Massachusetts: Big Steps Toward Renewable Energy - Research Paper Example

Massachusetts: Big Steps Toward Renewable Energy Introduction The U.S. is the leading energy consumer in the world. The universally accepted unit of measurement in energy is British Thermal Units (BTU). One BTU is equivalent to the energy produced by burning a kitchen match. One BTU is required to boil a pound of water. The amount of energy the US consumes usually measure in quadrillion BTUs. In 2009, the US consumed one quadrillion BTUs. Nearly 88 percent of this requirement is supplied by oil, coal and natural gas (Walsh 32). None of the three is renewable and they also pose great dangers to the environment (Hargreaves). Although there is no fixed computation, different sources estimate another 50-120 years of supply of these sources of energy (McLamb). These could go shorter if the dependence accelerates. This is the primary reason that makes it critical for everyone to develop renewable sources of energy. Just like any revolutionary idea, renewable sources of energy are getting their fair share of criticism such as the high cost of initial installation. In the United States, Massachusetts is one of the States that are vigilant in pushing the growth of renewable energy sources. Solar panels, wind turbines and geothermal energy are the top three sources that are being developed. Below is critical examination of the current state of renewable sources of energy, legislations that are helping push it forward and the costs and savings that each source requires. Solar Panels Traditional energy sources are slowly dwindling away, which one of the main reasons for sky rocketing energy bills experienced by most resident in Massachusetts. As a way to overcome this financial debacle and also to safe guard the energy needs of the nation, the government has look for ways to establish more cost efficient and renewable energy sources for the residents of Massachusetts. One of the best solutions offered as a viable, renewable energy source is solar energy. Solar energy can be tapped through solar panels. The only problem is the high cost associated with the installation of solar panels. The solution has come in the form of solar rebates, energy credits and tax incentive programs, which should empower the residents of Massachusetts to make full use of solar power. Current State of Solar Energy Solar power installation figures in Massachusetts are around 2,000 solar panels, which generate around 22 megawatts of electricity. Those figures are impressive but not big enough compared to the target the government has set for itself according to its energy portfolio standard. An energy portfolio standard is a regulation which seeks to increase the production of energy from renewable energy sources like solar, wind, geothermal, etc. The Massachusetts renewable energy portfolio standard (RPS) was created to legislate the restructuring of the electric utility industry. In the year 2003, the RPS required that 1% of electricity in Massachusetts should be generated from renewable energy sources. Thereafter, the percentage should increase by 0.5% every year up to 2009. After that, the annual percentage increase should be 1%, until suspended by the Massachusetts Division of Energy Resources (DOER). With those types of targets in mind, the government would like to increase from the current production of 22 Mw to 400MW by the year 2020. This is quite a tall order to meet, and one the solution that Massachusetts has been able to use, is the establishment of the Common Wealth Solar Rebate Program. This program provides rebates through a non-competitive application process for the installation of solar (photovoltaic) panels, done by professional, licensed contractors at public, commercial, institutional and industrial facilities. Eligibility is limited to host customers and project sites, located in Massachusetts and be a customer of either a municipal lighting plant or a Massachusetts electric distribution utility. Under this program, there are several rebate systems that encourage both utility providers and users to use solar panels in Massachusetts. Legislations and Taxes State Renewable Energy Credits (SREC) This is a tradable, non-tangible energy commodity in the USA, which act as evidence that 1 Megawatt-hour of electricity was generated from a renewable energy source, solar to be exact. The one drawback that SREC is the minimum solar energy target it requires from utility companies. If targets of solar energy production targets per year are not met, they have to pay a fee of $600 per SCREC. A cheaper alternative, for utility companies, is to buy SCREC from the open market, which are normally priced cheaper than the fee. It was $550 by February of this year (MDOER). A typical 5kw sized solar power installation, on a house roof, should be able to generate around 5 SREC’s a year. Home owners can then work out a deal with utility companies for their SCREC’s for a certain number of years. For example, if home solar panels are able to generate 5 SCREC’s a year, priced at $400 you should be able to make $2000 a year for 10 years, which comes to $20,000. To protect solar panels users from unfair trading practices, DOER has established a floor price of $285, for SREC’s. This price includes a 5% handling fee. Net Metering This is an electricity policy for consumers who use renewable energy sources, like solar power, with the aim of deducting any energy outflows from metered energy inflows. Since solar energy is only available during the day time, users of solar panels