Overcoming the roadblocks to democratizing the electricity system – part 5 of 5 | Grist

Note: We ask republishing partners to include a pixel to help us measure story reach. The only information this tracker gathers is the publication domain and date, and view counts. For questions, email syndication@grist.org

HTML

PLAIN TEXT

<h1>Overcoming the roadblocks to democratizing the electricity system – part 5 of 5</h1>
                  <p>
                  <em>"This story was originally published by <a href="https://grist.org" title="Grist">Grist</a>. Sign up for Grist's <a href="https://go.grist.org/signup/weekly/partner?utm_campaign=republish-content&utm_medium=syndication&utm_source=partner" title="Weekly newsletter">weekly newsletter here</a>."</em>
                  </p>
                  <div><strong>A serialized version of <a href="http://www.ilsr.org/">ILSR</a>‘s new report, <a href="http://cleantechnica.com/2011/09/15/2011/09/08/2011/09/01/the-economics-of-distributed-renewable-power-why-we-should-democratize-the-electricity-system-part-2/content/democratizing-electricity-system"><em>Democratizing the Electricity System</em></a>, Part 4 of 5. </strong>Click for <a href="http://energyselfreliantstates.org/content/electric-system-inflection-point">Part 1</a> or <a href="http://cleantechnica.com/2011/09/15/2011/09/01/the-economics-of-distributed-renewable-power-why-we-should-democratize-the-electricity-system-part-2/">Part 2</a> or <a href="http://cleantechnica.com/2011/09/08/the-political-and-technical-advantages-of-distributed-renewable-power/">Part 3</a> or <a href="http://cleantechnica.com/2011/09/15/why-we-should-democratize-the-electricity-system-part-4/">Part 4</a>.</div>
<div>
<h2>Overcoming the Roadblocks to Democratizing the Electricity System</h2>
<p>The  electricity grid system has become host to a distributed generation  phenomenon that has developed in a largely hostile environment.  It’s  possible that distributed generation has enough inherent economic and  political advantage to be sustainable, but new policy could  significantly expand distributed generation in the electricity system.</p>
</div>
<div>
<p>The  following policies illustrate the many ways that the electricity system  can incorporate the benefits of  distributed energy generation.</p>
<h3>Distributed Generation or Solar Power Carve-Outs</h3>
<p><a href="http://new-grist-preprod.go-vip.net/wp-content/uploads/2011/09/solar-dg-rps-map_0.jpg"> </a>With  nearly 30 states already mandating the development of renewable energy,  more states should focus on power that can be generated locally and  with greater economic returns to the state.  Already 16 states have  carve-outs in their renewable mandates for either distributed generation  or solar power, specifically.<a href="http://energyselfreliantstates.org/content/overcoming-roadblocks-democratizing-electricity-system#foot1"><sup>1</sup></a> These carve-outs reduce competition between large and small projects  and create a domestic market for distributed generation that can support  more local ownership and in-state economic value.</p>
<h3>CLEAN Contracts</h3>
<p>Clean,  Local, Energy, Accessible, Now.  The CLEAN name highlights the  distributed energy potential of a guaranteed, long-term contract and a  price for renewable energy sufficient to attract investment (the same  deal offered to regulated utilities).  This policy (under various names,  such as feed-in tariffs) is responsible for half of the world’s  installed wind power and three-quarters of its solar PV.  It’s the  dominant energy policy in most of Europe as well as a growing number of  places in North America (Ontario, Vermont, Oregon, Gainesville, FL).</p>
<p>In  Ontario, a robust and comprehensive feed-in tariff is encouraging the  development of over 2,500 MW of renewable energy, much of it distributed  generation.  In Germany, home to some of the most effective renewable  energy policies in the world, more than half of its 27,000 MW of wind  are in projects 20 MW and smaller.<a href="http://energyselfreliantstates.org/content/overcoming-roadblocks-democratizing-electricity-system#foot2"><sup>2</sup></a>   Over 80 percent of the 3,000 megawatts of solar PV added to the  German grid in 2009 were put on rooftops, most less than 100 kW.<a href="http://energyselfreliantstates.org/content/overcoming-roadblocks-democratizing-electricity-system#foot3"><sup>3</sup></a></p>
<p>CLEAN  contracts can be used in concert with renewable energy standards but  also as a standalone policy for encouraging the development of renewable  energy.  Their signature success is reducing risk for renewable energy  development with a guaranteed and transparent contract, reducing the  costs and time to project developers to obtain financing.  In general,  CLEAN contracts have a lower total cost for renewable electricity than  renewable mandates due to fewer stranded costs associated with auctions  or solicitations (see below).<a href="http://energyselfreliantstates.org/content/overcoming-roadblocks-democratizing-electricity-system#foot4"><sup>4</sup></a></p>
<p>Every state should adopt a CLEAN contract policy.</p>
<h3>Renewable Auctions</h3>
<p><a href="http://new-grist-preprod.go-vip.net/wp-content/uploads/2011/09/auctions-stranded-costs_0.png"> </a>In  lieu of a CLEAN contract policy, the California public utility  commission (CPUC) recently opted to develop a renewable auction  mechanism to encourage the development of 1 to 20 MW distributed  generation projects.  While this program is admirable for its focus on  the distributed generation segment, the auction mechanism has its own  liabilities.</p>
<p>Utilities like auctions outside their control no more  so than any requirements to purchase third-party generated electricity  and have challenged CPUC’s implementation order.</p>
