Solar energy policies and opportunities for poultry growers: A review of the Delmarva region as compared to Arkansas, Oklahoma and Missouri

Transcription

1 Solar energy policies and opportunities for poultry growers: A review of the Delmarva region as compared to Arkansas, Oklahoma and Missouri University of Arkansas Division of Agriculture Public Policy Center March 2012 Contact Information: Tom Riley, Director Public Policy Center triley@uaex.edu Kristin Higgins, Program Associate Public Policy Center khiggins@uaex.edu University of Arkansas, United States Department of Agriculture and County Governments Cooperating. The Arkansas Cooperative Extension Service offers its programs to all eligible persons regardless of race, color, national origin, religion, gender, age, disability, marital or veteran status, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.

2 Introduction The United States lacks a coherent national energy policy; therefore, states across the country have crafted legislation and policies addressing renewable energy production. These actions are in response to increasing electricity costs, higher prices for traditional fossil fuels such as coal, natural gas and oil, as well as concern about future access to oil. Environmental concerns were also a factor. Energy policies are also being used more frequently as an economic development tool for states that want to create jobs and attract manufacturers. Policies vary from state to state and include different types of incentives that are supposed to make purchasing and installing solar photovoltaic systems more affordable. Arkansas poultry farmers, who predominantly use electricity for lighting and cooling chicken houses, have recently expressed an interest in photovoltaic systems, hoping that solar power will help reduce their operation costs. According to the 2007 Census of Agriculture, the state had 6,089 farms producing some type of poultry. 1 However, Arkansas does not have any legislative-based solar energy policies in place. A bill introduced during the 2010 Legislative session by Sen. Sue Madison, D-Fayetteville, that would have created a mechanism to sell excess energy generated by solar systems, failed to make it out of committee. Currently, coal-fired plants supply about half of Arkansas electricity demand. 2 All of the coal burned is delivered by train from Wyoming, according to the state s 2010 energy profile by the Arkansas Economic Development Commission s Arkansas energy office. (Wyoming s coal contains lower amounts of sulfur than coal found elsewhere). Meanwhile, the National Renewable Energy Laboratory estimates that Arkansas has an average to higher-than-average potential for solar power in the state because of the amount of kilowatt hours of solar radiation received per square meter per day. 3 The purpose of this paper is to identify solar-power policies and legislation adopted by states on the East Coast where poultry is a major industry and to reveal how effective these policies have been for poultry farmers in the region known as Delmarva (Delaware, Maryland and Virginia). A summary of the solar policies and legislation of Arkansas and other member states of The Poultry Federation is included. This report is informational only. The Public Policy Center does not make recommendations. Arkansas policymakers can use this information to determine whether the state should adopt 1 _013.pdf Arkansas Energy Data Profile 3

3 energy policies of its own, and if so, what kinds of incentives exist that could make solar technology more affordable for poultry farmers as well as for the general public. The Greening of America A Short History Photovoltaic systems are just one kind of solar energy system used in the United States. Solar thermal is another type of system, and it often involves pumping water through coils to transfer heat. Thermal technologies often focus on heating or cooling, while photovoltaic systems are used to create electricity. This paper focuses solely on photovoltaic policies. Solar photovoltaic systems are made up of several panels containing solar cells that convert sunlight into electricity. These photovoltaic panels can either be mounted to a rooftop or positioned on the ground with as much exposure to the sun s radiation as is practical. A solar energy system is typically productive for 25 years. 4 The photovoltaic effect was first put to practical use in 1954 after scientists realized that silicon, a material used today in solar panels, created an electric charge when exposed to sunlight. Solar energy was used in satellites launched into space in the 1960s. Interest in domestic solar power applications increased during the energy crisis of the 1970s, when the United States faced a shortage of petroleum because of oil embargoes and political unrest in the Middle East. During this time, scientists created more efficient, less expensive solar cells that were then put on the market. These cells were available for unique applications such as watches, landscape lights and novelty gadgets but the technology was expensive and inefficient. In 1979, President Jimmy Carter had 32 solar thermal panels installed on the White House to help heat water. Carter set a goal of deriving 20 percent of the country s energy needs from renewable energy sources by the end of the century. And yet, a decade after the turn of the century, the United States generates only 7 percent of its energy from renewable sources, with less than 1 percent of that coming from photovoltaic (PV) systems. 5 The past decade has seen a significant increase in oil prices, which continue to fluctuate and which surpass $100 a barrel. Although Arkansas electricity prices remain below the national average, according to the state energy profile, the cost of electricity has increased. The average price of electricity in the United States rose from 6.74 cents per kilowatt hour in 1998 to 9.74 cents per kilowatt hour in 2007, nearly a 45 percent increase, according to the U.S. Energy Information Administration. 6 4 Solar Energy: An Investment and Cost Guide for Delaware Poultry Growers, Jan Where did the Carter White House s Solar Panels Go?, Scientific American, Aug 6, Energy Affordability, Capitol Facts & Figures, The Council of State Governments, May

