By Francis Koster, Ed.D.

Our electrical utility system works so well that headlines are made only when it fails. In many other parts of the world, the headlines celebrate when the system works continuously for more than a few days!

Until recently, almost half of all electricity generated in the USA came from burning coal. Another quarter came from natural gas, a fifth from nuclear power, and about one-twentieth from hydroelectric dams.[1] As the public health, environmental, and weather-changing impacts of coal and natural gas have gotten clearer, much attention has focused on finding better ways of keeping our televisions and refrigerators humming along.

In some parts of the country, renewables are now are making a noticeable contribution. Entrepreneurs can use windmills, the sun, or burn waste to make electricity and feed it into the utility grid for use by their neighbors. These enterprises might be called “non-utility generators." In many parts of the country, they are unwelcome.

There are many different kinds of state regulations that utilities have to operate under. Some states, like New Jersey, iiencourage small “non-utility generators," while others, like North Carolina, discourage them by their rules and regulations. Additionally, regardless of the state regulations, some utilities have internal policies which encourage the addition of new generation capacity by citizens, while others have policies which limit or discourage it. We do not have a national plan – we have a mess, and an opportunity.

In those areas which want to encourage small scale disbursed power generation, one technique is called a Renewable Energy Power Purchase Agreement. A non-utility company builds and owns the generation station (could be solar, wind, geothermal) on the property of an energy user like a school or shopping center. They sell the power to the property owner at a fixed price under a multi-year contract priced cheaper than buying the electricity from the local utility.

One example of this is the City of Pendleton, Oregon which used a Power Purchase Agreement in partnership with Honeywell Building Solutions to construct a solar system at its sewage treatment plant. The business deal allowed the taxpayer to pay less for electricity while laying out no upfront capital. At the end of the 20 year contract, the city can buy the system, renew the contract under amended terms, or have Honeywell remove it.[3]

Another technique is called a "feed in tariff." This is an agreement between an electric utility and a small private power producer (could be a homeowner, or a business) that the utility will buy any cleanly produced power at a pre-set price for fixed length of time into the future. The largest program of this type is in Germany. More than 80 countries[4] now use this technique, including China, which started aggressively implementing it in 2011. Chinese pay a premium for the power produced because they have very dirty coal which causes a lot of air pollution, and they want to create a national system of alternatives. Some people who are concerned about the public health costs of the dirty coal think this is a good trade off; others who focus more on the price per unit of energy only are critical.

These countries have other motives as well. By guaranteeing homeowners an income stream, the homeowners were encouraged to buy power generation systems from local renewable energy vendors, thus creating “blue collar” jobs [5] disbursed through the country.

Globally, these strategies and others like them have been proven to unleash a lot of decentralized electrical generation and entrepreneurial energy.

Some criticize the contracts because the rates paid to the owners of the renewable generation systems are higher than the price a person buys electricity for now. However, the fair comparison is between a new centralized generation plant with good pollution control systems and a new renewable energy system. In many parts of the world, and parts of our own country, some renewables have proven to be cheaper to install and run than new coal or nuclear plants, for example. All signs are that this will be increasingly true.

We are faced with many challenges as a country, including the need to create jobs, protect the public health, and hold down the full cost of producing power, while creating a diversified energy system which can be resilient in the face of unanticipated tragedy such as Japan is experiencing. These tools can help us.


References: 

 
 
 
 
 
 
Copyright 2012. All rights reserved.