Since 1998, state clean energy funds in the U.S. have committed nearly $400 million to 234 utility-scale renewable energy projects totaling 2,249 MW of capacity, according to a report released by the Lawrence Berkeley National Laboratory (LBNL), in conjunction with the Clean Energy States Alliance (CESA).
Of the 2,249 MW of new renewables capacity currently supported, 1,116 MW have been built to date, leaving 1,133 MW still in the development pipeline. This backlog is partly a reflection of unforeseen difficulties in the development process, such as permitting challenges, difficulty securing a power purchase agreement, and periodic lapses in the federal production tax credit (PTC).
Wind power continues to be the most favored technology, having captured more than 60% of total funding provided (at nearly $250 million), and accounting for more than 80% of the total capacity supported (at 1,878 MW).
States are increasingly using new and innovative incentive structures to support projects. While 78% of aggregate funding has been awarded through real-time production payments (e.g., x/kWh over a y-year period), a few states now offer variations on that theme. For example, rather than pay for production over time as the project generates power, several states have instead awarded an “advance production payment” as a lump-sum at the inception of commercial operations. The lump sum is secured by a letter of credit that declines over time as the project generates power and thereby earns the incentive. Other states have made advance purchases of a project’s tradable renewable certificates (TRCs) — the state provides the funding at the start of commercial operations, and in exchange receives TRCs over time.
Both approaches — i.e., the lump-sum production incentive and the advance purchase of TRCs — provide capital early in the project’s life, when capital-intensive renewable energy projects most need it. Yet, unlike a regular grant with no strings attached, both incentive types still hinge on the project generating power, and therefore not only encourage good performance, but also are less likely to trigger a corresponding reduction in the value of the federal production tax credit (PTC). All-told, 90% of all incentives awarded to date can be considered production-based.
Other innovative incentive structures include providing 10-year price insurance on a project’s TRCs, either through an outright purchase, or by creating price floors through the use of options and collars. Finally, several states have experimented with the use of debt to finance wind projects.
LBNL: http://eetd.lbl.gov/ea/ems
Clean Energy States Alliance: www.cleanenergystates.org
The report, which contains tabular and graphical summaries of the data, can be downloaded from:
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