4 The downturn in the economy has also generated an interest in creating a new type of work force often referred to as green jobs. The Green Jobs Act of 2007 authorized $125 million for worker training programs and the American Recovery and Investment Act of 2009 put another $150 million into training Americans, providing energy assessments, product installation and other on-the-job training. There is also an environmental interest in using solar power in an attempt to reduce emissions from electric plants that rely on coal and to reduce reliance on nuclear power to supply the national electricity grid. Whatever the reason, states across the country have adopted their own energy policies, some dating back to the early 2000s. These policies, often in the form of legislation, range from giving local governments the authority to exempt solar arrays from real property taxes to joining markets where energy credits are sold. In the Delmarva region, legislators have adopted several policies to encourage the specific use of solar photovoltaic systems. The next few pages will review these policies and the corresponding legislation state by state. Delaware Delaware has legislation in place requiring energy providers to purchase renewable power. By doing so, the state created a market for energy credits that makes adding solar power to homes and businesses more financially attractive. In 2005, the state legislature passed a bill requiring Delaware electricity providers to purchase 10 percent of the electricity sold in the state from renewable sources. Providers had to be in compliance by This requirement is called Renewable Portfolio Standards [RPS]. [See Figure 1] In 2007, this percentage was increased to 20 percent and solar photovoltaic was specifically identified as a source. Other renewable energy sources, under the law, are wind, ocean tidal, ocean thermal, fuel cells, hydroelectric facilities, sustainable biomass, anaerobic digestion and landfill gas. Delaware s legislature increased the requirements to 25 percent in The law now requires electric providers to purchase at least 3.5 percent of its power from solar photovoltaic sources by Utilities meet the solar requirement by purchasing Solar Renewable Energy Credits [SRECs]. Solar energy producers, such as businesses and homeowners, retain ownership of their SRECs and can sell them. However, to participate in selling SRECs on the market, producers must be certified by the state s Public Service Commission

5 Although this legislation does not make the initial cost of solar photovoltaic cheaper, it does create a situation where investors can make their money back over several years. Utilities in the state also participate in the Green Energy Program, which offers grants to residences and businesses that install renewable energy products such as solar photovoltaic systems. This program was set up in 1999 through state legislation that was passed for the purpose of restructuring electric utilities. Customers are charged a certain fee each month, with this money being invested back into the program to offer more grants. Legislators increased this amount in The public s response has been so great that two of the major electric utilities in Delaware have had to create waiting lists of potential grant recipients. The total of grant requests on both lists tops $1.5 million. In fact, the Delaware Electric Cooperative warns its customers that it could be four years before they see grant payments. This is because the utility companies collect only a certain amount in fees each month and then must wait until they have enough to fulfill a grant before cutting checks. Grants range from as little as $1,200 from Delaware Electric Cooperative to $245,122 for Delmarva Power customers. 8 Delaware is one of 43 states that have net metering laws. Net metering enables users to sell back unused electricity to the utility at peak rates. Rates and standards for net metering are determined by state law and the utilities, so users in different states face different regulations and payments. In Delaware, net metering is available to all customers