have to depend on normal energy grids during the night. Net metering allows users to bank excess energy production into future credits. This then reduces the financial burden of using standard electricity, from your utility company (MDOER). The credits accorded by utility companies will vary, according to the way they rate your credits. For example, some will credit 1kWh for each 1kWh the installation is able to produce, whereas other maybe less generous, and only accord 0.9kWh for 1kWh. One major issue faced by net metering, is the limit of 1% set for utility companies. Current figures indicate that capacity has not yet been exceeded but as the uptake of solar panels increases, some people may be locked if this “cap” is not lifted. Massachusetts Solar Tax Incentives and Rebates There are a number of state funded tax incentive and rebate programs available to solar panel users in Massachusetts. These programs are applicable to both residential and corporate installations. The following list, applies to residential solar panel installations in Massachusetts (Norris): 1. Personal Tax Credit Massachusetts has a 15% tax credit, which offsets the states income tax towards the cost of installing solar panels, up to a maximum of $1000. 2. Property Tax Exemption This program exempts users of solar panels, in Massachusetts, from paying property taxes for periods of up to 20 years. 3. Sales Tax Exemption This program removes taxes on any equipment directly related to solar panels, fitted to residential houses. How the Commonwealth Solar Rebate Program Works Despite its obvious benefits, some individuals find the whole program complicated and therefore demoralized from taking action. Here is a breakdown of the parameters of the program and possible investment costs, for installing solar panels (MCEC). The Commonwealth Solar Rebate Program is governed by a set of parameters that state: All equipment used must be new, UL listed and complaint with IEEE standards. The modules, production meters, and inverters used in the installation must be on the California Energy Commission’s list of qualified equipment. Projects must be installed in accordance to local, state, federal building and electrical codes, laws and practices. This requires the use of a Massachusetts licensed electrician. Project must also be grid-tied and behind the meter. System installers are responsible for the application process and necessary permits. Only online applications are acceptable. An energy efficiency audit will be required afterwards. Costs and Savings Installation Cost So what type of benefits does one stand to gain, and how can one reduce the cost of installation using these programs? Here is an example of what it would cost one to set up a residential installation in Boston, Massachusetts. For a 5KW (5000 watts) installation, there is an approximate $5.30/watt installation cost for 5000 watts, the total cost should come to $26,000. It may be reduced by taking into consideration the various rebates and tax benefits one is entitled to. For instance, $750 per kilowatt, multiplied by 5KW, one should receive a total of $3,750 in rebate money. So now the total cost, deducted by this figure comes to $22,750. After that, we take into account the 30% federal tax credits one eligible to receive; one receives a tax credit of $6,825. This figure deducted to from the $22,750 installation cost, brings down the figure to $15, 925. The SREC payment for the first year is eligible for a $2,000 discount from the installation cost, which brings down the figure to $13,925. The Massachusetts State Tax will owe one $1,000. That further brings down the installation cost to $12,925. Another cost saving avenue is the electricity bill. The 5kws produced by the system should be able to cover around $75 of the monthly electricity bills, which comes to around $900, per year. This system can actually pay for itself, if one takes into consideration the earnings made from your SREC payments. With a 5KW solar panel installation, one should be able to break even in 6 years; at 2,000 dollars a year, one should have earned 12,000 dollars in 6 years. This figure does not even take into account the cost savings on the electricity bills (Solar Power). Wind Turbines Massachusetts A wind turbine works by converting the kinetic energy from wind into electricity. The first modern wind turbine was set up in Massachusetts in 2001, at windmill point at the tip of the town hull. This 660 kW turbine was owned and managed by the Hull Municipal Light Plant (HMLP), with the assistance of the Massachusetts division of Energy Resources and University of Massachusetts renewable energy research laboratory. Wind turbines are normally tricky to set up, due to the number of factors that are taken into consideration when establishing a possible site for them. When HMLP sought to set it up in a highly populated coastal area, within close proximity to Boston’s Logan international airport, they naturally faced some amount of resistance (MDOER). The Hull wind turbine was able to achieve a number of milestones, in the green technology arena (Schleede): It was the first commercial sized wind turbine to go online within the eastern shore line. It was the first turbine to be set up on a suburban site on the North American Continent. It was the first publicly owned wind turbine, located in the United States within a close distance to a mass transit system (a ferry). Current State of Wind Turbines in Massachusetts Due to their very nature, wind turbines need to be located in windy areas. In