The whole idea of green energy—renewable resources—grew out of an energy reality that was much different from today’s. It was in the 1970s, following the OPEC Oil Embargo that solar panels began popping up on rooftops and “gasohol” subsidies were enacted. It was believed that green energy would move the U.S. off of foreign oil and prevent oil from being used as a weapon against us.
Today, that entire paradigm has been upended and OPEC’s power has been virtually neutered by increasing domestic oil production and decreasing gasoline consumption.
Jay Lehr, Heartland Institute science director, likens continuing “as though our new energy riches did not exist” to “ignoring our telecommunication revolution by supporting operator-assisted telephones with party lines.”
Instead of growing our gas, we need to be growing food that can feed a hungry world and balance out the U.S. trade deficit.
In a November 17 editorial, the Wall Street Journal (WSJ) perfectly sums up the current renewable resource status: “After 35 years of exaggerations about the benefits of renewable fuels, the industry has lost credibility.” Similarly, on the same day, the Washington Post (WP) went a step further, stating that ethanol “has been exposed as an environmental and economic mistake.”
It seems that ethanol is an idea whose time has come—and gone.
Ethanol
Mandated for blending into America’s gasoline supply in 2007 through the Energy Security and Independence Act, ethanol now has an unlikely coalition of opponents—including car and small-engine manufacturers, oil companies and refiners, and food producers and environmental groups.
A national movement is growing and calling for the end of the ethanol mandates that, according to the WSJ, have “drained the Treasury of almost $40 billion” since the first gasohol subsides were enacted in 1978. Realize the word “Treasury,” used here, really means “taxpayer.”
“At the end of 2011, the ethanol industry lost a $6 billion per year tax-credit subsidy,” the WP points out. But the mandate for the American consumer to use ethanol remains through what Senator David Vitter (R-LA) calls: “a fundamentally flawed program that limps along year after year.”
Imagine the surprise, given that EPA Administrator Gina McCarthy asserts: “Biofuels are a key part of the Obama Administration’s ‘all of the above’ energy strategy, helping to reduce our dependence on foreign oil, cut carbon pollution and create jobs,” when, on November 15, the EPA gave a nod toward market and technological realities and, for the first time, proposed a reduction in the renewable volume obligations—below 2012 and 2013 levels.
On a call with reporters, a senior administration official explained: “While under the law volumes of renewable fuel are set to increase each year this unanticipated reduction in fuel consumption brings us to a point where the realities of the fuel market must be addressed to properly implement the program.”
The WP describes the problem: “Mixing more and more ethanol into a fixed or shrinking pool of fuel would bump up against the capacity of existing engines to burn it, as well as the capacity of the existing distribution network to pump it.” It states: “The downward revision of roughly 3 billion gallons is the first such reduction since Congress enacted the Renewable Fuel Standard (RFS) in 2007.”
The EPA’s decision is lauded by AAA President and CEO Bob Darbelnet: “The EPA has finally put consumers first.” He said the targets in the 2007 law “are unreachable without putting motorists and their vehicles at risk.”
The November 15 announcement has even received rare bipartisian support. In a joint statement, House Energy and Commerce Chairman Fred Upton (R-MI) and ranking member Henry Waxman (D-CA) praised EPA’s decision to cut into the biofuels mandate next year. “As our white papers and hearings made clear, the status quo is no longer workable,” Upton said. “Many of the issues raised by EPA, stakeholders, and consumer advocates are now reflected in the agency’s proposed rule.” Both suggested the committee would continue to examine possible legislative changes to the overall mandate.
The ethanol lobby is not so enthusiastic. “Despite a lack of demand,” states the WSJ, it “wants government to force a blend of E15 or higher on millions of consumers and force car makers to adapt their fleets to a fuel that offers less octane per mile traveled and no environmental benefit.”
