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 forsolarenergy 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 ‚Äìfired 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.