Politicians and Policymakers for an Energy Independence Plan

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Comment by Michael, Houston on November 3, 2008 at 6:10am

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Comment by Roy R on September 9, 2008 at 8:33am

Solar Monopolies in Florida! The REC Wrecking Ball – Coming to a State Near You


Florida’s electric utility system is a regulated monopoly. Now, with passage of the Florida Energy Bill this week, legislators in Tallahassee have set a course, that unless rectified, will most probably extend similar monopolies into the fastest growing energy markets – renewables and solar, and in doing so decimate the existing Florida solar industry in favor of larger Wall Street backed multinationals. It seems inconceivable that once policymakers and legislators fully comprehend the implications of the direction that they are heading in, that any true Floridian will actually support this – but stranger things have happened. Now is the time to speak out.

Buried in the Florida House and Senate Energy bill is language that would allow the state electricity Regulator, the Public Service Commission, to introduce policies known as renewable energy credits (or RECs) as a way to stimulate solar and other renewable energy electricity production. RECs are basically bought by utilities from renewable producers and certify that the utilities have acquired a unit of renewable energy, and as such can be used as a mechanism to force utilities to meet certain renewable targets. The problem is that there is growing evidence from other states that have introduced RECs, that these policies are radioactive. Maryland, introduced RECs earlier this year. Even before the policy was signed by the Governor, the largest utility announced it had signed a multi-year transaction to buy solar RECs from SunEdison, a major international solar company. That deal gave the 2 companies a 30% share of the market for 2008 and 60% for 2009 – a quasi monopoly. This crowds out the existing local solar industry since it leaves them with only 40% of the market to participate in. Job losses will follow.

New Jersey has an ill thought out solar RECs policy as well. Smaller residential solar companies are in decline and shedding people. Says Lyle Rawlings, CEO of a large NJ solar integrator “the market is in collapse right now, with projects being canceled and many of the solar businesses that grew under the rebate program now hanging on by their fingernails. The REC market literally is not working, except for a handful of companies who have been able to get long-term REC contracts - we know that the market concentration is very unhealthy, and we think it’s an improper way to deliver a solar incentive program”. Furthermore NJ will be missing its RPS target primarily because of these issues. So based on recent market evidence RECs are a wrecking ball for local renewable companies.

The problem stems from the fact that utilities retain the power to decide who they buy RECs from, and utilities quite naturally won’t want the hassle of buying small quantities of RECs bilaterally from household solar systems or small commercial providers – they would much prefer to deal with one or 2 large aggregators of the RECs doing the largest commercial renewable projects, so they arrange bilateral deals direct with them. Whats wrong with this?

Since the utilities prefer to buy in bulk they will pay more for these aggregated RECs – typically up to 80-90c in the $, whereas for residential or small commercial RECs the value is 50c or less (this is the figure the State of Maryland has proposed should they become the default residential aggregator). Consequently while the RECs incentive covers 70% or so of the build out cost of the larger commercial projects, thus providing a massive contribution to the companies least in need of it, they only provide 30% of the cost of the small systems that are the life blood to the local solar integrators. This leads to a curtain call for the local industry all done with rate payer and tax payer money that has effectively been laundered to the benefit of the larger commercial REC suppliers. And funnily enough who is supplying the policy language for the legislatures and PUCs? The answer is the very same solar companies that will benefit from them!

There are already strong indications in Florida that these same out of state large solar companies are lining up multi year contracts with Florida utilities in excess of 100MW that could sop up a majority of the RECs that would become available to the solar industry – leaving next to nothing for the local solar integrators to compete for.

As Ted Middleton, Managing Member of a Maryland solar company explained, “The ratepayer base thus foots the highest bill possible to fund Wal-Mart installations, and the little guys (houses) get a much lower cash benefit relative to each REC produced because they have little market leverage with remaining REC purchasers”

Florida legislators have just voted to approve renewable policies such as these – thankfully the energy bill both requires the PSC in Florida to fine tune these policies and then seek reaffirmation from the legislature in 2009. Maybe in the intervening months, the Governor’s office and Florida policy makers including the PSC should ask smaller NJ and Maryland solar companies as well as the Florida SEIA companies if they think these REC policies are working. They will likely hear a resounding NO!

“Unfortunately, the language that passed through the legislatures favors a REC based policy. Without any change, for the foreseeable future anyway, Florida could end up with renewable energy policy primarily designed for only one or two large companies, just like what has happened in Maryland and New Jersey,” comments Pete DeNapoli, FlaSEIA Director. “Sure, the state of Florida will meet the RPS goals, but the bottom line is that the Governor’s goal of creating a vibrant renewable energy industry with thousands of new, high paying jobs will not be realized,” Pete adds. “With Production Based Incentive or Feed-In Tariffs, you get it all.”

