Tag Archives: state subsidies

State Support for Sustainable Energy

The data are in and the numbers are crunched. 2015 is officially the hottest year for the planet in recorded history. Last year raced past the previous hottest year, 2014. In fact the 10 hottest years on record have occurred since 1998.

The science is clear, the heating is due in the main to burning fossil fuels. Governments around the world are developing strategies to decarbonize their economies. Here in the United States we have federal various tax credits which lower the cost for both individuals and businesses to be less reliant on fossil fuel combustion. Purchase tax credits are available for energy efficiency and sustainable energy production. Also, production tax credits for wind produced energy are available.

Variable levels of subsidization from the states for both purchase and production of sustainable energy is also available. These can come as purchase savings: income tax credits, income tax deductions, sales tax rebates, and cash rebates. Production of sustainable energy, for example solar photovoltaic systems or wind turbines are subsidized by feed-in tariffs or net metering. Levels of support also vary by sector such as homeowners, coops, or for profit businesses.

California is generally recognized as the nation’s leader in clean renewable energy because they have committed to a renewable portfolio of 50% by 2030. This means they expect 50% of energy production in the state to come from renewable energy. Their success thus far is driven by a combination of all the above, credits for efficiency, the purchase of equipment, and for energy produced.

An example of a production subsidy is a feed-in tariff. This is a rate structure for electricity where the producer of clean energy, say a homeowner with solar panels, signs a long term contract to produce energy to the grid at a premium price. In Michigan the average cost of electricity is about 11 cents a kilowatt hour (kWh). Producers with a feed-in tariff are paid 24 cents a kWh. Payback times at this rate could be less than five years!

Here in Arkansas we are about in the middle of the pack, renewable energy support-wise. There is essentially no state purchase support, but net metering provides some assistance for the production of clean, carbon free energy. Net metered systems in Arkansas use bidirectional meters. When the sun shines and production is in excess of consumption the meter runs backwards, at the same rate as it runs forwards when consuming energy. There no additional access charge or fee for net metered systems. What this means is that the home producer is paid retail cost for the power sent to the grid.

Less valuable but still of some help are net metered systems where the producer is only paid the power company’s avoided cost, the wholesale rate. This doesn’t reward the expense of providing clean power to the grid as the avoided cost is the cost of the oldest, cheapest, and usually coal fired power production. Nevada recently downgraded their net metered systems to pay only the wholesale price for production, rather than the retail price.

Only two states, Tennessee and South Dakota, have no production support for distributed clean energy.