Renewables industry pushes for tougher targets

www.environmental-finance.com
2 July

Renewable energy advocates have welcomed the momentum toward adoption of a US federal renewable electricity standard (RES), but vowed to keep pushing for a stronger mandate.

The American Clean Energy and Security Act, sponsored by Congressmen Henry Waxman and Ed Markey, was the first bill to pass a house of Congress that would cap greenhouse gas emissions. However, it also requires electric utilities to meet 20% of their electricity demand through renewable energy and improved energy efficiency by 2020. Although lower than the 25% target featured in the initial Waxman-Markey proposal, the bill passed on 26 June surpasses the 15% by 2021 requirement adopted by the Senate energy and natural resources committee last month.

"We need to strengthen the RES," said Tim Howell, commercial leader, power & renewable energy for GE Energy Financial Services in Stamford, Connecticut. "We're going to have to keep pressure on Washington." Utilities selling more than 4 million MW hours of electricity a year would be required to source 6% of their power from renewable sources or reduce demand through energy efficiency initiatives by 2012, increasing to 15% from renewable energy sources and 5% from energy efficiency improvements by 2020, according to the House bill.

Since about 20% of US electricity is produced by entities below the threshold, it makes the bill "less aggressive" in driving renewable energy production, said Jack Ihle, Washington-based associate director of climate change and clean energy for energy market information firm IHS Inc.

The momentum for a federal RES after years of stalled efforts in Congress bodes well for the renewable energy sector, said Gabriel Alonso, CEO of Horizon Power Wind Energy in Houston, Texas. "I'm confident we will have a RES that will make a difference in the near future," he said.

But the federal targets are seen by renewable energy developers as insufficient to spur significant demand beyond that which is already driven by state mandates. "Some states already have more aggressive goals than [the federal RES bills] so the higher the better," said Pat Agudow, vice-president of administration and policy management for solar product supplier Opel International in Shelton, Connecticut.

Congress should encourage renewable energy development in US regions without standards, specifically the south-east, while doing nothing to discourage the states that already have mandates, either through pre-emption or an adverse interaction with carbon legislation, said John Geesman, co-chairman of the board of directors of the American Council on Renewable Energy in Washington, DC.

"That's a difficult legal balance," he said. "But I think if you look at most of the states with aggressive [renewable portfolio standard] programmes, there's less interest in the positive side of federal legislation and more apprehension of the potential negative effect."

The House bill clarifies that US states can implement feed-in tariffs, a mechanism designed to encourage renewable energy development by requiring utilities to purchase energy generated by renewables at above-market rates set by the government. Since the House has adopted the RES with the feed-in tariff, the Senate will be lobbied heavily to include it in its bill, Agudow said. California adopted a feed-in tariff in 2008 to support the development of up to 480MW of renewable generating capacity from small facilities while other states are considering implementing tariffs.

The feed-in tariff provides guaranteed rates of return for long periods of time and requires the least amount of up-front capital from the government, but can be vulnerable to fraud if the programmes are improperly structured, said Frank Middleton, vice-president of marketing for Opel. "The feed-in tariff is the one we're favouring the most because we've seen how well it's worked in Europe," he said. "It's not the perfect model, but it's probably the best model we know of."