Brooke Coleman, Advanced Ethanol Council executive director, expressed the industry’s disappointment: “While only a proposed rule at this point, this is the first time the Obama administration has shown any sign of wavering when it comes to implementing the RFS.”
Coleman added: “What we’re seeing is the oil industry taking one last run at trying to convince administrators of the RFS to relieve the legal obligation on them to blend more biofuel based on clever arguments meant to disguise the fact that oil companies just don’t want to blend more biofuel. The RFS is designed to bust the oil monopoly. It’s not going to be easy,” To which, Taylor Smith, Heartland Institute policy analyst, quipped: “The renewable fuel industry has reacted to EPA’s announcement as if something big has been taken away from them, when technically nothing has been taken away from them, just less will be given to them in the future. The oil industry’s heavy lobbying may be blamed for EPA’s announcement, but ethanol’s failure to lower CO2 emissions or reduce oil use or oil imports since the law was passed has just as much if not more to do with it.”
Ethanol is setback.
Solar
While the ethanol mandate hasn’t been eliminated, the administration has wavered and has given a nod toward “market and technological reality.” Likewise, those of us opposed to government mandates and subsidies were handed a small victory in Arizona when, on November 14, the commissioners tipped their hand by setting a new direction for solar energy policy. In a 3-2 vote, the Arizona Corporation Commission (ACC) took a step and added a monthly fee onto the utility bills of new solar customers to make them pay for using the power grid.
While the ACC decision didn’t make national headlines, as the EPA decision did, it has huge national implications.
The issue is net-metering—a policy that allows customers with solar panels to receive full retail credit for power they deliver to the grid. Supporters of the current policy—including President Obama—believe that ending it “would kill their business.” Opponents believe it “unfairly shifts costs from solar homes to non-solar homes.”
The ACC vote kept the net-metering program, but added a small fee that solar supporters call “troubling.” Officials for SolarCity and SunRun—companies that install solar arrays—have reportedly said: “The new fees mean fewer customers will be able realize any savings.”
“What amounts to a $5 charge is a big hit to the solar industry,” said Bryan Miller, SunRunvice president for public policy and power markets. “In our experience, you need to show customers some savings.”
Considering that Arizona Public Service Co. (APS) wanted to cut the rate paid to customers with solar and wanted a much larger fee added, the ACC decision might not seem like a victory. In fact, the solar supporters called it a victory for their side, claiming “policymakers in Arizona stood up for its citizens, by rejecting an attempt from the state’s largest utility to squash rooftop solar.” But that’s not the full story.
The new fee passed 3-2—which might sound like a narrow margin. However, the two “no” votes, voted “no” because each believed the fee should be higher—meaning that all five commissioners wanted a fee added (four of the five had previously indicated that they were ready to add fees as high as $50 a month). Additionally, the fee is only in place until the next rate case that will be filed in June of 2015. Plus, a clause was added that allows the commission to adjust the charge annually. After December 31, solar customers will be presented with a document making it clear that the fees they pay the utility may increase.
James Montgomery, RenewableEnergyWorld.com associate editor, reported that the Alliance for Solar Choice representative, Hugh Hallman, acknowledged that there is a cost-shift that the solar sector needs to address. In the ACC case, it was the solar industry that proposed the fee—even thought it had “bitterly” fought any new fees. The Arizona Republic coverage of the vote states: “The solar industry offered the $5 compromise as it faced the reality that the commissioners appeared poised to enact even higher fees closer to what APS requested.” And adds: “The meeting appeared to be going against the solar industry.”
Commissioner Brenda Burns, who was one of the “no” votes because she wanted higher fees, called out the Arizona Solar Energy Industries Association over a statement made in a letter claiming that solar customers used their own money to install solar at no cost to their neighbors. She noted: “Solar customers got up-front incentives to pay for their solar panels until they expired in October. Those incentives came from other customers and ran into the thousands of dollars for many solar users. APS ratepayers paid more than $170 million in cash incentives,” she said. “It is a fact, and we shouldn’t ignore the fact.”
