Letter to Public Service Commission Regarding Focus on Energy
Support for Renewable Energy
February 14, 2012
In July 2011, Focus on Energy stopped accepting applications for funding new renewable energy installations owned by businesses, schools and local governments. Later that year, Focus on Energy expanded the suspension to cover residential customer-sited renewable energy systems as well. So far in 2012, Focus on Energy has not resumed accepting applications for new systems. While some installation activity is still occurring, the pipeline of previously approved renewable energy systems is starting to run low.
On January 30, RENEW Wisconsin presented an open letter to the Public Service Commission (PSC) requesting the rapid restoration of Focus on Energy financial support for renewable energy resources at historic levels. (http://tinyurl.com/7ss7qgc) Signed by over 150 businesses, organizations, local officials and schools, the open letter was a clear and unequivocal statement of our desire to get back to work and expand the sustainable energy marketplace, strengthening Wisconsin’s economy and creating jobs and business opportunities in the process. Shortly thereafter, the PSC responded to our letter with one signed by Gas and Energy Division Administrator Robert Norcross, which is posted on its web site and other on-line forums. http://tinyurl.com/norcrossletter
The PSC letter begins with a defense of the funding suspension, which was prompted by the over-commitment of program dollars to renewable energy projects approved in previous years. The problem arose from a lack of internal controls at the program administrator level to balance approved obligations with available funding. As expressed in a July 2011 press release, RENEW acknowledged the agency’s responsibility to correct that deficiency and to ensure that future outflows do not exceed revenues.
We also support the PSC’s recent decision to allow public policy to influence and shape Focus on Energy’s renewable energy offerings. As noted by the PSC, the regulatory test used to determine Focus on Energy’s cost-effectiveness does not adequately capture the full range of benefits that renewable energy provides. To overcome these limitations, the PSC adopted new evaluation criteria to help the program administrator determine which renewable technologies should be funded in the future, and at what levels.
While an improvement, the new evaluation criteria may not be robust enough to support a renewable energy allocation at historic levels (roughly 10% of Focus on Energy’s annual revenues). It will be a challenge for the PSC to compensate for the significant weight that the PSC’s cost-effectiveness test gives to short-term energy savings, even with this new formula in place. This emphasis on short-term energy savings in the PSC’s cost-effectiveness test invariably puts renewable energy at a disadvantage compared with energy efficiency.
The theme of cost-effectiveness is reiterated throughout the PSC letter, leaving the reader with the impression that renewable energy is still something of a sideshow activity and certainly not an economic engine ready to power Wisconsin’s future. RENEW respectfully disagrees with that characterization. We take the audacious view that conventional generation sources have seen their heyday and that electricity supply additions in the future will center on renewable resources. With that in mind, we believe it makes more sense to measure the cost-effectiveness of distributed renewable energy against utility-scale renewable energy investments as opposed to energy efficiency investments.
In drawing comparisons between these two categories of renewable energy investments, a number of conclusions stand out.
1. When loads are flat and are expected to remain flat for the foreseeable future, distributed renewables are less likely to result in overcapacity and excess generation than utility-scale facilities.
2. Distributed renewable energy investments supported by Focus on Energy will occur within Wisconsin. This is an attribute that smaller-scale renewables share with energy efficiency, but not necessarily with utility-scale renewables.
3. With utility-scale renewable generating facilities, the entire cost of the investment is recovered through rates. With customer-owned renewable generation facilities supported by Focus on Energy, a significant fraction of the installation cost is borne by the owner.
4. The availability of customer-supplied capital for renewable energy capacity additions is enhanced through Focus on Energy incentives. Utility-owned renewable capacity additions have no effect on the availability of customer-supplied capital.
In our view, incremental increases in distributed renewable energy generation can result in long-term capacity substitutions that can justify retirements of older fossil generation units, something that energy efficiency by itself cannot achieve. But this benefit is not monetized in standard cost-effectiveness tests. This fact alone argues for an alternative approach to measuring the cost-effectiveness of renewable energy.
