and Asian renewable energy technology companies seeking to expand in North America.
So How Does Ontario Compare to Germany?
Looking solely at installed capacity, the comparison between Ontario and Germany is laughing material. While Germany has over 5,000MW installed, the whole of Canada has less than 50 MW California, the largest PV market in North America, has 530 MW by comparison. Capacity-wise, Ontario therefore has lots of catching-up to do, being today where Germany was roughly 20 years ago.
Comparing the inputs to the economics of energy is more flattering for Ontario. It might surprise even Canadians themselves to learn that Ontario receives more sunlight than Germany, which is located a little further north than the Canadian province. In fact, large parts of Ontario get 10-15% more sunlight per year than southern Germany.
Since the incentives take the form of a feed-in tariff in both Ontario and in Germany, as opposed to California where they are added to the electricity savings (through net metering), local electricity rates are less important to the ROI of solar systems.
On the other hand, Ontario electricity rates are much lower than in both Germany and California, meaning
that public support to expand the energy supply side has not been as strong as in those two jurisdictions. Instead, the political “carrot” used to motivate the Ontario public and justify the Green Energy Act has been the promise of a province free of coal-fired plants.
Comparison of Germany, Ontario and California:
Key economic drivers for solar photovoltaic projects (Riverdale Partners analysis)
Top Economic drivers for solar PV projects
Feed-in-tariffs, in US $/kWh
0.53 (declining 5-10% p.a.)
Guaranteed for 20 years
0.35 – 0.64 (proposed)
Guaranteed for 20 years
Incentive of 0.15 on top of electricity savings, for first 5 years (declining rate based on installed capacity step-scale) – Add to average electricity rates for a rough comparison with FITs
Average electricity rates, in US$/kWh (estimates include “hidden” fees such as distribution fee, debt retirement and other regulatory charges)
0.06 – 0.13
0.08 – 0.20
TOU rates go up to 0.40
Solar Insolation, annual average (kWh/m²/d)
Source: Ground monitoring station, via Retscreen
Note: all amounts converted to US$at April 6, 2009 exchange rates
Ontario FITs Favor Systems Below 100 kW
For systems up to 100 kW in size, the Ontario FITs at the proposed rates would be superior to the German FIT. That is especially true for residential and smaller rooftop installations with rates of CAN $0.802 (~US $0.64, EU €0.47) for every kilowatt-hour of power generated by rooftop solar photovoltaic systems below 10kW. It’s worth noting that, in 2007, systems below 10 kW made up 40% of the German market; it appears that the Ontario FITs will stimulate a similar initial focus on smaller systems. Like in Germany, Ontario systems would benefit from a guaranteed 20-year fixed rate.
Proposed Feed-In Tariffs for Solar PV in Ontario
Tariff in CAN $/ kWh
Tariff in EURO/kWh
Up to 10 kW
500 + kW
Up to 10 MW
Note: all amounts converted using April 6, 2009 exchange rates
Is It Time To Set Up Shop in Ontario?
The main critic of the Act is that it does not establish long-term targets for renewable capacity. As the government suspended the the previous policy, which paid a fixed CAN $0.42 (~US $0.34, EU €0.25) per kWh to all solar project categories, two years after its introduction, some observers argue that regulatory policy stability is not guaranteed, and the Minister can still change policies if political priorities shift.
While regulatory uncertainty remains indeed a source of risk, some cleantech companies have decided not to wait for more assurance from the government, and jumped in with announcements of new installations in Ontario. Everbrite Solar, a division of Toronto-based Everbrite Industries, has licensed a turnkey manufacturing technology from an unnamed supplier overseas, to invest CAN $500 million in a photovoltaic manufacturing facility in Kingston, Ontario. Arizona-based First Solar and solar project developer Recurrent Energy of San Francisco acquired and are planning to develop multi-megawatt solar projects in Ontario, and thin-film module manufacturer Nanosolar Inc. is seriously considering to set up a regional assembly plant in the province, according to a local newspaper.
It has been made clear that the Act will favor businesses with Ontario operations and include requirements for a certain amount of domestic content (at a level yet to be decided). With the Ontario value chain in cleantech needing significant strengthening, early movers are likely to see significant advantages. Apart from a handful of local manufacturers, additional suppliers are needed to get new projects off the ground. Ontario-based companies like ARISE Technologies, 6N Silicon, Timminco and Menova Energy are technology leaders, but they all depend on outside partners to complement their offerings. This need is likely to create opportunities for best-in-class providers from Europe and Asia.
