Along with our economic downturn and troubles on Wall Street, the market price for Massachusetts Renewable Energy Credits (RECs) has fallen 50% from its highs last spring.
Renewable energy goals for Massachusetts are mainly established through its Renewable Portfolio Standard (RPS), a legislated program that requires total sales of Retail electricity meet a minimum percentage of new renewable generation each year.
The Massachusetts Technology Collaborative (MTC), a quasi-public agency responsible for promoting renewable generation in the State, actively provides public financing for renewable energy projects as one way to meet the State's clean energy goals. In return, MTC receives a portion of the RECs generated by these projects on a long term basis, and sells them.
On October 8, the MTC held an auction of its current year (2008) RECs and a forward sale of 2009 RECs. In total, MTC auctioned 7,683 Massachusetts and Connecticut renewable certificates from 2008 and 26,000 Massachusetts renewable certificates to be generated in 2009.
The results of the auction were mixed depending on your perspective. Wind projects in New York and Canada, racing to participate in the Massachusetts RPS market, have helped the state meet its goals, suggesting the RPS is working. With the minimum percentages met, prices dropped. The 2008 RECs sold at half of their value from a few months ago, and MTC was unable to secure an acceptable bid for its 2009 RECs, as the market anticipates further declines.
However, if wind and other renewable developers were anticipating high REC values, the economics of the RPS are no longer as attractive and could well slow or even stop development. The question becomes what will the State do in this situation?
Windaction.org warns we're in an unsustainable boom and bust scenario, that rewards speculators for playing the REC market rather than effectively producing useful reliable electricity.
The wind industry's lobbying of Congress to extend the Production Tax Credit (PTC) reached a fevered-pitch last week when the Federal government took no action on the PTC before recessing for August break. Ralph Cavanagh, director of the Natural Resources Defense Council's energy program called Congress' inaction a "criminally irresponsible failure", Sierra Club e-mailed marching orders to willing soldiers calling on them to demand their "do-nothing" representatives do something, and print media did its best to dutifully deliver the daily message: without the production tax credit, giant corporations now on the verge of unleashing an economic and environmental boom will go elsewhere, and our most desperate regions of the country will remain desperate.
After decades of receiving significant subsidies from ratepayers and taxpayers, and recent assertions by the American Wind Energy Association that wind is "no longer an alternative energy source, it's mainstream", the industry's cries portend something else: that wind energy is uneconomical and cannot survive without government intervention. The Federal cost to extend the production tax credit for a single year is $7 billion, the most expensive item in the energy bill debated last Spring. According to the U.S. Energy Information Administration (EIA) subsidies for wind dwarf most fuel types at $23.37 MWh. Yet, what do we get for this "investment"?
A) An intermittent, unreliable (but very sexy) energy resource that does not deliver electricity during the very time of day and year when we need it the most.
B) A resource built hundreds of miles from load centers requiring up to a trillion dollars in public dollars to string transmission lines through undeveloped rich habitat, and
C) The requirement that up to 90% of the electricity from wind be matched with redundant generation to ensure reliability when the winds die down.
Last week, Massachusetts Secretary of Energy Ian Bowles said "Renewable plants have an enormous subsidy under the renewable (energy) portfolio laws. If they still can't compete, they probably shouldn't be built."
Windaction.org couldn't agree more. It's time for our Federal representatives who support the production tax credit to hear from those who understand the economics behind "big wind". Contact your representatives today, and tell them "enough is enough".
This month, the U.S. Energy Information Administration (EIA) released an important analysis on Federal energy subsidies with a focus on electricity production. The total Federal energy-specific subsidies to all forms of energy was estimated at $16.6 billion for fiscal year 2007, more than double the estimated amounts in 1999 as calculated in 2007 dollars.
Windaction.org was most interested in Table ES5 of the Executive Summary which itemizes subsidies paid per fuel-type as measured in megawatt hours (MWh) of generation. A subset of the table is listed below:
| Coal | $.44 per MWh |
| Nat. Gas | $.25 per MWh |
| Nuclear | $1.59 per MWh |
| Biomass | $.89 per MWh |
| Geothermal | $.92 MWh |
| Hydro | $.67 per MWh |
| Solar | $24.34 per MWh |
| Landfill gas | $1.37 per MWh |
| Wind | $23.37 per MWh |
Wind proponents are quick to discuss absolute amounts paid in subsidies for coal, nuclear, and other traditional sources of generation. But when measured using a common unit (per MWh), subsidies for wind dwarf most fuel types at $23.37 MWh. Currently, wind receives 14+ times the subsidy paid for nuclear and a whopping 53x that of coal.
