Whoever said that the states are the laboratories of democracy certainly got it right, at least when it comes to energy policy.
While Washington dithers over how to hold coal-fired power plants accountable for all the CO2 they emit for free into a rapidly warming atmosphere, states like Arizona are tweaking tax policies and regulatory standards until they finally jump-start the renewable energy industry.
The latest example comes with news that Arizona Public Service has finally awarded a contract for wind power from an in-state site. Yes, the winning bidder, NextEra, is from Florida. But at least the jobs in construction and operations at the facility north of Williams will be local, not in New Mexico, where APS previously had bought power.
The Arizona Legislature had previously approved tax credits for wind and solar energy developers, but they weren't competitive with neighboring states like New Mexico and California. When state tax revenues plunged, lawmakers said they couldn't afford to increase the credits, meaning plans for a host of local wind and solar plants stayed on the shelf.
UNDERWRITING COMPETING STATES
The Arizona Corporation Commission had required commercially owned utilities like APS to generate 20 percent of their electricity by 2020 from renewable energy, but it hadn't specified the location. That meant that Flagstaff-area public agencies and businesses, through the Sustainable Economic Development Initiative, were paying a renewable energy premium on their electric bills in hopes of future price breaks but in the meantime underwriting wind farms and solar plants in competing states.
Finally, as part of the most recent APS rate case, the ACC added a "Buy Arizona Wind" clause to its renewable energy standard, and the Perrin Ranch Wind Energy Center west of Highway 64 is the result. When operational in 2012, it will be the state's largest wind farm, generating several dozen jobs along with lease payments to private landowners and the state.
WIND STILL FREE
One could quibble that the Arizona budget gap, through foregone tax revenues, is not only wider because of Perrin Ranch but at the expense of local entrepreneurs, who lost out to a Florida competitor. But 25 years from now, when wind will still be free while coal and natural gas will likely cost double or even triple the current prices, APS customers (who also are taxpayers) will no doubt appreciate the investment and the nudge that the ACC gave it. And who knows, the next tweak to the renewable energy standard just might include a requirement to buy power from an Arizona-headquartered company, or at least one with a homegrown R&D team and plans to re-invest its power revenues in-state.
That kind of locally focused, long-term horizon for the return-on-investment in renewable energy in northern Arizona is important, given the powerful hold that out-of-state coal and gas interests appear to have on members of the state congressional delegation. Forest restoration across millions of acres will depend for financial support, in part, on strandboard plants and biomass energy plants that will use the wood waste from the harvesting of small-diameter trees. Eventually, that wood waste might be turned into ethanol to power motor vehicles.
But in the near term, the technology and infrastructure needed to get the wood products renewable energy sector off the ground won't happen without the same combination of tax credits and regulatory requirements that are driving wind and solar. The payoff will come in not only more value-added building materials and a cleaner-burning, more sustainable fuel that generates local jobs, but a healthier and safer forest across the region.
SPUR RESEARCH AND DEVELOPMENT
Congress, however, doesn't have its act together on either the renewable energy front or jobs, too. The cap-and-trade bill that is stalled in the Senate is aimed in theory at reducing greenhouse gases while securing America's independence from foreign oil. In practice, however, it would impose higher costs on the fossil fuel sector of the energy industry, thus making renewables more competitive. It would spur research and development in everything from electric car batteries to cellulosic ethanol, hyper-efficient solar cells and wind turbine blades.
The short-term costs to the energy consumer have been estimated by the Congressional Budget Office at $175 a year per household, and that is apparently a deal-breaker for enough Republicans and conservative Democrats (including U.S. Rep. Ann Kirkpatrick, D-Flagstaff), to kill the bill, at least for this session.
But there is still nothing to prevent Congress from enacting and extending less costly, targeted tax credits to supplement what has been cooked up in those state laboratories of democracy. If Arizona, a state with one of the nation's largest budget gaps, can still continue its commitment to the renewable energy industry, surely Congress can do its part.
TREES ARE RENEWABLE ENERGY
What if, for example, trees harvested as part of a forest restoration plan were reclassified as a renewable climate and energy resource subject to the same tax credits available to wind and solar? What if utilities throughout the West were required to generate a substantial portion of their electricity from wood-waste biomass plants? What if investors in cellulostic ethanol using wood waste were given major tax breaks?
The talk in Washington today is all about extending across-the-board tax cuts as a way to stimulate the economy. We'd much prefer targeted cuts and credits, combined with regulatory incentives, that jump-start jobs in sectors like renewable energy that really matter, not only in the Flagstaff region but nationwide. Arizona has shown that it can tweak those policy tools enough to get wind energy off the ground. Now it's time to look at our overgrown national forests in much the same light, but this time with Congress running the lab.