Other incentives to setting up operations in Ontario include the Next Generation Job Fund (NGJF), which covers 15% of the cost of establishing operations in Ontario for direct foreign investment, and generous R&D tax credits covering a wide range of activities. Universal healthcare and a federal pension plan, Ontario’s proximity to a market with over 400M people through NAFTA, and a very cost competitive workforce compared to the U.S., with the third largest manufacturing base in North America (after Texas and California), complete the picture.
So, while this is not a foregone conclusion by any measure, the stars seem to increasingly align to make the Ontario market more attractive. The key question is whether ambitious global players can afford to miss the train if Ontario emerges as a new solar locomotive?
The Path To Success in Ontario
As we alluded in our previous article in Renewable Energy World magazine, Roadmap for A Changed Landscape: Consolidation and Integration in the Solar PV Business, businesses with a winning formula must take advantage of international expansion opportunities like this, or risk being rapidly outflanked by their competitors. With average factory gate prices of crystalline modules already 24% down on 2008 levels due to overcapacity, and module prices decreasing, favorable business environments like the ones being created in Ontario should be explored pro-actively.
While doing so, new market entrants will need to carefully consider a number of factors when planning their moves in Ontario, relying on smart networking and targeted partnership strategies to grow their business locally. We will detail some of those considerations in an extended version of this article, to appear in the upcoming print issue of the magazine.
Greg Boutin and Jon Worren work together in the cleantech practice of Toronto-based Riverdale Partners, a boutique management consulting firm providing strategic planning, marketing and sales management services to fast-moving companies. Among other cleantech projects, Riverdale Partners recently helped a solar integrator grow in the German market, and is currently assisting a U.S. venture to position a new technology in the solar PV space. Detailed biographies of Greg and Jon are available at the company website.
Market uncertainty is the bane of any company's existence. Renewable energy companies, in particular, face difficulties in getting off the ground without some market certainty, which is why many nations (and some U.S. states) have opted for a feed-in tariff policy to support renewable energy.
Feed-in tariffs (FITs), guaranteed payments for renewable energy, are now on the radar screen because they have been highly effective in Germany, Spain and many other nations. Germany added 1.5 gigawatts (GW) of new solar power alone in 2008 — ten times what California added in 2008.
I've written in the past about the benefits of FITs for California and we now have a good chance of seeing a well-tailored FIT become law. SB 523 (Pavley) contains an earlier version of the Renewable Energy and Economic Stimulus Act of 2009 (REESA), drafted in large part by this author. REESA is designed to promote renewable energy projects from half a megawatt to twenty megawatts. (It is an interesting lesson in legislative "sausage making" regarding how this language made its way into SB 523, but this is besides the point for this column!)
This market segment, what I call the "community-scale" market, is an orphaned market segment in California. There are essentially three market segments: small-scale, community-scale and large-scale. The California Solar Initiative (CSI) and the Small Generator Incentive Program provide significant incentives for small-scale solar, wind and fuel cells, up to one megawatt. These systems must be "net metered," which means they have to serve on-site load first and any excess generation is banked in the grid and credited back to the customer on an annual basis. The best a customer can do on a net-metered system is reduce their bill to zero.
FITs are different. FITs allow a generator to sell power directly to the utility at a price set by regulators, for a contract up to twenty years. This creates the necessary market certainty I mentioned above and has been proven to be highly effective at bringing renewable energy online quickly.
At the other end of the scale, the Renewable Portfolio Standard (SB 1078) incentivizes large-scale renewable energy projects, generally twenty megawatts and above. Some of the proposed solar and wind power projects approach 1,000 megawatts in scale. We are fully supportive of this scale in theory, but we recognize fully that such projects have significant land use and other environmental impacts and that neighbors often fight tooth and nail against such mega-projects.
By providing a well-designed FIT for community-scale projects (also known as "wholesale distributed generation" because these facilities connect to the grid at the distribution level rather than on the demand-side of the meter), we can incentivize solar projects from half a megawatt to two megawatts on rooftops that don't have sufficient on-site load for a net-metered system under the California Solar Initiative. There are a great many warehouses and other buildings or parcels of open land around California, close to load, that meet this definition. And they is going to waste under the CSI. The three major investor-owned utilities have proposed their own programs (with socialized risk and privatized profit) to access this market, demonstrating its validity as a market segment. But a comprehensive FIT is a far better approach than the piecemeal approach being requested by the investor-owned utilities — probably with much lower cost to ratepayers.