<p>According to CPUC  data, approximately 97% of projects bid into auctions under the state’s  renewable energy standard have failed to win a contract from the  utilities.<a href="http://energyselfreliantstates.org/content/overcoming-roadblocks-democratizing-electricity-system#foot5"><sup>5</sup></a> This failure rate of 97% represents millions of dollars in stranded  costs, costs that developers have to ultimately try to pass on to  utilities and their ratepayers.  It’s an incredible waste of human  energy in pursuit of “lowest-cost” renewable energy.</p>
<h3>Renewable Energy Incentives (Federal)</h3>
<p>The  most important change to federal renewable energy incentives, short of  adopting CLEAN contracts, would be to transition away from tax credits  and toward cash payments.  The cash grant program – effective 2009  through 2011 and passed as part of the economic stimulus bill – has  significantly increased local ownership of renewable energy projects.<a href="http://energyselfreliantstates.org/content/overcoming-roadblocks-democratizing-electricity-system#foot6"><sup>6</sup></a> But the cash grant program is intended to be temporary, even though  President Obama’s proposed budget would extend it through 2012.</p>
<p>The  cash grant program was adopted because the major renewable energy  developers were unable to find tax equity partners to use the tax  credits during the recession, but it’s a band-aid on a deeper problem  with using the tax code for renewable energy incentives.</p>
<p>One  alternative for the federal government is to make the tax credits  refundable.  This would allow anyone eligible for the tax credits to  maximize them even if their tax liability was limited.  It would also  avoid the problem of a shrinking tax liability market during a major  recession.</p>
<p>An even better strategy would be for the federal  government to permanently shift its incentive payments to cash, and to  base them on the output of renewable energy systems (like CLEAN  contracts).  In addition to opening access to incentives for  community-based and nontaxable entities (e.g. municipalities), paying  for production would increase the efficiency of government dollars by  paying for output, rather than reducing capital costs on potentially  low-performing projects.  The cash payment option also reduces tax law  problems for community ownership.  Unless an investor in a wind or solar  project takes an active role in project oversight, they can only use  their tax credits against passive income (from a business or investment  income), and most Americans have no passive income.  A cash payment can<br />
be used by any investor, in any project structure.</p>
<h3>Transmission Incentives and Regulatory Policy (Federal)</h3>
<p>A  second area of focus at the federal level is regulatory policy, set by  FERC.  Currently, high-voltage transmission projects are eligible for  (and in fact routinely receive) bonuses to their return on investment;  bonuses that are not given to power plant construction.  The bonus  incentives distort a state-based comprehensive planning policy that asks  utilities to consider many options, not just transmission, for meeting  their reliability and safety goals.  Instead, investor-owned utilities  and transmission developers have an incentive to encourage the  development of transmission at the expense of more cost-effective  alternatives.  This program should be terminated.</p>
<p>Congress should  also clarify that FERC should give great latitude to states in energy  planning, that FERC does not have the authority to overturn state  transmission related decisions and that FERC’s analysis must analyze  alternatives to transmission not simply alternative routes for  transmission lines.</p>
<h3>Renewable Energy Incentives (State)</h3>
<p>In  addition to a comprehensive policy like CLEAN contracts, there are  other renewable energy incentives.  States should focus their dollars on  projects that provide the greatest economic advantage for the state,  and incentives for renewable energy should prioritize distributed  generation that has a higher likelihood of local ownership.  A good  example is Minnesota’s now-expired incentive for small wind projects  that offered 1.5 cents per kilowatt-hour for wind projects smaller than 2  MW.</p>
<h3>Community Choice Aggregation and Municipalization</h3>
<p>There  are few better opportunities for energy self-reliance than local  authority.  Community choice aggregation (CCA) allows cities, counties,  and collaborations of local governments to govern their electricity  supply contracts.  In some cases, like California’s Marin County, more  than three-quarters of the electricity supply to local customers is  renewable.  Other CCA organizations have succeeded in achieving lower  rates for their customers with new local supply and or competitive  contracting.</p>
<p>A step further (especially for the 46 states without  CCA laws) is municipalization.  Over 2,000 municipal and state-owned  utilities serve 45 million Americans, and they provide communities with  local determination over their electric supply.  The power of  municipalization is enormous.  When Boulder, CO, recently decided not to  renew their franchise with Xcel Energy to study municipalization, they  found the possibility of enormous economic opportunity (and lower  rates), as well as getting a bid from Xcel to provide 90% of Boulder’s  electricity from wind by 2020.</p>
<p>Communities should consider the  benefits of local control of their electricity system to maximize the  potential for local, distributed renewable energy development.</p>
<h3>Solar Access Laws</h3>
<p>One  of the biggest barriers to distributed solar in residential areas isn’t  financial, but rather the obtuse rules of homeowners’ associations that  bar the installation of rooftop or ground-mounted solar PV systems.   States should pass solar access laws giving every property owner the  right to put a solar PV system on their roof.  Exceptions can be (and  are) made for historic areas, but energy self-reliance shouldn’t be  subject to outdated aesthetic concerns.</p>
<h3>Model Net Metering Rules</h3>
