The American Legislative Exchange Council (ALEC) is convening this week in Chicago to adopt recommended policies for the coming year. ALEC, which is tied financially to the Koch Brothers, is the organization behind this year’s unsuccessful attempts to repeal state RPS policies.
For next year, ALEC is shifting away from an outright “repeal” strategy toward RPS policies to one that purports to introduce free market principals into the highly regulated utility sphere but in actuality just attacks renewable energy policies from a new angle.
The proposed legislation is founded on the premise that renewable energy is more expensive than traditional forms of energy, and should be made available only as an option for customers willing to pay more. While the price premium is true for some technologies in some parts of the country, a report released this week from Lawrence Berkeley Labs shows an average price of $40/MWh offered to utilities by wind developers for projects in 2011 and 2012 – well below the levelized cost of energy (LCOE) for most other forms of power.
According to documents prepared for the ALEC conference, the model legislation, entitled the Market-Power Renewables Act, proposes to create a “voluntary” market for renewable energy, similar to many optional offers for renewable energy that existed prior to the passage of RPS in states around the country.
The legislation proposes the following:
- Customers who want to purchase renewable energy shall be able to do that at their choice
Any existing RPS requirement will be reduced annually based on the amount of voluntary renewable energy purchased
RPS will be eliminated in 2025
Revenue earned from the sale of Renewable Energy Credits will be exempt from regulation by the state’s utility commission.
The legislation runs into problems on a number of fronts. First, utilities and independent power generators have made significant investments based on markets established through the existing RPS. While not an outright “repeal” of the RPS – at least not until 2025 – the legislation would eliminate all requirements on utilities to purchase renewable energy. Gone would be the market certainty needed to encourage investment, as well as the pressure to compete over that guaranteed market, which brings down costs.
Furthermore, removing any revenues generated by RECs from the regulatory arena leaves utilities free to charge customers anything they like for renewables, regardless of the cost. In the highly regulated world of utilities, it leaves a monopoly with no oversight – and the customer footing the bill.
Above all, the ALEC legislation is a solution in search of a problem. RPS policies have been successful in driving renewable energy development and economic growth in states across the country, with little cost impact on consumers. In 2012, 72% of the content of wind turbines installed in the US was produced domestically, up from just 25% in 2006-07. RPS policies have been driving a vibrant new manufacturing sector.
Going into next session, the advanced energy industry and its allies will need to be on guard against this new tack from ALEC and its members in legislatures around the country.
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