Moreover, with REESA providing support for any renewable energy projects up to twenty megawatts, we know there is enormous potential for tapping our renewable energy resources relatively quickly. A recent state report found tremendous potential around the state for twenty megawatt solar projects. These projects, tallying almost 28,000 megawatts (enough for about one fifth of the statewide electricity demand), will require minimal new infrastructure because they can be built close to existing substations. However, this report looked only at the state-wide potential for twenty megawatt solar PV projects, overlooking the much larger potential for projects between half a megawatt and twenty megawatts utilizing all renewable energy technologies.
The two primary problems for this market segment are pricing and permitting. REESA will take care of the pricing, through a tightly-crafted process involving the California Energy Commission and the Public Utilities Commission, and smart project developers will have to take care of the permitting — but they will face far lower obstacles than the mega-scale solar and wind projects proposed for various parts of California.
Ratepayer impacts are highly important of course — we shouldn't build out renewables "at any cost" because there may be better ways to spend ratepayer funds. We've crunched the numbers, however, and found that achieving the renewable energy build-out (up to two percent of total load, annually, which is the maximum authorized by REESA) will likely result in less than a one percent ratepayer impact each year. This is the case because the process prescribed by REESA will result in just a few cents per kilowatt hour more for solar power (still the most expensive renewable energy technology) but a likely cost reduction for wind power and geothermal power, when we compare these costs to the status quo policies.
To sum it all up, REESA may be a real "game changer" in terms of opening up a huge new market for renewable energy. It will create thousands of new jobs throughout California and other ancillary economic benefits. We also know that there is a direct relationship between renewable energy capacity additions and a proportional reduction in natural gas prices due to reduced demand. And we are confident that the ratepayer impacts will be minimal in the short-term and probably very beneficial in the mid- to long-term as fossil fuel costs continue to rise and renewable energy costs continue to fall.
Please contact Senator Fran Pavley and other California legislators and let them know that you support REESA and SB 523.
By Jim Christie - Analysis
SAN FRANCISCO (Reuters) - President Barack Obama aims to double alternative energy production over three years, but how much "green" power will come from the U.S. West is uncertain if the sunny and wind-swept region cannot overcome a shortage of power lines.
Installing large solar installations and dotting landscapes with wind turbines across the western United States would be, technically speaking, straightforward, and potentially popular with the renewed interest in domestic energy sources amid rising economic, environmental and security concerns.
Delivering the region's green power to markets, however, is proving easier said than done.
"Our customers are telling us that they're already seeing transmission bottlenecks with their future plans," said Vic Abate, head of General Electric Co's renewable energy business.
Transmission line costs vary wildly. For years the rule of thumb was $1 million per mile, but a recent project in Southern California cost $16.5 million per mile.
T. Boone Pickens' "Pickens Plan" for generating 22 percent of the United States' electricity from wind power sees the need for $70 billion in transmission and power-grid infrastructure.
"It's all over the map," said George Given, head of the consulting firm Wood Mackenzie's global power unit. "If you're building over Texas, which is relatively flat ... you don't have so many issues. But if you're building in mountains, it's monumentally different work."
Transmission line projects in the U.S. West, much of it mountainous, face another steep challenge the region's industry and public officials say the Obama administration must tackle: federal bureaucracy.
Much of the region's expanses are overseen by a variety of U.S. agencies charged with managing natural resources, wildlife, parks and native populations.
"Nevada is, what, 90 percent federally owned?" said Rich Halvey, energy program director at the Western Governors Association. "We're continually stymied because of how long it takes to get transmission projects approved and built."
SPEEDING FEDERAL PERMITS
Bureaucratic delays stem from mandates of U.S. land agencies, said Lew Milford of the Clean Energy States Alliance, which represents 20 states' renewable energy funds: "It's one of those tricky good-versus-good problems -- trying to move more renewable energy but in an environmentally friendly way."
The U.S. Forest Service is the toughest sell of any U.S. land agency, said Robert Mitchell, chief executive of transmission systems developer Trans-Elect.
"If you are the chief forester and it is your responsibility to protect forest, probably the last thing you want to happen is to have transmission lines built through the forest," he said.
U.S. land agencies will need to cut red tape to help speed transmission projects, said Wayne Whitlock, a partner with the law firm Pillsbury Winthrop Shaw Pittman and a former lawyer at the U.S. Department of the Interior.
"Would they give exemptions? I'd be surprised if they do that. But they do have to make these projects higher priority," Whitlock said.