One element left unstated in the PSC’s letter is a date certain for the resumption of Focus on Energy funding support for renewables. The absence of a specified resumption date creates a climate of uncertainty that will likely result in project cancellations and workforce reductions. We urge the PSC to specify a target resumption date at the earliest moment possible.
Finally, we wish to respond to the following statement in the letter: “While the Focus on Energy program has an impressive payback, the over-inclusion of renewables in the portfolio has the potential to reduce the cost-benefit below the mandatory 1.0 ratio.”
This statement verges on hyperbole. It would take a combination of improbable events for that outcome to become a mathematical possibility, let alone reality. Even in early 2011, with renewable energy accounting for 25%-30% of total program allocations, the program was never in danger of achieving a negative cost-benefit ratio. Avoiding overstatements like the one above would go a long way toward rebuilding the confidence that the renewable energy community once had in Focus on Energy.
In the meantime, we at RENEW would be happy to provide assistance to the program administrator in evaluating the cost-effectiveness of future renewable energy investments in Wisconsin.
Program and Policy Director
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From a guest commentary by Keith Reopelle and Charlie Higley in the Janseville Gazette:
In spring 2011, Gov. Scott Walker and legislative leaders significantly cut funding to Focus on Energy, the energy efficiency program that helps residents and businesses lower energy bills. A recent legislative audit demonstrates that the benefits of Focus on Energy more than double the program’s costs, and legislators should quickly restore lost funding in order to maximize the program’s cost-saving potential.
Focus on Energy was created in 2001 to help homeowners and businesses reduce energy costs. More than 2 million Wisconsin residents and businesses have participated in the program.
The statewide program helps keep energy bills affordable for all Wisconsinites by reducing energy use and preventing the need to build expensive new power plants and transmission lines that we all pay for with increased electricity bills.
In addition, Focus on Energy helps reduce the amount of money we spend to fuel our power plants. Wisconsin spends $12.5 billion every year on imported electricity and dirty, out-of-state fossil fuels. Much of that is spent on coal, oil and natural gas to generate electricity and heat our homes. Investing in energy efficiency is the No. 1 way we can reduce that and keep money circulating within our own economy.
The audit released by the bipartisan Legislative Audit Bureau confirms that Focus on Energy successfully lowers energy bills and provides environmental and economic benefits that far outweigh program costs. For every $1 invested, residents and businesses save more than $2 on energy bills, according to the audit. This helped save more than $264 million on energy bills in 2010 alone. Since its inception, Focus on Energy has helped residents and businesses save more than $2 billion. . . .
Keith Reopelle is senior policy director at Clean Wisconsin, the state’s largest environmental advocacy organization. Contact him at firstname.lastname@example.org. Charlie Higley is executive director of the Citizens Utility Board of Wisconsin. Contact him at email@example.com.Read Full Post | Make a Comment ( None so far )
From a well-done article by Todd Finkelmeyer in The Capital Times:
The earth’s population hit the 7 billion mark last week.
Perhaps just as eye opening is the fact that the planet is adding more than 200,000 people to that total every 24 hours. That’s nearly another Madison each day.
“We need to start thinking proactively about energy use and other sustainability issues, or we’ll be forced to face the consequences of having to be reactive,” says Craig Benson, who this summer was named UW-Madison’s first director for sustainability research and education. “Resources are no longer plentiful, so it behooves us to think much more strategically about our energy resources.”
I remember my fourth-grade teacher making similar statements after the 1979 oil crisis. Several book reports on wind and solar energy followed in the next couple of years. It wasn’t difficult finding material on this issue because it was a mainstream topic of interest. And yet, here we are more than three decades later, and renewable energy still is struggling to gain serious traction.
