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Tam Hunt: Act Now on the Right FIT for California

Renewable-energy legislation needs your help to get passed now

California is on the brink of passing into law a game-changing Feed-In Tariff (FIT) policy that will unleash the tremendous potential of renewable energy and provide a massive economic boost in the state. A lot rides on getting the support of state Sen. Christine Kehoe, D-San Diego, so get ready to encourage her to do the right thing.

Tam Hunt
Tam Hunt

Before getting into the details, however, let’s review the current state of affairs. Renewable energy and energy efficiency are on a roll: wind-power installations in the first half of 2009 — 4,000 megawatts — exceeded those of 2008, itself a record year. This happened amid the worst recession since the Depression, so this is quite an achievement. Solar-power installations in the United States and globally have, however, remained level with 2008, due primarily to the ailing economy. But level is better than declining. Energy efficiency and conservation (the latter is based on behavior change, while the former is based on technology) have also improved. For example, petroleum consumption in the United States is down about 7 percent compared to 2007, a remarkable reduction considering that the trend in recent years has been to increase 2 percent to 3 percent each year. This change, however, is due primarily to high prices and declining economic activity.

As many commentators have noted, and as I’ve mentioned in previous columns, President Barack Obama “gets it” regarding the need for a dramatic improvement in renewable-energy production and energy efficiency and conservation. He has already committed many billions of dollars for tax credits and other incentives on these items and they are starting to have an impact. However, I am not, as I wrote in my last column, happy about the proposed climate-change bill because I don’t think it will have much impact as written.

Adding to the urgency for aggressive action is a recent change of position at the International Energy Agency regarding the timing of peak oil — the point at which global oil production peaks and then declines. The IEA, in its 2008 World Energy Outlook, projected a peak in global conventional oil production sometime before 2030. This projection has since been moved up. In a recent interview with Great Britain’s Independent newspaper, IAE chief economist Fatih Birol warned of a potentially “catastrophic” supply shortfall as a result of lack of sufficient investment in new supplies and rapidly declining conventional oil supplies — at about twice the rate of previous projections. He also advanced the IEA’s projection of the conventional oil peak to 2020. This is practically around the corner and is yet another wake-up call to a world slumbering in the dream of infinite fossil fuel resources. We need urgent action to create a renewably powered sustainable world, with widespread use of electric cars and plug-in hybrid electric cars to replace our petroleum consumption.

This is where an aggressive Feed-In Tariff (FIT) comes in. AB 1106, carried by Assemblyman Felipe Fuentes, D-Los Angeles, is pending in Sacramento and will, if passed, be a game-changer for renewables in California. The state’s Renewable Portfolio Standard, or RPS, effective since 2003, has achieved very little in terms of bringing new renewables online. Last year saw an increase, but it was almost entirely from out-of-state facilities. We need to develop in-state supplies to localize our grid and keep the economic benefits here. The RPS has been so ineffective that the total percentage of renewable energy online in California, even with the out-of-state boost to our renewable-energy portfolio last year, has declined in every year since the RPS was implemented. The most recent report was just released by the California Energy Commission, and it found that the total amount of renewable energy was 10.6 percent in 2008, a decline from 11.8 percent in 2007. This is unfortunate and unacceptable.

AB 1106 promises to change this equation substantially because it would require utilities to accept up to 2 percent of their total demand, each year, from new renewable-energy facilities 10 megawatts and below; and ratepayers would never experience an increase in rates above 1 percent. A key additional feature is the certainty of the FIT price: this is not negotiated and would be set by the California Public Utilities Commission. For projects 5 megawatts and below, AB 1106 would create a “cost-based” FIT, which has been proven around the world to be unparalleled in bringing huge volumes of cost-effective renewable energy online. The pricing mechanism for projects between 5 and 10 megawatts is still being debated, but in any case, will be superior to the “market-price” mechanism that is used in the RPS program today.

With this transparency and consequent certainty for the marketplace (which, for the sake of full disclosure, includes my new company, Community Renewable Solutions LLC), we can expect many thousands of megawatts of renewable energy to come online quickly, in the form of “community-scale” projects that don’t require new transmission lines, which can take up to a decade to plan and build, and don’t require massive amounts of land. (I am fully supportive of wisely placed large renewable-energy projects but believe, for a variety of reasons, that the community-scale market segment can do as much or more than the large-scale market segment).

AB 1106 is better than a competing FIT bill, SB 32 carried by Sen. Gloria Negrete McLeod, D-Montclair, because SB 32 would only allow projects up to 3 megawatts (doubling the current limit of 1.5 megawatts), and with respect to pricing would only require the PUC to consider “locational benefits” of community-scale projects. This is an improvement, but we can do better. Worst of all, SB 32 contains a “poison-pill” clause that was included to appease the utilities that would prevent the PUC from implementing any additional FIT provisions in the future. The limited improvement offered by SB 32 does not warrant this poison pill. AB 1106, on the other hand, will introduce a tremendous FIT program that has been proven around the world. Accordingly, it is opposed by the utilities, which prefer the large-scale, utility-controlled generation model.

Please contact Kehoe, chairwoman of the Senate Appropriations Committee, and urge her to strongly support AB 1106 for passage this year. Kehoe’s support is required to get AB 1106 through her committee and this must happen within the week of Aug. 24 to have AB 1106 signed into law this year by Gov. Arnold Schwarzenegger. Call Kehoe’s office today at 916.651.4039 and ask her to support AB 1106. And click here to join the California FIT Coalition.

Again, if passed, AB 1106 will be a game-changer for bringing renewable energy online and boosting California’s economy. And as California goes, so goes the nation. We need aggressive action. Now. Help make it happen!

— Tam Hunt is president of Community Renewable Solutions LLC, and a lecturer in climate change law and policy at UCSB’s Bren School of Environmental Science & Management.

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