In a January 6 letter to Obama, California Gov. Arnold Schwarzenegger urged "Establishing clear policy within the U.S. Bureau of Land Management and other federal agencies to prioritize renewable energy project development and transmission on federal lands."
He also urged the U.S. Forest Service speed permitting and project changes needed to complete Sempra Energy's Sunrise Powerlink, a $1.9 billion, 120-mile long, 1,000-megawatt power line from California's inland Imperial Valley to coastal San Diego County.
State regulators back the project and the U.S. Bureau of Land Management on Tuesday gave its approval for the line to cross 49 miles of its land.
"If we get that, we're poised and ready to take the project into the next stages," says Mike Niggli, Sempra Energy Utilities chief operating officer, adding the Sunrise line would greatly enhance delivering green power.
Wind-swept Wyoming also wants the U.S. government to focus on transmission infrastructure.
"For several years, transmission has been the recognized bottleneck," Democratic Gov. Dave Freudenthal recently advised Obama by letter.
Investment incentives like those for wind farms may be needed, Freudenthal recently told Reuters.
"There have been no incentives for the guys who want to take the transmission risk," he said. "Maybe the federal government has to step in ... to provide that help so that lines get built," he said.
(Additional reporting by Bernie Woodall in Los Angeles and Scott Malone in Boston; Editing by Christian Wiessner)
Pending new regulations overview on Feed-In Tariffs before house to encourage home alternative energy industry.
The federal tax credits for renewable energy have been a major barrier to widespread ownership of renewable energy. The production tax credit, for example, can only be taken against passive income, a type of income that very few of us actually earn. Accelerated depreciation or investment tax credits can be taken against ordinary income – slightly better – but again the credit provides more benefit the higher one's tax bracket and the more tax liability one has. The overhead costs in aggregating sufficient tax equity to finance wind and solar projects have proven very high. Nevertheless, to date the industry has grown rapidly based on this inefficient and cumbersome arrangement.
The economic downturn, however, has all but eliminated the ability of renewable energy projects to sell their tax credits. The result is that in mid-January, AWEA and SEIA joined an increasing call to move toward refundable tax credits.
This is a useful step, for it opens up the possibility of investments in renewable energy from a much wider portion of the American people. But it is only a halfway step. It will apply to the production tax credit but probably not to the other types of tax benefits — accelerated depreciation and investment tax credits. Thus similar overhead costs in selling tax liabilities will occur and local ownership will still be stunted.
A better solution would be to avoid the need for tax incentives completely and set a price utilities have to pay for renewable energy sufficient to attract investors. Since investors would earn their money from the sale of electricity, not the sale of tax credits, a majority of Americans might be able to become investors.
The strategy is called a feed-in tariff (FIT). It has achieved remarkable success in Europe and has now been adopted by one Canadian province (Ontario) and one U.S. municipal utility in Gainesville, Florida. Half a dozen states are currently considering such a strategy.
Under a FIT, the government or public utility commission sets the price for renewable electricity high enough to attract investment. The price is varied to achieve multiple goals. For example, a government might prefer to encourage, with a higher price, rooftop solar rather than remote solar power plants. It might prefer to encourage, with a higher price, emerging technologies.
Utilities must enter into long-term (usually 20-year) contracts with the producer. The government revisits the tariff price every couple of years, lowering it when it feels producers are making excess profits, raising it when insufficient production is occurring.
Many Americans may react in horror at the idea of government setting a price. But in fact, that is the way the electric system has worked for more than a century. Regulatory commissions offer a utility a guaranteed rate of return sufficient to attract investment in new power plants.
Indeed, the U.S. now has two types of price setting. For conventional power plants utilities are given a cost-plus contract. Ratepayers will pay a price that recovers the cost of the power plant plus a healthy but reasonable profit. For renewable energy plants, however, we cobble together a byzantine array of tax benefits, rebates and mandates.
Some 38 states have renewable electricity mandates. In these states, government sets the quantity and the "market" sets the price, with the market massaged by tax and other incentives. Under a feed in tariff the government sets the price and the "market" the quantity. Neither is a pure market based strategy. But the feed-in tariff is much more transparent, comprehensible and — studies have shown — less expensive and more effective.