If we can find ways to expand the use of renewable energies such as solar and wind, we’ll not only tap into supplies that are basically limitless but simultaneously curb the production of pollutants and greenhouse gases that contribute to respiratory ailments and, most believe, global warming. The U.S. Department of Energy recently calculated the global output of heat-trapping carbon dioxide jumped by the biggest amount on record last year and that 2010 levels of greenhouse gases are now higher than the worst-case scenario predicted by climate experts only four years ago.
But even if saving the planet isn’t your thing, what red-blooded American could be in favor of continuing to send roughly $1 billion per day in U.S. currency to foreign oil producers — especially when that transfer of wealth often goes to nations we’re not exactly buddy-buddy with?Read Full Post | Make a Comment ( None so far )
From an article by Tom Content in the Milwaukee Journal Sentinel:
Wisconsin’s move to roll back funding increases for programs that help homeowners and businesses save on energy bills was criticized in a report Thursday by a national energy efficiency advocacy group.
The American Council for an Energy-Efficient Economy released a scorecard rating states’ efforts in the area of energy efficiency.
Wisconsin was in the top 10 several years ago but ranks 16th in this year’s scorecard. Massachusetts was the top state overall, and Michigan and Illinois were cited as among the most improved states.
“Clearly, 2011 has not been kind to our economy, but energy efficiency remains a growth sector that attracts investment and creates jobs,” said Michael Sciortino, ACEEE senior policy analyst and the report’s lead author.
“With even higher energy savings possible, we expect leading states to continue pushing the envelope next year and inspire those at the bottom of the rankings to embrace energy efficiency as a core strategy to gain a competitive advantage by generating cost-savings, promoting technological innovation, and stimulating growth,” he said.
Wisconsin has lost some ground while other states have made significant pushes to set up initiatives that provide incentives to consumers and businesses to conduct energy-saving retrofits. Improvements by Michigan and Illinois pushed those states to rankings just behind Wisconsin.
The report saluted efforts in Arkansas, Rhode Island and Arizona, which “worked with utilities and adopted significant energy efficiency regulations,” the report says.
“Despite significant progress, some states have slowed or stepped backward in the race to save energy. New Jersey and Wisconsin have both diminished investments in utility-sector energy efficiency and Arizona is considering a law that will reduce transportation efficiency in the state.”Read Full Post | Make a Comment ( None so far )
From an article by Ronnie Garrett in Corporate Report Wisconsin:
Reduce. Reuse. Recycle.
Those are words my kids hear a lot. We think about what we buy, opting for recyclable materials or recycled content instead. We think about what we throw away, opting instead to find someone who can use it or a place to recycle it. And we think about the energy we use. In our home you don’t get air conditioning 24/7 during the summer — even when it’s 98 degrees outside — and you don’t get to jack up the heat to 80 because you’re cold during the winter.
So it frustrates me a great deal when I hear about things that show our state legislature isn’t taking conservation efforts as seriously as it should.
Take for instance the fact that in the past six months, three wind farm developers with a combined investment of more than $600 million, have stopped operations in Wisconsin. The developers cited regulatory uncertainty and a perception that Wisconsin offers a hostile business environment for “green” energy as the reasons why.
And while Gov. Scott Walker’s effort to end Wisconsin’s recycling as we know it was denied by the state Legislature, the budget bill did cut funding for local recycling by 40 percent, which will result in communities making cuts to their services or charging fees to make up the lost revenue.
In June a coalition of 124 businesses signed a letter asking the governor to veto the portion of the state budget that rolled back funding to Focus on Energy, a statewide energy efficiency and renewable energy program. In spite of this grassroots effort, that claimed the focus also created jobs for the state, the cuts remained in the state budget.
Ironically, these things came to fruition around the same time that a report issued by The Brookings Institution reported Wisconsin’s clean energy jobs at nearly 77,000. Among the clean energy jobs categorized in the report were those in energy efficiency, renewable energy, and recycling and reuse. The report also cited Focus on Energy for the attractive buyback rates offered by utilities for renewable energy and the innovative incentives that encourage customer installation of renewables.Read Full Post | Make a Comment ( None so far )
July 5, 2011
Funding Hiatus Darkens Outlook for In-State Renewables
For the first time in its 11-year history, Focus on Energy is no longer accepting applications from Wisconsin businesses and nonprofit entities seeking to install renewable energy systems. This new policy took effect July 1.
