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Power Struggle

Government cracks the renewable energy whip on public utilities as green technologies struggle to reach maturity.

by / July 1, 2007
The fantasy of a renewable energy revolution may be coming true now that government is goosing one forward. States across the nation are implementing ambitious targets for generating power from renewable sources, often as part of efforts to combat global warming. Now the questions are: Can public utilities meet the challenge, and can technology keep pace?

California, for instance, will require its public utilities to generate 20 percent of their power using renewable energy sources by 2010. The state also enforced an auto emissions reduction and is cleaning up its smokestacks. The cumulative effort will push greenhouse gas emissions in California back to 1990 levels by 2020, according to Gov. Arnold Schwarzenegger.

The landmark initiative prompted other states to crank up their own efforts to reduce global warming. The Washington Legislature recently passed a law mandating goals similar to California's. And New Hampshire and Minnesota both passed the highest renewable energy usage requirements of public utilities to date -- 25 percent by 2025. But bragging rights may be short-lived because the California Public Utilities Commission announced that it's considering ways to reach 33 percent renewable energy usage by 2020.

In all, more than 20 states require that public utilities generate some portion of their electricity from renewable sources. At the national level, a federal standard of 20 percent by 2020 also is gaining momentum, due to the recent state requirements and party-leadership change in Congress, according to the Union of Concerned Scientists (UCS).

Meeting these renewable energy goals won't be easy for public utilities, many of which require drastic infrastructure changes to meet the surging power demands. They already face massive costs as they prepare for an imminent new building cycle. The Energy Information Administration projects that electricity generation in the United States will increase by 40 percent in the next 25 years.

"We need to make decisions today about how to meet that demand, and that is to include the construction of new base-load generation, meaning big power plants that run 24 hours a day, seven days a week, uninterrupted," said Dan Riedinger, spokesman for the Edison Electric Institute (EEI).

Aggressive renewable energy requirements will make that expansion even costlier, he said. Hydropower is currently the most widely used renewable energy source in the United States, producing nearly 7 percent of the nation's electricity, according to the EEI. But it's not as popular as it once was. Many environmentalists now oppose hydropower because it threatens fish and other wildlife.

Other options, such as wind and solar power, have experienced growing activity. But they have their own pricey obstacles.

Rise of Renewable Power
Renewable energy usage standards -- which hovered in the low single digits when originally implemented during the late 1990s -- recently doubled, putting pressure on utilities to generate cleaner power, according to Jeff Deyette, energy analyst with the UCS.

"States with existing standards have increased their requirements," he said. "That's where you see the 15 percent to 20 percent range, which has been the trend over the past two to three years. The new states considering standards are bypassing the lower percentages and just going straight for the 10 percent to 20 percent range."

SustainLane, a San Francisco-based online media company that promotes sustainable energy, released a top 10 list of U.S cities ranked by their use of renewable energy.

Oakland, Calif., hit the top with 17 percent of its electricity produced by solar, wind and geothermal energy. Altamont Pass, a wind-swept mountain pass in Northern California that is home to one of the nation's largest wind-power facilities, provides some of the city's electricity.

"Wind and solar were the two main sources," said Warren Karlenzig, chief strategy officer of SustainLane.

The list skewed heavily toward the Golden State, with Sacramento, San Francisco and San Jose sharing the No. 2 spot, San Diego, clinching the fifth, and Los Angeles, the seventh. SustainLane credits that success to the state's ambitious renewable portfolio standards.

The UCS expects renewable energy initiatives to produce a significant environmental impact. The group projects that 21 states and the District of Columbia will collectively reduce their greenhouse gas emissions by 108 million metric tons of carbon dioxide by 2020, due to renewable energy requirements. That amount is equivalent to taking 17.7 million cars off the road, according to the UCS.

But while the leading states are making progress, the nation as a whole has plenty of work to do. Excluding hydroelectric power, just 2.5 percent of electric power generated in the United States currently comes from renewable sources, Deyette said. At the current growth rate, that number would reach 6.3 percent by 2020.

That portion could expand if efforts to establish a federal standard of 20 percent succeed.

"I don't think 20 percent is a stretch, but it's aggressive," Deyette said, "particularly for a state that's currently at 2 percent."

He said the U.S. Senate passed three 10 percent requirements that ultimately failed during the past several years, but thanks to the 2006 Democratic congressional takeover, several 20 percent requirement proposals now brew in Congress.

A New Energy Landscape
Rising electricity consumption and mounting pressure to develop renewable energy sources put public utilities in a bind because most new energy technologies remain immature and relatively expensive.

