New Direction Toward Energy Democracy for Largest Environmental Group in US?
The January/February 2013 issue of Sierra Magazine carried a feature story by senior writer Paul Rauber titled “Solar for All”. Sierra Magazine is the Sierra Club’s in house publication and the article could signal a shift in the organization’s energy priorities toward democratizing electricity generation.
Nevertheless, the “teaser” for the article leapt out at me: “Until now, rooftop solar has only worked for those with hefty electric bills and sunny roofs. Community solar could make it available to everyone.”
The title and the teaser caught my eye for several reasons. The subject is close to my heart. I write and lecture about community power worldwide. I promote community power and local ownership of renewable energy. So I was encouraged that the Sierra Club finally featured community ownership prominently in its magazine.
Yet the title made me uneasy, as I’ll explain, and the article, while an otherwise laudable attempt to explain the concept, left me feeling frustrated that they could have done so much more. Let’s hope that this is just the first in a series exploring how the concept of local ownership is one of the secret’s behind the remarkable growth of renewable energy in Germany.
The Sierra Club is the US’s largest grassroots environmental organization. It differs markedly from top-down environmental groups such as the Natural Resources Defense Council, Union of Concerned Scientists, and the Environmental Defense Fund that use their membership only to raise money. As a consequence, articles in Sierra Magazine indicate what “the Club,” as it’s known, thinks are priorities, and the articles influence hundreds of thousands of members across the US, many of whom are activists.
The Club has recently seen a change at the helm and the new Executive Director Michael Brune has brought a breath of fresh air into the staid organization. In contrast to his predecessor, Brune has gone out of his way to engage grassroots activists. Many of these activists see what’s happening in Europe, particularly Germany, and they want to be a part of the renewable energy revolution. Brune has responded and this past summer he attended the World Wind Energy Association’s conference on Community Power in Bonn, Germany. There he took the opportunity to personally meet Germany’s political and community power leaders.
Gradually, the Sierra Club, like a super tanker, is slowly beginning to change course on its renewable energy policy. This is the context in which Rauber’s Solar for All article appears.
The good news is that the magazine covered the topic in a feature story and they relied heavily on the Institute for Local Self Reliance’s John Farrell for much of the background on policy, the cost of solar in the US and Germany, and on the promise of community ownership. There’s no better authority on community renewables and their potential in the US than John Farrell.
You can see and hear John Farrell in action by watching a Skype interview that Rauber conducted to go along with the article. The broadcast John Farrell Talks Community Solar with Sierra (Club) Magazine Editor Paul Rauber is well worth viewing.
Renewables for All
What made me uncomfortable was the title and all it implied. Solar should certainly be for all. But equally important—and maybe even more so in the US context–Wind should be for All, Biogas should be for All and generally Renewable Energy should be for All. If American revolutionary Thomas Jefferson were alive, I am sure he would agree.
For some inexplicable reason though, environmentalists in the US, when they think of renewable energy, think only of solar and don’t go any further. As a consequence, articles such as “solar for all” only address solar and in this case only solar photovoltaics (solar PV), leaving readers with the mistaken sense that community or local ownership is only for solar PV.
Long before there was any buzz around the political slogan “solar for all” there were dedicated people across North America developing, installing, and operating community-owned wind projects. I’ve had the good fortune to work with them in both Canada and the US. They are a dedicated bunch. They have to be to make any progress in North America where it is a constant uphill struggle against what look like insurmountable obstacles.
Still, these community and renewable energy activists have made progress that shouldn’t be overlooked. In Ontario a hardcore group of Canadian activists installed North America’s first commercial-scale urban wind turbine in downtown Toronto in 2003. No one can miss it driving in from Pearson International Airport as it stands majestically over the Gardener Expressway and Lake Shore Boulevard.
The leaders of this effort went on to work doggedly for the next decade to bring community power on a grand scale to Canada’s most populous province. In doing so, these activists were largely responsible for North America’s most comprehensive renewable energy policy in three decades. And partly due to their success, Ontario is able to complete shutting down all its coal-fired power plants this year.
While the Ontario example is small, nearly 2% of the total wind generating capacity in the US has been developed by and is owned by local people. Today there’s more than 715 MW of locally-owned wind in the US in the upper Midwest. Community-owned solar pales in comparison.
For more on the status of community power here, see Community Power Update for North America 2012.
Further, a constant focus on solar PV to the exclusion of other resources obscures the fact that we need all renewables if we’re to make any headway against the enormous consumption of electricity in the US and Canada.