Massachusetts, those types of areas are mostly available near coastal areas. To make wind turbines a viable renewable energy source, Massachusetts entered into various agreements, on a state level, to reinforce this commitment. In May 2008, the Governor of Massachusetts, Deval Patrick, approved the Massachusetts Ocean Management Act. This legislation required that Massachusetts should develop a first-in-the-nation comprehensive plan to manage development in its state water, balancing natural resource preservation with traditional new uses, including renewable energy. The final plan was finalized in 2009, and identified two areas in Massachusetts state waters that bore the potential for utility scale alternative energy development (Trent). The Governor of Massachusetts, also signed a Memorandum of Understanding (MOU) in 2010 with the Governor of Rhode Island, Donald Carcieri, regarding future offshore wind turbines close to the state boundary. The MOU states that, any proposed wind farms in area designated on the MOU, would have to gain the approval of both states and any state economic benefits would be shared. In 2010, Massachusetts also became a member of the Atlantic Offshore Wind Energy Consortium, a consortium of 10 states, which aims at promoting a coordinated approach to the development of wind resources on the outer continental shelf. To ensure the compliance and support of utility companies, Massachusetts established a key piece of legislation called the Green Communities Act. This Act support the development of wind turbines by requiring utility companies to into long term agreements with alternative energy developers (around 10 to 15 years), and thus providing them with the resources required to develop effective and efficient wind turbines for public consumption. These projects are under the Bureau of Ocean Energy Management, a task force set up to oversee the implementation of federal regulation in wind projects of at the coast of Massachusetts. Legislations and Taxes Wind turbines are supported in Massachusetts at a federal and state level, for which they provide several incentives and rebate programs accessible to a variety of individuals. These programs include: 1. Sales tax exemptions: buyers of wind turbines are exempted from paying sales tax on their purchase of a wind turbine. 2. Local property tax exemptions: provisions are made for owners of wind turbines, not to pay their property tax. This exemption is in effect for 20 years after the date of installation and applies only to the value of the wind turbine equipment reflected on the property tax bill, not the full amount. 3. State personal income tax credits: owners of wind turbines in Massachusetts are eligible to receive a personal income tax credit on the purchase of their equipment. This tax credit is charged on 15% of net expenditure for the system, including installation, or $1,000, whichever is less. If the credit is greater than the states income tax liability in individual years, then it can be carried over for 3 years. Eligibility is restricted to the purchase of new equipment, compliant with all applicable performance and safety standards and is expected to remain in operations for at least 5 years. 4. Massachusetts Renewable Energy Certificate (REC): utility companies are required to generate a certain amount of power from clean energy sources like wind turbines. If they are unable to comply with those standards by using their own facilities, then they will have to buy them users of wind turbines, in the form of a Renewable Energy Certificate (REC). The state assigns a particular value to RE’s to protect owners of REC’s from market manipulation or excessively low prices. REC’s can be a good source of income, especially if you have an efficient wind turbine that is able to generate a good amount of power. 5. Federal incentives: Even though the federal policy does not provide any direct income tax incentives, for home owners, it is able to support the use of wind turbines by exempting federal taxation on utility rebates to home owners. Another incentive applicable to new and existing wind turbine installations is the eligibility for financing under energy-efficient mortgage programs offered by convectional and government sources. These financing programs are aimed at insuring that the increased purchasing power of borrowers is equal to the estimated cost savings associated with reduced energy used (MCEC). The need to find alternative renewable energy sources is not just a matter of cost savings but safe guarding the future of our planet, and hence future generations to come. Wind turbines have proved themselves to be an effective and efficient “green energy” source, depending on the location. The above benefits make owning a wind turbine a viable choice, for those looking to go “green” for their energy needs. Cost and Savings A number of factors are taken into consideration. These determine the cost of setting a wind turbine. These factors include: 1. Wind Speed: one needs a wind speed of at least 10 mph or more to harness the power of a wind turbine. The lower the speed the lower the power generated and vice versa. The main price determinant is the number of wind turbines needed to meet energy needs. 2. Zoning rights: wind turbines harness the power of the wind high of the ground, often 40 feet high. Wind turbines are subject to local zoning laws, which often require owners to obtain a permit before installation. The permit comes at a fee, which may vary depending on several factors. 