Research Paper: Implementation of Solar Power

Pages: 8 (2777 words)  ·  Bibliography Sources: 8  ·  Level: College Senior  ·  Topic: Energy  ·  Buy This Paper

Government Policies and Solar Power Systems

Government regulations and policies affect renewable power generation a great deal, as is revealed through a brief review of the history of governmental policy in regards to power generation. Federal, state, and local governments support solar power creation, progress and improvement through a broad assortment of strategy and regulatory instruments. As the cost of solar power creation has fallen during administrative incentivization, the regulatory expenses have increased. Some modification is desirable in the permitting procedure for this innovative equipment. The prospect of government fiscal incentivization is reliant on both the financial system and the political state of affairs.

Any explanation of solar power in the current market must begin with an exploration of the traditional generation of electricity. Schmidt lists four reasons why the power plant monopoly was established: 1) economies of scale, 2) fixed capital, 3) peak demand capacity requirements, 4) size/siting limitations (1). Lay people frequently forget that electricity is not storable, so because of its essential nature, it is regulated as a public good that is required to instantly meet peak demand. Because of the illiquid nature of the investment, regulations helped assure supply and demand. Since power plants are more efficient at a larger scale, monopolies are inevitable.

Schmidt also points out that our current system is globally relatively uncommon, consisting as it does of "private ownership that services a profit motive with public control through regulation to mitigate market power and ensure public convenience and necessity by providing desired levels of public goods" (2). Rather than regulation of a government agency, like the department of motor vehicles, the courts have addressed prices and market agencies while state agencies deal with health, safety, and the environment, leading to an uneasy balance between private capital and public benefits (Schmidt).

Due to rising costs, limited expansion of demand, and slowing technological advances in the 1970s, those state agencies had to expand their roles to influence capacity expansion, financing, and policy development, particularly as the public benefit side of the equation gained emphasis (Schmidt). As deregulation favoring competition came into vogue in the 1980s, paradoxically interconnection over larger geographic areas allowed fewer power plants to be built (Schmidt). Since the competitive markets were created in the 1990s, those markets began to dictate prices as energy efficiency came into vogue and multiple electrical sources became available to the consumer (Schmidt).

Government Regulation over Solar Power & Policies adopted by state and local governments to encourage solar deployment

Key to understanding the role of solar power is the 1978 Public Utility Regulatory Powers Act (PURPA), which increased the role of Qualifying Facilities (QFs), which "produce up to 80 mw of electric capacity from & #8230; renewable resources," by requiring public utilities to buy power from QFs (Schmidt). This "market driven policy that ensures a minimum amount of [non-hydroelectric] renewable energy is included in the portfolio of electricity resources of the licensed electricity suppliers serving a state or country" is known as a Renewable Portfolio Standard (Singh and Sood; Palmer and Burtraw). This has been proposed in Congress many times, but is unlikely to pass, perhaps because RPSs have a propensity to support renewable energy generation to the detriment of natural gas utilization (Palmer and Burtraw). As this a politically volatile topic, the § 1251, Title XII of the Energy Policy Act of 2005 (EPAct 2005) actually eliminated this requirement and amended with the vague requirement for a plan "minimize dependence" on a single fuel source and sell electricity generated using "diverse" sources (Energy Policy Act of 2005).

No new renewable portfolio standard (RPS) has been passed at the federal level (DSIRE). Nonetheless, "twenty-nine states and the District of Columbia, the Northern Mariana Islands, and Puerto Rico have established an RPS" and many of those explicitly favor solar power (DSIRE). In addition, six states' RPSs create a renewable energy market because utilities can trade renewable energy credits to comply with the RPS (Palmer and Burtraw). As a result, the utility can a) generate its own renewable energy, b) buy renewable energy and the accompanying credits, or c) simply buy renewable energy credits (Palmer and Burtraw). Two states give credit multipliers for renewable energy generation (Palmer and Burtraw). Similar systems have been implemented abroad (Palmer and Burtraw). As a result, "approximately 60% of all new resources added to the grid by 2019 will come from wind and solar" says the North American Electric Reliability Corporation (NERC) on RenewableEnergyWorld.com (Leone).

