In a vertically integrated utility model, what disincentives (regulatory, financial and ratemaking) exist for the expanded use of renewable energies?


One disincentive for expanding the use of renewable resources in the traditional model is the generally higher production costs currently associated with many renewable energy resources. In a regulatory climate that focuses on just low cost, the higher prices of renewable energy resources will often act to exclude them from consideration. While there are well-documented case studies to the effect that traditional low-cost resources are receiving significant subsidies or cause significant collateral cost impacts that are shifted to society as a whole (such as air pollution), traditional regulatory and ratemaking policies tend to discount or completely ignore these "societal costs." There are financial disincentives for cooperatives that might be interested in incorporating renewables in their generation mix. Since cooperatives rely on RUS and CFC for financing, which require the least-cost generation resources, renewables that are more expensive than fossil fuel generators do not even get considered.


4. In a competitive electric market utility model, what disincentives exist for the expanded use of renewable energies?


In a competitive electric market model, the lowest delivered cost per kWh is the driving force in decisions to add new generators. If renewables appear, in the short run, to be more expensive, they will not be considered, even though over the long-run, when considering potential fuel cost increases or fuel availability risks, the renewables may be a better long run choice. Many renewables are very capital intensive, but have little, if any, ongoing fuel costs. (The wind and sun are free.) On the other hand, many conventional generators, such as gas turbines, have extremely low capital costs, but also have the potential for extremely high-cost fuel impacts over time.

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