Renewable Energy in the U.S.: Lessons Learned

1. Renewable Energy in the U.S.: Lessons Learned Paul Komor University of Colorado komor@colorado.edu 27/05/03

2. Outline of presentation 1. Description of U.S. energy situation 2. Renewable energy policies: What works, what doesn’t 3. Lessons learned

3. U.S. energy mix: 6% renewables

4. U.S. electricity generation • 7% Hydro • ~1% other renewables

5. U.S. restructuring: curious mix

6. Unexpected success story: Wind

7. Unexpected success story: Wind • 3000 MW installed in U.S. 1999-2002

8. Unexpected success story: Wind • 4.7 GW spread over 31 states

9. Wind economics • New wind competes against new natural gas • Natural gas prices very volatile • Wind contracts now typically €0.03 -€0.06 / kWh • Wind’s intermittency emerging as the key barrier

10. Renewable policies: what works • Federal wind production tax credit (PTC) • State renewable portfolio standards (RPS) • Green pricing • Bond funds • State system benefit charges (SBC)

11. National wind production tax credit • Only significant national policy • €0.016/kWh for generator • Good for 10 years of operation • Set to expire 12/03, may be renewed • Wind developer: ‘I’m dead without it’ • Wise use of public funds?

12. State Renewable Portfolio Standards (RPS) • Similar to UK’s RO • 16 U.S. states have RPSs • Some are using green tags (RECs) • Usually tied to restructuring (liberalisation) • Vary widely in goals, rules

13. RPS example: Texas • Restructuring legislation in 1999 • Required 2000 MW of new renewables (~2% of total generation) by 2009 • Requirement on retailers, not generators • Active green tag (REC) program • Over 1000 MW of new wind already

14. Green pricing • Voluntary, higher price electricity • 100+ utility green pricing programs • Many active green marketers • Green Mountain: 600,000 customers • 980 MW of new renewables (mostly wind) built to serve green pricing markets

15. Bond funds • San Francisco: borrowed €100 million for solar. • Projects cannot increase net costs (including loan repayment) • Package solar with efficiency • Model program, other cities are considering it

16. System benefit charges (SBC) • 15 states have SBCs • Usually passed as part of restructuring • A per-kWh tax, used to support renewables, efficiency, other public goods • Allocation of funds contentious and occasionally ugly

17. Renewable policies: what doesn’t work • Subsidies for capacity, not generation • Using RPS to target specific technologies • Requiring green programs without incentives for success • Failing to protect renewable funds

18. Policy challenges • Cost of uncertainty vs. need to update/improve/fine-tune policies • Goals: install new generation? Reduce costs? Promote economic development? Boost a lagging technology?

19. Political challenges • Lack of public interest • Political power of entrenched fossil fuel interests • Utility culture: risk-averse, few incentives for innovation

20. Conclusions • Work towards agreement on policy goals, then clarify and stick to them • Learn from others’ mistakes • If establishing renewable funding pots, have rigorous allocation agreements in place first • Set boundaries carefully, but promote/pursue private investment

21. Questions, comments? P. Komor komor@colorado.edu