Net metering allows small generators (including solar) to get credit from the public utility for producing electricity, even though they may be consumers at a later time (Schmidt). This "purchase" may be at retail cost, or at wholesale cost (Singh and Sood). This is an inexpensive, simply managed technique of persuading customers to use solar power (Singh and Sood). Often, solar power is at its most abundant in peak demand episodes, increasing the system load feature, and thus benefiting utilities (Singh and Sood). While DSIRE says that no federal policy exists on net metering, § 1251, Title XII of EPAct 2005 amends § 111(d) of PURPA to read:

(11) NET METERING. -- Each electric utility shall make available upon request net metering service to any electric consumer that the electric utility serves. For purposes of this paragraph, the term 'net metering service' means service to an electric consumer under which electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period.

Perhaps DSIRE means that there is no uniform policy. They point out that the 45 explicit state policies vary by type of applicable customer, individual system capacity limit, aggregate system capacity limit, eligible customer types, eligible system types, treatment of net excess generation, and ownership of renewable energy credits (RECs) associated with customer generation (DSIRE).

Another key element of federal policies regarding solar power generation is the interconnection standards. Interconnection refers to the connection between a small power generation system, like a household solar panel system, and the grid (DSIRE). Singh and Sood refer to these as "Electricity Feed-in Laws" or "Advanced Renewable Tariffs (ARTs)" and note that they are a booming strategy instrument for inspiring the speedy progress of renewable energy, like solar panel installations. In this situation, regulation tends to work in favor of the individual, because it specifies the processes through which a customer must go to obtain an interconnection to allow net metering (DSIRE). This puts individuals on an "equal footing" with utilities (Singh and Sood). Lacking guidance, customers often end up going through a complex, arduous, and costly series of negotiations in order to obtain an interconnection.

In response to EPAct 2005, the Federal Energy Regulatory Commission (FERC) has developed policies and procedures for the interconnection of large and small customer-sited systems (including solar) to the grid (FERC), as well as interstate transmission line regulations (Leone). Despite this, there is no uniformly adopted state policy. About 24 states have general customer standards regardless of net metering. Approximately 15 states have standards only for net metering systems. Some states' standards apply only to customers of investor-owned utilities (DSIRE). Other variations include individual system capacity limits, interconnection fees, standard agreement requirements, insurance requirements, external disconnect switch requirements, and area network grid requirements (DSIRE). IEEE 1547: Standard for Interconnecting Distributed Resources with Electric Power Systems, adopted in 2003, handles technical issues and compliance tends to be required by states with comprehensive interconnection standards (DSIRE).

Costs and financial incentives available to implement a residential solar project

One way that governments influence technology development is through incentivizing research and development, public works projects, workforce training, public awareness initiatives, and business development activities (Singh and Sood). There are five general types of incentivization: 1) subsidies and rebates for capital investment; 2) tax relief on capital investments; 3) production tax credits to offset costs; 4) guaranteed loans as financial assistance; and 5) use of economies of scale purchasing power (Singh and Sood). Another method to initiate a shift towards renewable energy generation would be a tax or cap and trade on carbon emissions (Palmer and Burtraw). However, this is a politically volatile topic, and unlikely to be accepted.

One type of REPC is the Renewable Electricity Production Tax Credit (PTC) (DSIRE). The PTC is a tax credit equal to 2.2¢/kWh for wind, geothermal, closed-loop biomass power generation; and 1.1¢/kWh for other eligible power generation technologies (including include marine and hydrokinetic resources, such as wave, tidal, current and ocean thermal) (DSIRE). It applies to electricity sold by the taxpayer to an unrelated person during the taxable year, and is usually applicable only to the first 10 years of operation (DSIRE).

However, taxpayers may opt to take the Business Energy Investment Tax Credit (ITC) instead (DSIRE), which was originally for investment in geothermal and solar generators equal to 10% of the capital cost of the generating facility with no expiration date… [END OF PREVIEW]

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