Wind, a seemingly ideal source of renewable energy, is among the fastest growing alternative power sources. But not all areas of the country have access to the reliable air currents needed for that type of power generation. Furthermore, wind farms aren't that easy to set up.

"It's not just a matter of siting a wind turbine or establishing a wind farm," Riedinger said. "Typically where there is wind -- and somewhat steady wind so you can get the most out of each turbine -- you're nowhere near the electric grid. You also have to establish the transmission lines to carry the electrons from the turbine to where they can be used.

"Siting those lines is often more difficult than siting a wind farm," he continued, "whether it's off the shore of Cape Cod or on mountain peaks in Vermont."

Local resistance often stalls a utility's ability to establish wind power transmission lines. "Siting one line can take more than a decade," he explained. "Everybody wants the electricity, but no one wants the lines running near their homes or where they can see them, which is understandable."

Utilities also actively pursue solar power. San Francisco voters passed a $100 million bond for solar research in 2001. The measure succeeded in response to government findings that Enron and other electricity traders suppressed power plant operations in California, causing rolling blackouts and price hikes.

But solar energy remains too expensive to commercially compete with other sources, and government efforts to promote solar technology may be having a mixed impact, according to Lori Bird, senior energy analyst at the National Renewable Energy Laboratory.

"Some state policies say a certain fraction of renewable energy has to come from solar," she said. Those policies spurred solar energy development, but they also increased competition for critical materials.

"There's been so much growth in the industry during the last couple of years that there's a shortage of silicon," Bird said. "The industry has been somewhat constrained by that. The global demand for solar is very strong, and the U.S. has to compete with Germany and Japan and so forth in trying to get solar panels."

Jerry Taylor, senior fellow at the Cato Institute, said high costs will prevent solar energy from playing a significant role in near-term renewable energy conversions.

"It's going to be nowhere on the radar screen unless the government just mandates that people build it, regardless of price, or subsidizes the living hell out of it, as we're doing for residential use of solar energy in California and other states," he said.

Renewable energy initiatives also may be rekindling interest in using biomass -- wood, livestock waste, garbage, yard waste and other materials -- to generate power.

"Biomass projects, overall, were on the decline," Bird said. "They may be reversing that some now. It's been up and down."

She said biomass could be cost-effective in certain areas of the United States, especially the South. But the practicality of using biomass to generate power rests on a complex web of factors.

"A lot of it depends on costs, what happens with federal incentives for biomass sources and so forth," Bird said. "Biomass plants also compete with other uses of the biomass feedstock."

One advantage of biomass-powered utilities, however, is their tendency to fortify local economies. These generating plants need nearby biomass providers. Biomass as renewable energy is only profitable if the fuel travels no further than 50 miles to the plant, Deyette said.

Geothermal power -- using hot water or steam from deep beneath the Earth's surface to generate electricity -- represents another option for some regions. "Geothermal is cost-effective in the Western part of the U.S.," Deyette said. "We're seeing more and more geothermal projects proposed and built."

Ultimately a single renewable energy source won't cut it for the entire country. Instead, the nation must develop a diversified landscape of individual localities powering themselves with whatever renewable sources their geographies provide. Furthermore, states lacking access to renewable energy sources will need a way to purchase excess "green" electricity produced in other regions, Deyette said.

A Dirty Solution
Despite the focus on renewable energy, spiraling demand for electric power is prompting utilities to consider coal to power massive generators needed to sustain future needs. Coal may be one of the dirtiest sources for electric power, but it offers a cheap and abundant energy source.

Complicating the problem is the fact that natural gas -- a cleaner-burning alternative to coal-fired energy plants -- is becoming difficult to acquire.

"We have constraints on pipeline capacity, the availability to deliver gas to where it's needed, as well as our ability to explore and take advantage of additional natural gas reserves in the U.S. and off the U.S. coast," Riedinger said.

A process called co-firing could help reduce dependence on coal-fired power generation. The technique turns an existing coal-fired plant into a coal/biomass-burning hybrid. "It's relatively easy to retrofit an existing coal-powered plant and burn a clean renewable energy source in that facility," Deyette said. "You get a lot of environmental benefits from it. It's cost-effective, and you're directly displacing coal-powered generation."

Co-firing typically enables 5 percent to 10 percent of a plant's energy to come from biomass, Deyette continued, adding that it would offer an easier renewable energy conversion to the southeastern United States, which lacks abundant wind.