It's also apparent the Federal government does NOT treat all renewables equally. Subsidies for wind far exceed those paid for Biomass, Geothermal, Hydro, and Landfill gas combined.
Yet, given the unpredictable, intermittent nature of the fuel source, wind energy is the least able, of all renewables, to reliably supply generation during peak periods. Further, wind requires companion generation to address low or no winds conditions, and extensive, costly transmission upgrades to deliver power long distances to load centers.
The Recorder newspaper published an interview with Judge Theodore Morrison, retiring member of Virginia's State Corporation Commission (SCC). Judge Morrison served on the Commission when it reviewed and conditionally permitted the controversial 39-megawatt Highland New Wind Development wind energy facility proposed for Allegheny Mountain in Virginia. Judge Morrison's comments are worth noting given the aggressive campaign now underway by the wind industry to pressure Congress into renewing the Federal Production Tax Credit (PTC) as part of the Economic Stimulus Package.
In his interview, Morrison referred to the Highland Wind project as "symbolic" in the larger scheme of electricity demand. "It was only for 40 measly megawatts ... People shouldn't think we can get away from large [conventional power] plants with these," he said, adding that "I wish people would get realistic about the promise of renewables."
Energy expert Thomas Tanton notes that up to 65% of wind turbine installations are foreign sourced. Thus, if the extension were to be added to the Stimulus package, the only economies "truly stimulated" would be those countries (Denmark, Germany and India) that have the lion's share of the world turbine market."
The US Senate will be voting this week on a stimulus package. It's time for all of us to contact Congress and ask our representatives to get realistic about what the American taxpayers gain in return for the billions in public dollars spent on wind energy subsidies.
The wind industry has continuously lobbied Congress to enact a long-term extension of the federal production tax credit (PTC) since the incentive was first introduced in 1992. The PTC now represents up to one-third the return on a given wind farm. While it's true that fossil fuel generation also receives federal subsidies, when measured on a per kilowatt hour basis, wind is paid significantly more for a very minor percentage of overall generation (1% of U.S. consumption).
The question becomes whether the public is receiving value in return for the billions "invested" to date. Three basic limitations of wind generation suggest the investment may not be worth it:
The PTC should encourage reliable, usable generation produced close to where and when the energy is consumed. Presently, the PTC does not!
More than half the states in the U.S. have adopted a Renewable Portfolio Standard (RPS) requiring a percentage of electric generation come from renewable sources. A Lawrence Berkeley National Laboratory study found that 62% of the renewable generation needed to satisfy these RPSs will come from wind, with Texas and the Midwestern States seeing 94% compliance coming from wind energy.
Adoption of RPS policies hinges on state-sponsored studies that project the costs and benefits of RPS programs. Berkeley Lab researchers found that, across all state studies, the methodologies used in determining projected electricity rate impacts, environmental effects, and public benefits were limited and failed to account for key costs including:
In an interview, Berkeley Lab researcher Ryan Wiser said that "many of the studies were designed with the explicit intent to either influence legislative processes or, alternatively, to potentially affect the design of RPS policies as established by regulatory agencies."
According to the report the "disparity between study expectations and current market reality suggests that the actual cost impacts of state RPS policies may significantly exceed those estimated in our sample of studies, especially if higher wind costs persist."
In light of these findings, windaction.org encourages all state studies receive a second look. Legislators and the public deserve to know the true costs of these programs.
Robert Bradley, in his seminal policy paper entitled Renewable Energy Not Cheap, Not "Green", discusses the Department of Energy's 1976 study which estimated wind power could supply nearly 20% of the U.S. electricity by 1995. By 1996, wind represented 1/10th of 1 percent share with clear signs the market was in decline. In 1997 Enron entered the picture with its purchase of Zond, one of the largest developers of wind generation. This, coupled with new state and federal restructuring initiatives that funneled billions into new subsidies for wind and other renewables, resuscitated the near-dead market.
Yet, the inherent flaws of wind energy that made it economically unviable in the 1990's still exist today. Bradley wrote "because wind power's high up-front capital costs and erratic opportunity to convert wind to electricity more than cancel out the fact that there is no energy cost for naturally blowing wind. Low capacity factors, and still lower dependable on-peak capacity factors, are a source of wind power's cost problem." Much of Bradley's paper applies today and it's well worth reading.