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

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 of .5 cent/kWh for alternative energy generation for six years and given an investment tax credit to people who bought alternative energy generating equipment like solar panels of wind turbines. Although the two bills passed the Legislature, they were vetoed by Governor Dirk Kempthorne who was concerned about the potential loss of tax revenue.

"The whole idea of the tax incentives was to jump start renewable energy development in Idaho," says Eskridge.

So this session, because of work by an interim energy committee, the Legislature will look at a sales tax exemption. "In working with the renewable energy community and the public, the committee determined that a sales tax exemption is far more useful," says Eskridge, "and that is what we will be forwarding to the Legislature."

Net metering is another way to entice additional renewable generation. It allows customers to generate their own electricity with renewable technologies. At the end of their billing period, they pay only for their net consumption: the amount of power consumed, minus the amount of power generated. So if they generate more than they use, they receive a credit from the power company.

"It's the right thing to do," says Ken Regelson, an engineer in Boulder, Colo., who began installing a solar energy system last year. Once it's completed, he expects it to zero out his electricity bill.

Thirty-eight states offer some form of net metering.

SETTING GOALS

To date, 18 states and the District of Columbia have some form of a renewable energy objective, commonly known as a renewable portfolio standard, that requires electricity providers to gradually increase the amount of renewable energy--such as solar, wind and bioenergy--in their electricity supplies. The amount of total power from renewable energy specified in these standards ranges from around 1 percent in Arizona to 20 percent in California and Hawaii, with varying target dates.

Achieving a renewable energy mandate often takes time. Although most states enacted their portfolio standards through legislation, Colorado used its citizen initiative process. "As a legislator, I felt committed to the legislative process," says former Speaker of the House Lola Spradley. But after three years, and three different unsuccessful bills, she says she felt that opportunities had been exhausted and agreed to help the agricultural and environmental communities get the renewable portfolio standard initiative on the ballot.

In November, Colorado voters approved Amendment 37, establishing a renewable portfolio standard for the state with more than 53 percent of the vote. Amendment 37 sets a 10 percent renewable energy requirement for Colorado's largest utilities by 2015, with 4 percent of that 10 percent to come from solar technologies.

FUNDING THE GOALS

Another state initiative--and perhaps the most important to finance these energy programs--is the system benefit fund, sometimes known as a public benefit fund. These funds consist of lees that all electricity consumers pay to finance renewable energy and energy efficiency as well as provide energy assistance to low-income customers.

These funds are "not by any means insignificant," says Martin Kushler, utilities program director with the American Council for an Energy-Efficient Economy. "There are right now 16 states that have some form of a public benefit funding program, and those programs are providing up to $1.2 billion per year for the various energy efficiency efforts in those states."

The California Energy Commission receives up to $135 million a year in public benefits funding. According to Bill Keese, chairman of the commission, the state is looking to develop an "emerging renewables program for self-generating systems, which gives consumers rate reductions for using fuel cells, wind turbines, and photovoltaic and solar thermal energy."

A SUMMIT IN THE WEST

Renewable energy development efforts have been bolstered by California Governor Arnold Schwarzenegger and New Mexico Governor Bill Richardson, who recently headed up an energy summit with 16 other western states. They adopted a Clean Energy Initiative for the West, with the goal of producing 30,000 megawatts of clean energy by 2015.

"I think there may be a little friendly competition between Richardson and Schwarzenegger to see who can lead the way on these issues," says Chris Wentz, the director of the New Mexico energy and conservation management division, who noted that the initiative was "carefully crafted" with an eye to the particular industries and economies of each state.

"The initiative did not say that they were going to walk away from fossil fuels, or anything like that," Wentz says. "Instead it just takes into consideration that there is going to be more growth out there and a larger demand for energy, and that we should try to meet that new demand with renewables, while also continuing to concentrate on efficiencies."

NOT THE ONLY ANSWER

State renewable energy mandates and incentives continue to promote and expand the use of renewable energy. As costs of renewable energy generation continue to decrease, and their use becomes more widespread, they can help to ease the impact of rising natural gas prices, and assist states in meeting clean air objectives.

Renewables are not the only answer; other alternatives, such as nuclear power, gas or coal, and transmitting power from one place to another, may be part of a state's comprehensive energy plan. The next few years will be telling, however, as these new renewable energy technologies work their way into the mainstream electric power system.

POINT/COUNTERPOINT

Although 47 states have policies to promote renewable energy, opposition remains. Opponents of increased renewable energy development include components of the oil and gas industry and surprisingly, the environmental community. Their arguments range from the economic to the ecological.