At a conference on feed-in tariffs held by the Institute for Local Self-Reliance in Minnesota in early January, former Minister of Energy of the German state of Schleswig-Holstein, Willi Voigt said that the renewable energy debate in the U.S. today sounds exactly like it did in Germany ten years ago. It was around that time that their experimentation with various renewable energy incentives gave way to a feed-in tariff. The renewable energy industry immediately took off. Renewable energy generators today satisfy 15 percent of German electricity needs. Half of the renewable energy power plants are locally owned.
The Germans are exceeding their renewable energy goals at a cost less than that of other European countries that have imitated U.S. strategies. American renewable energy generators face increased risk and cost from bundling energy incentives, confronted with the possible expiration of tax incentives, and having to find equity partners. German producers can attract low-cost financing because their electricity contract is guaranteed, the price is attractive and the process of gaining interconnection approval is simple and fast. German renewable energy policy also results in more economic development (and green jobs), because more than half of projects are locally owned.
Shifting to refundable tax credits is a good step, but the country and the renewable energy industry would do better to demand a new way of doing things. As our newly inaugurated president has suggested, we should set our sights higher.
John Farrell is a research associate at the Institute for Local Self-Reliance, where he examines the benefits of local ownership in renewable energy. His latest paper, Wind and Ethanol: Economies and Diseconomies of Scale, uncovers why bigger isn't necessarily better. He's a graduate of the University of Minnesota's Humphrey Institute of Public Affairs and currently resides in Minneapolis, Minnesota.
Changing the direction of the country's energy policy is central to the agenda of the nation's 44th President, and supporting renewable energy development and deployment lies at the heart of President Obama's plan. Most notably, President Obama has called on Congress to pass legislation that would invest US $150 billion in a "clean energy economy" over 10 years potentially creating as many as 5 million green jobs.
Given severe economic conditions, some have expressed concern over the President's ability to deliver on his pledge to promote renewable energy. However, a suite of renewable energy policies will be integral to an aggressive economic stimulus package designed simultaneously to revive the American economy and accelerate the country's transition to cleaner energy. Beyond the stimulus package, President Obama will take further steps to advance a clean energy agenda.
For companies that have experience in renewable energy and those new to the field, the Obama Administration's plan presents promising opportunities for growth.
Form and Substance: What Will the Obama renewable Energy Plan Contain?
President Obama introduced his ambitious renewable energy plan in a speech on January 8th, in which he articulated the details of his economic recovery and reinvestment package. The Obama plan would double the production of renewable energy in the United States within three years and establish a national goal of 25% renewable energy power generation by 2025. While Congress has expressed reservations over the details of the President's proposal, the groundwork has been laid for a dramatic shift in the country's energy portfolio. The President's key energy goals include the following elements:
Invest immediately and substantially in renewable energy so as to double renewable energy power generation in the next three years.
Increase the country's energy efficiency by modernizing greater than 75% of federal buildings and improving the energy efficiency of two million American homes.
Create five million green jobs and invest $150 billion in a "clean energy economy" over 10 years, including the investment in advanced biofuels and plug-in hybrids, development of commercial-scale renewable energy (e.g., solar and wind power) and construction of low-emission coal plants.
Build a new electricity "smart grid," thereby saving money, protecting U.S. power sources and delivering clean, renewable forms of energy to all areas of the country.
Mandate an increase in the use of renewable energy by implementing a federal Renewable Portfolio Standard that requires 10% of the nation's electricity consumption to come from renewable energy sources by 2012, and 25% by 2025.
Reduce by 2020 the use of carbon fuels by 10% and require 60 billion gallons of advanced biofuels to be incorporated into the American fuel supply by 2030.
Develop and deploy clean coal technology through carbon capture and sequestration technologies and the development of clean coal technology.
Establish national building efficiency goals that include making all new buildings carbon neutral or zero-emissions by 2030 and improving the energy efficiency of both new and existing buildings in the next ten years.
At this writing, it is unclear which elements of President Obama's renewable energy agenda will be included as policy proposals in a an economic stimulus package, and which elements will be marked for later inclusion in separate energy or environment bills.
With respect to the stimulus legislation, President Obama and members of Congress are actively debating package details. The House Committee on Energy and Commerce recently approved the energy provisions of the House economic recovery package, including several energy efficiency and renewable energy components. The full House of Representatives has yet to vote on that legislation, and the Senate is still developing its approach to a stimulus plan.
