Solar takes a backseat in national climate and energy bill

21 May of 2009 by

For the past eight years solar advocates throughout the UnitedStates lamented the lack of federal leadership on renewable energyissues.

If only we had a President who fully realized the economic,environmental, and moral obligation to stem global warming and increaseour domestic clean energy supply, we said.

If only we had a filibuster-proof majority in the U.S. Senate promising sweeping clean energy legislation.

If only we had a fervent renewable energy advocate chairing the House’s Energy and Commerce (E&C) Committee.

Well, that dream checklist is done, done and done.

Here we are in May, with Obama’s first 100 days behind him andCongress assiduously debating his clean energy plan. The President’splan includes three major components: global warming policy (cap andtrade), a national requirement for utilities to produce a certainpercentage of their power from renewables (Renewable Energy Standard),and much-needed improvements to our antiquated transmission system.

Does this sweeping new plan include provisions to make solar energy, which currently accounts for 1/10thof one percent of our electricity supply, a substantial part of thenation’s energy mix?  The accurate answer is nuanced, but the shortanswer is no.

Federal Renewable Electricity Standard (RES)

The Obama Administration supports a policy requiring that 25 percentof our electricity demand be met by renewable energy by 2025.  InMarch, Representatives Waxman (D-30th CA) and Markey (D-7th MA) released their 600 page energy bill,which after weeks of negotiations contains a watered-down RES target of20 percent standard by 2020, with up to 15 percent of electricity salescoming from renewable sources and 5 percent through efficiency.

Senator Bingaman (D- NM), Chair of the Senate Energy and NaturalResources (E&NR) Committee, is working on a similar goal of 20percent renewable by 2021, with energy efficiency also able to satisfya quarter of that requirement. Bingaman’s RES proposal faces stiffopposition, with the real possibility of unanimous Republicanopposition. As an indicator, Republican ranking member on the E&NR,Senator Murkowski (R-AK) is calling for a 15 percent goal that could besatisfied with nuclear energy, more hydroelectricity and unlimited useof efficiency measures.

Nearly any policy action that encourages more renewable energy isA-OK with us. We support the House and Senate’s federal RES goal,though significantly weakened, because it sets an important tone forthe country and will directly lead to new wind and biomass development,all important steps on the path to a new clean energy future.  However,as currently written, none of the pending RES policies will deploysignificant amounts of solar. According to the Department of Energy’s analysisof that 25 percent RES by 2025, which again is much stronger than thecompromise goals emerging from Committees, the federal RES structurecould lead to a 35 percent increase in solar compared to a 678 percentincrease in wind.  When you’re starting at less than one percent, 35percent growth doesn’t amount to much.

Under the current RES proposals states would be able to buy and sellRenewable Energy Credits (RECs) in a federal REC market.  In thismarketplace, cheap wind from Montana could be sold by theMontana-Dakota Utility Company and bought by Southern Company tosatisfy Georgia’s RES requirements.  As a result, renewable energydevelopment will be greatly weighted toward more mature least-costrenewable energy options. That is good news for winning the votes ofthose worried about the near-term price tag, and it is great mechanismto bring wind and biomass to the grid.

By focusing entirely on the inputs, it doesn’t recognize the valueof the results: solar energy production during day-time hours tosupplement night-time wind generation, for example. Or the contributionof solar generation during the hours of the day when electricity costsare higher. Or the immense economic and job creation benefits of bothdistributed and central station solar. Solar that’s installed onrooftops and within the distribution grid also avoids costly investmentin transmission and distribution system expansion and upgrades.  Not tomention that solar is the most abundant free source of energy availableand the cost for both distributed and central-station solar generationis expected to drop significantly with higher levels of deployment. Ifwe are serious about weaning our nation off fossil fuels and creating astronger, more secure new energy economy, diversification of renewableswill be crucial to maintaining a reliable electricity supply.

solar carve out Solar takes a backseat in national climate and energy billThe Solar Energy Industries Association spent the last six months urging Congressto add solar specific provisions to the draft RES bills, namely adistributed generation carve-out to support rooftop solar, inclusion ofsolar hot water among the qualifying technology, and accommodations forutility-scale solar. The solar set-aside is a policy mechanism in usetoday in fifteen states, and one that has proven effective inkick-starting robust new solar markets.

Instead, a “REC multiplier” for distributed generation is emergingas the favored solar mechanism in the federal bills underconsideration.  With a three times multiplier, one megawatt  hour ofdistributed solar would be treated as three megawatts of wind, biomass,geothermal  or hydro in the REC market. If past experience at the statelevel proves anything (think Arizona and New Mexico), the multiplierwill do little to encourage distributed solar as there’s still littleincentive to invest in the early-market, higher-cost energy option. Without a direct carve-out to encourage this initial investment indistributed solar, it will take much longer to realize the economies ofscale cost reductions projected for this valuable energy resource.  Afurther downside to REC multipliers is that they dilute the overallrenewable requirement. One megawatt counting as three reduces the totalamount of renewable energy in the mix, an outcome that undermines theoriginal intent of the policy.

Climate Change Policy

If the skeptics are wrong and this plan passes through Committee and becomes law, will it help deploy solar? Unlikely.

