Solar Advocacy Group Says Climate Bill Will Fail to Make Solar Energy Cheap

Originally posted at the Breakthrough Institute

The solar energy advocacy organization VoteSolar issued a pretty clear verdict on whether or not the Waxman-Markey American Clean Energy and Security Act will effectively make solar energy cheap and abundant: "The accurate answer is nuanced, but the short answer is no."

Here's their take on the Renewable Electricity Standard, which Breakthrough digs into in a detailed analysis here:

The Solar Energy Industries Association spent the last six months urging Congress to add solar specific provisions to the draft RES [Renewable Electricity Standard] bills, namely a distributed generation carve-out to support rooftop solar, inclusion of solar hot water among the qualifying technologies and accomodations (sic) for utility-scale solar. The solar set-aside is a policy mechanism in use today in fifteen states, and one that has proven effective in kick-starting robust new solar markets.

Instead, a "REC multiplier" for distributed generation is emerging as the favored solar mechanism in the federal bills under consideration. With a three times multiplier, one megawatt hour of distributed solar would be treated as three megawatts of wind, biomass, geothermal or hydro in the REC market. If past experience at the state level proves anything (think Arizona and New Mexico), the multiplier will do little to encourage distributed solar as there's still little incentive to invest in the early-market, higher-cost energy option. Without a direct carve out to encourage this initial investment in distributed solar, it will take much longer to realize the economies of scale cost reductions projected for this valuable energy resource. A further downside to credit multipliers is that they dilute the goal, an outcome that undermines the original intent of the policy. One megawatt counting as three reduces the total amount of renewable energy in the mix, an outcome that undermines the original intent of the policy.

And here's their take on the cap and trade title of the bill, which Breakthrough has also dissected in several posts here:

The Waxman-Markey energy bill also includes a carbon reduction plan. ...

The climate plan in the Waxman-Markey Discussion Draft is the result of years of negotiations and vetting. More than 300 people have testified at over 40 days of hearings in the E&C Committee alone on this plan over the past two Congresses. Even with all of the coalition building of the last decade, Waxman faces a serious challenge just to move the bill out of the E&C Committee. If the skeptics are wrong and this plan passes through Committee and becomes law, will it help deploy solar? Unlikely.

Much like the RES, the carbon cap and trade will encourage short-term, least-cost implementation mechanisms, ignoring the other tremendous benefits solar offers....

If there is an auction of any allowances by the time the bill is passed into law, the solar community is asking that 5 percent of the auction proceeds be set-aside into a solar technology deployment fund. It remains to be seen whether this provision will be contained in the Waxman-Markey draft. But one thing is certain, giving credits away for free means fewer federal dollars to be invested in efficiency, transmission and renewable energy programs.

The role that solar and renewable energy generation plays in the new carbon market also remains in question. Solar advocates assert that solar generators, whether roof-top solar owners or large-scale concentrating solar power plants, should either receive some portion of the carbon credits allotted, or the overall cap should be lowered to account for renewable energy projects.

Both options are designed to ensure real reduction in overall GHG levels from investment in solar generation. Unless we account for renewable energy generation when implementing the program, carbon-emitting generators could meet their requirements by taking credit for emission reductions from renewable energy projects that are already developed. A situation that amounts to zero progress on carbon reduction.

VoteSolar's conclusion:

[W]e remain skeptical that current versions of either the RES or a carbon cap and trade policy will lead to significant solar deployment. The pending bill has proven that a new, cleaner energy future is a national priority. That in itself is progress. But a "sweeping" federal energy bill that fails to deploy a portfolio of renewable energy options is an underwhelming outcome, ill-equipped to help us meet the challenges at hand.

Read more!

Senators Cantwell, Kerry and Smith Introduce Clean Energy Package

Senator Maria Cantwell (D-WA) introduced a new energy bill to Congress last week that would provide long term extensions of several key clean energy tax credits, including the Federal Production Tax Credit. The bill, the "Clean Energy Investment Assurance Act of 2007" (S.6020) has been co-sponsored by Senators Gordon Smith (R-OR) and John Kerry (D-MA).

According to a summary of the bill from Senator Cantwell's office [word doc] the purpose of the bill is three fold:

Provide a sufficient duration to the incentives for investment in and wide-scale deployment of renewable energy technologies.

Provide incentives for improved efficiency to reduce energy consumption and enhanced management of energy demand.

Set an overall goal for the tax incentives—production of energy resulting in zero carbon emissions—and enable all technologies to become cost competitive within the defined timeframe of the incentives.

The bill would do the following:

Expands and Extends the Federal Production Tax Credit:

Extends the Production Tax Credit (PTC) for renewable energy generation through Dec 31st, 2013.

Expands the PTC to include thermal energy production technologies utilizing renewable energy to produce useful heating or cooling (i.e. solar hot water heating, biomass for heating, etc.).

Specifies that the PTC applies to any zero-carbon emission generating technologies utilizing renewable fuels, even if not explicitly enumerated in the bill (i.e. provides the Treasury Department the authority to grant eligibility for emerging zero-emissions technologies like wave, tidal, etc. to qualify without having to go through full Congressional amendment of bill).

