The whole idea of green energy -- renewable resources -- grew out of an energy reality different from today's. In the 1970s, following the OPEC Oil Embargo, solar panels began popping up on rooftops and "gasohol" subsidies were enacted. It was believed that green energy would move the United States off of foreign oil and prevent oil from being used as an economic weapon against us.
Today, that entire paradigm has been upended and OPEC's power has been virtually neutered by increasing domestic oil production and decreasing gasoline consumption.
In a Nov. 17 editorial, the Wall Street Journal sums up the current renewable resource status: "After 35 years of exaggerations about the benefits of renewable fuels, the industry has lost credibility." Similarly, on the same day, the Washington Post went a step further, stating that ethanol "has been exposed as an environmental and economic mistake."
Mandated for blending into America's gasoline supply in 2007 through the Energy Security and Independence Act, ethanol now has an unlikely coalition of opponents -- including car and small-engine manufacturers, oil companies and refiners, and food producers and some environmental groups.
A national movement is growing and calling for the end of the ethanol mandates that, according to the Journal, have "drained the Treasury of almost $40 billion" since the first gasohol subsides were enacted in 1978. Realize the word "Treasury," used here, really means "taxpayer."
On Nov. 15, the EPA gave a nod toward market and technological realities and, for the first time, proposed a reduction in the renewable volume obligations -- below 2012 and 2013 levels.
The EPA's decision is lauded by AAA President and CEO Bob Darbelnet: "The EPA has finally put consumers first." He said the targets in the 2007 law are "unreachable without putting motorists and their vehicles at risk."
Ethanol has been dealt a blow.
While the ethanol mandate hasn't been eliminated, the administration has wavered and has given a nod toward "market and technological reality." Likewise, those of us who oppose government mandates and subsidies were handed a small victory in Arizona. On Nov. 14, the Arizona Corporation Commission set a new direction for solar energy policy by adding a monthly fee (approximately $5 per residential customer) onto the utility bills of new solar customers for power grid connection and maintenance.
While the decision didn't make national headlines, as the EPA decision did, it has huge national implications. There are a number of other state commissions currently reviewing similar policies.
The issue is net-metering -- a policy that currently allows customers with solar panels to receive full retail credit for power they deliver to the grid. Supporters believe that ending it "would kill their business." Opponents believe it "unfairly shifts costs from solar homes to non-solar homes."
In a 3-2 vote, the Commission vote kept the net-metering program, but added a small fee. However, the two "no" votes each believed the fee should be higher -- meaning all five commissioners wanted a fee added. The fee is only in place until the next rate case that will be filed in June of 2015 and a clause was added that allows the commission to adjust the charge annually.
The Commission's process pointed out the customers' savings, $170 million in cash incentives got them, could be "largely or entirely wiped out" with a small $5 fee. It solidified that there is cost-shifting taking place -- which the solar industry has denied. And, it set up larger fees and potential credit adjustments in the near future.
Renewable energy has suffered a setback in both the EPA ethanol decision and the Commission's solar decision. Shouldn't wind be next?
On Nov. 14, 52 Congressmen signed a letter, organized by Rep. Mike Pompeo, R-Kan., calling for the end of the wind production tax credit. They point out that the credit, which was scheduled to end on Dec. 31, 2012, was extended "during the closing hours of the last Congress," as a part of the American Taxpayer Relief Act. Not only was it extended, but it was enhanced by modifying the eligibility criteria. Originally, wind turbines needed to be "placed in service" by the end of the expiration of the wind production tax credit to qualify. Under the Taxpayer Relief Act, they need only to be "under construction" to qualify.
The letter points out: "If a wind project developer merely places a 5 percent deposit on a project initiated in 2013, it will have at least until 2015 and possibly 2016 to place the project in service and obtain the (tax credit). That means that a wind project that 'begins construction' in 2013 could receive subsidies until 2026."
Like ethanol and solar, "the growth in wind is driven not by market demand, but by a combination of state renewable portfolio standards and a tax credit that is now more valuable than the price of the electricity the plants actually generate."
The EPA finally saw some sense when it announced the reduction in the amount of ethanol that refiners are required to blend into gasoline in 2014. The Arizona Corporation Commission signaled a change in ratepayer compensation for solar energy. Will Congress show similar wisdom and allow the wind tax credit to expire at the end of 2013?
These mandates and tax credits are remnants of an outdated energy policy. America's energy paradigm has changed and our energy policies need to keep up and be revised to fit our new reality.