March 19, 2009
The Rooftop Revolution
A little-known policy is turning sleepy central Florida into a green
energy hub. Could it do the same for America at large?
by Mariah Blake
Washington, DC, United States [RenewableEnergyWorld.com]
This winter, as Congress was scrambling to pass the stimulus package, the
bottom fell out of the renewable energy sector -- the very industry that
lawmakers have held out as our best hope of salvaging the economy. Trade
groups like the American Wind Energy Association, which as recently as
December was forecasting "another record-shattering year of growth," began
predicting that new installations would plunge by 30 to 50 percent. Solar
panel manufacturers that had been blazing a trail of growth announced a wave
of layoffs. Some have since cut their workforces in half, as stock prices
tumble and plans for new green energy projects stall.
While rate hikes are seldom popular, the community
has rallied behind this policy, because unlike big power plant
construction-the costs of which are also passed on to the
public-everyone has the opportunity to profit, either by investing
themselves or by tapping into the groundswell of economic activity the
incentive creates. |
But there is one place where capital is still flowing: Gainesville, Florida.
Even as solar panels are stacking up in warehouses around the country, this
city of 120,000 is gearing up for a solar power boom, fueled by homegrown
businesses and scrappy investors who have descended on the community and are
hiring local contractors to install photovoltaic panels on rooftops around
town.
One of those investors is Tim Morgan, a tall fiftysomething man with
slicked-back hair and ostrich-skin boots who owns a chain of electrical
contracting companies. His industry has been hit hard by the downturn, but
he has a plan to salvage his business, which he explained over a drink at
the Ballyhoo Grill, a gritty Gainesville bar with rusty license plates
nailed to the wall and Jimmy Buffett blaring on the jukebox.
Morgan intends to rent roof space from eighty Gainesville businesses and
install twenty-five-kilowatt solar generating systems on each of them, for a
total of two megawatts-a project that would nearly double Florida's
solar-generating capacity. He estimates the venture will cost between $16
million and $20 million and bring in $1.4 million a year. Already, he has
lined up financing, found local contractors to do the installation, and
staked claims to the rooftops of at least fifty businesses. "And we're just
one tiny player," he told me. "Look around. You can see how fast this thing
is going to move."
Indeed, around Gainesville similar projects abound. Paradigm Properties, a
residential real estate company, plans to install photovoltaic arrays on
fifty local apartment buildings and its downtown headquarters. Achira Wood,
a custom carpentry outlet, is plastering the roof of its workshop-roughly
50,000 square feet of galvanized steel-with solar panels. Interstate Mini
Storage is doing the same with its sprawling flat-roofed compound.
Tom Lane, who owns ECS Solar Energy Systems, a local solar contractor, told
me he's planning to expand his staff from eleven to at least fifty. "The
activity we've seen is just explosive," he said. "I've been in the business
thirty years and I've never seen anything like it."
Why is the renewable energy market in Gainesville booming while it's
collapsing elsewhere in the country? The answer boils down to policy. In
early February, the city became the first in the nation to adopt a "feed-in
tariff"-a clunky and un-descriptive name for a bold incentive to foster
renewable energy. Under this system, the local power company is required to
buy renewable energy from independent producers, no matter how small, at
rates slightly higher than the average cost of production.
This means anyone with a cluster of solar cells on their roof can sell the
power they produce at a profit. The costs of the program are passed on to
ratepayers, who see a small rise in their electric bills (in Gainesville the
annual increase is capped at 1 percent). While rate hikes are seldom
popular, the community has rallied behind this policy, because unlike big
power plant construction-the costs of which are also passed on to the
public-everyone has the opportunity to profit, either by investing
themselves or by tapping into the groundswell of economic activity the
incentive creates.
Though Gainesville is the first to take the leap, other U.S. cities are also
moving toward adoptingfeed-in tariffs. Hawaii plans to enact one this
summer, and at least ten other states are considering following suit. Among
them is hard-hit Michigan, where Governor Jennifer Granholm has promised
that the policy will help salvage the state's economy and create thousands
of jobs by allowing "every homeowner, every business" to become "a renewable
energy entrepreneur." There is also a bill for a federal feed-in tariff
before Congress.
To understand why feed-in tariffs are potentially revolutionary, you first
have to understand how they differ from the system we've been using to drive
investment in renewable energy so far. For the last fifteen years, the
United States has relied on a patchwork of state subsidies and federal tax
breaks-mostly production tax credits for wind power, which let investors
take write-offs for the energy produced.
When Wall Street was riding high on mortgage-backed securities, this made
green energy an appealing option for big banks, which funneled billions of
dollars into sprawling wind farms as a way of lowering their taxes. But when
the market collapsed and corporate profits dried up, so did the incentive to
invest. Since last year, the number of tax equity investors — mainly big
investment banks — sinking money into wind farms has dwindled from as many
as eighteen to four, and the remaining players have scaled back.
This tax-based system has other drawbacks as well. Because Congress has to
renew the tax credits-and has often failed to do so-renewable energy is a
risky market. Frenzied bursts of investment are followed by near-total
collapse, a pattern that has hampered the growth of our domestic green
manufacturing sector. Also, tax incentives (and the quota systems in place
in about half of U.S. states) end up favoring large-scale projects, mostly
monster wind farms concentrated in remote places like the Texas panhandle.
This has been lucrative for the companies, like GE and Siemens, that build
them, but of limited economic benefit to local communities. What's more, a
lot of energy is wasted transporting power from the sparsely populated areas
where it's produced to the cities and coasts-assuming it can be transported
at all. Transmission lines are in such short supply that turbines (and
occasionally entire wind farms) sometimes have to be shut down because of
bottlenecks in the grid.
Feed-in tariffs promise to solve many of these problems by encouraging
small, local production, driven not by Wall Street banks but by ordinary
entrepreneurs-a system that boosts efficiency and fortifies local economies.
This article is an excerpt of a larger piece available now at the Washington
Monthly and was reprinted with permission.
To read the remainder of the piece, which goes into great depths on the
history of feed-in tariffs as well as the economic benefits that they
provide, click here.
Mariah Blake is an editor of the
Washington
Monthly. This story is part of a "Big Ideas" series published in
partnership with the
New America Foundation.
To subscribe or visit go to:
http://www.renewableenergyaccess.com |