6 Figure 1 Map of states with Renewable Portfolio Standards or goals. Source: Dsireusa.org 4

7 Maryland Maryland legislators have also adopted renewable portfolio standards, requiring electricity providers to use renewable energy sources to generate at least some of their power. Different percentages are required each year from several possible sources. In 2007, the state amended its laws to specify solar photovoltaic and a requirement of two percent by Utilities must purchase solar renewable energy credits, or SRECs, or pay a fee, typically several hundred dollars, for each credit shortfall. The penalty is seen as a way to ensure participation, although some states use the fee to supplement their energy grant programs. Customers retain the ownership of their SRECs, but must be certified as a generator by the Maryland Public Service Commission. Maryland s law allows utilities to enter 15-year purchase contracts from generators, guaranteeing both the utility and generator long-term benefits. Counties are also authorized to give businesses property tax credits on their solar photovoltaic hardware. [See Figure 2] In 2008, the state legislature also exempted solar energy equipment from the state s sales and use tax. [See Figure 3] The state also provides several types of loans that poultry farmers can apply for in order to purchase solar energy equipment, including one kind that is specifically designed for farmers who want to increase energy efficiency on their farms. Maryland uses federal stimulus dollars to provide grants of up to $50,000 for commercial enterprises so they can purchase solar photovoltaic systems. As with Delaware s policies, Maryland s legislation opens up net metering to all customers. Under Maryland s law, other sources of renewable energy include wind, qualifying biomass, landfill gas, geothermal, ocean, fuel cells, hydroelectric plants, poultry-litter incineration facilities and other waste-to-energy facilities. 9 MD 5

8 Figure 2 Map of states with legislation authorizing property tax incentives. Source: Dsireusa.org 6

9 Figure 3 Map of states authorizing sales tax incentives, such as tax exemptions, for renewable energy products. Source: Dsireusa.org 7

10 Virginia Unlike the other two states, Virginia passed legislation in 2007 setting a voluntary renewable energy goal of 15 percent of sales by In 2011, the state created a voluntary solar resource development fund that customers can contribute to, with the money going toward loans for solar energy projects. The state also created a $36 million grant fund to attract manufacturers of clean energy products to Virginia. A similar grant for solar goods has been in place since Virginia authorizes counties and cities to exempt solar equipment from local property taxes. Property tax incentives are in place in at least 31 other states. In Virginia, state legislation does not give customers of a municipal utility the option to do net metering. Along with solar energy, Virginia recognizes wind, geothermal, hydropower, wave, tidal and biomass energy as renewable energy sources. Arkansas Arkansas legislators have not established any renewable portfolio standards with a solar carveout, as it is called when a percentage of solar energy is specified in state energy mandates. At least 29 other states have some form of a renewable portfolio standard. Since Arkansas doesn t have renewable portfolio standards, the state doesn t have its own market for SRECs. However, the state established net metering rules in 2001, although municipal utilities are independent of the state s Public Service Commission and do not have to follow the rules. 11 Approximately 70 net metering customers were feeding their excess capacity to electric utilities in the state two years ago, according to a 2010 report by the Arkansas Alternative Energy Commission. All but one of those customers was residential. 12 Arkansas energy consumption continues to grow each year, but the state still exports about 14 percent of its electricity to users outside Arkansas, according to the commission s report. The commission recommended in its 2010 report to Gov. Mike Beebe that the state change Arkansas Code Annotated (5) (A) to allow excess electricity produced by net metering customers to be credited to them on future bills. Currently, customers lose any excess credit at the end of the year Arkansas Alternative Energy Commission Initial Report to Governor Mike Beebe, Senate President Bob Johnson, House Speaker Robbie Wills, Nov. 23, 2010, df 8