The future power system activists envision is not one of 20% renewables, or the “progressive” target of 30% in California, but fully a 100%. To make that work we need a lot of wind, a lot of biogas and geothermal, and yes, a lot of solar too.
The Sierra Club is a US organization and it’s magazine serves readers and activists in the US. As a consequence it wants to emphasize inspirational stories about what Americans can do to protect their environment. Even so, the article Solar for All is so narrowly focused on the US that it fails to give a complete picture of the community power movement in North America and its roots in Europe.
Take the article’s theme: community-owned solar PV. The article completely ignores what’s going on in community solar in Canada. In Ontario, SolarShare has installed 700 kW of locally-owned solar PV and by mid summer will have installed more than one megawatt under the province’s feed-in tariff program.
This isn’t idle talk. They’re doing it—now. See for yourself, how much they’re generating in real time by going to SolarShare’s Projects Map. Ignoring them belittles their accomplishment.
Activists are developing more than just community solar in Ontario. The province’s feed-in tariff program includes nearly all renewable technologies. In the spring of 2012, advocates had installed 4 MW of community-owned power from several different renewable resources.
Miniscule on the scale of North American demand, certainly, but far more than comparable community solar in the US had accomplished by then.
One truly inspirational story that Sierra Magazine’s subscribers didn’t read about is that of a pioneering wind project installed last spring by the M’Chigeeng First Nation that the tribe has dubbed the Mother Earth Renewable Energy Project. The 4-MW wind project of two turbines stands on a 3-acre (1-ha) site on Manitoulin Island overlooking Lake Huron on the tribe’s ancestral lands.
Now that M’Chigeeng has shown the way, other First Nations and métis (the aboriginal peoples of Canada), others may soon follow. And if Ontario community power and aboriginal developers can fulfill their obligations, there will be a string of projects coming on line. There is nearly 2,000 MW of community power and aboriginal projects in the queue. Unfortunately, Ontario community power advocates face many of the same hurdles as their colleagues south of the border and much of this capacity is unlikely to reach fruition without concerted provincial action, especially on connections to the Ontario’s antiquated grid.
Overselling California’s Solar Success
We should all celebrate our accomplishments in renewable energy here in the US, but it doesn’t help our case when we oversell them.
A common mistake many journalists make is to confuse a kW of one technology with a kW from another or confuse power and energy. Rauber fell into this trap. In celebrating the progress we’re making with solar in California, he says that the state had installed 1,000 megawatt of solar PV. If he’d stopped there, he’d been fine. But in an effort to explain what that means, he said that it was equivalent to the “energy generated by a large coal- or nuclear-fired power plant.
No, it’s not.
It is true that the peak “power” produced by 1,000 megawatts (MW) of solar PV is equivalent to the peak power produced by a 1,000 MW conventional power plant, when that plant is running full out. However, the “energy” generated by 1,000 MW of solar PV is not the same as that generated by a typical conventional plant through the year.
In sunny California, 1,000 MW of solar PV will generate 1.5 TWh annually. In Ontario, the same amount of PV will generate about 1 TWh annually. In contrast a conventional plant will generate 5-7 TWh annually. Thus, it takes about five times more solar PV to equal the energy generated by a conventional power plant.
This is an important distinction because it puts our modest success in a less complimentary, but more realistic, light. This distinction is also significant because it illustrates that scale is important. We need a lot of solar—and a lot of wind and other renewables—and we need it now.
As a journalist, Rauber can be excused for this common mistake. Unfortunately, I’ve had to explain this distinction to a Stanford University-trained engineer who was using the same inflated rhetoric to justify a policy position. In the latter case, it was unlikely a mistake, but instead a deliberate deception. Such deception isn’t acceptable when right wing think tanks misuse data to prove that renewables don’t work and it’s no more acceptable when renewable advocates stoop to the same tactics to prove that it does.
Rauber deftly explains the many difficulties homeowners and community groups face in developing their own solar projects in the US. But one comment doesn’t ring true and reflects a misperception in the US that leads to odd policy choices. Rauber says that “banks are not interested in financing penny-ante solar arrays.” While that may be true today in the US, it need not always be so.
Germans claim, justifiably, that anyone in Germany can do solar from the smallest homeowner to the biggest corporation. One reason they can is that banks provide ready financing—even to renters.
Why? Because Germany has a comprehensive system of feed-in tariffs that guarantees the price that will be paid for each kilowatt-hour of electricity generated. With that knowledge, banks in Germany can accurately predict the revenue stream they can loan against.