Several Democratic Congressional leaders, including Senator Kent Conrad (D-ND) and Senator Ron Wyden (D-OR), have expressed concern that the President's plan does not sufficiently promote "clean energy" or renewable energy investments. Although details of the stimulus plan's energy provisions remain under negotiation, the package may ultimately include, among other policies: revolving loan funds for energy efficiency projects, extension of renewable energy tax credits, federally guaranteed loans to biofuels projects, and expanded tax benefits for purchases of plug-in hybrids and energy efficient retrofits in private homes. Given the breadth of Congressional negotiations, the legislation may not be ready for President Obama's signature until mid-to-late February.
President Obama's Energy and Environment Team
The energy and environment team that the President announced in mid-December reflects the incoming Administration's commitment to accelerating the country's transition to more renewable energy: Steven Chu as Secretary of Energy; Lisa Jackson as Environmental Protection Agency (EPA) Administrator; Nancy Sutley as Chair of the White House Council on Environmental Quality (CEQ); and Carol Browner as Assistant to the President for Energy and Climate Change.
In particular, Steven Chu is a strong proponent of "carbon-neutral" energy technology. For Mr. Chu, solving the nation's energy needs involves a two-step process: (1) "maximiz[ing] energy efficiency and decreas[ing] energy use;" and (2) "develop[ing] new sources of carbon-neutral technology." The carbon-neutral technology that Mr. Chu envisions includes photovoltaic cells, cellulosic ethanol from switchgrass and carbon storage and sequestration. Prior to his nomination, Mr. Chu called for tax and fiscal policies that will encourage investment in renewable energy. If confirmed, Mr. Chu will be responsible distributing $38.5 billion in loan guarantees for new nuclear and other power plants that would cut greenhouse gas emissions; researching renewable energy sources such as biofuels, solar power and energy efficiency; and implementing many of the Congressional programs contained in the economic stimulus package and energy legislation.
Finally, President Obama's creation of the new White House "Energy Czar" post signifies that the incoming Administration recognizes the complexity of the country's energy needs and is committed to achieving the goals articulated during the campaign and the transition. President Obama has appointed Carol Browner, the former EPA Administrator under President Clinton, to fill this new position. As the Assistant to the President for Energy and Climate Change, Ms. Browner will coordinate the Administration's energy and climate policy. In part because this is a new position, Ms. Browner faces a significant challenge in the coordination of several very independent federal agencies with different mandates.
Challenges notwithstanding, the announced plan and personnel of the new Administration suggest pushing for dramatic growth in renewable energy will be a cornerstone of the Obama presidency.
Washington, DC, United States [RenewableEnergyWorld.com] President Barack Obama signed the American Recovery and Reinvestment Act of 2009 on Tuesday and the measure includes US $16.8 billion for the DOE Office of Energy Efficiency and Renewable Energy (EERE). The funding is a nearly tenfold increase for EERE, which received $1.7 billion in fiscal year 2008.
The act also directs DOE to analyze the nation's electrical grid to determine if significant potential sources of renewable energy are locked out of the electrical market by a lack of adequate transmission capacity. DOE must then provide recommendations for achieving adequate transmission capacity.
While the bulk of the new EERE funding is supporting direct grants and rebates, $2.5 billion will support EERE's applied research, development and deployment activities, including $800 million for the Biomass Program, $400 million for the Geothermal Technologies Program, and $50 million for efforts to increase the energy efficiency of information and communications technologies.
An additional $400 million will support efforts to add electric technologies to vehicles. And separate from the EERE budget, $400 million will support the establishment of the Advanced Research Projects Agency-Energy (ARPA-E), an agency to support innovative energy research, modeled after the Defense Advanced Research Projects Agency (DARPA).
The economic stimulus act also stipulates that $5 billion will go towards the Weatherization Assistance Program, and the act also increases the eligible income level under the program, increases the funding assistance level to $6,500 per home, and allows new weatherization assistance for homes that were weatherized as recently as 1994.
A complementary measure in the act provides $4 billion to the Department of Housing and Urban Development (HUD) to rehabilitate and retrofit public housing, including increasing the energy efficiency of units, plus an additional $510 million to do the same for homes maintained by Native American housing programs. HUD will receive an additional $250 million to increase the energy efficiency of HUD-sponsored, low-income housing.
The act also directs $2 billion in EERE funds toward grants for the manufacturing of advanced battery systems and components within the United States, as well as the development of supporting software. The battery grants will support advanced lithium-ion batteries and hybrid electric systems. Another $300 million will support an Alternative Fueled Vehicles Pilot Grant Program, and an additional $300 million will support rebates for energy efficient appliances, while also supporting DOE's efforts under the Energy Star Program.
