What have changed
the most in past century? Some people may say it is the fashion that we are
wearing completely different style of clothes. Some other people may say it is the technology that we can
fly to the other side of the earth within 15 hours. Many others may say it is the way of life that changed the
most. We don’t need to send a
letter and wait for a month to hear from our loved ones from thousands of miles
away. More and more people choose
to go to universities. But most of
all, people are computing more energy out from the natural than we ever did,
and world is going to need more energy without a doubt. Therefore, facing the limited
supply of fossil fuel and climate change, many governments start to invest in
renewable energy. United State, as
the country consume the most energy in the world, creates many energy policy in
order to promote renewable energy in the hope that one day it can replace
fossil fuel as the major energy source.
However, the current energy policies are not so effective because policies
like Renewable Portfolio Standard (RPS), Mandatory Green Power Option (MGPO) or
subsidizing for immature technologies, have not effectively increase renewable
energy share and create a long term stable market in United State.
Energy is in
almost every aspects of our life. Microwaves
use energy to heat up food.
Computers use energy to accomplish computations. Cars burn energy to take people to
places. Even the clothes that
people wear are made using energy of some forms. Energy industry has become one of the most important
industries of modern world. Since
1971, energy used worldwide has raised almost 70 percents. According to the International EnergyAgency (IEA), if the current energy use patterns persist, the global energy usewill continue increase about 2 percents per year for at lest next 15years. Currently, would consume
more than 132,000 TWh of energy every year. More than 80 percents of that energy come from fossil fuels.[i] As all people know, fossil fuel is a
finite recourse, and takes about thousands of years to form, but its high power
intensity and stability made it the best and most convenient energy source
since the beginning of industrial revolution. However, recently, environment and security concerns about
using fossil fuels have taken the headlines on newspapers. Even though it may be impossible to prove using fossil fuels
as the sole reason for climate change, the strong correlation between increasing
CO2 level in the atmosphere and use of fossil fuels cannot be ignored. The instability of oil market (OPEC) is also
one of the most important concerns for many governments. Therefore, people turn their attention
on looking for an alternative answer to support the fast growth of modern
society. More and more countries
started to promote renewable energies, such as solar energy, wind turbine and
biomass. As a result, a share of
renewable power has grown rapidly in the past decade worldwide.
However, in United State, the story
is a little different. It is true
that the capacity and generation of renewable energy in United States has being
growing, but it did not catch up the total growth of energy consumption.
Since 2000, the share of renewable
energy has been growing back a little.
By 2011, 12.67 percents (10.38% in 2010) of United State energy camefrom a renewable source. However,
it is still much below the 16.7 percents (2010) share in the world. Some people may think this is due to
the fast growth of energy consumption in United States; about 20 percents inpast two decades, but the world consume much more, about 39 percents in twentyyears. One the other hand, the
ineffectiveness of energy policies in United States has been the major cause of
losing the battle on renewable energy development.
Renewable
Portfolio Standard (RPS) is one of the most accepted green energy policies in
United States, but the result of the policy is not so glamour as it intended to
be. RPS is implemented as a
regulation to require utility companies to reach to a certain percentage of
their electricity to come from a renewable source. The goal of RPS is to increase renewable energy deployment
and reduce state reliance on fossil fuels in term of energy generation. In states where RPS is implemented, the
utility companies are required to reach a certain percentage of renewable
energy either by generation of exchanging renewable energy credits or
certificates.
 |
| Carley, S.,2009.State Renewable Energy Electricity Policies: an Empirical Evaluation. EnergyPolicy37 |
The good thing about such
regulation is to not mandate a specific allocation of government money. Even though in some states, such as Texas,
where 915 MW of wind energy development in 2001, RPS seems to be effective, in
many other states, the story is not so good. First, policy duration is often long, about 10 to 20
years. There are so many
uncertainties, such as economical development of each state, developments of
green technology, individual utility company growth, energy consumption growth
or next term RPS’s goals. Without
the stability, companies are unlikely to keep a log-term sales contracts that
are necessary for low-cost finance.