According to Focus on Energy officials, this suspension of financial incentives is necessary to balance demand for renewable energy systems with available funds. In 2009, Focus on Energy allocated approximately $10 million to support customer-sited renewable energy systems. More than half of that allocation went to businesses, farmers, local governments, schools, and nonprofit organizations throughout the state.
“We recognize that Focus on Energy officials have a responsibility to ensure that outflows don’t exceed revenues. However, this suspension could not have occurred at a worse time for Wisconsin’s renewable energy contractors,” said Michael Vickerman, executive director of RENEW Wisconsin.
“Unfortunately, this move coincides with Milwaukee-based We Energies’ decision to walk away from an agreement with RENEW Wisconsin to commit $60 million over a 10-year period to develop renewable energy within its territory,” Vickerman said. ‘We Energies disclosed its unilateral action in May, barely more than halfway into honoring its commitment.”
“Given the adverse environment for renewable energy right now in Wisconsin, we hope that the interruption amounts to nothing more than a brief timeout,” said Vickerman.
“Unless funding is restored quickly, 2012 will turn out to be a very lean year for contractors and installers,” Vickerman warned.
As of this moment, the renewable energy marketplace is bristling with new installations. Installations to be completed this summer with incentives from Focus on Energy include:
• Two small wind turbines serving a Monroe County cranberry grower;
• A solar hot water system serving a new apartment building next to the Hilldale shopping complex in Madison;
• Side-by-side solar hot water and electric installations atop a new classroom building at the UW-Oshkosh;
• An engine generator fed with biogas derived from the City of Appleton’s wastewater treatment plant.
However, without a fresh supply of Focus-funded projects, Wisconsin’s renewable energy development pipeline will slow to a trickle, forcing contractors and installers to either seek work in other states or lay off employees.
Wisconsin has more than 2,500 customer-sited renewable energy installations, the vast majority of which received either financial incentives or facilitation services from Focus on Energy. In total, these installations have a generating capacity of about 20 megawatts.
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From an article by Judy Newman in the Wisconsin State Journal:
Focus on Energy, a statewide program that promotes energy efficiency, is in the midst of big changes: new management by an out-of-state corporation, suspension of a popular rebate program, and sharp funding cuts in the pending state budget.
Nearly 20 people already have lost their jobs, mostly in Madison, as a result of the management change.
Meanwhile, dozens of small Wisconsin businesses that specialize in setting up solar panels and wind turbines fear for their futures because of the slashed allocation and rebate removal.
“It’s a lot of economic activity and jobs in Wisconsin. It’s a lot of energy efficiency, as well,” said Keith Reopelle, policy director for Clean Wisconsin.
Focus on Energy was created in 2001 to provide education, resources and cash incentives to Wisconsin residents and businesses to increase the use of energy-efficient products and systems, from furnaces to solar panels to vending machines.
In the past 10 years, more than 91,000 businesses and more than 1.7 million residents used the program and saved $2.20 for every dollar spent, according to Focus data. . . .
Since taking over Focus on Energy on May 9, one of Shaw’s first decisions, with PSC support, was to suspend payments to businesses that install renewable-energy systems, as of June 30.
Contractors like Seventh Generation Energy Systems were stunned.“It’s pretty devastating,” said James Yockey, chief executive officer. “It probably took out six to 10 projects that we were looking to close … for work in the fall and the coming spring.”
Several of the projects were wind turbines for farmers. “I think the incentives are decisive in people saying yes,” Yockey said . . . .
Program supporters have appealed to Gov. Scott Walker to veto the Focus budget cut, including a letter signed by 124 Wisconsin businesses. As of Friday, there was no word on his response. Walker is scheduled to sign the budget today.
