Regrettably, Indianapolis Power & Light has decided to end its innovative program to stimulate growth in renewable energy. It should rethink that decision.
IPL received approval from the Indiana Utility Regulatory Commission in 2010 to start a three-year pilot program called Rate REP (Renewable Energy Production), in which it enters into 15-year contracts to pay higher-than-retail rates for electricity produced by solar, wind and biomass. This type of program, also called feed-in tariffs, has been popular in Europe, where it has stimulated strong growth in solar power in Spain and Germany and wind energy in Denmark.
In a letter to the commission announcing its decision, IPL gave three reasons for discontinuing the program. First, the company says it has all the renewable energy it needs. By this, it means that it has all the renewable energy it thinks it will be required to have for the next few years, chiefly in the form of 300 megawatts of wind power that it buys. Hopes for a federal law requiring more renewable energy have faded, and Indiana’s voluntary “clean energy” law is so lax that utilities can qualify for incentives without adding any renewable energy.
In its letter, IPL makes the dubious claim that renewable energy “now costs more than traditional forms of generation.” That’s clearly not the case with coal. IPL acknowledges that it faces steep costs to bring its dirty coal plants into compliance with new federal rules to protect human health.
Natural gas is currently cheap and IPL plans to purchase 600 megawatts of new gas-fired power in the next few years. But since lots of utilities are thinking along those lines, natural gas prices are bound to rise, especially if states or the federal government enact the tough regulations we need to stop the threat to water supplies from hydrofracking, the new drilling technology that has led to the steep fall in the price of gas. IPL would do better to expand its wind purchases and not have to worry about fluctuating fuel costs.
Another reason IPL is halting the program is because it found that companies taking advantage of it are renewable energy companies that partner with IPL customers. Surprise! If people are going to sign 15-year contracts to provide electricity, you would want them to know what they are doing.
Finally, IPL says it worries about the cost of solar panels rising. It’s because panels have gotten so much cheaper in recent years that the program has received such intense interest. Now the company claims it needs to end the program because solar might get more expensive, but by continuing to offer incentives like Rate REP we can keep bringing those costs down, as Spain and Germany have shown.
IPL helped put Indiana on the renewable energy map with its Rate REP. The Institute for Local Self-Reliance recently issued a report on these types of programs. So far they exist only in 14 states. With IPL exiting the field, we are left with a similar program by the Northern Indiana Public Service Company (NIPSCO) to keep us in the fold.
IPL was headed in the right direction, with its Rate REP and the low cost of its green power option, as described in last month’s ILG issue. It could be a leader among utilities and make Indianapolis a leader among Midwestern cities if it would decide to retire the coal-fired Harding Street plant, commit to more wind purchases and keep its Rate REP program going. We should all urge the company to do so.