<p>In  most states, customers who generate energy on-site can essentially roll  back their electric meter, receiving a 1:1 credit for every  kilowatt-hour they generate.  Strong net metering laws make grid  interconnection simple, allow for systems of significant size (up to 2  megawatts), and ensure customers get reimbursed at the retail  electricity rate for each kilowatt-hour of demand they offset (even if  production modestly exceeds consumption).  In the best case, rules  provide compensation for excess energy at premium rates (more like a  CLEAN contract).</p>
<p>The cutting edge of net metering laws includes  virtual or aggregated net metering.  The former allows customers to  share the output of a community-based energy installation even if it  isn’t physically connected to their meter.  Essentially, the law  requires utilities to replace hardware with bookkeeping.  The latter  policy – aggregated net metering – allows customers to aggregate their  meters (e.g. a college campus with multiple buildings, each with its own  meter) so that an on-site electricity source, like a wind turbine, can  be credited against the consumption from the entire campus, instead of  just one building.</p>
<p>Every state should adopt model net metering rules to encourage more on-site renewable energy generation.</p>
<h3>Model Interconnection Rules</h3>
<p>With  interconnection posing a major roadblock to greater expansion of  distributed generation, model rules can provide states with guidance in  establishing more effective policy.  In their 2010 report, <em>Freeing the Grid</em>, the Interstate Renewable Energy Council details the various components of an effective interconnection policy.<a href="http://energyselfreliantstates.org/content/overcoming-roadblocks-democratizing-electricity-system#foot7"><sup>7</sup></a></p>
<p>The following list highlights the more important components:</p>
<ul>
<li>Generators  up to 20 MW allowed with multiple size “breakpoints” in the  interconnection process (e.g. 10 kW, 2 MW, 10 MW, 20 MW) to segregate  and fast-track minimal impact projects from those requiring more study.</li>
<li>Shorter timelines than FERC federal interconnection standards.</li>
<li>Interconnection fees capped (and waived entirely for net metered customers), engineering fees fixed to prevent uncertainty.</li>
<li>Safety standards consistent with major electrical safety standards (Underwriters Laboratory and IEEE).</li>
<li>Use of federal “technical screens” to fast-track review of projects with many similarities.</li>
<li>Standard interconnection agreement.</li>
<li>Rules apply to all state utilities.</li>
</ul>
<p>California  Assembly Bill 1302 also provides an example of model legislation for  distributed generation.  The law requires every major utility to provide  maps and other information outlining zones that are optimal for the  deployment of distributed generation.  The law would also require  utilities to take distributed generation into account when making  investments in the electric grid, would require a third party audit of  the interconnection process, and provide more transparency of the  queuing process for renewable energy projects.</p>
<p>States and public  utility commissions should adopt these interconnection rules and laws to  drastically simplify and remove uncertainty from the process of  developing distributed renewable energy projects.</p>
<h3>Building Codes</h3>
<p>Net  zero energy buildings are an increasing part of building codes in  Europe, transforming building efficiency codes into a more comprehensive  policy for energy balance.  These policies require that buildings be  operated without using fossil fuels, have a net zero energy balance (by  balancing on-site generation with load) or have a positive energy  balance.  Most would take effect by 2020.</p>
<p>Since even the most  efficiently designed building uses some energy (especially in colder or  humid climates), a net zero energy building code is a de facto incentive  for distributed generation.  States and local governments should use  the building code to reduce on-site energy consumption, allowing the  cost of energy efficiency and distributed generation to be integrated  into the first mortgage, one of the most cost effective financing tools.</p>
<h3>Identification of Existing Grid Capacity (“Sweet Spots”)</h3>
<p>Utilities  should be required to publish data on their distribution networks<br />
to  allow distributed generation developers to identify areas with available  capacity where interconnection costs may be lower.</p>
<p><em>Grid-lock: the monopolistic lock on power of existing utilities</em></p>
<p>Minnesota  was the first state to conduct an engineering-level analysis of the  capacity of the existing state sub-transmission network to interconnect  additional distributed generation.   The first study found up to 1,400  MW of additional distributed wind energy could be injected into the  existing grid in the West-Central part of the state.  The cost for  integration was less than 10 percent of an equivalent amount of new,  high-voltage transmission line.<a href="http://energyselfreliantstates.org/content/overcoming-roadblocks-democratizing-electricity-system#foot8"><sup>8</sup></a></p>
<p>A  subsequent, legislature-ordered state-wide study confirmed the first  regional study and suggested that Minnesota had sufficient capacity in  its existing transmission system to interconnect sufficient renewable  electricity to meet its 25 percent renewable portfolios goal.<a href="http://energyselfreliantstates.org/content/overcoming-roadblocks-democratizing-electricity-system#foot9"><sup>9</sup></a></p>
<p>California’s  statewide grid operator is conducting its own analysis of the capacity  of the existing transmission network to interconnect significant  quantities of distributed generation.  At the same time, California’s  Public Utilities Commission has ordered two of the state’s largest  utilities – SCE and SDG&E – to provide a map of capacity on  distribution level circuits to developers.  Every state should require  its utilities to do the same.</p>
