I've been in the clean energy field for close to ten years, and I've had a pretty bearish view on small wind's potential in the Maryland area. The problem was that there was a huge gap in the available technology in this area. There were tiny 2.4 kilowatt (KW) turbines, good only really for a home, and then nothing of significance until you hit the big 1.5 megawatt (MW) utility scale turbines. Now, the situation has changed.
I was at a wind energy conference in Baltimore this week, and heard about companies installing all kinds of different sized turbines. There are 10 KW, 20 KW, and even 100 KW machines that are being used commercially. This means that you can now install turbines to power farms, schools, small businesses, and large businesses. That opens up a whole new market for wind in Maryland and elsewhere. If we do things right, we could see these mid sized turbines springing up all over the state, but especially on the Eastern Shore and Southern Maryland. We can see small "Community" scale wind farms made up of these medium turbines feeding clean energy into our grid.
This is a very positive development. Not only does small wind produce clean energy, it is much easier to get built than large utility scale wind. There is much less opposition and the permitting process appears to be easier. Also, small wind provides distributed power, in parts of the region closer to our large population centers. Don't get me wrong. I am all for large wind projects in western Maryland or offshore. But I'm also for speed, for a quick conversion to clean energy. Small, community sized projects may provide us facts on the ground immediately. We don't have to wait.
Small wind needs help, however. The Maryland Renewable Portfolio Standard (RPS) provides incentives for energy companies to buy wind and other clean, renewable energy sources. But the incentive is not enough to bring on the level of small wind projects we need. The incentive in the RPS needs to be more like the incentive in the Solar "carve out" in the RPS. I don't have space to explain what a Renewable Energy Credit (REC) is, (check out www.cleancurrents.com), but it's the primary tool that acts as the incentive to build clean energy to meet an RPS. The REC price for wind is currently around $1 or $2, while the REC price for solar is $300. If we allowed small wind systems (say, projects under 10 MW) to be part of the solar carve-out, and hence to raise the value of the small wind REC to that of the solar REC, we'd see an explosion of new wind development in Maryland. We'd see community wind energy developers bring new jobs to the state. The current explosion in solar that's bringing new solar jobs and new solar companies to the state would happen in the small wind area. I think our elected leaders should consider adding small wind to the solar carve out. Small wind is ready for the prime time, and Maryland should welcome it with open arms.
Thursday, November 19, 2009
Thursday, November 5, 2009
How Green Should a Utility Be?
I'm really not sure how I feel about utilities in Maryland trying to appear environmentally conscious. Sounds weird, I know. Don't get me wrong. I'm all for anything that decreases our addiction to fossil fuels and helps fight climate change. But I don't know if it's good that Maryland utilities promote their "green" agenda, when it seems that most of the "green" they are doing is simply complying with state law and is on the ratepayers dime. Let me elaborate.
The utilities in Maryland are a strange beast. They are neither a government entity, nor a truly private company in the standard sense of the word. Unlike other private companies, their maximum profits are determined by a government agency (the Public Service Commission), but in exchange they do not have to worry about losing money. They do not acquire customers like a normal for-profit business. They are assigned a given territory. If you live or your office is in that territory, you automatically become their customer. If they want to make an investment in infrastructure, to improve operations or better serve their "customers," they need to get approval from the PSC, the government board. They have certain programs (ie. efficiency) they must run because of state law, yet they get to recoup every dollar they spend from every ratepayer in their territory. Despite all this, they are considered "for profit," and actually have shareholders/investors.
Thus, the utilities have jumped on the green bandwagon and are extolling their commitment to a greener world. If you don't think their green image is important to them, just check out this report by Pepco Holdings, owner of one of the state's utilities.
Why is it important for them to brag to investors and others about being green? Because it increases the value of the brand, and thus increases the company value for shareholders.
This is where it gets weird. When a utility in Maryland offers energy efficiency incentives, is that something they should get credit for, or get to brag about as a "green measure?" When they simply comply with the law passed by the state of Maryland, is that a "green" initiative? It's not so clear. A normal company would be using its own money to pay for a program it offers, and thus get to take credit for it, but really it should be something that is above and beyond the minimum requirement of the law, no? But if a utility in Maryland is using ratepayer money to fund the program, what exactly is that utility doing to go above and beyond business as usual?
For example, if Pepco spends money to sponsor something like Bethesda Green, does that money come from their profit or does it come from the Pepco ratepayers? It's really hard to tell. Bethesda Green is a worthy group to sponsor, don't get me wrong. Clean Currents is a proud sponsor. But we don't get to automatically recoup the money we spend on the sponsorship from a captured audience. When a utility does sponsor a worthy cause, should it be allowed to put its logo on the promotional material and get the PR benefit? I don't know. If the utility is using ratepayer money to fund the donation, I think the answer should be "no."