In addition, an insufficient enforcement also causes trouble. For example, in Arizona, there was no penalty
for non-compliance, and RPS is funded with specified ratepayer surcharges. Moreover, in many states, the supply
–demand conditions are poorly balance in RPS. Maine is a good example, where eligible supply is far exceed
demand and result in no effect on new renewable generation in the region by
RPS. The narrow application on
investor-owned electric utilities and competitive energy service providers also
limited RPS’s effectiveness. In
most states, public owned electric utilities and provider of last resort are often
exempted. In Connecticut, due to
this exemption, RPS only covers less than 5 percents of its total electricity
load. Furthermore, because of the
last resort provider, which usually covers majority of residences in the state,
is often not regulated in RPS, there is almost no long-term contracts for new
renewable generators in many states, such as Massachusetts. Alone side of those major pitfalls, RPS
is often lack of stability on rules like resource eligibility, out-of-state
renewable generation, which also leads to limited long-term contracts of green
energy generation.[ii] As a result, many studies have
concluded that RPS has no significant impact on generation of renewable energy,
such as Delmas er al’s model in 2007 and Carley’s model in 2009.[iii]
RPS
is not the only attempt of US government on developing green energy. Mandatory Green Power Option (MGPO) is
another renewable energy policy that have not being universally effective in
United States. Compare to RPS,
MGPO is fairly new. It is based on
consumers’ demand on renewable energy.
The policy requires utilities operations to offer a green power option
to consumers. In other words,
consumers have the choice to choose green energy in favor of environment or to
choose non-green energy in favor of cost.
The policy is fairly popular amount the media and public, and many
studies have shown the positive effects of the policy on increase green energy
generation, but only in limited states.[iv] The reason for the limitation is that there
are two preconditions for this policy to be effective. First, consumers have to be willing to
pay for green energy, which often cost much more than fossil fuel energy. Second there has to be a choice among
electricity products.[v] Due to those to preconditions, the
effects of MGPO are taking place at a very slow speed. Even though the consumers’ awareness of
climate change and environmental effects of fossil fuel has increased in the
past decade,[vi]
the overall percentage of people who are aware of the green energy options and willing
or capable of paying extra for green energy is still very limited. According to Natural Marketing
Institute’s (NMI) Lifestyles of Health and Sustainability (LOHAS) Consumer
Trends Database, only one out of six people aware of the green power options
provided by their electric suppliers.
Only 7 percents of families report buying some renewable energy for
their home. Many of people who claim
to care about environmental issue of fossil fuel fail to use renewable energy
due to the high price.[vii] Moreover, the second precondition
also limited the number of states that are willing to implement the policy due
to political concerns. The policy
requires all utility company to provide green energy option in the state, which
is financially or technically hard for many utilities, especially last resort
utilities. If implementing the
policy, it means a large financial support needed from the government to many
utilities. As the result, until
2012, only 11 states (Colorado, Delaware, Iowa, Maine, Minnesota, Montana, New
Mexico, Oregon, Vermont, Virginia and Washington) have MGPO.
There
are two categories of US renewable energy policies, first one contains rules
and regulations like RPS and MGPO; second is the financial support to encourage
renewable energy. Government’s
subsidizing is one of the financial supports for green energy. However, it is one of the most
argumentary policies. Nowadays, subsides
exist at the federal, state and local level. In states, such as New York and California, the combination
of federal tax incentives and state and local subsidies can cover up to 50percents of a renewable energy project cost. In fact, subsidizing has proven to be one of the most
effective short-term policies in promoting renewable energy generation. However, it is a terrible policy in the
long run. First of all,
subsidizing puts more financial pressure on government, which is already in a
tight budget. In 2011, the federal
government spent $16 billion on subsidizing renewable energy. In 2010, the subsidies for energy productions are showing as below.
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It is not to say that promoting
green energy is wrong or unnecessary.
However, in face of $16 trillion nation debts, $16 billion is not a
small number to spend. Some people
may think the spending is necessary in term of environmental protection. In fact, can renewable energy really
solve the climate change issue? It
is a question, even the best environmental scientist cannot answer you, because
the answer is simply “No one really knows.” The limitations on renewable energy technologies are the
first roadblock that scientists and engineers can’t overcome. For example, wind turbine has a veryhigh cost. The production of solarpanels creates heavy carbon pollutions.
Biomass often generates low or even no net energy gain. The truth is
that renewable energy generation technologies are still immature, and none of green
energy source offers a promising future to replace high energy density fossil
fuel. Renewable energy subsidizing
is like a gamble on green energy technologies without really knowing if the
technologies would be successful overall.
And it is a gamble with billions of dollars, which Americans don’t have
in this economy.
