INTRODUCTION II. THE GLOBAL POLICY POTPOURRI--AN OVERVIEW A. Renewable Portfolio Standards B. Tender Regimes C. Feed-In Tariffs D. Production Tax Credits III. EMPERICAL EVIDENCE OF DEPLOYMENT POLICY SUCCESS A. Scope, Methodology, and Metrics of the IEA Policy Review 1. Measuring Policy Efficacy 2. Measuring Policy Efficiency B. Policy-based Deployment Success for Onshore Wind 1. Policy Efficacy 2. Policy Efficiency C. Policy-Based Deployment Success for Solar Photovoltaics 1. Policy Efficacy 2. Policy Efficacy D. Quantitative Answers and Qualitative Questions IV. "SOFT-COST" FACTORS--A FRAMEWORK FOR POLICY EVALUATION A. Investment-Based Factors B. Market-Based Factors C. Behavioral Factors V. A "SOFT-COST" FACTOR ANALYSIS OF DEPLOYMENT POLICIES A. Policy impact on Investment-Based Factors 1. Investment Certainty 2. Transaction Costs 3. Range of Potential Investors and Investment Opportunities B. Policy impact on Market-Based Factors 1. Grid Access 2. Dispatch Priority 3. Forecast and Balancing Responsibilities C. Policy impact on Behavioral Factors--Social Acceptance D. Summary VI. TOWARD A MORE INVESTOR-ORIENTED U.S. RENEWABLES POLICY A. Adjustments to Current U.S. Policy Instruments 1. Enhancing the Market Efficiency of RPSs 2. Complementing Tax Credits with Direct Subsidies B. Keys to Feed-In Tariff Success in the United States 1. Getting the Tariff Right--And Keeping it Right 2. Structuring a Nuanced, Multi-Tiered Feed-In Tariff 3. Ensuring Compatibility with Existing Policies VII. CONCLUSION I. INTRODUCTION
The challenge of scaling-up technologies for the generation of electricity from renewable energy sources (renewables) is often compared to the 1960s Space Race. (1) In his 2011 State of the Union address, President Obama referred to America's pressing energy challenges as "our generation's Sputnik moment." (2) Indeed, there are striking parallels between the Space Race and the Race to Renewables, (3) beginning with the shared need for technological innovation at an unprecedented scale. It is no coincidence that the newly established Advanced Research Projects Agency-Energy (ARPAE) tasked with promoting the necessary energy innovations is modeled after the Defense Advanced Research Projects Agency (DARPA), which is responsible for the development of many crucial space technologies. (4) Like the Space Race was in the 1960s, the Race to Renewables is motivated, at least in part, by concerns over national security. Just as maintaining the balance of power with the Soviet Union during the Cold War was a major motivation for NASA's Apollo Project, (5) one of the drivers behind the Race to Renewables is the desire to enhance America's energy security by decreasing its dependence on foreign oil and gas from geopolitically unstable parts of the world. (6)
Despite these apparent similarities, the analogy between the Space Race and the Race to Renewables is, in fact, an understatement. The latter features many more participants, including most industrially developed and many developing nations. (7) More importantly, the Race to Renewables has considerably higher stakes, adding overwhelming environmental and economic issues to concerns over national security, (8) Successful climate change mitigation requires that today's carbon-intensive economy turn low-carbon by 2050. (9) Only a complete and rapid transformation of the energy sector can limit global warming to a temperature increase of two degrees Celsius compared to pre-industrialization levels. (10) This two-degree scenario is vital to avoid massive and irreversible disruptions of the global ecosystem. (11) The necessary energy revolution will require massive efforts to improve energy efficiency and to facilitate the timely transition to a low-carbon electricity sector based on renewable sources of clean energy.