<h2>The Moment for 21st Century Energy Self-Reliance</h2>
<p>Distributed  generation offers a cost-effective and fast-scaling alternative to  centralized generation of electricity, and at a cost competitive with  centralized renewable energy development.  Most importantly, it offers  an opportunity to democratize the electricity system, dispersing power  generation and its attendant economic benefits.</p>
<p>The technical  barriers to the transformation are surmountable.  In the short run, much  more distributed generation can be added to the existing grid system  without substantial difficulty.  In the long run, new technical  expertise and cheaper energy storage will transform the static,  centralized grid into a dynamic and primarily decentralized renewable  energy system.</p>
<p>While the transformation is a technical one, the  largest barriers are political.  From the federal to the state to the  local level, policies shield the legacy electric grid from a democratic  transformation.</p>
<p>New policies are needed to level the playing field  for local, distributed generators.  Rules are needed to change the  historic paradigm of a few large-scale, fossil fuel power plants  supplying a grid connected by long-distance transmission lines.  Rules  are also needed to prevent regulators from forcing the same paradigm on  inherently distributed renewable energy production.  These rule changes  range from ending perverse and unnecessary incentives for new  high-voltage transmission lines to transforming federal incentives to  cash and production-based payments to tearing down interconnection  barriers to the democratization of the grid.</p>
<p>The need for new  rules is ultimately driven by the need for a new energy model.  If new  wind and solar power plants are built in the outdated, centralized model  with significant new infrastructure, it will preclude local ownership  and the spreading of economic benefits.  Without these local benefits,  the centralized strategy generates more resistance than a distributed  system, a bane in both politics and electricity systems.</p>
<p>The  urgency of action on global climate change only magnifies the  disadvantages of pursuing a centralized model of renewable energy  development.  Community-based and distributed renewable energy  production builds a political constituency to support the expansion of  renewable energy and the retirement of fossil fueled generation, helping  step away from a carbon-based electricity system.</p>
<p>The political  advantage of distributed generation is obvious.  The technological and  economic dynamics have moved in favor of distributed renewable energy  generation, but without new rules the opportunity will be lost.</p>
<p> </p>
<div>
<p><strong>To read more about democratizing the electricity system, click through:</strong></p>
<ul>
<li><a href="http://energyselfreliantstates.org/content/electric-system-inflection-point">Part 1 (The Potential for Distributed Generation)</a></li>
<li><a href="http://energyselfreliantstates.org/content/content/economics-distributed-generation">Part 2 (The Economics of Distributed Generation)</a></li>
<li><a href="http://energyselfreliantstates.org/content/political-and-technical-advantages-distributed-generation">Part 3 (The Political and Technical Advantages of Distributed Generation) </a></li>
<li><a href="http://energyselfreliantstates.org/content/regulatory-roadblocks-democratizing-electricity-system">Part 4 (Regulatory Roadblocks to Democratizing the Electricity System)</a></li>
<li><a href="http://energyselfreliantstates.org/content/overcoming-roadblocks-democratizing-electricity-system">Part 5 (Overcoming the Roadblocks to Democratizing the Electricity System)</a></li>
<li><a href="http://energyselfreliantstates.org/content/democratizing-electricity-system">Download the full report</a>.</li>
</ul>
</div>
<h2>References</h2>
<p><sup>1</sup><a name="foot1"></a> Summary Maps.  (DSIRE, 2011).  Accessed 02/02/2011 at <a href="http://tinyurl.com/49lo5ub">http://tinyurl.com/49lo5ub</a>.</p>
<p><sup>2</sup><a name="foot2"></a> Farrell, John.  Distributed Wind Power Scales, Too.  (Energy Self-Reliant States blog, 1/28/11).  Accessed 2/28/11 at <a href="http://tinyurl.com/5us9d8n">http://tinyurl.com/5us9d8n</a>.</p>
<p><sup>3</sup><a name="foot3"></a> Farrell, John.  Over 80 Percent of German PV Installed on Rooftops.   (Energy Self-Reliant States blog, 1/19/11).  Accessed 2/28/11 at <a href="http://tinyurl.com/674o7vh">http://tinyurl.com/674o7vh</a>.</p>
<p><sup>4</sup><a name="foot4"></a> Michel, Jeffrey H.  The Case for Renewable Feed-In Tariffs.  (presentation, January 2008), p. 25.</p>
<p><sup>5</sup><a name="foot5"></a> Lewis, Craig.  Driving Clean Local Energy and Delivering the New Energy  Economy.  (Four Corners Green Living Expo Presentation on CLEAN  Programs, April 2011).  Accessed 6/9/11 at <a href="http://tinyurl.com/3rj6y6x">http://tinyurl.com/3rj6y6x</a></p>
<p><sup>6</sup><a name="foot6"></a> Farrell, John.  How Renewable Incentives Affect Project Ownership.   (Energy Self-Reliant States blog, 12/6/10).  Accessed 02/02/2011 at <a href="http://tinyurl.com/6kyr8se">http://tinyurl.com/6kyr8se</a>.</p>
<p><sup>7</sup><a name="foot7"></a> <em>Freeing the Grid: Best Practices in State Net Metering Policies and Interconnection Procedures</em>.  (Interstate Renewable Energy Council, December 2010).  Accessed 6/14/11 at <a href="http://tinyurl.com/64p89ph">http://tinyurl.com/64p89ph</a>.</p>
<p><sup>8</sup><a name="foot8"></a> Bailey, John, et al.  Meeting Minnesota’s Renewable Energy Standard  Using The Existing Transmission System.  (New Rules Project and North  American Water Office, November 2008).  Accessed 3/23/11 at <a href="http://tinyurl.com/49pk5uv">http://tinyurl.com/49pk5uv</a>.</p>
<p><sup>9</sup><a name="foot9"></a> Analysis of the Phase II Report of the Dispersed Renewable Generation  Transmission Study.  (North American Water Office, 11/18/09).  Accessed  3/23/11 at <a href="http://tinyurl.com/6bn3boe">http://tinyurl.com/6bn3boe</a>.</p>
</div>

