Evolving incentives for renewable energy

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As part of a Jan. 29 presentation on geothermal energy to the Senate Special Committee on Energy, Chris Rose, executive director of the Renewable Energy Alaska Project, presented an overview of the evolving world of incentives for renewable energy production.

There is, for example, a market for the trade of renewable energy certificates granted to entities that operate renewable energy systems, Rose said. Rural villages that use wind farms have been able to obtain money from the sale of these certificates, he said.

And the U.S. federal government is offering production tax credits for renewables.

“This is by far the most important federal policy that is supporting renewable energy development in the United States,” Rose said.

However, Congress has only been authorizing the tax credits for one or two years at a time, a situation that has led to a lack of long-term tax certainty. That contrasts with Europe where countries tend to engineer 20 years or more certainty into their policies, Rose said.

“There’s a big push in Congress right now to have a longer term production tax credit,” he said.

But because of the stop-start impact of the federal tax credit re-authorization process, individual states have tended to go their own way in developing policies that encourage renewable energy development, Rose said. In 26 states there are mandatory standards for renewable energy, while four states have set less rigorous goals. Some states are collecting surcharges from electricity bills to gather money for renewable energy projects.

Another approach to encouraging renewable energy development is the use of government mandated feed-in tariffs that require utilities to pay above market price to people who feed renewable energy into the electricity grid. A system like this in Germany has resulted in a major growth in the use of solar energy but has increased people’s electricity bills by about 3 percent, Rose said.

But when it comes to progressing pilot and demonstration projects for new forms of energy production in Alaska, Rose urged creation of an emerging energy technology development fund. That would be particularly helpful in developing energy systems of all types for rural communities, he said.

“We have a laboratory in Bush Alaska … where we could perfect these kinds of systems and then be marketing them around the world,” Rose said.

—Alan Bailey