Pepco recently put a link to a carbon calculator on its web site. Ok. Not sure what the point is, but I sort of get it. A calculator only makes sense if it leads to direct action to reduce carbon. The question is, however, did the ratepayers pay to put that calculator up or did it come from Pepco's profits? I don't know the answer.
I don't pretend to know all the ins and outs of how the utilities operate. But I think that's sort of the point. There is such a huge gray, undefined area of what a utility can do as this strange beast somewhere between private and public. The best thing to do is to follow the model in DC and Delaware, where the state and district set up a separate Sustainable Energy Utility (SEU). The SEU gets to run all the green programs, using the ratepayers money instead of the utilities doing it. This way, you don't have the ratepayers funding the increased brand value of a private company. You don't have the ratepayers funding the creation of a "green" brand to compete with companies that are in fact truly green.
Public policy, or the public good, is best served by having a neutral party disseminate public funds with an equal playing field for everyone. Putting a semi-for profit company, with an agenda to increase shareholder value in charge of disbursing public funds is not the best way to approach things. If the utilities want to be green, that would be great. But they should do it on their own dime, and they should take actions that go well above and beyond the basic requirements of the law.
The utilities in Maryland are a strange beast. They are neither a government entity, nor a truly private company in the standard sense of the word. Unlike other private companies, their maximum profits are determined by a government agency (the Public Service Commission), but in exchange they do not have to worry about losing money. They do not acquire customers like a normal for-profit business. They are assigned a given territory. If you live or your office is in that territory, you automatically become their customer. If they want to make an investment in infrastructure, to improve operations or better serve their "customers," they need to get approval from the PSC, the government board. They have certain programs (ie. efficiency) they must run because of state law, yet they get to recoup every dollar they spend from every ratepayer in their territory. Despite all this, they are considered "for profit," and actually have shareholders/investors.
Thus, the utilities have jumped on the green bandwagon and are extolling their commitment to a greener world. If you don't think their green image is important to them, just check out this report by Pepco Holdings, owner of one of the state's utilities.
Why is it important for them to brag to investors and others about being green? Because it increases the value of the brand, and thus increases the company value for shareholders.
This is where it gets weird. When a utility in Maryland offers energy efficiency incentives, is that something they should get credit for, or get to brag about as a "green measure?" When they simply comply with the law passed by the state of Maryland, is that a "green" initiative? It's not so clear. A normal company would be using its own money to pay for a program it offers, and thus get to take credit for it, but really it should be something that is above and beyond the minimum requirement of the law, no? But if a utility in Maryland is using ratepayer money to fund the program, what exactly is that utility doing to go above and beyond business as usual?
For example, if Pepco spends money to sponsor something like Bethesda Green, does that money come from their profit or does it come from the Pepco ratepayers? It's really hard to tell. Bethesda Green is a worthy group to sponsor, don't get me wrong. Clean Currents is a proud sponsor. But we don't get to automatically recoup the money we spend on the sponsorship from a captured audience. When a utility does sponsor a worthy cause, should it be allowed to put its logo on the promotional material and get the PR benefit? I don't know. If the utility is using ratepayer money to fund the donation, I think the answer should be "no."
Pepco recently put a link to a carbon calculator on its web site. Ok. Not sure what the point is, but I sort of get it. A calculator only makes sense if it leads to direct action to reduce carbon. The question is, however, did the ratepayers pay to put that calculator up or did it come from Pepco's profits? I don't know the answer.
I don't pretend to know all the ins and outs of how the utilities operate. But I think that's sort of the point. There is such a huge gray, undefined area of what a utility can do as this strange beast somewhere between private and public. The best thing to do is to follow the model in DC and Delaware, where the state and district set up a separate Sustainable Energy Utility (SEU). The SEU gets to run all the green programs, using the ratepayers money instead of the utilities doing it. This way, you don't have the ratepayers funding the increased brand value of a private company. You don't have the ratepayers funding the creation of a "green" brand to compete with companies that are in fact truly green.
Public policy, or the public good, is best served by having a neutral party disseminate public funds with an equal playing field for everyone. Putting a semi-for profit company, with an agenda to increase shareholder value in charge of disbursing public funds is not the best way to approach things. If the utilities want to be green, that would be great. But they should do it on their own dime, and they should take actions that go well above and beyond the basic requirements of the law.
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