3. Agreements with utility companies: once the wind turbine is installed, it should be connected to the power meter, which then directly supplies the establishment. Depending on the wind speeds, and the amount of power generated by the wind turbine. It is possible to either be fully dependent or partially dependent on the power supplied by the wind turbine. If the wind turbine is able to generate power in excess of what is actually consumed, then the meter will be credited with points, which may be used later, if energy production by the wind turbine drops. Better yet, the utility company can give the extra credit (Schleede). 4. The Equipment: the equipment can range in value, depending on the manufacturer, your location, and specifications of the wind turbine. For instance, a wind turbine company may charge you $8,500-10,000 to install and set up depending on the area where the wind turbines will be installed. The amount of power that may be generated from the turbine is directly dependent on wind speeds in the area. For example, a wind turbine may be capable of generating 650 kilowatts hours a month would equate to a saving of around $65 a month (Trent). At that rate, a wind turbine should be able to pay for its self in a period of 11 years. This computation takes the assumption that energy rates remain the same for that period, relatively low wind speeds and energy costs below the national average. A more accurate assessment, taking into consideration an increase in energy costs that matches inflation figures, one is likely to break even within a 7 year period. Thermal Electric Heating System The cost of heating is becoming an unmanageable expense for most residents in Massachusetts. This rising cost of energy has a lot to do with the dwindling reserves of fossil fuels in the world. Therefore, we are hard pressed to come up with better solutions that can support us in the long term. This need for clean and renewable energy sources has led to the development of renewable energy sources, like solar thermal electric power generators. Solar thermal electric power generators work by converting solar heat into electricity. This puts this technology in direct competition with solar (photovoltaic) panels. So what benefits can users expect from the use of solar thermal electric generators? They are more energy efficient: they able to generate a lot more power when compared to photovoltaic panels. For example, a 150 watts thermal electric power generator can produce the same amount of electricity as would a 990 watts solar panel installation. They are cheaper to buy: they are cheaper to buy, when compared to solar panels. For instance, a 900watt solar panel installation would cost you around $5,000, whereas 900watt solar thermal electric would cost you $3,300 (MDOER). Solar thermal electric power generators are versatile and are suited for varied heating needs, depending on their classification: Low temperature collectors: used for heating swimming pools. Medium temperature collectors: used for heating water or air. High temperature collectors: used for electric power production. To make it possible for the resident of Massachusetts to use this technology, the government has set up various incentive programs to reduce the cost of investing in this technology. Here is a breakdown of the legislation, achievements and cost of installation you can expect from taking advantage of these incentive programs. Current State of Geothermal Energy In an attempt to help the United States gain control of the economy, create jobs and save energy, President Barack Obama signed in February 2009 a federal Economic Stimulus Package, which focuses on renewable energy sources. President Obama has spoken frequently on energy matters, including during the 2008 Presidential debate with John McCain on October 15th, 2008 when he said: “We can't drill our way out of the problem. That's why I've focused on putting resources into solar, wind, biodiesel, geothermal.” The White House believes that by making low interest loans available, it could generate at least an extra 200 heat pumps sale per month and kickstart a trend towards more geothermal energy. Bruce Ritchey, CEO of the geothermal heating system manufacturer WaterFurnace, says the new bill will be a huge advantage to the country: “Every state should take at least five percent of the funding available through the energy efficiency portion of the stimulus package and invest it in a geothermal incentive. I can't think of a faster, more cost effective, greener way to put people back to work, save fossil fuel, reduce carbon emissions and save homeowners thousands of dollars per year for the next 24 years. It's the stimulus that keeps on stimulating.” There are many advocates for such an energy saving product and Ritchey is at the forefront of such an environmental campaign, concluding: “Every state should invest it in a geothermal incentive. I can't think of a faster, more cost effective, greener way to put people back to work, save fossil fuel, reduce carbon emissions and save homeowners thousands of dollars per year for the next 24 years. It's the stimulus that keeps on stimulating.” Legislation on Thermal Electric Power Generation The legislation for this type of green technology, in Massachusetts, falls under the Green Communities Act of 2007. Some of the ways this act seeks to support renewable, energy efficient technologies is by: Encouraging energy-efficient programs to compete with traditional energy sources, by requiring utility companies to prioritize the purchase of all available energy-efficient improvements, which