What legislators and policy makers instead need to do is look at the highly successful renewable policies that have been in place in Europe for years and resulted in both the rapid deployment of renewable electricity projects, a massive expansion in local jobs from it, all done with no taxpayer expense and minimal increases in electricity prices. Germany has 250,000 employed in renewables generating $30BN in sales. At the very least Florida policy makers and legislators should do what the utility solar association SEPA is doing, and undertake a trip to Germany to review first hand how Germany has a vibrant solar and renewable industry with ~ 4000MW of solar at the cost for ratepayers of “the price of a loaf of bread”. Both the Florida Solar Energy Industry Association (FlaSEIA), the Maryland, District of Columbia and Virginia SEIA, Environmental Defense Fund as well as several high profile manufacturers and solar integrators have publicly advocated introducing these feed in policies as the best public policy incentives for solar and renewables.

So for the sake of those desiring a vibrant renewables job market in Florida, I ask legislators and policymakers to reconsider these ill advised REC policies. Thanks to the efforts of the Governor, and his energy team, Florida has the opportunity to develop a clear energy policy that can get the state to 20% of electricity from renewable sources, create robust new industries employing thousands of people and improve the states energy security. However the state must be careful in what policy incentive mechanisms are introduced to get us there and avoid replicating ill conceived and dangerous policies that are already failing in other states. Other State SEIAs, such as in New York and Pennsylvania, need also to proactively participate in this growing debate and understand the full ramifications of what often is being foisted on them by other so called national industry mouthpieces with vested interests inconsistent with the local industry.

Comment by Roy R on September 3, 2008 at 1:08pm

September 3, 2008
FARE Files Florida PSC Comments Calling for Feed-in Tariffs
by Paul Gipe, Contributing Writer
Florida, United States [RenewableEnergyWorld.com]
Tradable credits are the renewable equivalent of the Alaskan bridge to nowhere says a recent filing made with the Florida Public Service Commision (PSC). The Florida Alliance for Renewable Energy (FARE) filed comments with the Public PSC on August 26, 2008 suggesting that the state move towards a system of feed-in tariffs rather than going down its present path.
The filing goes on to suggest that a REC trading system will not achieve the goals set out by the Governor nor will it allow equitable opportunity to all in developing the state's renewable resources.
The Alliance is a coalition of leading Florida solar companies and the Alliance for Renewable Energy, a group formed to promote Renewable Energy Payments (feed-in tariffs) in North America.

FARE's filing was in response to a PSC docket on the state's proposed Renewable Portfolio Standard (RPS) using a system of Renewable Energy Credits (RECs) as the development mechanism. While many RPS policies do not use tradable credits as the sole implementing mechanism, some do.

Prepared by Florida investment banker John Burges, the filing argued that the proposed REC program, "will benefit a few large companies at the expense of many small and mid-sized" firms and do little to advance the Governor's renewable economic and industrial development objectives. Burges contrasted the success of Germany's feed-in tariffs in creating 250,000 jobs with the PSC's timid proposal.

The filing goes on to suggest that a REC trading system will not achieve the goals set out by the Governor nor will it allow equitable opportunity to all in developing the state's renewable resources. RECs are also a poor value to ratepayers in comparison to Renewable Energy Payments, Burges argued in the filing, citing several independent studies that reached that conclusion.

The proposed RECs trading market, "as currently drafted in the PSC rule are a more expensive policy and [will be] less successful in generating investments in renewables--they are the renewable equivalent of the Alaskan bridge to nowhere," the filing said.

Internationally, feed-in tariffs have become the mechanism of choice for increasing the uptake of solar, wind, biomass and other forms of renewable energy, according to FARE.
The Alliance urged the PSC to replace the proposed credit trading system with a system of feed-in tariffs. It also argued that the RECs trading system does not work well for renewables such as solar and biomass, that predominate in Florida.

The draft PSC rule has taken heavy criticism from other groups. Leading newspapers and NGO’s have been especially critical of the draft PSC rule. The St. Petersburg Times said the “Public Service Commission's targets for renewable energy [are] far below [Governor] Crist's” while the Miami Herald stated that the “Public Service Commission is recommending an extremely slow buildup in the use of renewable energy.”

“The (PSC) targets aren't ambitious enough to drive any kind of investment in renewable energy technology in Florida," said George Cavros of the Southern Alliance for Clean Energy in a letter to the Miami Herald. The targets were "the weakest in the nation. Dead last," he added. "Governor Crist would be 94 before his proposed 20 percent target is realized."

"We were just flabbergasted by the one percent cost cap," said Sean Stafford, who represents Florida Crystals, the sugar producer that operates the state's largest renewable energy plant, in reference to another clause that would cap all renewable costs at one percent of utility revenues.

Environmental Defense Fund (EDF) was also highly critical. Gerald Karnas, EDF's Florida Director, has called for the introduction of feed-in tariffs as the best way to achieve the Governor’s renewable objectives.

Comment by david epps on September 2, 2008 at 11:30am

OK, We have labored over about everything for months now. After critiquing all of the proposals, It is clear in my mind what legislation needs to be enacted. Picken's Army needs to mobilize, Now.

The American Energy Act is sponsored by the House Republicans. This is the best comprehensive plan addressing the energy issue. But it lacks certain critical components which we have to voice our strong concern and support for immediately.
Become a member of the Support the American Energy Act and pound on congress today and everyday.

I found this freeware, Roboform, which makes it easy to post to those contact forms.

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