Would American banks loan to homeowners if there were feed-in tariffs in the US? We don’t know for sure, but if they didn’t, German, Dutch, and other foreign banks would step in. They have the experience after all. They know it works.
One bank in Schleswig-Holstein, the northernmost state in Germany, has financed many of the wind, solar, and biogas plants operating there. They’ve never had a default. They’re more likely to finance a community-owned wind project than they are a Trump Tower or some equally high-risk, speculative real estate venture American banks are known for.
So with this preconceived idea that banks won’t finance solar in the US, solar advocates grasp at appealing straws such as “crowd sourcing” and solar leasing.
Despite the Sierra Club’s joint marketing agreement with solar leasing company Sungevity, or because of it, Rauber clearly states that direct and indirect ownership of solar through community solar is a far better deal than a leasing contract.
And Rauber goes to explain the convoluted steps community solar developers must take in the US to qualify for the 30% federal tax subsidy.
Community groups would have a lot more choice for financing projects if the US didn’t subsidize renewables with tax credits but instead simply paid a fair price for the electricity generated.
For example, the article singles out California’s Solar Mosaic and it’s “crowd sourced” funding. Rauber could just as easily cited SolarShare’s solar bonds in Ontario. They’re earning (present tense) about the same as investments in Solar Mosaic’s funds are expected to earn (future tense). SolarShare’s marketing may not be quite as flashy as that from a high-tech San Francisco Bay company and, yes, SolarShare is Canadian, but they are quietly funding and building locally-owned solar just across the border. All of SolarShare’s bonds must be owned by those living in Ontario, not so with Solar Mosaic. Investors in Solar Mosaic can live anywhere in the US. While it is “crowd sourced” it is not necessarily “locally-owned”.
Misinformed on German FITs
Rauber gets it right that Germany has made remarkable strides in solar PV development and let’s readers know the significance of this: on May 26 of 2012 Germany’s solar PV provided 50% of demand. But he misses the mark in explaining how this happened.
While the article laments that we in the US pay twice what the German’s pay for solar PV, Rauber lays the blame at our cumbersome bureaucracy. This is partly true, but only partly so. The most important reason that costs are so much less in Germany is that the Renewable Energy Sources Act is national policy with the force of law. This law grants the specific right, yes right, to connect solar—and yes wind, biomass, biogas, geothermal, and hydro—to the grid and to get paid for the electricity generated. The resulting boom in renewables that feed-in tariffs created have since driven down the cost–dramatically. In contrast, the subsidy system we use here in the US has, perversely, inflated costs.
The most glaring error, though, is Rauber’s attempt to explain how German feed-in tariffs work. Again, as a journalist he’s made several common mistakes. When Sierra Magazine continues with a series on community wind and community biogas, he will have an opportunity take another crack at explaining how feed-in tariffs work.
It’s always a challenge writing about a broad and complex subject. Many in the renewable energy industry and even some FIT proponents don’t clearly understand how feed-in tariffs work, so it’s understandable that Rauber would stray off course.
Either in an attempt to explain feed-in tariffs succinctly or through an editing error, the article conflates a guaranteed price with a guaranteed “reasonable rate of return”. In Germany as elsewhere, the fixed price per kilowatt-hour that is the hallmark of feed-in tariffs is “designed” or “intended” to produce a reasonable rate of return should everything go according to plan—the sun shines, the wind blows, nothing breaks for a long period, and so on. But only the price or the “tariff” is guaranteed, the profit, or the “rate of return” in this case, is not. You can lose your shirt with a FIT just as you can with any other investment, and many have.
As noted earlier, because the payment per kilowatt-hour is guaranteed—if you produce the electricity—banks and investors, including homeowners, are willing to finance renewable projects. Everyone, including your competitors can predict the revenue stream. In this regard, FITs are far more transparent than much of the pricing for electricity that we see in European and North American “markets”.
Worse though is that Rauber confuses payment for generation—feed-in tariffs– with “subsidies”. Again, this is a common mistake among professionals and journalists alike. It’s as though there is rampant case of collective amnesia about how electricity was priced in North America, and still is in many jurisdictions.
I’ve explained this many times before and this information is widely available. See Are feed-in tariffs just another subsidy?, and Are feed-in tariffs the same as tax credits?
