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January 21, 2009
At a time when many people in Washington are running around with
their hair on fire looking for schemes to dramatically increase renewable energy
use by mid-February at the latest, let's consider that what renewable energy
really needs is a shift to permanent, effective policies to pursue and develop
its potential.
The recent inclusion of the Federal Investment Tax
Credit for solar energy through 2016 is a good example of this type of policy.
But, it is just the start.
In our view, renewable energy's greatest
potential and competitive advantage is its ability to evolve rapidly and offer
technologies that produce electricity at lower and lower prices with no carbon
emissions, subsequently decreasing our dependence on foreign fossil fuels.
Here is one effective, low-cost approach to encourage innovation:
Create a set of national Standard Offers or Feed-in Rates for new, significantly
better renewable technologies. This policy would offer predictable compensation
to any renewable energy generator in the form of long-term power purchase
contracts, thus creating a streamlined administrative national framework that
makes developing renewable energy projects and manufacturing new technologies
highly investable for entrepreneurs and private capital alike.
The great
virtue of offering a national price for renewable energy is that it would be
immediately transparent and open to any technology company/developer. Currently,
developing utility-scale renewable energy projects requires dealing with
hundreds of private and public utilities all operating under strikingly
different state regulatory requirements, and it often requires substantial
upfront investments just to respond to requests for proposal.
The
feed-in rate we are proposing would be set below what current renewable
technologies deliver in order to focus support on breakthroughs that will drive
the price of renewable electricity down in order to replace more and more
traditional, fossil fuel based electricity generation. The national feed-in
price could be adjusted periodically by the policy's governing board in order to
move renewable electricity through the price points that would deliver greater
market share to renewable generation while avoiding excess or windfall profits
at the expense of the taxpayer. For example, the set of feed-in rate price
points could be set by (1) on-peak natural gas fired generation to (2) combined
cycle natural gas fired generation to (3) base load coal generation with an
adjustment to reflect the cost of CO2 emissions.
Setting an
initial feed-in rate at $0.15 per killowatt hour for 20 years for solar
projects, for example, would draw out multiple breakthrough technologies and
greatly advance their market penetration.
How close are we to
delivering renewable technologies at the threshold of commercialization that can
get to the first price point's on-peak natural gas fired generation? Wind
and geothermal technologies are there today in certain locations in the
U.S. Solar photovoltaic and thermal technologies are getting closer. An
on-peak natural gas fired plant will generate a kilowat hour of electricity at a
cost of between $0.09 and $0.11 per kilowat hour depending largely on the price
of the natural gas used as fuel. The cost of capturing and storing the CO2
emissions from that generation has been estimated at about $0.028 per kilowatt
hour (citation: S&P Viewpoint, Which Power Generation Technologies Will Take
the Lead in Response to Carbon Controls, May 11, 2007).
The Federal
Government's commitment would be to purchase a substantial amount of renewable
power, or hundreds of megawatts or gigawatts. To support utility-scale projects,
the feed-in system could also come with an offer to provide access to federal
land for projects with transmission access. For example, a Department of Energy
report demonstrated the feasibility of using the Nuclear Test Site in Nevada,
1,200 square miles, to host utility-scale solar energy projects. (see report at
REPP.org). A small portion of
that land could be offered at a low or zero cost lease to support huge solar
projects. Other federal lands could be identified and made available over time.
A national feed-in rate would be straight-forward to implement,
following the guidelines of past BPA hydro and wind generation projects for
example. A Renewable Power Marketing Authority (similar to WAPA and BPA)
would buy the power (i.e., pay the feed-in rate) and offer the electricity to
investor-owned, municipal, and electric cooperative utilities at a price that
would attract buyers. Any revenue shortfall would be covered by federal
appropriations, but the cost of the program should be low. For a 100-megawatt PV
project at the start that lost $.03 for every kilowat hour generated, the annual
cost would be roughly $6 million depending on the annual kilowat hour generated.
We believe this simple, easily implemented step could accelerate major
technology advances out of labs and turn development companies into mainstream
companies while assuring that renewable energy would become a major source of
utility-scale power projects in the U.S.
Once scaled up, these
breakthrough technologies would assure that renewable energy would become a
major source of utility power projects. And, these new and increasingly cost
effective technologies would go a long way to assuring that renewable energy
contributes to not only stabilizing climate change and increasing our energy
security, but to also seriously lowering the cost of meeting these
goals.
George Sterzinger is the Executive Director of the Renewable
Energy Policy Project (REPP) in Washington, DC. He has more than twenty years
experience in energy policy and regulation. See REPP.org.
This opinion piece is from two independent writers and is not connected with Greentech Media News. The views expressed here are those of the authors and are not endorsed by Greentech Media.
