Government Actions Drive Growth

Kimberley Burger Capozzi, Wednesday 14 June 2006 - 01:00:00

The Public Utility Regulatory Policies Act (PURPA) of 1978, credited with opening the door for the early wind industry to take hold, is being replaced as a primary growth driver by other state and national policies, said John McKinsey, attorney for Stoel Rives LLP.

McKinsey was part of a panel at the AWEA Windpower 2006 Conference and Exhibition that discussed federal and state policies. PURPA benefited wind by requiring utilities to enter "avoided cost" contracts with qualifying facilities (QF). But as costs of other electric generation have dropped, bringing down the avoided cost in QF contracts, the advantage of this policy to wind has been minimized, he said.

The QF feature was further weakened by the Energy Policy Act of 2005, which enables the avoided cost contract requirement to be dropped when a competitive market exists, McKinsey said. He anticipates more utilities applying for their territories to be deemed competitive.

These developments make RPS policies "more important than ever," but the policy tool as an "unproven track record" on whether it results in utilities entering favorable contracts for wind, he said. The adoption of green energy values and production tax credits are other key policies, he said.

The National Renewable Energy Laboratory (NREL) conducted an analysis of state-level policies using the Wind Deployment Systems Model (WinDS) to study expansion over the next 20 to 50 years. The model found that RPS laws and other incentives would be a "significant driver" in wind growth over the next decade, said Nate Blair, a senior energy analyst with NREL. But their impact will diminish in later years as economic factors - such as fuel prices versus wind costs - dominate, said Blair. Making sure penalties have enough teeth are key for meeting RPS goals, he added.

Another policy mechanism, the feed-in tariff, is being used heavily in Europe and elsewhere in the world, and is beginning to grow in popularity in the U.S. and Canada, said Wilson Rickerson, program associate for the Center for Sustainable Energy at Bronx Community College.

Renewable energy feed-in tariffs, such as minimum price systems and standard offer contracts, set a guaranteed price that is often at a premium and established for the long term, Rickerson said. These laws have encouraged rapid industry growth where they are implemented, and closely match generation costs when compared to the higher costs of RPS laws, he said.

The Canadian provinces of Ontario and Prince Edward Island, and the states of Washington, Minnesota, Wisconsin, New Mexico and California are using this type of tool to "accomplish specific policy goals often, like in-state manufacturing or community wind," he said. "Hybrid policies" may be useful in some areas, like applying fixed prices as part of an RPS, he added.

A national RPS has been pushed by many wind advocates, and was included in the Senate's version of the energy bill passed in 2005. The RPS provision was dropped in negotiations with the House on the final law.

Chris Namovicz, operations research analyst at the U.S. Department of Energy's Information Administration, shared the results of an analysis of a 10% national RPS, as the Senate bill proposed. The study found that it would boost renewable generation considerably, especially wind and biomass. The predictions show wind reaching just under 50 GW by 2025 - versus 15 GW in the reference case - which did not reflect production tax credit extension, Namovicz said.

This growth would mostly replace the generation by coal and to a lesser extent natural gas, he said. Net market impacts were considered to be small, including modest reductions in residential electricity bills and increases to the power industry.



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