          OPPONENTS SAY                        SUPPORTERS SAY

* Wind and other renewables are      * All energy sources receive some
subsidized.                          federal subsidy. The federal
                                     production tax credit for
                                     renewables has been unpredictable
                                     and inconsistent.

* Wind and other renewables cost     * The capital or initial costs of
more than fossil fuel generation.    renewables are higher, but there
                                     are no fuel costs associated
                                     with wind and most other renewable
                                     energy generation sources. Natural
                                     gas prices have tripled in the
                                     last five years and coal prices
                                     are on the rise.

* Wind plants produce power only     * Wind and solar are intermittent,
when the wind blows and solar only   but it is possible to use the
when the sun shines. This makes      traditional power grid as a
them difficult to rely on and adds   back-up.
a hidden cost.

* Wind turbines kill bats and        * The majority of bird kills have
birds, including some endangered     occurred in one location. The
species.                             fatality rates of birds vary
                                     among sites and are dependent on
                                     site-specific characteristics. The
                                     overall impact of wind development
                                     on birds is low compared with
                                     other human-related causes.

* Renewable energy is not as         * All forms of energy have
environmentally friendly as it       environmental impacts. But wind
is portrayed. Wind and solar take    and solar steer clear of hurting
up vast amounts of land, some        air and water quality.
located in valuable scenic areas.

MINNESOTA WANTS TO DO MORE

Minnesota has created a variety of incentives and mandates from grant, loan and rebate programs to net metering and a public benefits fund to cut energy costs and promote renewable energy. But still more is needed according to Senator Ellen Anderson.

"It seems logical that Minnesota should be a leader in renewable energy development because of our resources. To me, it's a matter of when, not if."

Minnesota has set a renewable portfolio goal for one utility only--Xcel Energy. The remainder of the state operates under a voluntary renewable energy objective. According to Anderson, pushing forward to get a real renewable portfolio standard is a big issue. "We have a good faith objective, but it's not the same thing," she says.

She sees potential for community-owned wind projects; making it easier for Minnesotans, not large-scale utilities, to own the wind developments. "It is important to keep the dollars circulating in Minnesota to fully recognize the economic development potential of wind energy," she says.

DRAMATIC CHANGE IN THE GAS PICTURE

After a long period of low and stable prices, natural gas prices started to rise fast around 2000. They have been high and volatile ever since, and most people predict that they will stay that way for a while. Prices are now close to three times what they were in the late 1990s.

[GRAPHIC OMITTED]

ROLE OF RENEWABLE ENERGY IN THE NATION'S
ENERGY CONSUMPTION

Natural Gas       25%
Coal              23%
Renewables         4%
  Solar            1%
  Biomass         47%
  Geothermal       5%
  Hydroelectric   45%
  Wind             2%
  Total = 6.131 Quadrillion Btu
Nuclear Power      8%
Petroleum         40%

Total = 98.006 Quadrillion Btu

Note: Table made from pie chart.

RELATED ARTICLE: New Mexico gets creative.

Like silver daisies slicing the air above, the 139 gleaming metal turbines of the New Mexico Wind Energy Center, on more than 9,000 acres of empty desert some 20 miles northeast of Farmington, is perhaps the state's most visible answer to its energy needs.

"At its peak, the center can produce around 200 megawatts of electricity," says Chris Wentz, the director of the state's energy conservation and management division, which is a part of the larger Department of Energy, Minerals and Natural Resources. "And that," adds Wentz, "is enough electricity to provide the annual power needs of more than 94,000 homes." New Mexico's total installed wind capacity of 206 megawatts produces a little less than 4 percent of the state's energy needs.

Currently the third largest wind power plant in the world, the New Mexico Wind Energy Center is the result of collaboration between two utility companies--FPL Energy of Florida, which owns and manages the facility, and PNM New Mexico, which purchases all of the facility's output.

But the center is the brainchild of the state's energy office, which operates on a $2.6 million budget partly comprised of federal grants and money appropriated by the Legislature. It's one more sign, says John Giglio, the executive director of the National Association of State Energy Officials, of innovative state approaches to emerging energy efficiency needs. "This is the sort of thing that we see happening more and more across the country," he says.

"Although the budgets for state energy offices vary widely and depend, of course, on a wide variety of factors within each state," Giglio says, "by and large some of the most unique and creative approaches to energy management and efficiencies is coming out of the states, sometimes in the face of daunting challenges."

--Garry Boulard