Subject: Wind Energy Weekly 55 1/3

From: [email-masked] (Howard Smith)
Date: Wed, 28 Jul 93 20:15:00 -0700

This message was from [email-masked] to HOWARD SMITH
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[The following is the electronic edition of _Wind Energy Weekly_,
Vol. 12, #555, 7.12.93, published by the American Wind Energy
Association.  For more information on the Association, contact
AWEA, 777 North Capitol Street, Suite 805, Washington, DC 20002,
USA, phone (202) 408-8988, FAX (202) 408-8536, email
[email-masked]]

UCS OUTLINES STEPS TO
FOSTER RENEWABLES

     The Union of Concerned Scientists (UCS), a leading
environmental organization, recently published a major study,
Powering the Midwest: Renewable Electricity for the Economy and the
Environment, which concluded that wind energy is among the
renewable energy technologies holding great promise for the region.
This is one of a series of articles reprinting excerpts from the
report, by permission of UCS.

Fostering Independent Renewable Generation

     Although utilities must be a focal point of renewable energy
development, many of the most impressive advances in the field have
been made by independent developers, particularly those in
California.

     In the Midwest, however, independent power producers often
have a difficult time breaking the lock-hold that investor-owned
utilities have on power generation in some states.  Encouraging an
independent power industry in the Midwest can only benefit
consumers in the long run by creating greater competition--and it
should also benefit renewable energy by bringing more innovative
risk-takers into the business.

     The primary goal of regulators should be to remove utility
ownership as a factor in determining the viability of a renewable
energy project.  This can be done in several ways [italics added]:

o    Reduce transactional costs by creating standard contracts and
     allowing "bundling" of bids for several renewable projects.

     Many renewable energy projects are quite small--often less
     than 10 MW in size--so that costs such as legal fees and
     lengthy regulatory hearings can be a substantial part of the
     total project cost.  Requiring utilities to offer simplified,
     standard contracts for small renewable projects--including
     residential and commercial PV and wind installations--would
     help reduce these costs.  Allowing renewable energy developers
     to bundle several projects into a single bid would also be
     effective.

o    Remove unnecessary contract requirements that tend to make
     renewable energy projects more costly and risky.

     Utilities should not impose requirements on independent
     developers that they themselves would not face in constructing
     their own power plants.  Thus, utilities should avoid
     limitations on contract duration that make project financing
     more difficult, and they should not insist on terms allowing
     contracts to be reopened or suspended should the utility no
     longer want the power.  When utilities and independent power
     producers are bound only by short-term contracts, it becomes
     far more difficult for the independent producer to raise
     capital, and the payments they receive are generally very low-
     -much lower than the cost of new power plants that the
     utilities may be planning to build.

o    Modify payment structures to ease the financing of capital-
     intensive, low-operating-cost projects.

     For the typical solar and wind project, contracts should be
     designed to provide higher payments at the beginning and lower
     payments at the end.  So long as the net present value of the
     contract over its duration is equal to or less than the
     utility's long-run cost of providing power, the contract will
     meet the least-cost test.

Utility-Internal Reforms

     Aside from the other problems hindering renewable energy
development, the very organizational structure of utilities can be
an important barrier.  Usually there is no single department in a
utility charged with identifying renewable energy opportunities.
Rather, the division of utilities into marketing, generation,
transmission, and legal departments often hinders innovative
thinking on questions such as the value of distributed generation.

     Utilities interested in pursuing renewable energy more
aggressively can make this process much easier by taking several
concrete steps:

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