SOLAR TODAY - November/December 2008

Inside ases

CHaIR’S cOrNer

Clean Energy Case History

By John Reynolds, FAIA

The Energy Trust of Oregon shows what a state can do.

We now have 18 states with clean energy funds, for increasing electricity production through renewable energy sources. In separate actions, renewable portfolio standards (RPS) have been adopted in at least 28 states. This is an account of how Oregon established its clean energy fund, and how the fund is doing after almost 8 years. What a contrast to the past

eight years of federal energy inaction.

In the late 1990s, two hot energy topics in Oregon were energy deregulation, severing the ties between energy generation and distribution; and public purpose funds, assessed on utility bills, to achieve John reynolds, energy conservation FAIA and develop renewable electricity sources.

In Oregon, the Republicans liked deregulation, which was seen as a way to reduce energy costs through free market competition, while the Democrats liked public purpose funds. Neither party liked the other’s favorite. With Democrats in control of the governor’s office and Senate, and Republicans running the House, neither of these ideas could pass without a compromise.

Oregonians thus got both deregulation and public purpose funds in a 1999 restructuring bill. The Energy Trust of Oregon (ETO), was established to collect and administer funds for both energy efficiency and renewable electricity. Answerable to the Oregon Public Utility Commission, the ETO board was appointed in 2001. Within a year it had hired a staff and commenced business.

Meanwhile the Enron scandal erupted. Enron-owned Portland General Electric lost millions in pension funds, and for Oregon, deregulation was effectively dead. Republican resentment over the failure of deregulation threatened the Energy Trust in those early years.

ETO’s funds come from a surcharge on the electric bills of the two major investor-owned electric utilities, PacificCorp and Portland General Electric. These two serve approximately one-third of Oregon’s population. The 1999 restructuring legislation specified that 2. 46 percent of their total billings go to ETO. Initially this amounted to

some $45 million annually. Of that amount, 77 percent is spent on energy-efficiency projects and the remaining 23 percent goes toward generation of electricity from renewable sources. ETO was given 10 years of life, and we set ambitious goals: by 2012, achieve energy efficiency equivalent to 300 megawatts; and help Oregon to install 450 megawatts of renewable energy sources.

A fiscal split personality resulted. For energy efficiency, we were limited to “ cost-effective” investments, which means the technology has to compete with cheap hydropower — about 2 cents per kilowatt-hour. For renewable energy investments, we were limited to “above-market” costs. On the one hand we tell people interested in energy efficiency, “You are limited to less than this much.” On the other we ask people interested in renewable energy, “How much more do you need?”

Since 2002, Energy
Trust has installed 13
times as many solar
energy systems as were
installed in Oregon’s
entire prior history.

To my lasting chagrin as an architect and passive solar enthusiast, direct use of solar energy for anything other than making electricity is lumped under energy efficiency, limited to a maximum of 2 cents per kilowatt-hour. This means that daylighting, water heating, passive solar heating and passive cooling are considered efficiency rather than energy production. The ETO can give a residence or a business more per kilowatt-hour for a PV system than for a more efficient solar water-heating system. The only way to change this is through new legislation, and our staff is divided as to whether putting direct-use solar into the renewable pot would result in more money for direct use. After all, renewables get only 23 percent of our funds, while the “cost-effective” limit is rising, enabling more investments in energy efficiency.

With an energetic, talented staff and consistent levels of funding, we soon established energy savings that surpassed the past

efforts of the utilities, with their ambivalent attitude about conservation: Fewer kilowatt-hours sold meant lower profits. Our renewable energy investments took somewhat longer to have effect. Most of the money went to utility-scale wind farms east of the Columbia Gorge.

Impressed by our electricity savings, in 2003 Oregon’s largest natural gas utility, Northwest Natural, asked the public utilities commission to decouple their rates from profits, while giving ETO 1.5 percent of their residential and commercial billings for energy efficiency investments. This ringing endorsement of our work, barely a year into our programs, enabled us to be fuel-neutral in our efficiency programs.

Of all the events of the past seven years, I especially cherish the moment in 2004, when we were ready to give $2 million to Portland General Electric for a wind farm, amounting to the above-market costs of the wind farm compared to the cost of a natural gas-fired plant. When the final calculations were complete, we gave them nothing: the two were of equal cost!

After the 2006 elections Democrats controlled both houses of the Oregon legislature, and they enacted an RPS. They also extended ETO’s life to 2025, and mandated additional funds for energy efficiency. The RPS required utilities to fund wind farms and other renewables without ETO help, and ETO renewable funds, undiminished, are now capped at 20 MW installations. We have invested in small wind, timber mill biomass, wastewater biomass and small hydropower for irrigation districts. We’ve funded more than 3 MW of photovoltaic installations. For perspective, consider that since the solar program began in 2002, Energy Trust has installed 13 times as many solar energy systems as were installed in Oregon’s entire prior history. Now we are looking at geothermal and wave energy applications. We’ve had help from the Oregon Department of Energy, which administers business and residential energy tax credits.