Once again, feed-in tariffs are simply payment for generation. Through some legislative process, renewables are deemed desirable for all those attributes we’ve been shouting about for decades. Society makes a decision: We want renewables and we will pay for them. This is exactly the same as when a private company, an electric utility for example, is approved by its regulator to build a conventional power plant “in the public interest”. The utility, the government in the case of state or provincially-owned utilities, or the city council for municipal utilities, decides to build a particular kind of power plant for the attributes that it brings.
These power plants can be fired by coal or gas, or they can be powered by nuclear energy. Each type of power plant has different attributes and a different cost structure. Nuclear plants are the most capital intensive, followed by coal plants, and then gas-fired plants. However, the fuel costs are the lowest for nuclear and typically followed by coal and then natural gas, the current shale-gas bubble excepted. Thus, the cost per kilowatt-hour of electricity generated by these different technologies differs as well. The decision to build them “in the public interest” and pay for the electricity generated then is a publicly approved decision. The regulator and owner then negotiate the price that will be paid per kilowatt-hour for the electricity the plant will generate. Payment, though, is based on the costs incurred in building the plant as well the estimated costs of running the plant over time.
The investor in a regulated power plant, in turn, is nearly always “guaranteed a rate of return” on their invested capital and this is reflected in the tariff paid for the electricity—and sometimes whether the plant produces electricity or not.
Feed-in tariffs differ from past regulatory practice in this regard. Feed-in tariffs only guarantee the tariff, neither the rate of return, nor the profit.
Moreover, feed-in tariffs are based on estimates and projections of typical costs and typical generation from a particular type of renewable energy. The tariffs are then posted publicly. Everyone has access to the posted tariffs. Everyone knows the price before any project is built. In this too they differ from past regulatory practice.
The tariffs based on the construction of conventional power plants are normally based on the plant as built. That is, if there are cost overruns or the fuel costs are higher than projected, the higher tariffs that result are often approved. In some cases, consumers pay a tariff for the power plant before it is built. This “construction work in progress” pays the utility for its investment before any electricity is generated. Utilities have also gamed estimates of fossil-fuel costs and the cost of fuel for fossil-fired plants has often been higher, sometimes much higher, than their cost projections and regulators typically have allowed the resulting higher tariffs to be passed on to consumers.
However, with feed-in tariffs, you only get the posted price. There are no “do overs”. In this way, legislators and regulators can much more accurately estimate costs to consumers with feed-in tariffs than they can through the regulation of conventional power plants.
So, back to the question of “subsidies”. When we pay more for coal than gas, is that a subsidy? No. When we pay more for nuclear power than coal, is that a subsidy? No. When we pay a high price for 30 years to pay off a big hydro project, then pay hardly nothing for many years more, is that a subsidy? No.
When we build an expensive nuclear power and learn that the costs are politically unpalatable and put the expense on the taxpayers instead of ratepayers—as they’ve done in Ontario–is that a subsidy? Absolutely.
When we pour billions of research dollars and tax credits into nuclear and fracking technology is that a subsidy? Again, absolutely.
This distinction is important in the North American context and likely elsewhere as well. Wherever neoliberal ideology has come to dominate economic thought and political discourse, as it has done here in the US during the past thirty years, the word “subsidy” has a negative political connotation. Because of that, the word subsidy should be used correctly.
Environmental journalists in particular should be sensitive to the power of words. The Sierra Club, like most environmental groups in the US, spends money on “focus groups” and “marketing consultants” to pick just the right words to “sell” their message, such as the lamentable choice of “CLEAN contracts” as an awkward substitute for the words “feed-in tariffs”.
Just as the neutral sounding “feed-in tariffs” can be used to pay for nuclear power in Great Britain, or coal-gasification in Indiana, the more positive sounding, focus group-tested “CLEAN contracts” can be used to pay for nuclear power in Ontario and carbon sequestration in Great Britain. This is the risk of using a value-laden term that can be misused. This week the nuclear industry is running full-page ads in Canada’s newspaper of record touting “CLEAN” [nuclear] energy.
At least with the term “feed-in tariffs”, it is not implying something that it is not. Feed-in tariffs can be used for many things, not just renewable energy. They can also be used to pay for energy efficiency.
While the predictability of payments for the electricity generated allows investors to demand lower returns, and bankers to get less interest on the debt than projects in quota markets–like those in the US–Rauber nevertheless overstates the safety of investments using feed-in tariffs. He describes such a solar investment, for example, “as secure as a savings account.” Not quite. Again, only the tariff paid per kilowatt-hour of generation is secured by feed-in tariffs. In a savings account you will not lose your principal. In contrast, you can lose everything in a renewable project paid for with a feed-in tariff. If you’ve made a mistake by buying faulty equipment or by overestimating your generation, and, hence, revenues, your project can fail and drag you down with it.