The ACC’s process pointed out the customers’ savings that $170 million in cash incentives got them could be “largely or entirely wiped out” with a $5 fee. It solidified that there is cost-shifting taking place—which the industry has denied. And, it set up larger fees and potential credit adjustments in the near future.
Rhone Resch, Solar Industries Association president/CEO, called the ACC decision “precedent setting action.” There are a number of other state commissions currently reviewing net-metering policies.
Renewable energy has suffered a setback in both the EPA ethanol decision and the ACC solar decision. Will wind be next?
Wind
On November 14, fifty-two Congressmen signed a letter, organized by Rep. Mike Pompeo (R-KS), calling for the end of the wind production tax credit (PTC). In the letter addressed to Rep. Dave Camp, chairman of the Committee on Ways and Means, they point out that the PTC, which was scheduled to end on December 31, 2012, was extended “during the closing hours of the last Congress,” as a part of the American Taxpayer Relief Act (ATRA). Not only was it extended, but it was enhanced by modifying the eligibility criteria. Originally, wind turbines needed to be “placed in service” by the end of the expiration of the PTC to qualify for the tax credit. Under the ATRA, they need only to be “under construction” to qualify.
The letter points out: “If a wind project developer merely places a 5% deposit on a project initiated in 2013, it will have at least until 2015 and possibly 2016 to place the project in service and obtain the PTC. That means that a wind project that ‘begins construction’ in 2013 could receive subsidies until 2026.”
Like ethanol and solar, “the growth in wind is driven not by market demand, but by a combination of state renewable portfolio standards and a tax credit that is now more valuable than the price of the electricity the plants actually generate.”
Earlier this month, more than 100 organizations—including the two for which I serve as executive director—sent a letter to Congress calling for them to allow the PTC to expire as scheduled. This letter states “after 20 years of preferential tax treatment,” wind energy “remains woefully dependent on this federal support” and calls for “energy solutions that make it on their own in the marketplace—not ones that need to be propped up by the government indefinitely.”
Both of these actions come at a time when wind energy is suffering some embarrassing setbacks of its own.
On November 20, the sixth GE 1.6 megawatt wind-turbine blade in 17 months broke off. Three “incidents” have taken place in Illinois (most recently on November 20), two in Michigan (November 12), and one in New York (November 17). The blades weigh about 20,000 pounds and are about 160 feet long. These six cases are called “rare” and “isolated” but there are hundreds of the same GE turbines in the same industrial wind parks where the blades broke off. One can’t help but wonder which turbine will “crash to the ground” tomorrow?
Reports indicate that so far, “no one was injured.” However, locals have reported shrapnel from the blade break has been found more than 1500 feet away.Setbacks for turbine installations are 511 feet from roads and only 700 feet from property lines, so the possibility of somebody getting killed is a real probability.
Note: The North American Wind Power story on the Michigan failures, states: “GE’s 1.6-100 is one of North America’s most sought-after turbines.” Woe to the person who has a different manufacturer’s turbine nearby if these are the “most sought after.”
While, to date, no one has been killed by a wind-turbine blade, plenty of birds—including federally protected birds, such as bald eagles—have been killed. On November 22, the first-ever criminal enforcement of the Migratory Bird Treaty Act for unpermitted avian takings at wind projects was settled. Duke Energy agreed to pay fines, restitution, and community service totaling $1 million and was placed on probation for five years.
The EPA finally saw some sense when it announced the reduction in the amount of ethanol that refiners are required to blend into gasoline in 2014. The ACC signaled a change in ratepayer compensation for solar energy. Will Congress show similar wisdom and allow the wind tax credit to expire at the end of 2013?
These mandates and tax credits are remnants of an outdated energy policy that is akin to “ignoring our telecommunication revolution by supporting operator-assisted telephones with party lines.” America’s energy paradigm has changed and our energy policies need to keep up and be revised to fit our new reality.