The allure of alternatives: legislatures are promoting renewable energy development through various incentives.

• Author: Smith, Jennifer

Oil and natural gas are doing more than fueling cars and heating homes. As costs continue to rise, they ate fueling the demand for alternative energy.

Wind turbines are spinning throughout the landscape. Twelve percent of the nation's com crops are used to produce ethanol, which is blended into the gasoline supply. Energy from the sun, animal and plant waste, and the Earth's heat are being harnessed to supplement, and in some instances supplant, our use of fossil fuels.

And legislatures are promoting these new energy sources. Forty-seven states have adopted incentive and mandate programs.

"We are reaching landmark times and cannot let these opportunities just slip by," says Arizona Representative Lucy Mason. "Renewable energy development is important to our rural areas. We're talking about attracting new businesses and highly skilled job opportunities."

GREEN IS IN

Utilities offer green pricing programs that let consumers buy some of their electricity from renewable resources. California and Colorado utilities offered the first such programs in 1993 and they are still in place today. The Colorado program is typical of many green pricing programs. Customers can pay an extra $2.50 a month to buy 100 kilowatt hours of green energy generated by wind power.

There are now more than 500 utilities in 34 states offering such programs. That seems impressive until you look closely and discover that in all but a few cases only about 1 percent of all utility customers actually buy green power. This is far below what the market research predicted.

Look still more closely, however, and there ate a few success stories. Austin Energy in Texas administers the most successful green pricing program in the country--Green Choice[R] with 380 million kilowatt hours in annual residential and commercial subscriptions at the end of 2004. Customers pay a hall cent more per kilowatt hour, but their prices remain level until 2013 because of deals Austin Energy made to buy electricity from new wind projects. Those who don't sign up for Green Choice are susceptible to the rising trend of fluctuating fossil fuel prices. According to Roger Duncan, the deputy general manager for Austin Energy, it is this guaranteed price that makes the program--with a customer participation rate of 4 percent--higher than the national average.

THE BAIT

To convince more people to turn green, states are offering varied financial incentives that include tax credits as well as grants and loans. Sixteen states have a corporate tax incentive on renewable energy equipment, 14 have a personal income tax credit, 25 have a property tax incentive and 15 have a sales tax incentive Only Arkansas, Georgia and Kentucky lack any type of financial incentive for renewable energy development.

Idaho Representative George Eskridge and Senator Brent Hill introduced a two-bill package of tax incentives for renewable energy last session. The bills would have provided a production tax credit...