| Independently Powered Energy News

Soon after getting on a human-propelled, mini Ferris Wheel, I realized I made a mistake. The revolution of my chair quickly increased after take off. On top of the frightfully zippy 360s, my chair began swinging wildly back and forth, causing my feet to slip off the pedals. While unable to control the ride, I discovered the seat belt was worthless. I clung desperately to the metal bar that separated me from the people below. Today’s market and financial turmoil is about as much fun. Frozen credit is causing people to hold on for dear life. Among those on Mr. Toad’s wild ride are renewable power plant developers. State policy makers can keep wind, solar, geothermal and other alternative power developers from flying off their seats by providing long-term financial certainty. A fixed and transparent price is needed for new renewable supplies, much like the successful “feed in” tariffs in Europe. These tariffs--I’ll call them “green-in” fees--can ensure the state’s impressive renewable mandates and greenhouse gas emission reductions targets are met if they are structured right. And, there are lots of examples to learn from. Independent renewable developers struggle to get financing for their projects. The seat belt that has protected them consists of the federal production and incentive tax credits. (Large wind farms get production subsidies and qualifying solar projects get incentive credits. The year facilities qualify for the credit allows them to reap the subsidy for the next 10 years.) Whether the much relied upon tax credits will be there for projects when needed is a biannual dilemma. The 1992 law creating the tax credits requires they be reauthorized every two years by Congress. Until this year, the assumption was that the production and incentive credits would not expire in spite of battles over its costs. However, the latest reauthorization tug-of-war dragged on far longer and was far messier because it got trapped in the $700 billion Wall Street bailout battle. Sales of Pepto Bismol soared among renewables executives. Failure to extend the federal tax credit would cause California’s utilities to fall farther behind in their renewable targets. The three investor-owned utilities acknowledge that 20 percent of their power supplies will not come from solar, wind and other alternative resources by 2010 as mandated on the 2002 Renewable Portfolio Standard law. State policy seeking a 33 percent renewable target is a high wire act at this stage. “If tax credits are not extended next year we can kiss every [Renewable Portfolio Standard law] goodbye,” said Marcel Hawiger, The Utility Reform Network staff attorney. State RPS laws set a mandatory level of renewable supplies. In California, utility deals involving about 2,100 GWh of wind, solar, geothermal and biogas projects are expected to come on line next year, according to the California Public Utilities Commission website. The credit for wind project output is estimated to be worth a little more than 2 cents/kWh. Solar projects get 2-3 cents a kW for capacity payments, or the functional equivalent in ouput payments, depending on the solar technology. That funding is significant, helping lower the price of renewable supplies. Thus lower costs, mean more contracts, which means more production and “economies of scale,” said Joshua Bar-Lev, Bright Source Energy vice president. He added that renewable projects are capital intensive infrastructure projects that create jobs and add to the local, state, and federal tax base. BrightSource signed a deal with Pacific Gas & Electric last April for 900 MW of solar power. Just before press time, the House had not voted on the bill approved by the U.S. Senate to extend the production tax credits one year for wind projects, eight years for solar, and two years for other renewable energy facilities. In California utility-renewable power deals, the renewable developer is responsible for lining up financing for power contracts--a bigger challenge in today’s roller coast economic environment. Utilities, like PG&E, Southern California Edison, and San Diego Gas & Electric, cannot reap the tax credit because utility rates are set by regulators. State politicians and regulators need to put our money where their mouth is on renewables. Reduce the financial uncertainty for renewable projects. California’s long advertised goal to help reduce reliance on fossil fuels, create a robust renewable power market, and curb global warming depends on it. The renewable solicitations by California’s private utilities repeatedly fall short of the mark, while the terms of the successful deals are kept secret. Adopting a “green in” fee provides much-needed price transparency and security. It also can help eliminate the complexity of the state’s renewable market, including replacing the convoluted benchmark price set for renewables, known as the Market Price Referent. For guidance we need only look to Europe, something California regulators have been quick to do on the carbon cap-and-trade market front, but evanescent when it comes to something like a “green-in” fee, which the utilities don’t like. Is it because it smells like the “T” word, as in tax not Mr. Toad? If that is the case, maybe we need to call it a “true green bailout.” European laws establishing fixed “green-in” rates led to significant increases in renewable power. Last year, Germany saw its renewable energy rise to 14.2 percent of its supplies, almost two percent above its target, according to Wilson Rickerson, an energy consultant. During an October 1 workshop on feed-in tariffs at the California Energy Commission, he said that Germany doubled its photovoltaic capacity between 2005-2007--growing it by 1,100 MW. Its wind power grew from 1,667 MW to 2,262 MW during the same time frame. Biogas supplies also doubled, reaching 1,270 MW. If state regulators are so willing to embrace a far younger and more insecure multi-billion dollar trading market, there is no excuse not to launch “green-in” fees. These fees, for instance, can be regularly reassessed and modified as needed to reflect changing economic conditions. For example, the fixed price paid for renewable power could be lower while federal renewable tax credits are in place and higher if they are allowed to expire. Regulators have the ability and know-how to make green in fees fit California’s environment. That would help reassure renewable developers that their seat belts will hold and they won’t be flung into thin air.

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