Renewable Energy Policies
State and federal policies that encourage renewable energy projects play an important role in their development.
At the federal level, the production tax credit (PTC) is the primary incentive tool. The PTC was passed by Congress to even the playing field between the renewable energy industry and the heavily subsidized fossil fuel and nuclear industries. The PTC currently allows the owners of qualifying renewable energy projects to take 2.2 cents off their tax bill for every kilowatt-hour of renewable electricity generated during the first ten years of the project. Though the tax credit is an important part of renewable energy project financing, its weakness has been its short-term duration. Congress has typically reauthorized the tax credit for only one or two years at a time, making it difficult for investors to plan development of renewable energy resources. The current PTC expires December 31, 2012 for wind projects, and December 31, 2013 for other renewable energy projects. Alternatively, wind and solar projects can choose to take advantage of a 30% federal investment tax credit (ITC) for facilities placed in service by 2013 if construction begins before December 31, 2011.
Historically, individual state policies have been the primary drivers of renewable energy development in the United States. The four primary policies used across the country are net metering, renewable portfolio standards, renewable energy funds and feed-in tariffs.
State net metering rules provide an incentive for individuals and businesses to invest in their own small renewable energy systems by allowing them to sell excess power they produce back into the grid.More than 40 states, including Alaska, as well as the District of Columbia and the U.S. Virgin Islands, now offer some form of net metering. Different rules in each state determine the maximum amount of power an individual can sell back to the utility, the price at which the utility must purchase the power, and the length of time an individual producer can “bank” the power they produce before a “net” bill must be calculated.
Alaska’s net metering regulations, passed in 2010, apply to renewable energy systems of 25 kW or less, and require large utilities to purchase power from customers, up to 1.5% of the utility’s average load. In addition, some utilities have their own incentive programs that allow individuals to sell power back to the utilities. Fairbanks’ Golden Valley Electric Association (GVEA) has developed a Sustainable Natural Alternative Power (SNAP) program. SNAP allows customers who wish to support renewable energy development to do so by contributing to a fund that is held in escrow by the utility company. Individuals in the GVEA service area who want to produce up to 25 kW of renewable electricity for the grid are paid from the escrow fund in proportion to the amount of power they produce, plus the utilities avoided fuel cost.
U.S. Department of Energy Office of Energy Efficiency and Renewable Energy
American Wind Energy Association
Golden Valley Electric Association
Renewable Portfolio Standards
Twenty-nine states and Washington D.C. have Renewable Portfolio Standards (RPS), and an additional 8 states, including Alaska, have a less binding Renewable Energy Goal. Alaska’s goal, adopted in 2010, is to generate 50% of the state’s electricity from renewable sources by 2025.
An RPS is a state law that requires utility companies to generate a specified percentage of their electricity from renewable resources by a certain date. For example, Nevada law mandates investor-owned utilities in that state produce 25% of their electricity from renewables by the year 2025. The percentage and end date vary widely from state to state. Utilities are typically given interim milestones, and must pay a fine if they do not reach those milestones. Most states allow utilities to purchase renewable energy credits (RECs) to meet the RPS standard and avoid paying fines. The RPS approach makes different entities and renewable energy resources compete to meet the standard. In addition, bills have been proposed in Congress to create a mandatory national Renewable Electricity Standard (RES).
Database of State Incentives for Renewable Energy
Renewable Energy Funds/System Benefits Charges
More than 20 states, including Alaska, have renewable energy funds (sometimes called clean energy funds), most of which are supported by small, mill-rated surcharges on energy sold to consumers. These surcharges are sometimes referred to as system benefit charges. Renewable energy funds provide support for the development of renewable energy by helping to remove market barriers, lowering financing costs, developing infrastructure, and educating the public. For example, the system benefit charges in Oregon are deposited into an independent trust that funds eligible wind, solar electric, biomass, small-scale hydro, tidal, geothermal, and fuel cell projects. These projects are supported by grants, loans, rebates, equity investments, and other financing mechanisms used by the fund.
Terms of the various funds vary from state to state. Some states have scheduled funds to last only five years. Other states have open-ended funds. Longer-term funds provide greater stability for renewable energy developers.
In Alaska, the Renewable Energy Grant Program was created in 2008 and is administered by the Alaska Energy Authority. As of 2011, the Legislature had appropriated $186 million for more than 150 qualifying projects from a wind farm in Quinhagak to a hydropower project in Gustvaus to a ground source heat pump system for the Juneau airport. This program is helping communities stabilize energy prices by reducing reliance on costly diesel fuel for electricity and heat. Between 2009-2010, projects supported by this fund displaced 1.69 million gallons of diesel for a cost savings of $3.37 million
In the states that have both an RPS and a renewable energy fund, the two policies work together to stimulate the renewable energy market. RPS standards “pull” renewable energy technologies into a state by creating a long-term market that reduces investment risk and provides a level playing field for developers. On the other hand, renewable energy funds “push” clean energy technologies by lowering market barriers through direct investment incentives and supporting the infrastructure needed to develop renewable energy. For example, in California, the fund is used to buy down the above-market costs of renewable energy. The development that takes place as a result of renewable energy funds helps states meet their RPS requirements.
Clean Energy States Alliance
U.S. Department of Energy Office of Energy Efficiency and Renewable Energy
Alaska Energy Authority
Feed Laws/Advanced Renewable Tariffs (ARTS)
Electricity feed laws and advanced renewable tariffs (ARTs) are used in a number of countries and are considered by many to be the world’s most successful policy mechanism for stimulating rapid renewable energy development. They give renewable energy producers guaranteed access to the electric grid at a price set by the regulatory authority, giving producers the contractual certainty needed to finance renewable energy projects.They also enable homeowners, farmers, cooperatives, and others to participate on an equal footing with large commercial developers of renewable energy. Currently, more than 16 countries in the European Union use some form of feed law.
ARTs are the modern version of Feed Laws. They differ from the simpler feed laws in several important ways. Tariffs are differentiated by technology, project size, or, in the case of wind energy, by the productivity of the resource. Tariffs for new projects are also subject to periodic review to determine if the program is sufficiently robust.
In 2009, the Canadian province of Ontario enacted North America’s first comprehensive program of Advanced Renewable Tariffs. The program offers 20- to 40-year contracts to producers of wind, hydro, biomass, landfill gas, and solar photovoltaic energy at a variety of prices ranging from 10 cents/kWh to 80 cents/kWh for small residential solar photovoltaic systems. The contracts are available to homeowners, businesses, and commercial energy producers, and differentiate between small and large energy producers. Additional financial incentives are offered for projects developed by First Nations, farmers, cooperatives, and community groups.
Vermont has adopted a modest version of an Advanced Renewable Tariff. The program is capped at 50 MW and offers 20-year contracts for renewable energy producers with prices varying from 12 cents/kWh for landfill gas to 30 cents/kWh for solar photovoltaic. The town of Gainesville, Florida also generated widespread publicity in 2009 for adopting a feed-in-tariff to spur installation of solar photovoltaic systems. The tariff incentivizes solar installations at homes and businesses with 20-year contracts that pay 24-32 cents/kWh depending on the size and configuration of the system. The program limits total installations to 4 MW a year and reserves a percentage each year for small residential systems of 10 kW or less. Legislation for feed-in tariffs is currently being considered in several other states.
Paul Gipe at wind-works.org
Who we are
Renewable Energy Alaska Project is a coalition of energy stakeholders working to facilitate the development of renewable energy in Alaska through collaboration, education, training, and advocacy.