Roy Morrison for BuzzFlash: Two No Cost, Low Cost Partial Climate Change Solutions
July 19, 2022
By Roy Morrison
The good news, in dark times, is that effective national climate change solutions can be instituted by congress for little or no money. We do not need huge subsidies for utilities to adopt renewables, or for electric vehicles, or for anything else.
The latest Biden administration climate plan to spend hundreds of billions on climate solutions has again collapsed in a fifty-fifty Senate. But there is a no cost – low cost way to move ahead rapidly with little or no federal spending.
How can that be?
The reality is that solar and wind energy have zero fuel costs and rapidly dropping capital costs. Fossil fuel power cannot compete. Coal plants are closing because they cannot compete despite the best efforts of Donald Trump and Joe Mansion. Trillions are being invested globally in renewables.
What’s needed is two easy pieces to embrace the economic and ecological opportunities presented by renewable energy.
First: A National Renewable Standard for Electric Power Suppliers
Many states have instituted a so-called “Renewable Energy Portfolio Standard (RPS)” mandating an increasing percentage of renewable energy from existing levels to 100% renewables on a net zero basis typically by 2040-2050. Rhode Island just adopted a 100% renewable standard by 2033. This is in accord with the IPCC warning that we must cut green house gas emissions in half by 2030 to escape the ever worsening consequences of exceeding an average of 1.5 degrees centigrade temperature increase.
A national RPS mandating 100% renewables on a net zero basis would allow each state to craft their own plan for net zero emissions and could allow the continued use of fossil fuels if the emissions stay out of the atmosphere. Such Carbon Capture and Sequestration (CCS) has proven to be expensive and uneconomic, unable to compete with zero fuel cost and zero pollution renewables.
Second: Make Energy Users the Owners of Renewable Energy Systems
Renewable developers build systems and get finance on the basis of their ability to sell the power to end users, for example, to a business, a university, a city, a cooperative of energy users. Some states have adopted a so-called Fed In Tariff(FIT) where power is sold to the local utility at predefined rates, as in the MA SMART program, which avoids having to find separate off takers for the power.There is no reason that energy customers cannot also become owners of the renewable energy systems they use. Here’s how.
Existing federal tax policy includes a combination of tax credits for renewables and the use of MACRS accelerated depreciation. For solar, this is an Investment Tax Credit (ITC) currently 26% of system costs plus MACRS that means about half the costs of systems over five years are covered by tax leverage. But the rich with unearned income tax appetite need not be the only beneficiaries of tax policy.
Energy users can take advantage of tax code. When tax equity is “exhausted” after five years, the investors have received all the tax benefits, in year six groups of energy users can purchase the system based on the stream of income they are already paying for the energy they contracted for.
For example, a Town could contract with a renewable developer to provide renewable power at a defined price, typically for 20 years or more.The contract will include a clause giving the Town the right to buy some or all of the solar system at an appraised market value. The purchase costs to be covered by some of the stream of income from the facility. The deal facilitated by use of low interest state or municipal revenue bonds or by cooperative banks. And the purchase is again eligible for MACRS depreciation base on the new purchase price.
Energy users pay their bills as usual, but will also receive a yearly share of profits. The trillions of dollars in the renewable energy infrastructure that will be built can become substantially energy user owned. This gives energy users a seat at the table in crafting the policies and economics of the renewable energy future. This is another good reason to extend and make permanent the solar and wind tax credits that have been an on or off thing. They represent a small fraction of the dollars spent on fossil fuel and nuclear subsidies.
Purchase of systems after tax equity is exhausted can proceed now in most states. Congress should pass enabling legislation, first to allow such purchases in states without retail electric competition, second to instruct FERC to help facilitate as needed such transactions, and third to permit states to issue a class of revenue bonds to facilitate such purchases. NY State, for example, does not allow such types of revenue bonds.
Conclusion
There is enormous amounts of private capital available for renewable development on all scales. A national Renewable Portfolio standard calling for 100% renewables on a net zero basis by 2035 or 2040 is the path to mitigate climate catastrophe. The ownership of substantial portion of the renewable energy infrastructure by energy users is also the pursuit of justice and fairness. Ownership and control of the renewable energy future should not be in the hands of the billionaires but by the people. Now’s the time for Congressional action.
Fact Check
Rhode Island 100% renewable standard
Renewable Portfolio Standards by States
https://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx
Renewable Portfolio Standards (RPS) require that a specified percentage of the electricity utilities sell comes from renewable resources. States have created these standards to diversify their energy resources, promote domestic energy production and encourage economic development.
Renewable energy policies help drive the nation’s $64 billion market for wind, solar and other renewable energy sources. These policies can play an integral role in state efforts to diversify their energy mix, promote economic development and reduce emissions. Roughly half of the growth in U.S. renewable energy generation since the beginning of the 2000s can be attributed to state renewable energy requirements.
It’s worth noting that several states have expanded their policies to incorporate additional resources in recent years. There is now a distinction between a “Renewable Portfolio Standard” (RPS) and what some states have labeled as a “Clean Energy Standard” (CES). The difference between a RPS and a CES comes down to how a particular state defines what is a “renewable” versus a “clean” source of energy. Clean energy typically refers to sources of energy that have zero carbon emissions.
Some of those “clean” sources may not be considered “renewable.” For instance, under some CES policies, nuclear energy is considered a “clean” energy source because it is carbon-free; it is not widely considered “renewable,” however. Conversely, biomass, which is an eligible resource under many state RPS policies, is considered “renewable” despite producing carbon emissions.
In most cases, a CES policy will include an RPS as part of the requirement. For example, California enacted its CES in 2018, which requires the state’s utilities to generate 100% clean electricity by 2045. As part of the CES, the state RPS was increased to require 60% of electricity must come from renewable sources by 2030. Following that date and benchmark, the remaining 40% of the CES can be met by any qualifying clean energy resource. Most often, these are defined as any resource that is carbon-free or carbon-neutral.
Iowa was the first state to establish an RPS; since then, more than half of states have established renewable energy targets. Thirty states, Washington, D.C., and two territories have active renewable or clean energy requirements, while an additional three states and one territory have set voluntary renewable energy goals. RPS legislation has seen two opposing trends in recent years. On one hand, many states with RPS targets are expanding or renewing those goals. Since 2018, 15 states, two territories, and Washington, D.C., have passed legislation to increase or expand their renewable or clean energy targets. On the other hand, seven states and one territory have allowed their RPS targets to expire; an additional four states have RPS targets that expire in 2021.
https://www.energystar.gov/about/federal_tax_credits/renewable_energy_tax_credits
Roy Morrison’s latest book is The New Green Republic
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