In Part I of her recent feature on the US Government's commitment to renewable energy," Felicity Carus identified some weapons in President Obama's arsenal in the fight to support RE projecs, infrastructure and industry. In this follow-up article, Carus talks about other variables impacting the renewables market in the US.
Renewable energy credits (RECs) are also a large component of
President Obama's executive order, whether from on-site
generation or off-site generation. Some examples: Intel and
Microsoft are currently the largest buyers of RECs to green
their business: it's a neat model since it requires no direct
investment or commitment to project finance from the company.
Furthermore, RECs are also extremely cheap- - less than $1 per
MWh for voluntary RECs, which is no way near enough to pay for a
project.
Other companies, such as Google and Walmart (which also buys
RECs), are choosing a more direct approach by providing project
finance, often through tax equity investments. The ITC, for
example, is a 30 per cent tax credit. Once debt and sponsor
equity has been wrapped into the deal, the ITC might be worth
less than one-third; however, they can still save significant
amounts on final payments to the Internal Revenue Service. These
companies also enter into power purchase agreements (PPAs) for
20 years to procure clean power.
So when SEIA president and CEO Rhone Resch implored the
government to "go further," (see Part I) he was indirectly
criticising the federal cop-out. "Federal agencies should have
the authority to adopt long-term power purchase agreements in
order to maximise savings for US taxpayers," he explained.
"Today’s outdated system discourages the same power purchases
for federal facilities that successful companies like Walmart,
Costco and Apple use to save money by going solar.”
Previously, President Obama's approach to climate change has
been to command the Army, Navy and Air Force to fight it. The US
military, one of the world's largest consumers of energy, has
embraced its 25 per cent renewable target by 2025 with great
gusto; it might not only save on its $11 billion annual spend on
liquid fuels alone, but it might also saves lives on the
frontline. By 2025, these targets could result in 3GW of
renewable capacity installed by the military, estimates show.
The power of military procurement has been witnessed in other
industries, notably the semiconductor and aerospace sectors. The
hope now is that the military and federal government agencies,
which spend $500 billion a year in goods and services, can do
the same for renewables.
President Obama has turned to his allies on the ground in the
military and federal government, partly because his foes in
Congress will not let him move on any significant national
energy policy. He has form on being able to achieve the
seemingly impossible with a flash of signature in the Oval
office, rather than through tortuous wranglings in Congress.
Some examples of climate-related actions achieved in spite
of Congress: the establishment of new fuel standards: US
CAFE standards will push fuel economy for passenger vehicles to
54.5 mpg by 2025. In addition, new standards have been set for
electric power plants, which will close up to 77GW of the 314GW
of coal-fired stations in the US.
President Obama is also under considerable pressure to make good
on his administration's commitment to cut carbon emissions 17
per cent by 2020. Even without much effort, that target looks
achievable as natural gas replaces coal as America's fuel of
choice for electricity generation. The president's
"all-of-the-above" energy strategy includes commitments to shale
gas and tar sands, which take a heavy toll on the environment.
And the US is only at the start of a boom in unconventional
fossil fuels, which could turn this trend on its head.
Pushback against Obama's renewable programme is inevitable from
the conventional fuel lobby and their representatives in
Congress who will claim that this order is just another attack
in Obama's "war on coal".
Laura Sheehan, senior vice president of communications for
the American Coalition for Clean Coal Electricity, has said:
"Shoe-horning renewable technologies that cannot deliver the
baseload electricity this country needs, does no one any good,
and puts the American economy at risk."
Felicity Carus' article will appear in its entirety in the January/February 2014 issue of Renewable Energy Focus magazine. Subscribe online to read her ongoing coverage on this issue as well as other subjects.