<p>This article originally appeared in <a href="https://grist.org/">Grist</a> at <a href="https://new-grist-preprod.go-vip.net/article/2011-09-21-overcoming-the-roadblocks-to-democratizing-the-electricity/">https://new-grist-preprod.go-vip.net/article/2011-09-21-overcoming-the-roadblocks-to-democratizing-the-electricity/</a>.</p>
                  <link href="https://new-grist-preprod.go-vip.net/article/2011-09-21-overcoming-the-roadblocks-to-democratizing-the-electricity/" rel="canonical"/>
                  <p>Grist is a nonprofit, independent media organization dedicated to telling stories of climate solutions and a just future. Learn more at <a href="https://grist.org/">Grist.org</a></p>
                  <script id="grist-syndication-pixel" async src="https://www.googletagmanager.com/gtm.js?id=GTM-TG2PKBX" data-source="repub" data-canonical="https://new-grist-preprod.go-vip.net/article/2011-09-21-overcoming-the-roadblocks-to-democratizing-the-electricity/" data-title="Overcoming the roadblocks to democratizing the electricity system – part 5 of 5" crossorigin="anonymous"/>

Our goal at Grist is to tell stories about climate solutions and a just future. That means we love when other outlets share our work. If you’re interested in republishing this story online or in print, we just have a few requirements:

