Enhancing the Investor Appeal of Renewable Energy

By Mormann, Felix | Environmental Law, Summer 2012 | Go to article overview

Enhancing the Investor Appeal of Renewable Energy


Mormann, Felix, Environmental Law


VI. TOWARD A MORE INVESTOR-ORIENTED U.S. RENEWABLES POLICY

Both empirical evidence across the globe and this Article's qualitative "soft-cost" factor analysis suggest that the United States would be well advised to adopt a feed-in tariff approach to leverage greater investment in renewable energy. However, designing and implementing a feed-in tariff that spurs sustainable growth of U.S. renewables while limiting the financial burden on ratepayers requires careful consideration of a number of factors, and must not be rushed into. (300) In the meantime, well-targeted, specific adjustments to the currently employed policy instruments represent crucial first steps toward a more investor-oriented U.S. renewables policy. (301)

A. Adjustments to Current US. Policy Instruments

For the past quarter of a century, renewable energy policy in the United States has been dominated by RPSs and tax credits. (302) Based on this Article's qualitative analysis, both policy instruments would considerably improve their attractiveness to investors if they offered a more favorable treatment of the "soft-cost" factors related to the electricity market structure, such as grid access, dispatch priority, and balancing responsibilities. (303) In addition, policy-specific tweaks in design and implementation could significantly improve the impact of RPSs and production tax credits on investment-based "soft-cost" factors and, hence, enhance their ability to leverage investment in renewable energy technologies. (304)

1. Enhancing the Market Efficiency of RPSs

There are about thirty state-level RPS regimes in force in the United States today. (305) Under these RPSs, renewable energy investors are exposed to the dual market risks of the wholesale electricity market (to sell their power) and the market (to sell the certificates they receive for relying on renewables). (306) The REC market in particular imposes enormous uncertainty on the profit expectations of investors and, as a result, drives up the cost of capital.

The absence of a unified national REC market and the multiplicity of competing standards have led to a proliferation of state certificate markets. (307) The various state RPS mandates have brought forth a panoply of inconsistent definitions of eligible renewable energy technologies. As a result, the U.S. renewables market has splintered into regional and state markets, offering investors poor liquidity and, with it, enormous volatility. (308) The problem posed by different REC definitions is exacerbated by conflicting rules on the treatment and value of these certificates. (309) The REC shelf life, for instance, ranges from three years in Michigan, to indefinite validity in Arizona. (310) The vastly different ability to bank RECs for future sale or proof of compliance directly affects their market value, and inevitably fosters the creation of different REC sub-classes. To make matters worse, there is not even a universally accepted currency for state-issued RECs. While most states award one certificate per MWh of eligible electricity, some issue RECs on a per kWh basis. (311) In addition, state RPS mandates vary considerably in their aspirational aggressiveness, as well as in their planning and enforcement rigor, all of which affect--directly or indirectly--the market value of RECs. (312) This multiplicity of state RPS mandates has produced huge fluctuations in certificate market prices, ranging from $1.75 in California to $35 in New England for a REC over 1 MWh of wind energy. (313) With such uncertainty, it is hardly surprising that investors are reluctant to fund U.S. renewable energy projects, and, when they do so, charge a premium for their risk exposure.

A federal RPS is often celebrated as the panacea that would reduce the REC market risk to investors by creating a unified national certificate market with harmonized definitions, accounting, and compliance rules. (314) A more liquid, transparent, and less volatile national REC market could indeed be expected to increase investment in renewable energy technologies, while saving utilities and ratepayers billions of dollars (315) Washington's history of more than twenty-five failed proposals for a federal RPS, however, makes it politically unlikely that a federal RPS will unify the panoply of fragmented state REC markets in the near future. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Enhancing the Investor Appeal of Renewable Energy
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.