Wind Energy Markets
As wind energy costs fall, and interest in the economic and environmental benefits of wind grow, markets for wind-generated electricity are expanding.
Public Utilities Regulatory Pricing Act of 1978 (PURPA)
The Public Utility Regulatory Policies Act was one of five bills in the National Energy Act of 1978. One of the primary objectives of PURPA was to “back out foreign oil” and to stimulate use of domestic renewables. PURPA has become popularly known for its small-power production program because, with its move toward deregulation, it launched a major change in electric markets for new power plants.
Qualifying Facilities
A new class of non-utility power producers was created by PURPA, called “qualifying facilities” or QFs. Only QFs are eligible for the benefits of PURPA. Qualifying “small power producers” consist of generators run by wind, solar, biomass, hydropower and waste resources. Utility ownership of QFs is limited to 50 percent. Projects can become QFs by simple declaration or they can ask FERC for certification. The latter is costly and is common when significant capital must be raised.
Regulatory Exemptions
PURPA exempts QFs from utility-type regulation. This is necessary because persons would be deterred from building QFs if they were regulated like a traditional electric utility; the administrative costs would be too high. QFs are not retail suppliers and there are no service territory issues. Also, QFs are exempt from financial, rate and organizational regulation at the federal and state levels. The exemptions, however, do not include environmental, site permitting, building, electrical, zoning or any licensing laws at any level of government.
Avoided Costs
The benchmark price for sales of QF output to utilities is based on the concept of the purchasing utility’s “avoided costs.” The avoided cost is the cost that the utility would otherwise have incurred to obtain an equivalent amount of energy or capacity. With avoided cost, the utility’s ratepayers would be unaffected and the QF would have the opportunity to receive payments based on money the utility would have spent anyway. For example, if a utility was planning a new 200 MW power plant that would generate power at 7¢/kWh, the first 200 MW of QFs willing to contract for the life of the utility’s planned plant would get 7¢/kWh. Conversely, for a utility with surplus power, the only costs avoided would be the costs of fuel and variable operations and maintenance costs. I
While PURPA provides the foundation for today’s wind markets, the markets themselves are changing with deregulation of the utility industry, new mandates for renewable energy in many states, increased public interest in renewable energy, and the cost competitiveness of wind power. There are many emerging markets for wind power.
Green Pricing and Green Power Marketing
Rising consumer demand for cleaner, domestic energy sources is creating a market for the environmental or "green" value of wind and other renewably generated electricity.
Green tags- These are the tradable or saleable commodity that represents the environmental attributes of renewable energy generation. Individuals or businesses buying green tags can think of it as a way to offset detrimental environmental impact of their own energy use.
Utility green pricing programs- Many utilities around the country are voluntarily offering or obligated to provide a green power choice for customers. Usually these programs allow consumers to opt to pay a little extra each month to contribute to the development of new renewable energy projects.
Resources
Center for Resource Solutions - San Francisco-based organization with several programs related to green power programs and markets, including Green-e program, Marketers' Marketing Group, and Green Pricing Accreditation Initiative.
Green Tag/Renewable Energy Credit Marketers
(a sampling)
Utility Green Pricing Programs- Over 300 utilities around the country have or will soon have green pricing programs. Below is a sampling of big or successful programs.
* Moorhead Public Service, Moorhead, MN- Capture the Wind, highest customer subscription rate in the nation (5.8%)
* Austin Energy, Austin Texas- GreenChoice, highest total renewable energy sales (251,520,000 in 2002).
* Southern Minnesota Municipal Power Agency, Rochester, MN- SMMPA Wind Power, one of the five lowest premium rates ($1.00/100 kWh) in the nation.
* Xcel Energy, Mnnesota/New Mexico/Colorado- WindSource, among the largest programs.
Publications
published 2004.
Consumers and Green Electricity: Profiling Potential Purchasers, Rowlands, I.H., D. Scott and P. Parker, Business Strategy and the Environment, Bus. Strat. Env. 12: 36-48, 2003. (PDF: 125 KB)
Green Power for Business: Good News from Traverse City, Renewable Energy Policy Project - Research Report No. 1, July 1997. * The advantages and possibilities of tapping the business sector for the development of renewable resources. A case study of businesses in Traverse City, Michigan willing to pay more for green power. See http://www.repp.org Search the Research Reports
Cooperative Wind: How Co-ops and Advocates Expanded Wind Power in Minnesota, Renewable Energy Policy Project - Research Report No. 3, May 1998. * A case study describing how environmental advocates, consumer interest, and power co-ops worked together to increase the level of wind power in Minnesota. See http://www.repp.org Search the Research Reports
Disclosure and Certification: Truth and Labeling for Electric Power, Renewable Energy Policy Project - Issue Brief No. 5, January 1997. * Why the emerging electricity marketplace must be made to supply adequate information - disclosure of electricity sources, so as to benefit the environment and allow customers to base their decisions on a broad range of criteria. See http://www.repp.org Search the Issue Briefs
Power to the People: How Local Governments can build Green Electricity Markets, Renewable Energy Policy Project - Issue Brief No. 9, January 1998. * Explains municipal green aggregation, in which local governments group citizens into a "buyers club" for power generated from renewables. See http://www.repp.org Search the Issue Briefs
Net Metering
Resources
Updated July 12, 2004, posted on the Wind Farmers Network by Mike Michaud.
Publications
The Effects of Net Metering on the Use of Small-Scale Wind Systems in the United States, Forsyth, T.L., M. Pedden, and T. Gagliano,(PDF: 1.3 MB), National Renewable Energy Laboratory, NREL/TP-500-32471, November 2002. (PDF: 1.3 MB)
Transforming the Market for Solar Water Heaters: A new Model to Build a Permanent Sales Force, Renewable Energy Policy Project - Research Report No. 4, August 1998. * Direct solar water heating as an environmentally attractive and economical means of providing homes and commercial institutions with hot water. See http://www.repp.org -Search the Research Reports.
Net Metering: New Opportunities for Home Power, Renewable Energy Policy Project - Issue Brief No. 2, September 1996. * Net metering as an alt. to traditional dual-metering approaches to interconnect other non-utility generators. A simple method for encouraging direct customer investment in renewable technology. See http://www.repp.org Search the Issue Briefs
Renewable Energy Goals and Standards
Click on the image below to see a map showing which U.S. states currently have renewable electricity standards. This map was updated in August 2004.
