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PART II: WHY SHOULD THE GOVERNMENT PURCHASE RENEWABLE ENERGY?
Governments seek to promote environmental quality, local economic development, technological development, and fiscal responsibility — all of which are well served by renewable energy. (See Box 1 for an overview of some questions for governments to ask when considering whether to buy renewable energy.)
All governments have important legal and moral roles in en-vironmental policy and regulation, including protection of air, water, and land resources. At the same time, the government’s energy consumption has significant environmental impacts. If the federal government in 1996 relied on emissions-free renewables to meet just 5% of its power needs, it would have avoided using enough electricity from the national grid to avert almost 400,000 metric tons of carbon, or the emissions of 72,000 Americans.12 Including state and municipal governments in such an effort would have pushed this total much higher.
By replacing fossil fuels, renewables can also avert many local environmental pollutants, including those that form ground-level ozone and smog, and toxic pollutants such as mercury that pose substantial human health threats.13 This is of great importance to federal facilities such as Acadia, Grand Canyon, and Great Smoky Mountains National Parks, which suffer from reduced visibility due to energy production and consumption. It is also of special importance to state and local governments, where both industry and private citizens face stringent penalties if they are not in compliance with Clean Air Act regulations for sulfur dioxide, nitrogen oxide, particulate matter, and other pollutants. Governments can even receive direct credit for adopting renewables — the U.S. Environmental Protection Agency is proposing a special allowance for federal facilities that purchase renewables to receive tradeable credits for reducing nitrogen oxide emissions.14
Governments want to stimulate and attract businesses that provide jobs and tax revenues. Renewable energy technologies are much better suited than fossil fuels to exploit local energy resources such as wind, solar insolation, and biomass. Further, many renewable energy technologies are more labor-intensive. A New York State Energy office study found that wind power can create 27% more jobs than a coal plant would and 66% more than a natural gas plant.15 And distributed applications such as photovoltaic (PV) cells require an extensive work force of installers and buildings contractors not typically involved in central-station fossil fuel electricity generation. At the same time, many competing fossil fuel industries, such as coal, are becoming increasingly mechanized — while coal production grew at an annual average rate of 1.6% between 1992 and 1996, jobs fell dramatically, at an average annual rate of 6.7%.16
As a result, renewable energy can provide more jobs for many regions, including some with fossil-fuel-related employment, by harnessing local energy sources with local energy generation products. A study for Wisconsin found that displacement of fossil fuel energy by local renewable energy would prevent the flight of $6 billion from the state to pay for the extrac-tion, refinement, and transportation of fossil fuels. With accelerated economic growth, renewables could provide between 48,202 and 63,234 new job-years to the state, assuming all energy production was located there.17 Renewable energy firms can also form a formidable economic sector that contributes significantly to a locality’s economic well-being. Washington’s Department of Trade and Economic Development, for example, identified 134 renewable energy firms in the state. The companies had 900 employees and annual sales of $147 million in 1997.18
Some governments have recognized the link between renewables and job creation. For example, Iowa’s Energy Office has developed funds for corn-related ethanol projects whose cost (2–20¢ per gallon higher than fossil fuels) is offset by the local benefits to in-state corn growers.19 The city of Tucson, Arizona, is planning to construct facilities supported by PV and solar thermal equipment as a part of its effort to become a “solar capital” and thereby attract and support local industry, including a manufacturer of advanced thin-film PV cells.20 Perhaps the most robust model is the Sacramento Municipal Utility District (SMUD), which began a Solar Pioneers program to encourage PV purchases. Because of the success of the program, SMUD has attracted a local PV manufacturing plant.21
The government, especially at the federal and state levels, has been a central participant in the research, development, and demonstration (RD&D) of advanced technology, including many renewable energy technologies. While the government continues with RD&D, however, it has had difficulty completing its commercialization efforts. According to one expert, there is a “valley of death” for government-funded technologies — after a technology has passed through basic research, technical feasibility, and demonstration, it is difficult for it to graduate to commercial acceptance. The problem lies in attracting private firms to provide managerial and financial cost-sharing with the government, since the advanced technologies lack a clear market in the short term, while long-term success is uncertain.22
The “valley of death” means that the government is not getting full value for its RD&D dollar. Instead, technologies with uncertain markets can fall out of a competitive marketplace even though they have long-term viability and provide public benefits such as environmental protection and local economic development. While such a process can prune technologies that are technically and commercially doomed, it also hurts technologies, such as many renewables, that do not fit within the conventional power production system of high-capacity, central-station generation plants, but that do have substantial promise to provide clean, efficient services given greater investment and market share.
For this reason, the President’s Committee of Advisors on Science and Technology, a select group that reviewed the U.S. energy RD&D portfolio at President Clinton’s request, cited “aggressive government procurement” to “buy down the price” of renewables as a part of a commercialization strategy, bound by cost and time, “to complement national R&D work” and to address renewables’ “chicken-and-egg problem…of being generally high cost and thus limited to low market volumes, but needing large market volumes to drive costs down.”23
More specifically, government procurement of close-to- economic technologies with substantial public benefits can help make renewables a business priority for firms and financiers.
Government procurement of renewables often makes fiscal sense even without the benefits just described. Many renewable energy technologies use little or no fuel and have lower operating and maintenance costs than fossil or nuclear fuels. As a result, there are many cost-effective applications for renewables, particularly distributed applications such as PVs, solar water heaters, and small wind turbines. These technolo-gies can stand alone or be combined with more conventional technologies such as diesel generators to provide “firm,” uninterruptable power. They can become a secure source of power for governments, allowing them to operate facilities and equipment far from the power grid. They also protect governments from costly power blackouts and sudden spikes in the price of power from the grid.
There are many examples of governments realizing that renewables make fiscal sense. Because of cost-effectiveness, three federal agencies have installed in total at least 4,000 PV systems, while the Department of Defense’s Tri-Service Photovoltaic Review Committee identified 3,900 cost-effective applications for PVs, amounting to 423 megawatts (MW) of power — more than three times the world market for PVs in 1997. 24 Cities such as Albuquerque, New Mexico, have found ways to incorporate PV technology into their energy purchases based on cost-effective applications. And a Navy SEAL station on remote San Clemente Island, off the California coast, is installing three 250-kilowatt wind turbines to avoid $112,000 in annual diesel engine maintenance costs.
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