The act also stipulates that $3.2 billion will go toward Energy Efficiency and Conservation Block Grants, which were established in the Energy Independence and Security Act of 2007, but were not previously funded. The grants will go toward states, local governments and tribal governments to support the development of energy efficiency and conservation strategies and programs, including energy audit programs and projects to install fuel cells and solar, wind, and biomass power projects at government buildings. For background on the program, see pages 176-183 of the Energy Independence and Security Act of 2007.
The act also stipulates that $3.1 billion of EERE funds will go toward the State Energy Program for additional grants that don't need to be matched with state funds, but the act only allows such grants for states that intend to adopt strict building energy codes and intend to provide utility incentives for energy efficiency measures. To help states implement the measures, a separate portion of the act allocates $500 million to the Department of Labor to prepare workers for careers in energy efficiency and renewable energy.
Renewable Energy and Smart Grids
The act includes $6 billion to support loan guarantees for renewable energy and electric transmission technologies. The funds are expected to guarantee more than $60 billion in loans. The act requires the DOE Loan Guarantee Program to only make loan guarantees to projects that will start construction by September 30, 2011, and that involve renewable energy, electric transmission, or leading-edge biofuel technologies.
The act also directs DOE to analyze the nation's electrical grid to determine if significant potential sources of renewable energy are locked out of the electrical market by a lack of adequate transmission capacity. DOE must then provide recommendations for achieving adequate transmission capacity. To help achieve those recommendations, the act includes a provision allowing the Western Area Power Administration to borrow up to $3.25 billion from the U.S. Treasury for transmission system upgrades, particularly for facilitating the delivery of power from renewable energy facilities.
In addition, the act provides $4.5 billion for the DOE Office of Electricity Delivery and Energy Reliability for activities to modernize the nation's electrical grid, integrate demand-response equipment and analyze, develop and implement smart grid technologies. The funds will also support research in energy storage technologies, efforts to facilitate recovery from energy supply disruptions and efforts to enhance the security and reliability of the nation's energy infrastructure. A complementary section of the act opens smart grid demonstration projects to electric systems in all areas of the country and establishes a smart grid information clearinghouse to share data from the demonstration projects.
Greener Federal Buildings and Fleets
Federal buildings and fleets will become greener under a measure of the new bill. The act provides $4.5
billion to the U.S. General Services Administration (GSA) to convert federal buildings into high-performance green buildings, which generally combine energy efficiency and renewable energy production to minimize the energy use of the buildings. The act also directs $4 million toward the establishment of an Office of Federal High-Performance Green Buildings within the GSA. In addition, the act provides $100 million for the Energy Conservation Investment Program within the Department of Defense, as well as another $100 million for energy conservation and alternative energy projects at facilities of the U.S. Navy and U.S. Marine Corps.
For federal vehicle fleets, the act provides $300 million to cover the costs of acquiring greener motor vehicles, including hybrids, electric vehicles, and plug-in hybrid vehicles, once they become commercially available. Buying plug-in hybrids could be an iffy proposition, however, as the funds must be spent by September 30, 2011.
Renewable Energy Tax Credits
The tax section of the act provides a three-year extension of the production tax credit (PTC) for most renewable energy facilities, while offering expansions on and alternatives for tax credits on renewable energy systems. The extension keeps the wind energy PTC in effect through 2012, while keeping the PTC alive for municipal solid waste, qualified hydropower, and biomass and geothermal energy facilities through 2013.
In addition, a two-year extension of the PTC for marine and hydrokinetic renewable energy systems will keep that tax credit in effect through 2013. The PTC provides a credit for every kilowatt-hour produced at new qualified facilities during the first 10 years of operation, provided the facilities are placed in service before the tax credit's expiration date.
For 2008, biomass facilities fueled with dedicated energy crops ("closed-loop biomass"), as well as wind, solar, and geothermal energy facilities earned 2.1 cents per kilowatt-hour, while other qualified facilities earned 1 cent per kilowatt-hour.
Unfortunately, the current slump in business activity means that fewer businesses are seeking tax credits, which means that renewable energy producers are having trouble taking advantage of the PTC. With that in mind, the act also allows owners of non-solar renewable energy facilities to make an irrevocable election to earn a 30% investment credit rather than the PTC. The option remains in effect for the current period of the PTC, that is, through 2012 for wind energy facilities and through 2013 for other qualified renewable energy facilities.
