On a recent trip to Germany to study the country’s energy policy, the phrase “energy transition,” or “energiewende” as the Germans s
Renewables attract utility investment dollars.
terms of cost or timeliness. The stimulus might streamline some of that for us—in terms of motivation from the various state-level decision makers to see investments in renewable energy that aren’t necessarily driven entirely by the existing RPS.
There’s a lot more money to be spent on renewable energy and energy efficiency, and it needs to get deployed at the state and local levels. You may see some things happen that go above and beyond the near-term requirements for RPS.
Dickson, Duke Gen: The three-year PTC extension provides a longer planning horizon. Previous extensions of one or maybe two years made planning and construction difficult. It meant we had to rush to get something into construction by the end of the year, and that’s not efficient. But a three-year extension does help us plan and design our business more efficiently.
The ITC is very interesting. It’s a good incentive, and we’re evaluating that on several projects. The trade-off between capital costs and capacity factor can make the ITC more attractive than the PTC in certain instances. It will bring some new projects to market that might not move forward otherwise.
The whole industry is evaluating the stimulus grants and loan guarantees. The cash-grant option in lieu of ITC will be beneficial for certain developers to get projects financed in certain situations, but I don’t know whether we’d do that.
Langston, OG&E: I have to tell you, it doesn’t change our strategy. When you compare the ITC vs. the PTC, the ITC has a finite amount of benefit based on the investment, versus the PTC, which is based on the quality of wind output. The PTC seems more favorable for us because of the quality of production we can get from wind farms in Oklahoma.
We made our decision some time ago to move toward renewables, but the incentives are good for the wind industry. OG&E supports those things and we were very glad to see the PTC extended for three years. Frankly we think it should have been a longer extension. It has to be sustainable so people can plan. These things cost a lot of money, and there needs to be certainty.
Kuga, PG&E: The 2008 legislation extending availability of tax credits to utility applications has been great. It effectively allows utilities to get into the business on equal footing with private developers. I think that’s been the main driver for many projects that were stalled. The financial crisis has slowed down progress, but the stimulus plan and tax grants are aimed at helping the industry move forward. As more people get comfortable with the technologies, the more production capacity will increase and bring economies of scale. From our standpoint, if the entire industry moves forward it will bring overall costs down and everyone will benefit—including our customers and the nation.
When you look at the size of the market and the scale of projects that are being considered, there’s more demand than supply at this point. So we need multiple players in the market, whether third parties, utilities or customers