11 The commission also recommended that the state develop a feed-in tariff essentially an ongoing rate that utilities pay to electricity generators for energy fed back into the grid. The generator, whether a homeowner or a farmer, could then use that guaranteed funding to pay off the cost of a system or to generate revenue. Meanwhile the utility could sell the electricity credits. Rates and pricing mechanisms can differ state to state, depending on the legislation adopted. In some instances, a feed-in tariff might include all the energy produced, including the amount used by the customer. Utilities would likely pass on the cost of paying feed-in tariffs to their customers through rate increases. Feed-in tariffs are relatively new in the United States. In some circles, the legality of state feed-in tariff legislation has been questioned out of concern that federal laws regarding wholesale of electricity preempt the state laws. However, research done by the National Renewable Energy Laboratory on behalf of state utility commissions, in conjunction with the National Association of Regulatory Utility Commissioners, has calmed some of those fears. 13 In early 2009, the city of Gainesville, Fla., adopted what locals believed was the country s first solar feed-in tariff ordinance. The ordinance said Gainesville residents with photovoltaic panels would receive 32 cents a kilowatt-hour when they produced energy. The program is currently sold out, according to an article in the American Solar Energy Society s Fall 2011 publication of Solar Today. 14 California, Georgia, Hawaii and Vermont have passed legislation allowing feed-in tariffs in the past three years. Not enough time has passed yet to determine the policy s impact in these states. In its 2010 report, the Arkansas Alternative Energy Commission recommended a feed-in tariff over creating a renewable portfolio standard. The Arkansas Renewable Energy Association also supported a tariff over creating an RPS. 15 One concern Arkansas policymakers have about enacting a quota in the Natural State revolves around what happens when that goal is met. Do energy providers stop buying solar-powered electricity? Feed-in tariffs do not have to be connected to a specific date and can be ongoing. Sen. Sue Madison, D-Fayetteville, introduced the Clean Energy Act in 2011 for consideration. The legislation would have required utilities to include renewable energy in their energy portfolios. The legislation would have authorized feed-in tariffs, with the price and terms to be established by the Arkansas Public Service Commission. However, Senate Bill 721 did not make it out of the Interim Committee on Senate Committee on Insurance and Commerce and it died April 27, 2011, when the Legislature adjourned. 13 Renewable Energy Prices in State-Level Feed-in Tariffs: Federal Law Constraints and Possible Solutions, National Renewable Energy Laboratory, Technical Report NREL/TP-6A , Jan. 2010, 14 Does it Pay? Figuring the financial value of a solar or wind energy system, Solar Today, Fall/Winter

12 Oklahoma and Missouri Oklahoma and Missouri are included in this report because they are members of The Poultry Federation group which includes Arkansas. In Oklahoma, in May 2010, state legislators established a renewable energy goal for electric utilities. House Bill 3028 called for 15 percent of the total installed generation capacity in Oklahoma to be derived from renewable sources by There is not a specific carve-out for solar power, and the legislation does not require utilities to purchase SRECs. Instead, each utility must file a report with the state each year on how it has responded to the goal, including information on the energy efficiency programs they ve administered. 16 Net metering has been available in Oklahoma since 1988, but state law does not require utilities to participate. In Missouri, net metering has been in effect since 2007, and legislators require all utilities to participate. 17 Oklahoma considers solar, landfill gas, wind, biomass, hydroelectric, geothermal electric, fuel cells, municipal solid waste, anaerobic digestion and fuel cells to be renewable energies. Unlike other states, Missouri enacted a Renewable Portfolio Standard through a ballot initiative approved by voters. 18 In 2008, residents approved Proposition C, which repealed a voluntary energy goal and replaced it with a mandatory standard of 15 percent renewable energy by This standard applies only to investor-owned utilities, and it contains a solar electricity carve-out of two percent. This means that by 2021, 0.3 percent of retail electricity sales must be generated by solar energy. To help meet this goal, utilities throughout the state offer rebates on photovoltaic systems. Investor-owned utilities have offered solar rebates of at least $2 per watt since Utilities that don t meet the standard are subject to penalties of at least twice the market value of SRECs, although a utility can receive leniency if the cost of complying increases retail electricity rates by more than 1 percent in any given year. However, there have been some challenges to this voter-approved requirement. State legislators have proposed several bills in recent years that would repeal Proposition C and replace it with lower-percentage standards. Currently, there is discussion in Missouri about a 2012 ballot initiative that would further touch on the standard and clarify whether the power had to be purchased from in-state generators. 19 Missouri legislators have also authorized property tax breaks for Renewable Energy Generation Zones, a designation that new or existing businesses can receive when they install energyefficient products or solar energy systems. In addition, these businesses must hire and maintain

