When Should Incentives End for Renewable Energy?

Wind Power
Photo courtesy of the Department of Energy

In last week's Insights, I noted how green building and renewable use was trending upward, according to some recent studies. This trend is commendable. However, the "The World Green Building Trends" report by McGraw-Hill Construction and United Technologies that I drew from in last week's Insights also noted that legislation appears to be a driver behind the use of renewables.

Eighty-seven percent of firms that have legislative requirements to use renewable energy are doing so. Seventy-six percent of firms that do not have legislative requirements are using renewable.

The National Conference of State Legislatures looked at the renewable legislation introduced in states in 2011. (A report on 2012 legislation was not available.) In 2011, states introduced almost 1,000 bills related to renewable energy. Of those bills, 140 were enacted.

I do not have stats on the percentage of introduced bills that eventually get enacted, but the 140 enacted bills are more than 10% of those introduced, which I think sounds like a fairly good success rate considering politics. That is especially true in that many of these bills involved offering financial incentives for renewable projects, which says to me that even state legislatures are recognizing the importance of renewable energy.

Bills that offered renewable energy loans passed in California, Nevada, Texas, Virginia and Wyoming. A few states offered grants related to renewable energy. For example, Illinois now offer grants to small businesses to help them create jobs, particularly if the small businesses are involved in renewable energy technology. A Virginia bill now offers grants for a program that offers financial incentives to manufacturers of renewable energy equipment.

Three states (Illinois, Maine and Montana) now have bills that offer credits for installing and operating renewable energy systems.

California passed legislation that now defines 5 megawatts of renewable generation as self-generation. Texas now says that a business that generates less or the same in distributed renewable generation as they use should not be considered a utility.

The most legislation was passed on areas such as renewable energy project siting and land use (nine states), renewable portfolio standards (eight states), tax incentives (nine states), net metering (seven states), solar energy (nine states) and wind energy (seven states). California, Delaware, Hawaii, Maryland, North Carolina, New Mexico, Oregon and Virginia passed bills that create standards for renewable portfolios, including specifying how much of a utility's electricity sales must come from renewable sources.

If I had a report from 2012, I would bet the number of bills related to renewable energy would be a considerable number again. The McGraw-Hill Construction report notes that part of the reason for more green building is that a large percentage of the world's population is moving to cities.

By 2050, cities will be home to 70% of the world's population. That creates transportation, housing and work issues related to resources that being more green can benefit. And while the report does not state how this relates to energy use, it is safe to say that a greater urban population also means greater energy use, so states are seeing the necessity to move utilities, business operators and citizens to greater energy as a long-term cost saving measure.

The question is, how much longer will the government need to continue to incentivize renewable use? When will this segment of the generation business mature to the point it no longer needs a hand?