Wednesday, January 30, 2008

Gaming Renewable Energy

The business culture in the United States overwhelmingly touts the virtues of a free market economy, but in practice what we have is a corporate nanny state (closely related to the conservative nanny state). This is particularly the case when it comes to power generation. The rules of the game, especially when it comes to renewable energy, are skewed in favor of the power utilities to the expense of the individual.

In a biting Truthout article, Renwables From the Bottom Up, Craig Morris compares the situation in Germany (where individual and small-scale renewable energy is thriving) to the United States (where net metering and other schemes limit the participation of the public). The profits of the utilities are assured, while the ability of small-scale producers to get a fair market value for energy they put back into the grid is restricted. Some free market...

In this article, Morris says:

Utilities also like net-metering because it imposes an artificial cap on the size of systems. In other words, it keeps the competition small. If your meter runs backward for the year, you may not even get the full retail rate for the excess power you produced, if you get anything. So if you conserve electricity at home, make sure you do not put too many panels on your roof lest you get nothing for your investment.

No wonder solar is moving slowly in the US. What we need is fair competition between energy providers and citizens - as cloudy Germany has. As a result of different legislation, Germans are not only the world leader in wind power, but also in solar, and their biomass sector grew by 55 percent in 2006. They don't use net-metering for solar or a tax credit for wind as we do. Rather, the secret to their success is that they empower citizens to compete with utilities eye-to-eye.

Remember deregulation? Where we failed, Germany succeeded. Since 1999, Germany's electricity and gas markets have been "liberalized," i.e. open for competition not only between corporations, but between corporations and citizens. Retail rates have remained stable, not skyrocketed, and there have been no rolling brownouts. On the contrary, Germany has only around 20-30 minutes of power outages on average each year - among the lowest blackout figures in the world. Renewables now make up 13 percent of the country's electricity supply - and this share is rising by around two percent per annum.

The German system does not pander to the vested interests of powerful utilities. Rather, utilities have to pay citizens a "minimum price" (floor price) set by the government for renewable power. The price is based on what power from a typical renewables generator would cost (cost of system divided by probable output); the retail rate on which net-metering is based is irrelevant here. Germans need only make sure that their systems are well designed and properly installed to turn a profit on their investments.

We desperately need to change our energy production policies to counter the rising spectre of global warming, but it's not an easy thing to do when somebody at the top is gaming the system.