In a competitive electric market model, what incentives exist for the expanded use of renewable energies?
There are two commonly mentioned "incentives" for the development of renewable energy resources in a competitive market: special retail products and renewable portfolio standards. Special retail products refer to efforts by retail competitive suppliers to market products specifically tailored to consumer preferences. For example, Green Mountain Energy Resources (GMER) provided three distinct products to California consumers: a 60%, 75%, and 90% renewable-based retail electric service. As consumers signed up, GMER committed to expand its contracts with renewable energy generators to maintain the advertised percentage of renewables.
Another approach to special retail products is a disclosure label that states, among other information, the resource mix of fuels that were purchased by the retail supplier. The thought is that consumers may want to switch to a supplier who provides a greater percentage of renewable resources in its fuel mix, thereby encouraging the development of renewable resources.
The second general incentive program for renewable resources is a renewable portfolio standard (RPS). Enacted either through state legislation or by commission rule, an RPS requires each retail supplier to have a minimum percentage of renewable resources in each product that it provides to consumers. Some RPS programs, such as the Environmental Portfolio Standard in Arizona, also mandate a specific percentage of "new" renewables or specific types of renewables. Maine, Massachusetts, and Connecticut have adopted RPS programs as part of their restructuring legislation. Portfolio standards can be an effective incentive, particularly if all electricity providers are held to the same portfolio standard requirements.
There are also some federal and state tax credits that are available. One potential incentive would be the standardization of distributed generation interconnection procedures and agreements. Simplification of procedures and streamlining of interconnection hurdles could significantly improve the potential for new renewables development. Net metering (or net billing) laws or rules would encourage customers to buy and install renewables on their own property. Renewable leasing programs or lease-to-buy programs would allow customers to utilize renewable systems even if the customer did not have the capital to install his/her own system.