Qualifying for Best Renewable Energy Incentives a Matter of Timing

by | Aug 4, 2009

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green_mountain_coffeeWhen it comes to installing renewable energy and qualifying for the best incentives – many of which are in flux as states continue to alter the rules of the game – it sometimes pays hundreds of thousands of dollars for a company to take a wait-and-see approach.

Take the example of Green Mountain Coffee Roasters. For this long-time innovator in sustainable business practices, even the best intentions didn’t count when it came to the Vermont state legislature’s decision May 27 to assign a 30-cent per kilowatt hour feed-in tariff to new renewable energy installations. The key word being “new.”

Because Green Mountain Coffee had already began construction on its solar installation when Vermont passed the law, the higher feed-in tariff will not apply. Instead, Green Mountain Coffee has to abide by a 16-cent per kilowatt hour feed-in tariff it had previously arranged with area power provider Green Mountain Power. Green Mountain pays 12 cents per kilowatt hour for conventional electricity, Comey said.

While on an annual basis the difference is not great, at about $15,000 a year, over the course of 15 years the difference would amount to about $238,000, Comey said, adding, “Over the 20-year lifespan of an array, that’s a significant impact.”

A feed-in tariff refers to the practice of encouraging production of renewable energy by agreeing to pay a premium per kilowatt hour over the cost of production, which typically is higher than the prevailing market rate for conventional electricity. The cost of the subsidy generally is spread around to all consumers of the utility’s power.

The utility benefits from paying above the market rate, Comey said, because on hot, sunny days when residents and consumers are using their air conditioning, the utility otherwise would have to go out on the grid and buy extra electricity at an elevated rate.

“It’s a classic win-win, where we get money and they save money,” Comey said. “On a hot sunny day is when the grid is weakest and a hot sunny day is when you can count on solar. Solar provides a bump when it’s needed the most.”

While the legislature set the rate at 30 cents per kilowatt hour the actual rate of the tariff is still in flux, Comey said. Vermont’s Public Service Board can take until Dec. 30 to make a permanent ruling on the feed-in tariff.

One downside to taking the feed-in tariff rate is that Green Mountain Coffee will not be able to apply the solar energy toward renewable energy credits in its annual report, he said.

Behind the State’s Decision

A letter dated July 22 from Vermont Department of Public Service said that no project would be eligible for approval unless initiated after the law went in place, said Paul Comey, Vice President of Environmental Affairs at Green Mountain Coffee.

Also not working in Green Mountain Coffee’s favor was a relatively small Vermont per-project cap of 50 megawatts.

At 100 kilowatts, the 530 solar panels on top of the distribution center in Waterbury, Vt., will be the largest solar array in Vermont. Still, the project is expected to generate only 1 percent of the power the plant uses.

The solar array is set to go live in early August, Comey said.

Despite the setback in Vermont, Comey said Green Mountain intends to continue pursuing renewables in demonstration projects. Green Mountain Coffee has a facility in Knoxville, Tenn., which was designated by the EPA as a solar city, so that appears to be the next logical choice, he said.

With the rapid evolution of the solar industry, future projects should not carry the same expense as the Vermont project, which because of its weight – 90,000 pounds in panels – required special engineering of the facility. Next generation thin panels should bring down the cost of adoption, Comey said.

National Feed-in Tariff Possible

Other firms considering adopting renewables may get help in the form of a nationwide feed-in tariff, if a potential House bill passes. Democratic Reps. Jay Inslee of Washington and Bill Delahunt of Massachusetts are working on a bill to require utilities to buy small-scale renewable energy from developers under a feed-in tariff scheme, reports The New York Times.

The two cite the success in adding renewable energy in Germany, which adopted a feed-in tariff system, helping the nation in 2007 exceed its 2010 goal of 12.5 percent of electricity coming from renewables.

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