In a move to protect the state’s taxpayers, the California Energy Commission (CEC) ratified by a unanimous 4-0 vote its Renewables Committee’s March 4 decision to temporarily suspend the Emerging Renewables Program (ERP) and review program rules that seem to have led to abuses of the ERP rebates by opportunistic small wind companies.

Beginning in April 2010, the CEC ERP rebate went up for one year to $3.00 per watt to accelerate the 1998-instituted incentive created to drive growth of under-30-kilowatt solar, wind and fuel cell systems. Though the Schwarzenegger administration developed bigger programs for solar, ERP’s $8.7 million in rebates subsequently helped build 582 small wind systems in California with a cumulative installed capacity of 3.6 megawatts.

When the increased rebate produced over 800 new ERP applications, it might have been thought a success but for some questionable economics.

“I have 314 approved applications,” Amy Morgan, a CEC Spokesperson/Information Officer. That’s about six times the previous annual rate of small wind system installations. But, Morgan clarified, over 85 percent of those (268, representing a  potential $6.7 million in California taxpayer-funded rebates) “are systems where it was almost no cost to the consumer” -- and “that raised a red flag.”

Before reaching their decision to review the ERP rules in pursuit of a less vulnerable formulation, the commissioners took testimony from some of those affected.

Small wind distributors complained that the March 4 rebate suspension -- which was enacted “with three hours' notice” -- effected hardship on both legitimate and abusive installers. A fuel cell distributor complained that the suspension penalized his industry as a whole, not just the abusers in small wind.

In the end, the Commission could only apologize for having no legal authority to separate out fuel cells or users from abusers and insisted it had to take action. 

“This whole situation did not give the renewables committee great comfort,” one commissioner said. “Driving technology and helping people with their electric bills in these hard times is a good thing,” he said, but the CEC’s responsibility is “to husband the ratepayers and taxpayers money” and there is “no other alternative than to take a time-out and get the program back on track.”

The goal, he added, was “to stimulate technology, drive improvements and get more renewables -- but not free wind.”

“What the rebates are for,” Tal Mamo, President of small wind distributor Talco Electronics, said, “is to get renewable energy that works.” To do that, Mamo believes the CEC rebate rules must be revised to make “the best use of taxpayer money.”

Mamo described the abuse of the rebates. “There are installers who will go to a customer and tell them ‘Look, you don’t have to put down any money upfront; we’ll take care of all the expenses, just sign here,’” Mamo said. “What the installer is doing is making money from the state of California from the rebates by installing a very inexpensive machine that hasn’t been proven or tested and in most cases is worthless.”

There are fundamental errors, Mamo said, in the CEC’s rating of small wind turbines. “There’s a difference between power and energy,” he explained. “Energy is kilowatt-hours.” The CEC rebates, though, are based on the generator’s kilowatts of power, not the kilowatt-hours the whole turbine can generate.

“What captures the energy from the wind are the blades,” Mamo said. “As an extreme example, I could give you a twenty-kilowatt generator, put two-foot blades on it and collect a rebate from California as if it was a twenty-kilowatt wind turbine. But really, it’s not going to produce any energy, because the blades aren’t big enough.”

Such an extreme example might not make it past CEC scrutiny, but Mamo said it characterized poorly performing machines that have won CEC rebates in the past.

Poor quality machines are Mamo’s other concern. As a wind turbine distributor, he said, it is his job “to know which turbines are out there.” He has seen, he added, the same foreign-made model with a variety of different U.S. manufacturers’ names on it. In a specific case in Iowa, he said, he saw a machine that developed a reputation for poor performance and malfunctions later reappear without improvements under a different name.

Asked if he has seen turbines on the CEC-approved list that he knows are of questionable quality, his answer was “definitely.”

Distributed Wind Energy Association (DWEA) President Mike Bergey, also President of the widely respected small wind manufacturer and distributor Bergey Windpower, said the solution to the problems Mamo described is certification by the Small Wind Certification Council (SWCC). “There is a loophole,” Bergey said of the ERP rebate program, “that allows the scam artists to exploit them.”

SWCC certification requiring a third-party performance test aligned with an international standard, Bergey said, will prevent inaccurately rated, low-quality machines from qualifying for excessive rebates.

“The new standard from the American Wind Energy Association (AWEA),” which Bergey helped to write, “is an industry-based standard, but it’s quite rigorous and it anticipates the kind of bad actors that we’re seeing in California. It’s meant to keep them out of our industry -- and to protect consumers.”

“If it’s SWCC-approved,” Mamo agreed, “it should be CEC-approved.”

Bergey raised a final, intriguing point the CEC needs to address when he asked, “What happens if the CEC determines that these rebates were fraudulently applied for? I think,” he added, “they need to make sure that people who have cheated the system are held accountable.”