The one-year renewal of the U.S. Treasury 1603 grant program, allowing investors to receive a 30 percent grant in lieu of a tax credit on renewable energy projects, and accelerated depreciation benefits passed in the lame duck session, will greatly benefit distributed generation and utility scale projects in 2011. The number of distributed generation or behind the meter on-site projects installed in 2011 will be directly related to incentives available in each state.
For example, in Ohio, the failure to renew the Advanced Energy Fund, a grant program providing up to $200,000 for renewable energy projects, will greatly decrease investment in on-site projects unless developers and advocates are able to get another incentive passed in the Republican-controlled Ohio General Assembly and governor’s office. However, states like Pennsylvania, whose grant incentives remain strong, will continue to reap the economic growth and job creation from investment in renewable energy projects. Investment in utility scale projects will also be impacted by state incentives typically focusing more on a state’s tax structure than grant programs. With more than 29 states having passed an RES you would assume these states would keep the necessary incentives strong to ensure the RES goals are obtainable, but with new political leaders in many of these states it is hard to tell how hard they will work to base a significant percentage of their electricity usage on renewable energy generation.
The value of renewable energy credits (RECs)–tradable, non-tangible energy commodities in the U.S. that represent proof that one megawatt-hour of electricity was generated from an eligible renewable energy resource–will also play a role in the amount of installed capacity in 2011. In states where grant incentives are drying up, RECs play an enormous role in making projects financially viable. In addition to the issues associated with the fluctuating market of RECs, many states might start seeing a flooding of the REC market as large megawatt projects are installed in their state. If these large projects are eligible for the respective states REC program, it could significantly decrease the amount of distributed generation projects since these projects would not be economically viable without the revenue generated by selling RECs. However, some states, like New Jersey, Massachusetts and Delaware, have passed policies to ensure this does not happen. Hopefully states like Ohio will follow the lead put forth by other states to encourage the installation of on-site renewable energy projects.
Another potential delay to increased distributed generation wind capacity in 2011 is the lack of a streamlined process for environmental regulation and siting of projects. The impacts to Bald Eagles, Indiana Bats and other wildlife from single turbine projects is not well documented and therefore projects are delayed or withdrawn after being denied federal funding from agencies like the U.S. Department of Agriculture Rural Development if they did not receive a green light from governmental agencies such as the U.S. Fish and Wildlife and Department of Natural Resources. The contradiction here, of course, is that reliance on renewable energy generation actually improves the health of wildlife by reducing mercury pollution in the air and water. There is no question that proper siting of renewable energy projects is critical to the success of this industry, but when viable projects are derailed due to a lack of well-defined regulations by agencies it reduces installed capacity.