Credit us.

For the byline, we prefer Author Name, Grist. At the top of our stories, if on the web, please include this text and link: “This story was originally published by Grist. Sign up for Grist’s weekly newsletter here.”

Check the image requirements.

Photos sourced from Getty Images in our pieces can be republished as long as you credit both Getty and Grist in the caption. Outside of this, you can’t republish photographs or illustrations without written permission from Grist and/or the photographer.

Don’t change anything significant.

You can change the headline and/or subheading, but articles must be republished in their entirety. It’s ok to change references to time (“yesterday” to “today”) or location (“Iowa City, IA” to “here”). If you really think changing the story with additional localized copy would help, please contact us directly and we can discuss the change. We must approve the change before it goes live.

Don’t sell our stories.

We also ask that you don’t sell ads specifically meant to be placed in our stories. If you already have ads populating on your site, that’s completely fine.

Keep in contact.

Let us know if you republish our content! As a nonprofit news site, tracking the impact of our reporting and analysis is crucial. We’d love to hear more about how the work was useful to you and your outlet. And on the off chance that we ask you to remove the story from your site or apply a correction, please do so.

Use best practices for sharing.

If you do share the story on your social media accounts, we’d love it if you tagged Grist’s accounts:

Twitter: @Grist
Facebook: @Grist.org
Instagram: @Grist

Get your weekly dose of good climate news to your inbox

Get your weekly dose of good climate news to your inbox

Republish this article | See instructions below:

Overcoming the roadblocks to democratizing the electricity system – part 5 of 5