13 two new employees and make a new investment of at least $100,000. They must also provide and help pay for health insurance for employees. 20 In Missouri, eligible renewable energy sources include solar, wind, hydropower, biogas from agricultural operations, landfills and wastewater treatment plant gases, biomass, fuel cells and other resources approved by the Missouri Department of Natural Resources. Pumped storage hydropower and nuclear energy are ineligible sources. On the Ground in Delmarva According to the Delmarva Poultry Industry, there were 1,667 chicken growers in the region and 4,911 chicken houses as of July Much of the analysis on the cost benefit of using solar power is quick to tout the use of grants or tax incentives. For example, USDA has a renewable energy grant for rural areas that provides up to 25 percent of the entire solar system s costs up to a maximum grant award of $500,000. There is also a Federal Solar Tax Credit that is 30 percent of the eligible solar energy system cost for systems installed and put into service by the end of The value of the credit depends on the grower s specific tax situation. 22 Despite state and federal grant possibilities and tax incentives for purchasing a system and the presence of RECs to recoup expenses, both industry representatives and education officials say poultry producers in the Delmarva region are not incorporating solar photovoltaic systems into their agriculture operations. There are multiple roadblocks. Systems, which can range between $300,000 to $500,000 23, are still too cost-prohibitive for most poultry growers, said Bill Brown, a state poultry Extension agent for Delaware. Most poultry farmers in the region are raising chickens for a larger company. They are already leveraged to the maximum, Brown said in an interview, and cannot take on additional debt. 24 Or they cannot get financing from their local bank because of the economy. Brown does not believe growers are convinced that solar operations are cost-effective. The SREC market has not been as financially promising as some had hoped, with single credits selling below $90, according to Brown. Some states have reported SREC credits selling for more than $200, but this is not the same scenario for every state. For each megawatt hour (MWh) of electricity produced, generators earn the ability to sell one REC Solar Energy: An Investment and Cost Guide for Delaware Poultry Growers, Jan Solar Energy: An Investment and Cost Guide for Delaware Poultry Growers, Jan Phone interview January

14 SRECTrade, which sells credits through auctions, reported that SRECs from Delaware sold for $65 in January In Maryland, SRECS sold for $204 to in-state buyers. However, Maryland credits sold to utilities out-of-state auctioned for $35, according to the trade group. Virginia solar producers can sell their credits in Pennsylvania, which historically has auction prices of $ Auction prices often depend on supply and demand, with credits selling for higher rates in New Jersey. A poultry producer whose operation served as a pilot project for solar use in chicken houses benefitted from a $500,000 grant package put together by the state and University of Delaware. Despite the easy financing, the solar company the university worked with eventually reorganized and abandoned the project. The project went through several facilitators that were also unstable, according to Dr. Robin Morgan, the dean of the University of Delaware s College of Agriculture and Natural Resources. 26 Along with that instability and difficulty in finding credit through traditional lenders, producers often don t have the tax liability to take advantage of incentives, Morgan said in an interview. Brown and Bill Satterfield, executive director of the Delmarva Poultry Industry, were aware of only one poultry producer using a photovoltaic system. The producer installed 350 panels among his 13-house operation, using federal and state rebates and tax credits to offset 65 percent of the $396,000 cost. 27 The producer for Perdue Farms financed his portion of the system through a traditional loan to be paid back by his regular income and any profits from selling SRECs. In addition to several thousand dollars a year in income from SRECs sold, the poultry producer was expected to save more than $10,000 a year in electricity costs, according to several 2010 news accounts of Rob Isaacs Delaware farm. Isaacs, who continued to rely on his electric utility to meet peak demand, expected to break even in five years. According to Satterfield, companies in the region typically buy propane for growers to heat chicken houses. 28 Electricity comes into play for lighting and cooling the houses, expenses borne by the growers. Satterfield said some producers are interested in using solar power for lighting and cooling. Delaware s Department of Agriculture is holding a symposium on solar use by farmers at the end of February. Brown, who is hosting the symposium, said he is looking at adding a photovoltaic system to his poultry operation through an agreement with a third party. Other Financial Considerations In states where there is a SREC market, third parties have entered the scene with power purchase agreements or solar leases interview January Smith, Nancy, Isaacs get electric meter into reverse with solar panels, The Mid-Atlantic Poultry, Phone interview January

