April 6, 2012
Massachusetts

Renewable anxiety

BY: Bruce Mohl, Commonwealth Magazine, www.commonwealthmagazine.org 6 April 2012

Lawmakers on Beacon Hill are getting nervous that Massachusetts won’t be able to meet its renewable energy targets over the coming decade.

The targets were first established by law in 2003 and then ratcheted up with the passage of the Green Communities Act in 2008. They obligate power sellers to obtain 7 percent of their electricity from renewable sources this year, with the amount rising 1 percentage point a year. By 2020, the obligation will be 15 percent.

Two provisions in the Senate electricity bill due up for debate today attempt to kick-start efforts to develop more renewable energy projects. One provision would direct utilities to enter into long-term contracts with renewable electricity generators for an additional 4 percent of their customers’ power needs. The other would authorize the state to start negotiating renewable energy contracts under certain conditions.

Both measures would steer contracts to the lowest-cost provider, a sharp change from current policy, which requires only that projects be cost-effective.

“The motivation was to try to make sure we’re doing everything we can to meet our goals in the most cost-effective way possible,” said Sen. Benjamin Downing of Pittsfield, the bill’s chief architect.

Both provisions are facing resistance from business groups and utilities and may either be scrapped or changed significantly. But their presence in the bill reflects a growing realization that the state’s renewable energy goals are going to be hard to meet.

In some respects, that concern is nothing new. The state Department of Public Utilities approved National Grid’s long-term contract for half of Cape Wind’s power output in 2010 not because the agency thought the contract was a good deal for ratepayers but because the power was desperately needed to help the state meet its renewable energy goals. “The demand for renewable resources over the next 15 to 20 years will far outstrip the current supply,” the DPU said in its ruling.

By my estimate, the state may need nine more Cape Winds over the next 15 years to meet its renewable energy goals. And we’ve all seen how hard it is to get Cape Wind built.

Massachusetts ratepayers subsidize renewable energy development through their purchase of electricity. Qualifying renewable power generators are issued one renewable energy credit, or REC, for each megawatt hour of power they produce. The power is sold into the grid and the RECs are sold to power suppliers, who use the credits to comply with the state’s renewable energy targets.

The price of RECs varies depending on supply and demand, but if there’s a shortage, power sellers still have to meet their REC requirement by making separate payments to the state. The size of these payments is capped.

The state’s most recent analysis of the REC market was issued in January and covers 2010, when the REC-purchase requirement was 5 percent. The analysis indicates the supply of renewables fell short of demand that year after three straight years when supply exceeded demand. Since the shortfall was small, the amount of capped payments to the state totaled just $242,000. A much smaller, separate REC program for Massachusetts-produced solar power that began in 2010 fell far short of its goal, generating capped payments of $11.7 million.

Most RECs are coming from renewable energy projects outside Massachusetts. According to the state report, 33 percent are coming from Maine, 25 percent from New York, and 12 percent from New Hampshire, while just 8.5 percent came from Massachusetts.

The state report offers no forecast of future REC supplies, but is optimistic that any shortage of RECs will drive up their price, prompting renewable energy developers to launch additional projects and produce more power. Lawmakers, however, are nervous. They fear the downturn in electricity prices (prompted by a decline in natural gas prices) may make it harder for renewable energy developers to succeed, even with subsidies. That’s why Downing and others are exploring ways to spur renewable energy development by having utilities and even the state contract directly for it.

URL to article:  https://www.wind-watch.org/news/2012/04/06/renewable-anxiety/