Renewable energy has come to a financial crossroads: The renewable electricity production tax credit (PTC), which has fueled the growth of wind energy, expired on January 1 of this year, and Congress has yet to decide whether to renew it. The solar investment tax credit (ITC), which has encouraged the growth of solar, will expire in 2016. How can the US continue to drive the growth of renewable energy without relying on tax subsidies? What can our government do for us?
In his opening remarks for the “Evolving Financial Landscape for Renewable Energy” panel held on Wednesday, September 10, former Governor George Pataki gave a corporate spin to John F. Kennedy’s famous words on the subject: “Don’t go to Washington to say, ‘What can you do to give us a chance to have green energy?’ Drive the technology. Change the paradigm so that we can have solar panels that outperform traditional energy. Go to the marketplace.”
The power of consumer choice was the theme of the night’s conversation, which was hosted by the Frank J. Guarini Center on Environmental, Energy and Land Use Law. Eli Katz LLM ’04, partner at Chadbourne & Parke, moderated the panel, which featured Neil Auerbach LLM ’84, CEO and managing partner of Hudson Clean Energy Partners; Steve Corneli, senior vice president of Policy & Strategy at NRG Energy; Dana Sands, managing director at TAG Energy Partners; and Jason Segal, managing director at Aldwych Capital Partners and a managing partner of the Environment and Renewables Group in New York. Pataki himself is now counsel at Chadbourne and Parke, which sponsored the event, where his practice focuses on energy, environmental, and corporate matters.
We don’t have to choose between having either a vibrant economy or renewable energy, Pataki stressed, calling that a “false dichotomy and a false choice.” Renewable energy can be economically competitive. As an example, he pointed to the rebuilding of Battery Park City after 9/11. When he insisted that all new buildings be constructed green, companies balked at what they called a financial burden. Yet Solaire, the 27-story residential tower now adjacent to the World Trade Center site and the first green residential high-rise in North America, gets a premium on rentals because it’s green.
“Invent, invest, create,” he told the audience, “and allow us to have the confidence that regardless of the political situation, the economic situation and the social situation are going to make renewable energy the energy of the future.”
The last ten years have shown a “truly phenomenal” cost reduction for renewables, Corneli pointed out, thanks in part to innovative business models and advances in technology. The price-competitiveness has changed the landscape. “We are on the cusp of a whole new set of drivers for renewable deployment that are not policy-independent but they’re not as policy-dependent as our industry has been in the past.”
As the cost of renewables decreases, consumers will be likelier to switch to renewables, he said. Meanwhile, utilities will raise their prices to make up for their lost revenue—thereby making renewables even more attractive.
Despite the promise of all these advances, however, Auerbach asserted that renewables still needs some measure of “affirmative action” from the government. First, consumer demand for power is not increasing, so there isn’t a drive to adopt new power sources; indeed, even as we use more electric devices and equipment, these devices themselves have become more energy-efficient. Secondly, because renewables provide an intermittent source of energy (for instance, solar energy is hard to come by at night), utility companies are less willing to go through the complex, expensive process of integrating them into the transmission and distribution system.
Regardless of these challenges, Auerbach speculated that three years from now, as more communities start moving off-grid and more consumers adopt “behind-the-meter” technologies like solar panel arrays, “The very function of the electric utility is going to be debated.”