ACES Low for the Solar Industry?

May 28, 2009

Analysts wading through the American Clean Energy and Security Act (ACES) have plenty of concerns about whether it has enough teeth to be an effective climate bill. But what does the bill look like for renewable energy providers?

"A lot of us in the solar industry are actually pretty worried about it," says Matt Cheney, CEO of Renewable Ventures, a Fotowatio company that owns and operates renewable energy and energy efficiency projects.

Their cause for concern is two-fold.

First, what started out as a strong renewable electricity standard (RES) in the ACES bill has been heavily watered down. It currently would require utilities to get 20 percent of their power from renewable sources by 2020, but 8 percent of that could be achieved through energy efficiency. Utilities that don't comply will have to pay a fee, but according to Cheney, that fee is lower than the non-compliance fees charged by the 28 states with their own renewable portfolio standards (RPS) in place.

"In this scenario, it could be more affordable for utilities to just pay the non-compliance fee," Cheney says.

A weak federal RES could also deter states from setting their own stronger standards.

"Thankfully, it's set up in a way that the federal RES won't supersede the state RPS, but we're still fearful about the effect it could have," says Cheney. "Really, the RES in this is almost unnecessary unless it matches current best practices or is forward thinking. To put out something that's less than what the states already have doesn't really do anyone any good."

The bill has won praise from the Solar Energy Industries Association, which released a statement claiming ACES would stimulate the deployment of solar energy by allocating carbon allowances for renewable energy and energy efficiency, applying triple renewable energy credits (RECs) for distributed generation including solar, and including solar water heating systems under the label "energy-efficient systems".

However, other renewable energy advocates who have dug through the nearly 1,000-page bill have determined that the carbon credits that could come solar's way thanks to the bill's cap-and-trade legislation would actually amounts to very little.

Those carbon credits are another cause for concern. The Breakthrough Institute's preliminary analysis of the bill found only 12.2 percent of cap-and-trade revenue going to renewable energy — and since the bill lumps clean energy with energy efficiency, that money gets divided among several industries. Polluting industries, on the other hand, would receive nearly 60 percent of the money generated in a carbon market.

"It's basically saying that by virtue of having polluted you now have the right to pollute in the new cap and trade program," Cheney says.

Renewable energy producers would actually lose out on cap-and-trade because they don't pollute.

Cheney illustrates this with an example:

"Say you own a coal-fired power plant that has been in operation for 10 years and I build a wind farm across the street and the grid no longer needs your power.

"A wind farm is, by nature, not a polluting tech, but even if my wind energy puts your coal plant out of business, you have these pollution rights, and you're laughing all the way to the bank because you can sell those rights on the open market.

"Society is transferring the right to pollute to companies who earn them because they pollute. Whereas I, who don't pollute, get nothing."

Fortunately, all is not lost just yet.

The bill still needs to make it through other committees, including the powerful House Ways and Means Committee. It will continue to be marked up and will no doubt pick up a few amendments along the way. Issues such transmission and distribution also still need to be worked out, though the authors of the ACES bill, Reps. Henry Waxman and Ed Markey, seem to be leaving much of that to Senate Energy and Natural Resources
Committee Chairman Jeff Bingaman, an expert on both.

The solar and wind industry associations, meanwhile, will continue to push to get the non-compliance fines increased and more of the cap-and-trade pie shared with renewable energy.

The American Wind Energy Association, in its official statement on the bill, discussed its concerns about how the RES measures had been watered down by members of the House Energy and Commerce Committee:

"While we hail the recognition of the importance of a national RES, such a low level — less than one-half the level originally proposed by President Obama and in Chairman Markey's original discussion draft — could severely blunt the signal to the private sector to invest billions of dollars and expand production, manufacturing, and job creation."

While Congress figures out what to do with the legislation, renewable energy projects will be getting a jump-start in the coming months as the Department of Energy's loan-guarantee program begins handing out funding from the economic stimulus package passed earlier this year. That funding will be important to the renewable energy industry given the potential for the RES and cap-and-trade provisions set out in ACES to be weakened even more.


See also:

Democrats on the Waxman-Markey Fence Worried about RES, Allocations

Renewable Energy: 'An Opportunity America Can't Afford to Miss'

Florida Renewable Energy Plan a Job and Economy Juggernaut

Polluters' War on Climate Legislation Is Taking a Toll

Road Map for a Clean Energy Revolution


Official White House Photo by Pete Souza

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