Dismissive of FITs in the US
Equally disturbing as his use of the term “subsidy” in describing feed-in tariffs is Rauber’s dismissal of the likelihood of feed-in tariffs in the US. Not that the evidence is against his conclusion. Since the Tea Party’s rise to prominence in 2010, the movement for feed-in tariffs in the US has been set back on its heels. Not only has the movement for feed-in tariffs been set back, but also renewables in general are on the defensive. Renewable policy—of any kind–is under constant assault by the right wing billionaires who have bankrolled the Tea Party.
The Sierra Club has never been an organization that has turned its back on a good fight even when the odds are against them. After all, it was John Muir himself who took on the federal government and the city of San Francisco over the Hetch Hetchy dam—and famously lost.
Unlike other environmental groups, the Sierra Club is driven by grassroots and local activists who are less likely to accept “pragmatic” advice to lower their demands to what is politically acceptable. Indeed, the Club’s whole “Beyond Coal” campaign is one that’s against the pragmatic solution of “some coal” that other environmental groups find necessary to support to gain “access” to legislators as “serious players”. No, the Club’s campaign is, like that in Ontario, to close all coal plants. They are not entering the corridors of power with their hat in hand demanding half-a-loaf, the whole organization is campaigning for the whole loaf—to close the coal plants down.
So it’s a little odd that the Club’s house organ would imply, “Well, we can’t do that (FITs) here, because we’re Americans in America, and well, you know, that’s just too much to expect here.” Such a defeatist attitude is a betrayal of the Club’s rich history, the many activists who have fought—and won—against unbeatable foes, and a strong strain in American self identification as a people who can overcome adversity. It’s part of the American psyche that we rose up and threw off the yoke of the mightiest power in the world in our fight for independence. Throwing our hands up in the air in despair goes against the grain of what it means to be American.
Again, Rauber is not alone in saying it can’t be done here. It is a common belief among professional environmentalists that feed-in tariffs, though invented in California in the early 1980s, just can’t be done in the US. That somehow, they’re too “European” or just too radical a solution for Americans. Some professional environmentalists in the US even argue that the job is too big, the demand too great, the time too short to give the American people an opportunity to invest in their own future—and the future of the planet for that matter—that a comprehensive feed-in tariff policy would enable. They argue that we’re better off giving this once-in-a-generation opportunity for democratizing electricity generation to the very electric utilities who have stood in the way of an energy transition in the US for the past 30 years.
Instead of calling for a “Beyond Coal” style political campaign to bring feed-in tariffs to the US, Rauber say a “more probable path” to community solar is for more of the same failed policies that we’ve had for the past decade—tax credits. In this he is simply reflecting the “pragmatic” political viewpoint of the Club’s lobbyists in Washington, DC.
Ironically, Rauber doesn’t identify the tax credits as “subsidies”–which they are–for the same reason I insist that feed-in tariffs not be misidentified as such, because the term is politically toxic in the US.
Grid Parity Nirvana
Sierra Magazine’s article closes with a paean to solar “grid parity”. Rauber exclaims, “When that time comes, neither lobbyist nor bureaucrat will be able to hold back the clean energy tide . . .” Only if it were so.
Unfortunately, I’ve been doing this long enough to know that lobbyists and bureaucrats can indeed quash the renewable revolution in the US and Canada grid parity or not. Wind has been at grid parity for years and look where that has gotten us.
Many of the problems holding solar PV back, and particularly community solar, will still be here when that magical day arrives and solar PV reaches grid parity. Grid parity for solar doesn’t bring Nirvana. We’ll still need the right to connect and a means to get paid for our power—net-metering only takes us so far.
As a laudable first stab at explaining the community power movement and its promise, let’s hope that Sierra Magazine and Rauber follow up with more articles on the topic. And this time, with a little more care, and with a little more research, they present a more complete story to Sierra Club activists across the country about the breadth of the movement and how feed-in tariffs can make it all happen.
The renewable revolution will only sweep the continent when we take energy policy back into our own hands and institute a comprehensive renewable energy policy that features feed-in tariffs targeted at democratizing electricity generation. When we do we will walk proudly in the footsteps of Thomas Jefferson and his fellow revolutionaries as Americans who have—once again—overcome adversity.