Towards Decentralized Renewable Energy: policy lessons from California and the U.S.

Community Power makes a powerful case for decentralized renewable energy generation. After reading this report, it’s hard to imagine that policy makers would be content to allow renewable energy development to continue under the conventional central-station model.

* Report: Community Power: Decentralized Renewable Energy in California. By Al Weinrub.

Excerpted from John Farrell:

“Reaching our renewable energy goals can be met cost-effectively, more quickly, and with greater economic benefits if we focus on decentralized renewable energy. That’s the powerful conclusion in a recently released report, Community Power: Decentralized Renewable Energy in California authored by Al Weinrub. The lessons are applicable everywhere, and are attracting particular attention in California, where large-scale desert solar projects and new transmission lines are meeting broad-based opposition.

The cost-competitiveness of renewable energy is not news to anyone familiar with the industry. But for the most prominent decentralized renewable energy source – solar power – community power from photovoltaics (PV) has better economics than centralized solar-thermal power plants. This is reinforced by data from the California Solar Initiative showing that most of decentralized solar PV’s economies of scale are captured by projects as small as 10kw. California has plenty of decentralized renewable energy potential in with rooftop solar alone, to meet its ambitious renewable energy target (33% by 2020). And the actual potential far exceeds the necessary amount required to meet the state standard:

The potential for decentralized solar generation goes well beyond the numbers cited in these studies, which represent only the most accessible commercial solar PV installations. Other, smaller rooftops are available for commercial PV power in urban areas, as are carports, parking lots, other disturbed land, rail and highway right of ways, and so forth.

California’s abundant, dispersed wind power resources also could be tapped in a decentralized fashion. Ineed, decentralized renewable energy is the most likely method for reaching the state’s ambitious near-term target of 33% renewable electricity by 2020. Centralized renewable energy often requires new high-voltage transmission capacity, which can take 10 years or more to construct, before the project itself begins construction. Centralization pursues clean energy in larger increments, but it will mean little to Californians to have a big pipeline of centralized renewable energy projects if none are ready by 2020.

While all these arguments for decentralized generation make a compelling case in the electricity market, the most important finding is the massive economic benefit of the decentralized model for renewable energy deployment. The jobs and economic impact advantage of dispersing wind and solar projects far outweigh any increased marginal cost of smaller scale projects. And this development model reduces environmental impacts–a hotly contested topic.

Decentralized energy carries significant political advantages. By spreading around wealth and expanding the field of energy producers, decentralized generation creates a political constituency to support renewable energy development, in stark contrast to the NIMBY response to centralized desert solar or new transmission lines.

So why is there is a challenging picture for its adoption? California regulators have allowed incumbent utilities to slip on their commitment to meet the state’s renewable energy milestones and instead invest millions in a fleet of new natural gas power plants. there is also the appropriately named “Legacy Model of Big Power”: a state and federal web of financial and regulatory rules favoring the development of large-scale, centralized power plants. The commonsense adage “follow the money” provides a vivid illustration of structural barriers to decentralized generation. Rather than invest in decentralized generation, dominant investor-owned utilities prefer to put their money in new transmission lines, where it gets a guaranteed profit at the expense of ratepayers. Striking growth in new transmission lines stands in stark contrast to near-flat energy demand. And every dollar these utilities use to overbuild transmission infrastructure is a dollar lost to the tools of the future: new distributed wind and solar power, energy storage, a smarter grid.”

What works? The track record of feed-in tariffs in promoting renewables

John Farrell:

“There are two political options for overcoming the existing barriers to decentralized generation, although the road for each has its own perils. Community Choice Energy legislation first passed in California in 2002, but it wasn’t until a year ago that a community successfully overcame utility-funded opposition to take control of its energy future. Legislation recently introduced in the California legislature in 2011 hopes to fight utility intransigence by strengthening the 2002 law.

The second strategy – a feed-in tariff – has the best track record, but is the least developed in the United States. Jurisdictions with feed-in tariff policies (such as Germany, Ontario, Vermont and Gainesville, Florida) have seen significant deployment of renewable energy (particularly solar) by offering standardized, long-term contracts and prices sufficient to offer developers a reasonable return on investment. Feed-in tariffs provide cost-effective deployment of renewable energy by reducing the rate of return of developers in exchange for significantly reduced risk. While feed-in tariffs are actually quite similar to the model for deploying new power generation in regulated utility markets, they have yet to catch hold significantly in the United States.


“Weinrub misses an opportunity to highlight some other, less comprehensive strategies for supporting decentralized energy. Colorado, for example, has passed a “community solar gardens” law to encourage the development of solar power with multiple owners and to allow folks without sunny roofs to “go solar.” Sixteen states have created set-asides or additional mandates for distributed generation or solar power. Despite these omissions, Community Power makes a powerful case for decentralized renewable energy generation. After reading this report, it’s hard to imagine that policy makers would be content to allow renewable energy development to continue under the conventional central-station model.

And in more good news, Chris Stimpson reports:

“Last year, a report from North Carolina showed solar power to be cheaper than power promised by planned nuclear construction in that state. The major finding was that electricity from new solar installations in North Carolina is now cheaper than the electricity that would come from proposed new nuclear plants there. It also found that the continuing downward trend of solar prices will widen the price gap dramatically as time progresses.

The reasons for the falling cost of solar include manufacturing and installation advances, economies of scale, and increasingly enlightened tax treatment at both federal and state level in the last five years. Over the same period, design problems and rising cost estimates have led to delays and cancellations of U.S. nuclear projects. The average increase in cost estimates for nine such projects is 140%, with some nearly quadrupling or quintupling their original figures. It’s considered significant that these delays and cancellations have mostly occurred in states with open competition for electricity sales. States with monopoly power markets – many in the south and southeast U.S. – are where utilities are still proposing new nuclear plants.

It now seems that, on the national scale, renewable energy production has practically caught up with nuclear. The December 2010 Monthly Energy Review, published by the U.S. Energy Information Administration, shows that each of these power sources was responsible for some 11% of primary energy production during the first nine months of 2010. The Review also shows that, while nuclear output dropped during this period, non-hydro renewables increased their output by over 11%.”

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