Force-Feeding the Market
Regardless of the power-generating method, current development of alternative energy sources hinges on government support. Taylor even goes as far as to say the renewable energy industry would collapse without government tax breaks and subsidized loans. "The industry is booming for a reason," he explained. "Government is mandating that these people build this stuff, and they're subsidizing to such an extent that there's an artificial profit opportunity there that wouldn't otherwise exist in the market."

But Riedinger said utilities must have government assistance to reduce the financial risks of implementing new technologies, particularly for attracting capital from Wall Street. "[The more] signals sent by the federal government [showing] their willingness to help utilities shoulder some of that risk," he said, "the more quickly we can deploy some of these technologies and get them to market."

At the same time, however, dependence on government bucks is cramping the alternative energy industry.

For instance, many projects depend on the federal Renewable Electricity Production Credit (REPC). However, the credit must be renewed by federal lawmakers every few years, making it hard for the industry to plan ahead.

Uncertainty over the REPC limits geothermal power development, Bird said. "There have been some geothermal projects, but probably not as many as there would be if there was a long-term extension of the production tax credit."

Even the booming wind power industry has been impacted. Wind turbine manufacturers base their production on Congress' renewal of the REPC, and fears that the credit would expire led to a turbine shortage.

But Deyette said the REPC was becoming more stable. "Congress hasn't let it expire since 2004," he noted. "It's in place until 2008, and everybody expects it to continue. Congress has strong bipartisan support for it to be renewed for at least another three years -- maybe longer."

He added that tax breaks and subsidies are nothing new in the energy industry, and that renewable energy deserved its fair share.

"Look at all of the subsidies that went to the nuclear power industry and things like that," Deyette said. "[Government] supports were there for the more conventional resources. They should be there for renewables."

However, he argued against including traditional hydroelectric power in renewable energy goals and subsidies, saying the method already is well established and may be essentially built out.  

"Many, if not all, of the large-scale opportunities for hydropower have already been developed," he explained. "With a renewable portfolio standard, the intent is to try to increase the development of emerging technologies."

Instead, a federal standard should allow existing hydropower plants to get their government-designated percentages from a process called "incremental hydro generation." That would enable a traditional hydropower plant to produce additional energy by installing more efficient generators.

Federal Standard Concerns
As the federal standard gains momentum, experts are uncertain how it would impact existing state renewable energy requirements.

Riedinger called a federal mandate unnecessary and said it shouldn't pre-empt already existing state requirements. He contended that a one-size-fits-all federal renewable energy requirement would hurt states with geographies lacking enough mature and affordable renewable energy resources. Utilities in those states would be forced to either pay fees to the federal government, or purchase renewable energy credits from electricity generators in other states with excess renewable capacity.

"In either case, this is going to increase costs for electricity providers in regions without whatever level of renewables is designated as appropriate by the government," Riedinger said. "They'll simply end up paying a fee on top of the costs already incurred in generating electricity for their own customers."

Riedinger also wonders how revenue collected through fees and penalties would be spent. "What happens to the money? Is it used to advance energy research and development? That's at least intellectually defensible. Or will it amount to just another source of revenue for the federal government?"

Deyette, on the other hand, said a federal requirement could function as a minimum standard that all states must meet. But states could implement stricter requirements if they choose.

And states buying electricity from other states with abundant renewable energy would be no different than states importing fossil fuel for electricity, he added. "A state without a lot of renewable energy also might not have a lot of fossil fuel resources, and import that fuel. You'd just be importing a different, but cleaner and more sustainable source."

The UCS projects that the United States could cumulatively produce enough renewable energy for the entire country to meet a 20 percent standard.

"The targets don't start out at 20 percent," Deyette said. "They gradually ramp up over 13 years, so that provides time for other technologies to develop and mature."

Cooling Hot Air
Taylor said the details in forthcoming renewable energy requirements will reveal just how dramatic the "revolution" truly is.

"It may very well be that we'll be throwing wood chips into co-fired power plants," Taylor said. "What's the big deal? That won't mean we'll have turned ourselves into a nation of windmills and solar voltaic."

He added that generating electricity with renewable energy would do nothing to reduce the nation's dependence on foreign oil.

"You could build 100 massive wind power and solar power plants in the U.S. and not reduce oil imports a drop," he said. "They're just two different industries. We don't use oil to make electricity."

Oil produces only 1.6 percent of all electricity generated in the United States, according to the EEI.

But, all seem to agree that technology leaves no bet safe.

"I would not want to make predictions about what the electricity system would look like 30 years from now, based on prices and technology today," Taylor said. "Anything could change."

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Andy Opsahl

Andy Opsahl is a former staff writer and features editor for Government Technology magazine.

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