“Cutting Focus on Energy will result in higher electricity bills and fewer jobs,” Randy Johnson, president of U.S. Lamp, a Green Bay energy-efficient lighting design company, said in the letter.
Seventh Generation’s Yockey said he hopes to avoid laying off any of his 16 employees by aiming his business at other states, and that could mean moving the company. “We prefer to be located in Madison but the bottom line is: we’ll see where the business takes us,” he said.Read Full Post | Make a Comment ( None so far )
From an article by Mike Ivey in The Capital Times:
Cuts to key environmental programs continue in Wisconsin, with a sharp reduction in future funding for Focus on Energy, a statewide energy efficiency effort.
On a party-line vote Tuesday, the Legislature’s Joint Finance Committee rolled back the budget for Focus on Energy to less than $100 million annually. The monies come from a tax on electric utility revenues and are distributed to businesses and individuals for energy savings projects.
The Focus on Energy program has been administered over the past years by the Wisconsin Energy Conservation Corp., a Madison-based non-profit. But the contract was awarded earlier this year to the Shaw Group, a Baton Rouge, La., firm with offices in Milwaukee.
The Public Service Commission in November 2010 had proposed new energy savings goals for Focus on Energy by hiking the utility assessment. Those budgets were then approved by the Democratic majority in Joint Finance and would have upped money in the program from $120 million in 2011 to $256 million by 2014.
But with the committee action, funding for Focus on Energy will remain flat for the foreseeable future.
Co-chairman Rep. Robin Vos, R-Rochester, led opposition to the increase, calling it a redistribution of utility ratepayer dollars.
Launched in 2001, Focus on Energy has helped residents and businesses save nearly $2 billion on their energy bills, supporters of the program say.Read Full Post | Make a Comment ( None so far )
A news release from Clean Wisconsin:
Letters signed by nearly 100 businesses delivered to Capitol
MADISON – Letters signed by nearly 100 businesses as well as faith, low-income and environmental advocates were delivered to members of the Joint Committee on Finance today, asking them not to eliminatethe funding approved last year for Focus on Energy, a statewide program that helps homeowners and businesses reduce energy use.
“Focus on Energy is a successful program that creates thousands of family-supporting jobs and cuts energy bills,” said Keith Reopelle, senior policy director at Clean Wisconsin. “Cutting this funding would increase
electricity bills as homeowners and businesses would lose the opportunity to reduce their energy bills by a combined $2 billion.”
Joint Finance Committee co-chair Robin Vos has stated his intention to eliminate the funding approved last year several times. That move is likely to happen as early as tomorrow through the committee’s consideration of the state budget, despite the fact that Focus on Energy funding is unrelated to the state budget.
“We urge you to protect the PSC’s investment increase for the program and allow our businesses to grow, add new jobs, and strengthen the local economy,” reads a letter addressed to members of the Joint Finance Committee. “With a proven track record of delivering cost-effective energy savings and driving local business, Focus on Energy should be allowed to grow.”
To date, Focus on Energy has created 24,000 jobs and saved homeowners $2.50 for every $1.00 invested in the program, according to an independent evaluation. When the PSC issued its approval for the increased funding in November of last year, it referenced an energy efficiency-potential study that showed 7,000 to 9,000 new jobs would be created with a similar increase of Focus on Energy funding.
“The Focus on Energy program contributes significant resources to help businesses and residents save energy, create jobs and stay competitive in the marketplace,” said Randy Johnson, president of US Lamp, Inc. “Reducing or eliminating Focus on Energy funding would take away our state’s competitive energy advantage and position us in the bottom, not the top, of states to consider for residence or locating a business. I would urge legislators to keep the Focus on Energy funding in place for the vitality of Wisconsin.”
Newly appointed Public Service Commission Chairman Phil Montgomery issued a statement two weeks ago, on Earth Day (April 22), lauding the program and pointing out that it saved Wisconsin ratepayers $380 million on their energy bills in 2010 alone.Read Full Post | Make a Comment ( None so far )
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