TheWaxman-Markey energy bill also includes a carbon reduction plan. Thegoal would be to set an “economy-wide” carbon limit and then auction ordistribute carbon emissions credits, also referred to as allowances,equal to that limit. Through trading of the credits, and gradualtightening of the overall cap, the plan aims to reduce total greenhousegas (GHG) emissions 17 percent below 2005 levels by 2020 and 85 percentbelow 2005 levels by 2050.

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

Much like the RES,the carbon cap and trade will encourage short-term, least-costimplementation mechanisms, ignoring the other tremendous benefits solaroffers.

In his carbon plan,Obama originally called for auctioning all emissions allowances.Carbon-intensive industries would be required to pay for their originalallotment of carbon credits, and the government would use the auctionrevenues to develop low-carbon alternatives. However, legislatorslooking for votes understand that a compromise on that position isnecessary. Sponsors of the Waxman-Markey legislation appear to havesettled on a deal that would give away as much as 59 percent of thecredits for free: 44 percent for the local distribution companies thatservice the electric and natural gas utility industries, and 15 percentfor heavy industries deemed especially vulnerable to internationaltrade. Only15 percent of theemissions allowances would be auctioned, with the proceeds going tocompensate the public for higher energy costs.

If there is anauction of any allowances by the time the bill is passed into law, thesolar community is asking that 5 percent of the auction proceeds beset-aside into a solar technology deployment fund. It remains to beseen whether this provision will be contained in the Waxman-Markeydraft. But one thing is certain, giving credits away for free meansfewer federal dollars to be invested in efficiency, transmission andrenewable energy programs.

Therole that solar and renewable energy generation plays in the new carbonmarket also remains in question. Solar advocates assert that solargenerators, whether roof-top solar owners or large-scale concentratingsolar power plants, should either receive some portion of the carboncredits allotted, or the overall cap should be lowered to account forrenewable energy projects.

Bothoptions are designed to ensure real reduction in overall GHG levelsfrom investment in solar generation. Unless we account for renewableenergy generation when implementing the program, carbon-emittinggenerators could meet their requirements by taking credit for emissionreductions from renewable energy projects that are already developed. Asituation that amounts to zero progress on carbon reduction. The latestWaxman-Markey bill would in fact allocate some allowances to states for investments in renewable energy and energy efficiency.

Transmission

There are around 7,000 MW oflarge-scale solar projects under contract in the U.S. today, mostly inthe American southwest.  One of the most significant barriers facingthese projects is access to available and affordable transmissioncapacity; the infrastructure that moves those valuable clean electronsto the communities where they are needed.

The current system for planning, siting, permitting and funding transmission development was designed for the 20thcentury electric industry; although some might argue it is best suitedfor the 1800s. This model assumes a relatively limited number ofcentralized, dispatchable power plants delivering electricity within autility’s service territory.  Solar and other renewables need a 21st century solution for transmission that looks beyond state borders to support the nation’s renewable energy goals.

Both the Senate and the House of Representatives are currently considering several bills (including Senator Bingaman’s transmission bill and Representative Inslee’s bill)that address these issues of transmission planning, siting and costrecovery.  All of the bills establish some level of oversight forplanning and permitting by the Federal Energy Regulatory Commission(FERC), with varying degrees of state or regional responsibility. Thisfederal oversight should help the country develop the mostcost-effective and reliable national transmission system possible asquickly as possible, and will help tap the massive potential forcentral station solar farms by linking the areas with the bestgenerating potential to load.

Another solar-friendly element included in many of the billsdirectly addresses the challenge of cost. Who pays for these criticallifelines of our new energy future? Well, all electric consumersbenefit from increased renewables in the general energy mix – foreverything from increased energy security, to stabilizing the cost forelectricity, to mitigating the impacts of global climatechange. Therefore the cost of new transmission should rightfully bespread across all ratepayers in what’s known as “interconnection-widecost recovery.”

There are many important details still being debated in the proposedtransmission legislation. How much, if any, non-renewable energy shouldbe allowed to use the new transmission superhighway? Which agenciesshould be designated as lead for environmental review? The devil is inthe details, and once the energy bill is passed, the real work willbegin. Implementation will no doubt bring a new set of challenges, butit’s an exciting first step on the road to a new grid capable ofincorporating solar into our national energy mix at an entirely newscale.

A floor, not a ceiling

While transmission reform will likely lead to more central stationsolar development, we remain skeptical that current versions of eitherthe RES or a carbon cap and trade policy will lead to significant solardeployment.  The pending bill has proven that a new, cleaner energyfuture is a national priority.  That in itself is progress. But a“sweeping” federal energy bill that fails to deploy a portfolio ofrenewable energy options is an underwhelming outcome, ill-equipped tohelp us meet the challenges at hand..

However, there is a silver lining. States, the traditional hot-spotsof solar progress, are not waiting for the federal government to solveour energy challenges. Policies that unleash solar’s many economic andenvironmental benefits – solar carve-outs within RES’s, net metering,interconnection, fair utility rates, sales and property tax abatementsand exemptions – are passing at the state level.  While all signsindicate that this federal energy bill will set a floor for solarenergy deployment, we expect to see pioneering work from states andcities as they continue to raise the ceiling.

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Annie Carmichael is director of federal solar policy at The Vote Solar Initiative. Jim Baak is director of utility-scale solar policy for the organization.

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