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 costs 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 state-based Renewable Portfolio Standard (RPS). While these standards
have been tremendously successful in producing large quantities of
renewable energy, utilities have almost exclusively fought their
implementation. Many of us resist being told what to do, even if it is the
'right thing'.
Another item 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-driven 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 returns' 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.
About the author...
Bill Roush has an MBA in Direct Marketing and has been an owner of a solar
equipment business. He is currently the President of the Heartland Solar
Energy Industries Association (SEIA chapter) and on the board of the
Heartland Renewable Energy Society (ASES chapter).