Alternately, the facility owner could choose to receive a grant equal to 30% of the tax basis (that is, the reportable business investment) for the facility, so long as the facility is depreciable or amortizable. The grants are also available for renewable energy facilities that would normally earn a business energy credit of 10%-30%, including systems using fuel cells, solar energy, small wind turbines, geothermal energy, microturbines and combined heat and power (CHP) technologies.
To earn a grant, the facility must be placed in service in 2009 or 2010, or construction must begin in either of those years and must be completed prior to the termination of the PTC. For facilities that would normally earn a business tax credit, construction must be completed prior to 2017. The grants will be paid directly from the U.S. Treasury. A separate measure in the act removes limitations on the business credit based on how the systems are financed and also removes a business credit limit on small wind energy systems.
The stimulus bill also provides greater tax credits for clean energy projects at homes and businesses and for the manufacturers of clean energy technologies. For homeowners, the act increases a 10% tax credit for energy efficiency improvements to a 30% tax credit, eliminates caps for specific improvements (such as windows and furnaces), and instead establishes an aggregate cap of $1,500 for all improvements placed in service in 2009 and 2010 (except biomass systems, which must be placed in service after the act is enacted).
The act also tightens the energy efficiency requirements to meet current standards. For residential renewable energy systems, the act removes all caps on the tax credits, which equal 30% of the cost of qualified solar energy systems, geothermal heat pumps, small wind turbines and fuel cell systems. The act also eliminates a reduction in credits for installations with subsidized financing.
For businesses and individuals buying electric vehicles, the act simplifies and expands the available tax credits. For electric low-speed vehicles, motorcycles, and three-wheeled vehicles, a 10% tax credit is available through 2011, with a cap of $2,500. For vehicles converted into qualified plug-in electric vehicles, a 10% tax credit is also available through 2011, with a cap of $4,000. And starting in 2010, full-scale commercial plug-in electric vehicles can earn a maximum tax credit of $7,500, depending on their battery capacity. The credit will phase out over a year for each manufacturer after they sell 200,000 plug-in vehicles.
The act also provides a bonus to homeowners or business owners installing clean fuel refueling systems at their homes or businesses. For businesses, the maximum credit for installing such refueling systems increases to $50,000 for most systems, up from $30,000, and it increases to $200,000 for hydrogen refueling stations. For homeowners, the credit is doubled from $1,000 to $2,000. Homeowners might install their own natural gas refueling system for a natural gas vehicle, or they might install recharging systems for plug-in electric vehicles. The credit is available through 2010 for most refueling systems and through 2014 for hydrogen refueling systems.
The economic stimulus act has also added a new tax credit to encourage investment in the manufacturing facilities that help make such clean energy projects possible. A new 30% investment tax credit is available for projects that establish, re-equip or expand manufacturing facilities for fuel cells, microturbines, renewable fuel refineries and blending facilities, energy saving technologies, smart grid technologies and solar, wind and geothermal technologies.
The credit also applies to the manufacture of plug-in electric vehicles and their electric components, such as battery packs, electric motors, generators and power control units. The credit may also be expanded in the future to include other energy technologies that reduce greenhouse gas emissions. The Secretary of Treasury must establish a certification program within the next 180 days and may allocate up to $2.3 billion in tax credits.
Clean Energy Bonds Expanded
Two bonding mechanisms for financing renewable energy and energy efficiency systems have been expanded under the tax section of the act. The act authorizes the allocation of as much as $1.6 billion in new Clean Renewable Energy Bonds (CREBs), which are tax credit bonds for financing renewable energy projects. CREBs were previously limited to a maximum of $800 million. The act also authorizes the allocation of $2.4 billion in qualified energy conservation bonds, up from the current limit of $800 million. These tax credit bonds are allocated to states and large local governments to finance a variety of clean energy projects.
Unlike normal bonds that pay interest, tax credit bonds pay the bondholders by providing a credit against their federal income tax. In effect, the new tax credit bonds will provide interest-free financing for clean energy projects. But because the federal government essentially pays the interest via tax credits, the U.S. Internal Revenue Service must allocate such credits in advance. However, tax credit bonds require the investment of a bondholder that will benefit from the federal tax credits, and those investors may be hard to find during the current business downturn. To try to draw more investment, a separate measure in the tax bill will allow regulated investment companies to pass through to their shareholders the tax credits earned by such bonds. Yet another measure adds a prevailing wage requirement to projects financed with CREBs or energy conservation bonds.
UNDERSTANDING NET METERING & FEED IN TARIFF POTENTIAL REVENUES FROM HOME POWER GENERATION