15 Under these types of agreements, a farmer and a third party would enter into a long-term lease contract. The third party developer would then install a solar system on the farm for low- or no-cost to the farmer and would retain ownership of the system. The farmer would benefit from stable (and possibly cheaper) electricity prices while the developer would have an installation producing SRECs to sell. Meanwhile, if the photovoltaic system does not provide enough electricity for consumption, the farmer can still purchase power off the traditional grid from the utility company. This arrangement would probably be more expensive for farmers over the long run than if they paid cash or financed a system with a traditional loan. Third-party agreements are a new type of speculation. With 29 states having some type of Renewable Portfolio Standard, the developer positions him- or herself to take advantage of credits or future policy changes. The third party also receives revenue from the homeowner or farmer, who pays the developer either for electricity coming from the solar energy system or a specific lease rate. Third party entities range from private companies wanting to take advantage of tax credits to SRECs to solar companies selling their products to nonprofits interested in expanding the solar power grid. Last year, Citigroup announced it had formed a $105 million fund with SunPower Corp., a California-based solar panel manufacturer and installation company, to finance 20-year third-party leases in eight states. The bank is in the middle of a 10-year, $50 billion initiative to support the growth of alternative energy around the world. 29 At least 20 states authorize or allow third-party purchase agreements, according to the Database of State Incentives for Renewables & Efficiency website. According to the database, such authorization usually lies in the definition of a utility in state statutes, regulations or case law; in state regulatory commission decisions or orders; and/or in rules and guidelines for state incentive programs. And, even though a state may have authorized the use of third party solar agreements, this does not mean that these arrangements are allowed statewide in every jurisdiction. Some states are trying to determine exactly how to handle third-party entities in terms of whether they need additional regulation, or if they are competing with traditional electric utilities. 30 In Brown s case, he is considering partnering with a nonprofit that is interested in expanding the solar capability in the state. Brown would pay a small monthly lease fee, which would be less than his typical electrical bill. The lease and its price certainty would benefit him, he said, because his electrical usage typically jumps when he is growing and then drops when he is not Solar PV Project Financing: Regulatory and Legislative Challenges for Third-Party PPA System Owners, National Renewable Energy Laboratory, Technical Report NREL/TP-6A , Feb