The large-scale deployment of renewables is by no means a purely environmental concern; it is also of significant economic importance. The U.S. electricity generation sector alone boasts annual retail revenues of more than $350 billion. (12) Global investment in solar energy technology has increased by over 250% annually between 2004 and 2008. (13) According to a 2011 survey among 350 venture capitalists from four different continents, more general partners anticipate an increase of venture capital investment for clean technology than for any other industry segment. (14) Some analysts forecast that by 2030, one in four U.S. workers, i.e., 37 million Americans, could be employed in the renewable energy and energy efficiency industries--assuming appropriate public policy support. (15) Others emphasize that a renewables-based energy sector will create more jobs per megawatt of power installed, per unit of energy produced, and per dollar of investment than a fossil fuel-based energy sector. (16) Denmark's world-leading wind turbine industry demonstrates the export potential of American-made clean energy products. (17) Conversely, American dependence on foreign oil continues to drive up the U.S. trade deficit with daily imports worth approximately $1 billion. (18) The 2008 oil price-shock cost the U.S. economy some $500 billion, underscoring the economic importance of improving the nation's energy security and independence. (19)
The good news is that a timely transition to a low-carbon, renewables-based electricity sector appears within technological reach. In 2008, former Vice President and Nobel Peace Prize winner Al Gore announced his plan to "Re-power America" (20) with 100% clean electricity from renewables within a decade. Since then, over half a dozen independent studies have confirmed the technological feasibility of meeting the entire electricity demand of a given country, (21) region, (22) or even the world, (23) with renewable sources of energy. In their timeframes for the shift to renewables, the feasibility studies range from 205024 as mandated by the two-degree scenario, to 2030, (25) to an extremely ambitions Gore-esque transition as early as 2020. (26)
The bad news is that we remain far from harnessing the full technological potential of power generation from renewable sources of energy. Current projections forecast that renewables will account for only 15% of American electricity generation by 2035/7 Compared to a renewables share of 10% in 2010, (28) the projected growth over the next quarter of a century is relatively modest. Our business-as-nsual trajectory, therefore, is too slow to reap the trifecta of environmental, economic, and energy security rewards that await the winner of the Race to Renewables. One U.S. commentator has already warned that, without a strong commitment to renewables, "we may look toward a future of imported clean technology as a substitute for imported dirty fuels." (29)
A whole plethora of obstacles presently stand in the way of a timely scale-up of renewable energy technologies. Economists have long warned of environmental externalities and other market failures and imperfections in the electricity sector that hinder renewables in their competition with fossil fuel incumbents. (30) Recent legal scholarship has investigated regulatory and other non-economic barriers to the large-scale deployment of renewable energy technologies, offering policy recommendations to cut through the red tape. (31),
Even ff these barriers are removed, scaling-up renewable energy technologies will still require an enormous infusion of capital. At a macroeconomic level, the overall cost of transitioning to an electricity sector based on renewables has been estimated at around $100 trillion globally--not including the necessary investments in transmission infrastructure. (32) Notwithstanding recent growth in venture capital and other clean-tech investment, the transition to a low-carbon, renewables-based electricity sector will require a massive influx of trillions of dollars in additional capital. (33) An investment of such magnitude, however, exceeds the financial means of even the wealthiest nations--including the United States, burdened with a national debt exceeding $15 trillion. (34) Budget austerity measures make it unlikely that military spending can provide renewable energy technologies with the type of capital injection that has helped other emerging technologies, such as the Internet or GPS, reach the stage of commercial application. (35) The private sector, therefore, is called upon to provide the capital necessary for the large-scale deployment of renewables.
From the private sector's microeconomic perspective, investment in renewable energy technologies is wrought with risks and uncertainties about, for example, technology innovation, fuel price development, emission regulation and pricing, and the fiercely debated comparative advantage between centralized utility-scale generation and distributed generation. (36) The high-stakes, high-risk nature of energy investment is exacerbated by the notoriously long "valley of death" between the proof of concept and commercial deployment of power generation technologies. (37) In the information technology industry, a simple mouse click may be all it takes to bring a new website or smartphone application online for its large-scale commercial deployment. In contrast, electricity generation technology often requires up-front investment of hundreds of millions of dollars to 15rove its suitability for large-scale commercialization. It is in these early stages of commercial deployment, however, that banks and financial markets are the most reluctant to provide the direly needed capital, much less at low cost. This Article starts with the presumption that public policy should serve as a catalyst to leverage the necessary private sector investment to deploy renewable energy technologies at scale.
Public policy support for renewables deployment across the globe presently manifests itself as four general policy approaches: (38) first, as feed-in tariffs, which offer producers of electricity...
Enhancing the investor appeal of renewable energy.
|Position:||I. Introduction through V. A "Soft-Cost" Factor Analysis of Deployment Policies, p. 681-725|
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