| Renewable energy has been
plagued by the fact that its' greatest benefits are not a part of
the economic equation that is usually used when making decisions
for more power plants. Things like clean air and water result in
improved health, but those health benefits don't make renewable
energy look cheaper or dirty fuels look more expensive in a
straight cost of service calculation. Some would add the unknown
costs to insurers, agriculture and others, of climate change to
fossil fuel costs. We devote billions of taxpayer dollars
defending our current and planned fossil fuel infrastructure, both
here and abroad, and yet this too does not make fossil fuels look
more expensive.
Secure, job creating homegrown energy that we don't have to
spend these taxpayer dollars on don't look cheaper in most 'what
does it cost me?' economic calculations. These have come to be
known as external costs of fossil fuels that just don't become
part of the 'bottom line' cost analysis that we usually make
energy decisions on.
There is, I believe, a way to factor in the benefits of
renewable energy that fits well with our economic system and
current regulatory structure. In short, it would be to allow
regulated, investor owned utilities (IOU's) to make a higher rate
of return on investments producing renewable energy than from
investments in 'dirty' fuels with external cost to society.
Certainly we know by now that electric utilities are very good
at providing affordable power and good jobs. Some of them have
even become good at using renewable energy, but usually only when
mandated to do so by a renewable portfolio standard. While these
standards have been tremendously successful in producing large
quantities of renewable energy, utilities have usually fought
their initiation and sometimes their implementation. Many of us
resist being told what to do, even if it is the 'right thing'.
Another thing our investor owned utilities are very good at is
delivering a regular financial rate of return. They dependably
meet the returns allowed by state regulators year after year with
few exceptions. This is an important point. State regulators
though a Public Utility Commission allows IOU's to make a set rate
of return such as 12% on their investments. This percentage is
determined by the PUC to be fair in balancing the need for the IOU
to make a profit, provide jobs and affordable power in their local
area.
It is time to allow IOU's a greater rate of return on clean,
safe, renewable energy investments than they are allowed on fuels
with huge external costs to society.
This 'preferred renewable return' incentive fits perfectly with
both our market based, profit making economy and our current
regulatory structure. IOU's can propose and PUC's can determine
what is the appropriate incentive (14% instead of 12% as an
example) for their local area. The incentives can be based on the
benefits of eliminating external costs to citizens, the state and
others and what is needed to spur investment. Ideally, there would
be a different 'preferred renewable return' for different
renewable technologies based on what is needed to bring the
technologies to the market. For instance, photovoltaics may
deserve a higher return based on their current higher costs. Each
PUC would be able to set such incentives as they see fit, based on
their local market and resources. Technologies could include the
full range of renewables available in the region, such as
geothermal, liquid fuels, landfill methane, solar hot water, solar
electric and wind. Financing of and grid management for
distributed generation, energy efficiency and even off grid
applications could be included in this incentive package.
Such an incentive would also be justified based on the huge,
roller coaster price swings of fossil fuels lately. The small
'preferred renewable return' would help us move from the wild and
unpredictable price swings of fossil fuel costs to the more
predictable and downward trending costs of renewable energy.
A 'preferred renewable return' could be initiated by the
utility, the PUC, the Governor or state legislature. Given the
success of recent public votes on renewable energy (Colorado, San
Francisco, Columbia, MO), it could also come from an initiative or
ballot issue.
This is a way to 'mainstream' renewable energy. Our local
utilities would then have every incentive to seek out investments
in the growing renewable energy marketplace. This would be an
ongoing, permanent incentive that would add the power of market
forces to getting us off the fossil fuel treadmill.
The article was originally published on
www.renewableenergynews.com
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