16 Farmers would most likely need an attorney or tax adviser to help them wade through their options, as well as a solar plan developed by the company installing the panels. Poultry farmers in areas with extreme snow, for example, would not want to put solar panels on their roofs. Along with generating SRECs to sell on the market, poultry farmers can benefit from solar systems in several other ways. Traditional net metering is where solar energy offsets the retail cost of electricity generated by the grid and often reduces the cost of future bills. Even without net metering, solar systems would produce lower electricity bills from the utility company, which could benefit poultry producers if the cost of electricity were to escalate over the next decade. Conclusion Interest in solar power has increased as oil and electricity prices have risen and the cost of solar technology has fallen. Some states also see the solar industry as a new source of job creation. Arkansas poultry producers are interested in the possible cost savings that a solar energy system could provide. Most states have adopted legislation that creates tax incentives, renewable energy portfolio standards or the types of funds that help offset the cost of a solar system. Other states have adopted penalties for utilities that do not purchase solar power, creating a market for solar credits and manufacturers, while also funding grant programs to help residents purchase systems. Arkansas, a state with higher than average potential for solar power, lacks any solar power programs or legislation with the exception of net metering programs. To address this deficit, the state s Alternative Energy Commission has recommended that Arkansas pursue feed-in tariffs and further study of consumer-based incentives, such as low-interest revolving loans, rebates and tax incentives. The University of Delaware encourages poultry producers to look at the historic annual costs of electricity for their poultry houses, the size of solar system needed to meet the electrical needs of their individual operations and the investment costs without any state or federal incentives to help determine the potential economic impact of installing and operating a solar energy system. The cost of photovoltaic systems continues to drop as technology becomes more efficient and China steps up exports of its lower-cost products. Yet because the typical up-front cost of a photovoltaic solar energy system for farmers ranges anywhere from $300,000 to $500,000, this alternative power source remains financially out-of-reach for many poultry operations. The low price of electricity in Arkansas encourages its continued use, despite environmental concerns over using coal and the cost of transporting coal from Wyoming. Industry leaders say it will take time for solar energy to be self-sufficient without government subsidies, but they also believe that some areas of the United States have reached grid parity, 14

17 or that the cost of solar power in these areas is now equivalent to that of traditional electricity sources. 31 The narrowing of costs for photovoltaic systems in the Delmarva region appears to be based in subsidies and incentives created by state and local government policy. These policies are driving interest in the SREC market as well as investor speculation in third-party leases. Key Definitions & Acronyms Delmarva A name given to the region of Delaware, Maryland and Virginia. Solar Photovoltaic Systems Solar panels that contain rows of photovoltaic [PV] cells that convert photons from sunlight into electricity. An inverter transforms the direct current to alternating current electricity suitable to power a poultry house. Solar Renewable Energy Credits [SRECs] Renewable energy credit, a tradable commodity linked to the amount of electricity a photovoltaic energy system produces. Renewable Portfolio Standards [RPS] A law or policy that requires a utility to purchase a specific percentage of a certain type of renewable energy, typically by a pre-determined date. Renewable Portfolio Goal A law or policy establishing a voluntary goal for how much renewable energy utilities should use or generate by a certain date. Net Metering A billing agreement between a utility and an electricity producer, (such as a homeowner with solar panels on the roof), to transfer surplus power back to the utility s grid in return for credits applied to future utility bills. In Arkansas, these credits expire at the end of each year. Feed-in Tariff [FiTs] A policy mechanism designed to encourage the adoption of renewable energy sources. Those who produce small amounts of electricity, such as homeowners or farmers, are paid per kilowatt-hour for surplus renewable energy returned to the grid. Contracts are usually long-term and rates are pre-established. Clean Energy Funds [CEFs] Funds typically established with fees from utility customers in order to help the public develop and install renewable energy projects. Delaware s program is called the Green Energy Program. Power Purchase Agreement An agreement between a property owner and a third-party that eliminates the up-front cost of a solar energy system for the property owner. The third party installs the energy system with the understanding that the property owner will pay a fixed amount of money over a long period of time. This fixed amount may be a lease fee or the cost of 31 John Smirnow and Joe Thomas. Panel discussion on Solar energy opportunities in the United States, Feb Panel presented at the University of Arkansas Clinton School of Public Service, Little Rock, AR. 15

18 the energy received from the solar system. The third party retains ownership of the system and the SRECs produced from the electricity generation. Additional Information Resources: Encouraging solar power: Solar Powering Your Community: A guide for local governments, U.S. Department of Energy, Jan Feed-in tariffs: What Is an Effective Feed-In Tariff for Your State? A Design Guide, National Regulatory Research Institute, April Clean energy funds: Leveraging State Clean Energy Funds for Economic Development, Brookings-Rockefeller, Jan

19 Appendix Full map of states with Renewable Portfolio Standards or goals. Source: Dsireusa.org 17