Amends PTC to extend full value of credit to all technologies (currently gives half credit to hydro, irrigation hydro, open-loop biomass, landfill gas and waste combustion). [The National Hydropower Association was really excited about this part]

Expands and Extends the Clean Renewable Energy Bonds:

Extends the Clean Renewable Energy Bond (CREBs) incentive for investment in renewable energy by consumer-owned utilities (COUs) and other tax-exempt entities through Dec 31st, 2013.

Increases funding cap for CREBs to $5 billion/year (currently, $5 billion cumulatively in loans can be granted at any given time, seriously hampering ability of CREBs to incentivize renewable energy development by public utilities)

Expands and Extends Residential and Business Renewable Credits:

Extends to 2017 residential and business tax credits for solar hot water, PV, fuel cells, etc. Makes credit based on system power, not percentage of system cost (as currently). $3k per KW for PV, $1k per KW for fuel cells.

Expands credit to cover "qualified energy storage air conditioning" technologies [I assume this means things like ice-storage AC units that can use off-peak electricity to store cold (in ice blocks) for later use during peak periods.]

Extends Energy Efficiency Credits:

Extends credits to end of 2012 for energy efficient home construction, and for non-business and commercial energy efficiency retrofits.

Promotes Smart Meter Technology:

Allows utilities to recover costs of "smart meters" on a 5-year cost recovery schedule, instead of current 20-year schedule.

This is a good package of expanded credits and incentives for renewable energy and energy efficiency. I'm particularly happy to see my senator, Gordon Smith, co-sponsoring this bill.

The long-term extensions of these important credits will provide the long-term planning and financial certainty the renewable energy industry needs to make investments, both in renewable energy projects, but also in manufacturing facilities in the U.S. The boom-and-bust cycle of the PTC in the past has severely hampered the pace of renewable energy development in the US and has also discouraged significant investment in manufacturing capacity. Without long-term certainty that a strong North American market for wind and other renewable energy technologies exists, manufacturers are reluctant to make major long-term investments in factories in the U.S. This has led to a shortage of wind turbines and other crucial components and meant that many turbines used in US wind farms have to be imported from overseas, increasing costs (especially considering the weakening of the dollar versus the euro and other currencies).

I hope that this bill is incorporated into the package of energy legislation Congress plans to consider and pass in June and July. These incentives are crucial to the accelerated deployment of clean, homegrown, renewable energy technologies and increased energy efficiency. They will help level the playing field between highly subsidized fossil and nuclear energy industries and emerging renewable energy industries and the long-term certainty this bill provides will incentivize both quicken the pace of renewable energy development as well as increased US-based manufacturing of clean energy technologies - a win-win for the U.S. economy.

Read more!

Eye On China: China Now World's Largest Investor in Renewable Energy

According to a Xinhua News Agency article (reprinted here), China has become the world's largest invester in renewable energy. The news was announced by experts from the environmental watchdog, the WorldWatch Institute earlier this month at an ongoing forum for decentralized sustainable energy solutions in China.

Dr. Eric Martinot, a senior research fellow with the US-based Worldwatch Institute and senior visiting scholar of Tsinghua University, said that excluding large hydropower, China invested $6 billion (US) in renewable energy in 2005 out of a global total investment of $38 billion.

Soaring oil prices have made renewable energy a focus for world investors, Martinot told Xinhua.

Government support for renewable energy was reportedly $10 billion in 2004 for both the United States and Europe, including budget funding and policy support. The United States and Europe provide more than $700 million per year for research and development, said Martinot.

Moreover, large commercial banks are starting to notice renewable energy and several are adding renewable energy investments to their lending portfolios, he said.

And the renewable energy industry is booming. There are now more than 70 renewable energy companies worldwide with a market capitalization greater than $40 million each and their total market capitalization is over $30 billion, according to Xinhua.

Major investments and acquisitions have been made in recent years by leading global companies such as GE, Siemens, Shell, BP, Sanyo and Sharp and the industry could provide over 1.7 billion jobs worldwide, Martinot said. China's renewable energy market has huge potential and is a great market for world investors.

Among the US$6 billion investment in 2005, most was poured into small hydropower and solar hot water energy, with $600 million going towards wind power, Xinhua reports. China is already the world's leader in solar hot water use and, as reported previously, China has a huge untapped reserve of wind power potential they are just beginning to develop.

As we've discussed here before, the Chinese government has pledged strong policy support to the renewable energy industry in the past year. In January, China's new national renewable energy law came into effect [see previous post] which sets tariffs in place to foster renewable energy use. The announcement last November that I reported on here siad that China's goal is to double their current use of renewable energy to 15 percent of the rapidly developing nation's energy mix by the year 2020. Xinhua reports that China has announced plans to increase its installed electricity capacity for renewable energy to 10 percent of its total power capacity by 2010 and 20 percent by 2020.

Either way, China clearly has made renewable energy a strong priority for both policy and investment.

By 2010, Xinhua reports that renewable energy excluding large hydropower will account for five percent of China's total primary energy consumption and the percentage is planned to rise to 10 percent by 2020.

Speaking at a meeting on energy development on the last month, Chinese Premier Wen Jiabao called for effective measures to ensure the implementation of the government's energy saving and renewable development policies and emphasized that renewable energy is an important strategic alternative to coal and oil.

Is this a continued sign that Red China may be going green?

If you'd like to read about five praiseworthy and inspirational individuals who have been striving to make a green China a reality, check out China.org's 2005 Green China Award winners...

[A hat tip to RenewableEnergyAccess]

Read more!