Furthermore, even
many people may think it is the gamble worth taking, the truth is that many
utility companies are not in favor of the policy, and the short-term nature of
subsidizing present so little effects on long-term developments in renewable
energy industry. All of subsidies
from the government have a expiration date, not so far in the future. For
instance, Production Tax Credits for wind turbine will expire on December 31st,
2012. On the same day of next
year, Credits for geothermal and biomass sector will expire. In 2016, investment tax credits for
solar energy are going to expire as well.
Many of those subsidies can only be extend by a Congress act, which is
one of the most uncertain things in this country. In fact, until 2011, many subsidies, like gash grants of
equipment costs for solar, has already stopped. Manufacturers worry about the future of their own company
and started to scale back on their operations, such as NGR cut 18 jobs last may
as the first layoffs in three decades.
The reason for manufacturers to fear the expiration of subsidizing is
their large dependency on that money as green energy companies. Even though green energy technologies
have been developed fast, its cost just simply impossible to be reduced in a
short-term. Many subsidies are only in terms of 3 to 10 years. It is not enough time for science to
find a cheaper way to build green energy generator. This shows most effects on solar energy industry due to high
cost on energy generation. The
expensive wind turbine production also limited wind energy development for the
same reason with uncertain subsidizing policy.
Even though many scientists have
predicted the dramatic cost reduction for renewable energy in the future,[viii]
many green energy companies still rely on government subsidies for many of
their operations now. Therefore,
subsidizing would not be a great answer in a long run for both the government
and the industry.
There
are many other policies, such as feed-in tariff. They will not be discussed in detail here, but looking at
the result of low renewable energy share in United States in comparison with
the world, it is clear that those renewable energy policies has not been so
effective. It may be true that
most policies are at early stage of their implementations, so that it may be
too early to judge their effectiveness.
However, the major barrier of renewable energy, such as the high cost of
electricity, price distortions due to subsidies, lack of customer awareness,
uncertainties in the market and technologies, are still in the way of renewable
energy development. And none of
current US energy policy seems to have direct positive affects on any of them.[ix] Without a major spike in coal and oil
price, the renewable energy market is likely to develop at a very slow speed in
US.
Nevertheless,
renewable energy is necessary for the future. Overall, the supply of fossil fuel is finite and
environmental issue of fossil fuel is serious. Radioactive damager of nuclear power is also a too big of a
risk to take for the society.
Green energy may not be the ultimate solution to the energy crisis, but
it is the best solution on the table.
Therefore, to develop a set of effective policies to support such
immature technology is necessary.
However, the current energy policies in United States are not so
effective in terms of increasing renewable energy generation and develop green
energy market. Many studies have concluded
“An effective and
synergistic approach would need to treat each of these policy mechanisms as
complementary, rather than as competitors that must constantly win approval
from policymakers. No single-policy mechanism is a panacea, and until
comprehensive policy changes are implemented, renewable energy and energy
efficiency will never realize their full potential. “[x]
[i] Schmalensee, Richard.
Stoker, Thomas M. Judson, Ruth A. World
Energy Consumption and Carbon Dioxide Emissions: 1950-2050. MIT Joint
Program on the Science and Policy of Global Change: 1996.
[ii] Wiser, R., Porter, K., Grace,
R., 2004. Evaluating Experience with Renewable
Portfolio Standards in the United States. Lawrence Berkeley National
Laboratory, Berkeley. LBNL-54439.
[iii] Delmas, Magali A.
Montes-Sancho, Maria J. US State Policies
for Renewable Energy: Context and Effectiveness. UCLA Insititute of the
Enviroment and Sustainability and Anderson School of Management, Los Angeles:
2011.
[iv] Delmas, Magali A.
Montes-Sancho, Maria J. 2011
[v] Delmas, Magali A.
Montes-Sancho, Maria J. 2011
[vi] Leire, Charlotte. Thidell,
Ake. Product-related
environmental information to guide consumer purchases e a review and analysis
of research on perceptions, understanding and use among Nordic Consumers.
International Institute for Industrial Environmental Economics, Sweden: 2004.
[vii] Bird, Lori. Sumner, Jenny.
Consumer Attitudes about Renewable
Energy: Trends and Regional Differences. Natural Marketing Institute,
Harleysville, PA: 2011.
[viii] NREL Energy Analysis Office
2002 Report
[ix] Menz, Fredric C. Green Electricity Policies in the United
States: Case Study. Clarkson University, Potsdam, NY: 2004.
[x] Sovacool, Benjamin K. The importance of Comprehensiveness in
Renewable Electricity and Energy-efficiency Policy. Nation University of
Singapore: 2008.
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