cost less that generating electricity, therefore reducing the cost of electricity for consumers. Providing rebates and other incentives to consumers, for using energy efficient technologies. Establish rules for “net metering” for installations of up to 2 megawatts This act has led to the creation of incentive and rebate programs, which seek to reduce the cost of installation for Massachusetts residents and to ensure the compliance of utility companies in the provision of solar thermal power. Cost and Savings The cost of installing a typical solar water heating system is around ?4,800 (including VAT at 5%). Savings are moderate - the system could provide most of your hot water in the summer, but much less during colder weather (EST). The maintenance costs are very low. Most solar water heating systems come with a five-year or ten-year warranty and require little maintenance. You should take a look at your panels every year and have them checked more thoroughly by an accredited installer every 3-5 years, or as specified by your installer. Solar water heating systems can achieve savings on your energy bills. Based on the results of our recent field trial, typical savings from a well-installed and properly used system are $88 per year when replacing gas heating and $127 per year when replacing electric immersion heating; however, savings will vary from user to user (EST). Typical carbon savings are around 230kgCO2/year when replacing gas and 510kgCO2/year when replacing electric immersion heating (EST). Conclusion Massachusetts is one of the most progressive States in the US in terms of pushing forward renewable energy. It has set up processes that encourage the direct cooperation of suppliers in making the technology more available to more people through tax cuts and tax breaks. There is also an incredible amount of involvement from the federal government which makes the continuous education of the consumers possible. However, despite the tax cuts and tax breaks, the installation overhead cost remains high, too high for a family with average income. All three renewable energy sources would take more than six years for the initial investment to be recovered. Such a long term ROI is the biggest hurdle especially for families who are barely making ends meet. The State still has a long way to go especially if you consider Massachusetts as one of the few States that is geographically compatible to source out power from renewable sources. For it to be met, though, the State needs to find a way on how make it more affordable than it already is. The overhead cost in installing these power sources is the biggest hurdle. If the federal government could find a way to cut the cost into half or a quarter, it might make it more viable for more consumers. References Blodgett, Leslie, and Kara Slack. Geothermal 101: Basics of Geothermal Energy Production and Use. Washington: Geothermal Energy Association, 2009. Print. Database of State Incentives for Renewables & Efficiency (DSIRE). “Massachusetts DOER - Solar Renewable Energy Credits (SRECs).” Massachusetts DOER. Web. 14 November 2011 Energy and Environmental Affairs (EEF). “Massachusetts Clean Energy and Climate Plan”. Massachusetts Energy and Environmental Affairs. Web. 12 November 2011 Solar Water Heating. “Energy Savings Trust,” Energy Saving Trust. Web. 12 November 2011 EIA Energy Information Administration. Renewable Energy Consumption and Electricity Preliminary 2009 Statistics, U.S. Energy Information Administration, Washington: EIA, 2010, Print. EIA Energy Information Administration. “Annual Energy Review,” Washington: EIA, 2011. Print. Hargreaves, Sam. “Global Energy Use to Jump 53 %,” Money CNN, Web. 12 November 2011 Massachusetts Clean Energy Center. “MassCEC Announces Clean Energy Job Growth In Massachusetts,” Massachusetts Clean Energy Center. Web. 12 November 2011 Massachusetts Department of Energy Resources (DOER). “MA #1 Energy Efficient State,” Massachusetts Department of Energy Resources. Web. 12 November 2011. Massachusetts' Renewable Energy Portfolio Standard, “Renewable Energy Portfolio Standard & Alternative Energy Portfolio Standard Programs,” Massachusetts’ Renewable Energy Portfolio Standard. Web. 12 November 2011. Solar Power Rocks. “Massachusetts Solar Power Rebates, Tax Credits, and Incentives,” Solar Power Rocks. Web. 12 November 2011 McLamb, Emerson. “Energy’s Future Today,” Ecology Global Network. Web. 15 November 2011 Norris, Rest. “Aggressive Planning Helping Massachusetts Achieve Solar Power Success,” Clean Technica. Web. 12 November 2011 OECD (Organisation for Economic Cooperation and Development). OECD Environment Outlook to 2030. Paris: Organisation for Economic Co-operation and Development, 2008. Print. Roberts, Sheldon. U.N. Says 7 Billion Now Share the World, NY Times. 2011, 43(12), pp14 Schleede, Garmer. “The True Cost of Electricity from Wind Power And Windmill “Availability” Factors”, MN For Sustain. Web. 12 November 2011. Tharakan, Peter.. Carbon Capture & Storage S.E. Asia, New York: Asian Development Bank, 2010. Print. Trent, “Looking At The Costs And Benefits Of Installing A Windmill / Wind Turbine,” The Simple Dollar. Web. 12 November 2011 United States Environmental Protection Agency. Municipal Solid Waste In The United States: 2009 Facts And Figures, Washington: Office of Solid Waste, 2010. Print. Walsh, Bernard. A New Clean Economy — With Old Sources of Energy, Time Magazine. 2010. 3(17), pp32 Williams, E., Lotstein, R., Galik, C. & Knuffman, H. A Convenient Guide to Climate Change Policy and Technology. Print Read More