Saturday, June 9, 2012

Wind Energy Money Drying up: REC better for consumers than FIT

A report from a West Texas television station was broadly circulated this week;  Wind Energy Is Booming, But Where's The Money? (video segment viewable at link).  The gist of the piece is that in West Texas, turbines are producing energy, but money hasn't been circulating.
Nextera, formerly known as Florida Power and Light, owns the turbines and electricity. Beaird believes Nextera might be selling contracts to Gexa, a subsidary of theirs. Not just selling, but over selling.

"They're selling contracts and they're not fulfilling them so they have to go back in and buy electricity at a higher price than they sold it," says Beaird.
 During the period of the wind money drought for West Texas landowners, energy reporting firm Platts introduced a monetary product to provide regular coverage on renewable energy certificates (fact sheet .pdf here).  Renewable portfolio standards are used in many states to demand utilities purchase a percentage of their power from selected 'renewable' generation sources, and the certificates are part of tracking that percentage.

ERCOT operates the grid in Texas, and has reports related to Renewable Energy Certificates (RECs) that indicate demand was down in 2012's first 4 months (here), while output from renewable was up (here).
Thus the price drop.

To put the report in the context of Ontario, RES schemes allow the pricing of supply to drop as supply rises in relation to demand.  Feed-in tariff (FIT) schemes, such as Ontario copied from Germany, do not.  Many Germans, including the most prestigious economic body in the country, are urging a move away from FIT (a number of links here)

The Industrial Wind Action Group recently posted an Editorial, "New York's RPS: High-cost and ineffectual"  It notes the expensive shortcomings of New York's neutered RPS, which removed the market benefits:
Unlike market-driven programs in other states, New York's RPS[1] uses a government-administered central procurement system to acquire renewable "attributes" from qualified projects. Projects selected through a competitive-bid process receive long-term contracts to sell their renewable attributes to the state. One megawatt hour of generation produces a single renewable attribute. These payments[2] serve as an added revenue stream for project owners. Funding for the RPS comes from fees charged on the monthly electric bills of NY ratepayers.
Which goes to show that the difference between an RPS and a FIT can be minimal - if the RPS is done poorly.

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