Future of Clean Energy Development

In Arizona, there is a field of solar panels arching beams of sunlight that stretches for over 100,000 square feet of desert. On the other hand, many homeowners are taking clean energy in their own hands and installing rooftop solar panels. Both sides suggest promising energy resources, however, at the moment the game seems to be to pick the best one.


Small energy seems to be losing. The shaky future of PACE indicates that small energy will not receive a boost from government backing. Nevertheless, small energy promises lower overall waste and cheaper energy. Imagine 1,000 homes outfitted with their own renewable energy source. There would be no middle man utility, which raises prices. However, the small model may be doomed by the fact that any payout would likely take 14 years with current technology and Congress has yet to extend a renewable energy tax credit, which would surely boost small development. Bill Gates recently announced a policy to invest in research and development. Although R&D could save small energy, we’ll have to wait and see.


As of now, the corporate model promises to be the most successful in offering renewable energy on a large scale. First, the power output (as indicated by the fields in Arizona) has a high potential. Second, the contribution margin achievable by the corporate model may aid in economic viability of large scale energy projects.


The contribution margin is not certain, however. FERC has control over utility markups and financial models.


On May 8, 2009, the D.C. Circuit issued an opinion in which it denied Alcoa's appeal of the FERC's approval of the use of the “net energy for load” method by NERC for allocating its costs of service among electric customers. In both Order No. 672 and the Certification Order, the FERC concluded that the “net energy for load” methodology was a “fair and reasonable method for allocating costs” to electric customers on the basis of energy consumption alone. Alcoa appealed the FERC's approval of this method arguing that it departed from the FERC's traditional two-part rate structure, composed of a demand charge and an energy charge. Alcoa also argued that

[b]ecause a significant portion of the organization's costs will be demand related, and because net energy for load does not distribute these costs according to each customer's demand-related needs, customers with traditionally low demand charges will be forced to shoulder a greater share of the organization's costs than they would under the traditional two-part rate structure.


The D.C. Circuit held that the FERC's conclusion that the “net energy for load” method is “fair and reasonable” was not arbitrary and capricious. In addition, it concluded that while it is not clear that the FERC deviated from its prior practice, the FERC “adequately explained any departure from its traditional two-part transmission rate precedent.”


Tribal development is also on the horizon, which may inhibit FERC’s ability to control contribution margins, resulting in stronger overall financial viability.


See you soon.