Tax breaks spur renewable energy projects

By Cherry Sokoloski
North Forty News

Alternative energy: it's not just for geeks anymore. With the push from Congress and the Colorado governor's office, wind, solar and geothermal projects are popping up faster than a person can say "tax break."

In mid-August, Groff Ag in Wellington installed a wind turbine and began profiting from the area's windy weather. According to owner Allan Winick, the business is eligible for a 25 percent energy tax credit on the $16,700 turbine.

A planned residential neighborhood in north Fort Collins, Union Place, will employ geothermal energy for the entire development.

And, Larimer County hopes to have two photovoltaic arrays installed by next spring, a 10-kw system on the roof of the courthouse office building and a 3-kw array on the solid waste building at the landfill. The systems together will cost less than $100,000, said facilities manager Steve Balderson, with about two-thirds of the cost covered by grants. Combined energy savings for the county will be between $1,300 and $1,600 per year.

The 2009 American Recovery and Reinvestment Act provides a 30 percent tax credit for residential renewable energy systems--also called "distributive generation"--put in place by 2016. Businesses and utilities also qualify for renewable energy credits. Folks who install these systems acquire a net meter that can spin forward or backward, depending on how much electricity is being consumed and produced. When the meter spins backward, a credit is applied to the person's electric bill. All customers with renewable systems enjoy reduced electric bills, of course, but some produce more power than they need and are paid by the utility for the excess.

Rebates offered

All local utilities--Fort Collins Utilities, Xcel and Poudre Valley REA --are offering rebates for installing solar panels or wind turbines. They're also buying power from small producers when excess electricity is produced. Both Fort Collins and REA have about 40 net-metering customers. Xcel Energy, a multi-state company, has more than 3,600 renewable customers in Colorado.

The size of a renewable system that qualifies for net metering is limited by how much power the customer consumes. Fort Collins is considering a new limit of 120 percent of the customer's consumption.

Limits imposed for net metering do not restrict how big a system someone can build. If the customer chooses, he or she may generate more power from renewables than the utilities allow, but the amount paid by the utility for excess generation will be limited.

Policies differ

There are some variations in the net-metering policies of the utilities, although all have to comply with state law. Differences relate to how much the utility pays for excess power and rebate amounts for installing systems. For instance, Fort Collins is the only utility to pay retail value for excess electricity produced.

All three utilities pay for the net meter required on residential properties. However, Groff Ag, an Xcel commercial customer, had to buy its own net meter.

The following provides a brief comparison among the utilties' net metering policies.

Fort Collins: The city pays the retail rate (that is, the same rate the customer pays the utility) for excess electricity generated. Any excess energy is carried over from one month to the next, and the customer is paid once each year if there is a positive balance.

The standard rebate for installing a renewable-energy system is $3 per watt up to 3 kw. Thus, the maximum rebate at present is $9,000. However, according to Light & Power manager Steve Catanach, the department is proposing a significant increase in funding for the program next year, meaning that these incentives would increase.

In Fort Collins, there's also a $4/watt (up to 3 kw) high-performance rebate for households that are among the lowest electricity users for the previous year.

Xcel Energy: Xcel pays a "PV" or wholesale rate for excess energy produced by customers. Beginning this month, customers have the option of receiving an annual cash-out for excess electricity produced, or carrying their balance forward indefinitely.

Rebates are based on the size of the system. Small systems (0.5 kw to 10 kw) receive a $3.50/watt rebate. Rebates for larger systems are based on the amount of energy produced. The largest system allowed in the net metering program is 2 megawatts, or 2,000 kw. These systems must go through a request-for-proposal process, and there are currently 19 operating in Colorado.

Poudre Valley REA: The co-op pays for excess energy at the wholesale rate --that is, the co-op's average cost of power.

State law allows REA to balance customer accounts every 12 months, as Fort Collins does, or to wait and settle up accounts when the customer discontinues service. REA chose the latter method, so customers do not receive payment for excess energy produced until they move. According to Mark Daily, REA's customer service representative, this policy allows the utility to keep its electric rates as low as possible.

REA also offers rebates, amounting to $3 per watt up to a 3 kw system. Daily said the co-op has had 10 net-metering systems installed this year already, compared with six in 2008.

"We certainly support renewable energy," he stated.

Larger systems ahead

Fort Collins is now encouraging larger producers of alternative energy, by revamping its net metering and interconnection policies. The city utility staff hopes to have the new policies approved by the city council by the end of the year.

The proposed new guidelines will allow much larger solar and wind systems to operate within the city's net metering guidelines. Currently, participating residential systems are limited to 10-kilowatt capacity and commercial systems to 25 kw. The city is proposing to increase limits to 1 megawatt, or 1,000 kw.

The change would accommodate businesses such as New Belgium Brewery, which is planning to install a 200-kw solar array.

"People are wanting to generate more from renewables, and the city is interested in helping develop a new energy economy," said Catanach. "There's a benefit to helping our customers achieve their goals, and we're happy to support them in the use of renewable resources."

Fort Collins is also actively engaged in improving technologies related to customer-generated energy and how it connects to the grid. The city received a $6.3 million grant last year from the U.S. Department of Energy to set up a "Smart Grid" demonstration project. Fort Collins and several partners are researching, developing and demonstrating new electric grid technologies. One of the goals is to reduce peak electrical load on the grid.

Partners in the Smart Grid project include manufacturers, consulting firms and governmental entities, including Woodward Governor, New Belgium Brewery, Colorado State University, Spyrae and the Brendle Group.

State law requires that most utilities generate 20 percent of their energy through renewables by the year 2020. For electric cooperatives like PVREA and larger municipal utilities such as Fort Collins, the requirement is 10 percent by 2020. Customers who produce their own power are helping to reach those goals.

Also, Catanach said, power generation by customers can help reduce the electrical load at peak demand times of the day. That's when electricity is most expensive for the city--or any utility--to buy.

From a utility's perspective, having customers share in the task of generating electricity, using renewable resources, is a win-win situation.