April 16, 2012
Director, Programs and Policy
In deciding last Friday on a new approach to funding renewable energy systems through the Focus on Energy program, the Public Service Commission (PSC) reserved the bulk of the incentives for energy systems using (1) biogas from agriculture and industrial operations; (2) biomass combustion; and (3) geothermal heat pumps. In so doing, it consigned solar and small wind to a minor role for the next couple of years.
The PSC’s decision came more nine months after Focus on Energy’s program administrator announced in June 2011 that it would temporarily discontinue awarding incentives to renewable energy systems beginning that July. Systems approved for incentives prior to that time were allowed to go forward.
Beginning in 2012, the PSC will impose a $10 million cap on program outlays dedicated to renewable energy in a given year. The percentage of that amount that flows to energy producers in the form of incentives has not been determined. Shortly after the Friday open meeting, the agency issued a statement which can be accessed at http://psc.wi.gov/pdffiles/News%20Releases/2012/04%20April/04132012RenewablesPlan.pdf.
The following represents RENEW Wisconsin’s reaction to the new Focus on Energy policy on funding renewable energy systems. For the record, RENEW Wisconsin’s advocacy was a driving force behind the creation of Focus on Energy renewable energy program in 2002.
+++++++++++++++++++++++++++++++++++++++++++“We wish we could be more supportive of the long-overdue action the Commission took last Friday, but unfortunately it is flawed in at least one key respect, and the result will be a very unbalanced resource portfolio going forward,” said Michael Vickerman, RENEW’s director of programs and policy.
“The biggest problem with the new policy is that it reserves three-quarters of available funds for biogas, biomass and geothermal heat pump systems while limiting funding for solar and small wind projects to only one-third of the program budget for biogas and biomass energy. Under the new policy, the amount awarded to biogas, biomass, and geothermal determines the overall funding level for renewables.”
“Let’s do the math. If it’s a good year for biogas, biomass, and geothermal, and enough applications come in to obligate in full the $7,500,000 reserved for this category, then solar and small wind could receive the remaining funds up to $2,500,000. But if biogas, biomass, and geothermal have an off year and only $3,000,000 worth of applications is approved, the share that remains for solar and small wind shrinks to $1,000,000.”
“We are strong supporters of biogas and biomass energy systems, but this allocation goes too far in that direction. Even under the best-case scenario, solar and small wind will see a significant reduction of incentive support.”
“Whether intended or not, the PSC’s funding formula effectively picks winners and losers going forward. Although state law directs the PSC to place a higher priority on non-combustible renewables than on combustibles, this policy does the reverse.”
“As long as funding for solar and small wind systems remains contingent on outlays for biomass, biogas, and geothermal, uncertainty and instability will prevail in that market segment. Administering this aspect of the Focus on Energy program will present a number of challenges. ”
“We believe this problem flows from the PSC’s continuing difficulties in fairly evaluating the cost-effectiveness of non-combustible renewables. Basically, the PSC treats those resources as though they were an expensive form of energy efficiency. But small, non-combustible renewables and energy efficiency are different animals, yielding very different outcomes and benefit streams. Small-scale renewables are clean and homegrown energy sources. The PSC’s test for determining cost-effectiveness in large part ignores those attributes,” Vickerman said.