Interesting paragraphs on renewables, and in particular, state incentives in California and
Wisconsin. Now we know why DCH has an office there?,
State and Regional Renewables Incentives
California is the leader in providing incentives for environmentally friendly technologies,
especially
renewable energy technologies. The California Public Utilities Commission has
consistently developed
State energy plans that favor the use of renewables, although, as discussed above, the
most recent
resource plan was struck down by FERC. The CPUC has responded by proposing that
utilities keep
and promote their current use of renewable energy through quantity mandates rather than
price
mandates. The success of this proposal could encourage and persuade other States
interested in
renewable energy development to enact similar policies.
Wisconsin is another State that provides an incentive for renewables development.
Wisconsin's
Advance Plan 6, passed in 1992, made it the only State to offer renewable energy
incentives through
direct payments on generation. Investor-owned Wisconsin utilities with qualifying wind,
solar thermal,
or photovoltaic generation receive a payment of 0.75 cents per kilowatthour, while all
other qualifying
renewable generation receives a payment of 0.25 cents per kilowatthour. The incentive
payment applies
to facilities that receive construction authority by December 31, 1998.
Like the CPUC, the Wisconsin Public Service Commission recognized that utility
ratepayers would
ultimately bear the costs of these incentives, but accepted the tradeoff in the interest of
promoting
renewables and obtaining such nonmarket benefits as fuel diversity and emissions
reductions. Given
the regulatory climate on the national level, State initiatives take on increased importance
in guiding the
future of renewable energy development.
The Uncertain Future of Renewable Energy
The FERC rulings limiting the use of above-avoided-cost renewable set-asides may
severely affect the
commercial renewable electricity industry. The industry is also facing increasing
competition among
generating plants and the possible repeal of PURPA. The extent to which the renewables
industry will
be able to continue to grow under these conditions is uncertain.
The immediate future of renewables is largely dependent on three factors. First, most
renewables
depend on the willingness of the public (expressed in the form of direct State and
Federal government
incentives or green pricing programs) to support renewable energy development. The
programs and
initiatives of State and local governments are especially important, and the States'
continued
involvement in the promotion of renewables will have a large impact on the future of
renewables.
Second, continued improvement in the technical and cost merits of renewable
technologies will
increase the probability of their commercialization. Simply put, if performance and cost
measures
continue to improve relative to alternative energy sources, more renewable technologies
will become
cost-competitive with conventional technologies. Finally, the prices of fossil fuels,
especially natural
gas, will establish the baseline for determining renewable energy's cost competitiveness.
As prices
change over time, so too does the economic viability of renewables. As the technologies
develop, and
especially if fossil fuel prices rise, renewables have the potential to compete with
conventional fuels in
all areas, including cost.
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