Policies that support this sector are needed to curb out-of-region reliance on fossil fuels and strengthen southern New England's economy
By TIM FAULKNER/ecoRI News staff
After lagging behind neighboring states for several years, Rhode Island is poised to become a major job creator in the solar- and wind-energy sectors.
With the Public Utilities Commission’s recent approval of a key incentive program, the state now has a stable of discounts and tax breaks that make solar panels as affordable as any in the nation.
“We’re in a good place, we feel we have the incentives lined up,” Marion Gold, director of the Rhode Island’s Office of Energy Resources (OER), said in a recent interview with ecoRI News.
If demand for solar in Rhode Island matches that of Massachusetts, which ranks second in the United States for solar jobs, according to the Solar Energy Industries Association, then significant employment and economic growth is sure to follow, predict state officials.
Even before the recent program approval, solar installers have seen an uptick in Rhode Island business, likely making a year-old estimate of 340 employees and 20 local renewable-energy companies an outdated profile of the sector.
“We’re making great traction in Rhode Island,” said Scott Milnes, president of Econox Group Inc., a solar- and wind-energy developer based in Winchester, Mass.
In 2014, Econox designed and installed the photovoltaic solar array atop Newport Vineyards in Middletown, R.I. The project took advantage of several financial incentives, including a federal grant for farmers, to help fund a green retrofit of the 38-year-old vineyard. The work included major energy-efficiency upgrades, as well as a system that converts grapevine trimmings into fuel for a wood-pellet furnace.
These enhancements, in turn, boosted several traditional economic sectors important to Rhode Island: tourism, agriculture and construction. Renewable energy also plays a part in boosting emerging sub-industries such as “agritourism” and “ecotourism,” as well as the local food and beverage movement. All of which offer the back-to-nature experiences sought by many tourists and shoppers to southern New England.
One potential boost for the renewable-energy sector — and the economy in general — is $60 billion from the U.S. Department of Energy to help finance wind turbines on farmland. The Wind Powering America Initiative is projected to create 80,000 jobs during the next 20 years.
Renewable energy is a catalyst in the local economy movement. And a vital local renewable-energy incentive is Rhode Island’s distributed generation (DG) tariff program, according to Milnes. The program offers fixed-price purchasing for electricity generated from solar, wind, food digesters and small hydro products. The fixed pricing locks in a stream of steady revenue for the owner of the renewable-energy system, which allows for a rapid payback on the cost of the project and long-term savings on electric costs.
“It’s bankable,” Milnes said. “Once people understand the economics, they realize they are a cash cow.”
After a four-year test of the DG program, the General Assembly approved, in 2014, a four-fold expansion of the program’s electricity allotment and opened it to smaller, residential-sized solar systems, as well as small hydro-energy projects.
Econox already has $4 million worth of new solar projects lined up for this enhanced DG program. The company also incorporated in the state, showing its commitment to the Rhode Island market. Other solar companies, such as SunWatt Solar, are opening offices in Rhode Island to take advantage of the anticipated demand.
“That program will be a big boost,” said Peter Hughes, business director for SunWatt Solar of Providence.
SunWatt has expanded from Massachusetts, where it participated in the wildly popular net-metering programs that allow renewable-energy systems to sell electricity back to the power grid.
Massachusetts is expected to roll out a new loan program this year to meet the state’s appetite for solar energy. Hughes expects similar growth in Rhode Island.
“I think you are going to see a lot more solar in the next three to four years,” he said. “It’s an exciting time in this area.”
Rhode Island, Massachusetts and Connecticut all mandate annual increases in the amount of renewable electricity that comes out of a wall socket. These renewable portfolio standards create demand for regional projects that add wind, solar and hydropower energy to the electric grid.
Connecticut has a renewable portfolio goal of 20 percent by 2020. Rhode Island is aiming for a 14.5 percent renewable-energy mandate by 2019 and new legislation looks to increase the amount to nearly 40 percent by 2035.
In fact, southern New England’s expansion of renewable-energy incentives and initiatives is expected to create a surge of low-tech, high-tech, white-collar and blue-collar jobs, according to both government and business officials.
“One of the challenges we have in Rhode Island,” OER’s Gold said, “is will the companies be able to keep up with demand for these programs?”
A more accurate assessment of Rhode Island’s renewable-energy demand, growth and jobs is expected this summer, when an economics report commissioned by the OER and the Commerce RI is scheduled to be released.
Here are the reasons for why the study is expected to offer an optimistic assessment of the state’s renewable-energy sector:
Room to grow. Currently, 98 percent of the electricity generated in Rhode Island is fueled by natural gas. No more than 1 percent is created by renewable energy, according to the U.S. Energy Information Administration. The OER wants to diversify Rhode Island’s energy portfolio and solar and wind power can help lessen the need for natural gas.
The good news for economic growth advocates is that this push for locally generated energy creates local jobs and supports local businesses.
Extending the state’s renewable-energy mandate, said Rep. Deborah Ruggiero, D-Jamestown, “means it’s jobs here in Rhode Island, it’s tax dollars in our local communities. ... It tells renewable developers that Rhode Island is committed to this important economic sector.”
The cost. A new residential or small commercial solar system costs between $10,000 and $40,000. Larger commercial and utility systems can cost millions. Right now incentives pay for about half. These incentives include a federal tax credit of 30 percent and state grants can cover up to 25 percent. Additional breaks are available for schools, farms and group purchasing programs, such as the recent Solarize Rhode Island program — similar programs exist in both Connecticut and Massachusetts.
A report issued last year by the OER and Commerce RI showed that expanding the state’s DG program, combined with the state grant program, would cost ratepayers $17.25 million per year, or about $1.43 more a month on the average electric bill. The economic benefit is about $30.65 million per year, according to the 50-page report.
This cost, of course, is higher for businesses and large energy consumers, and many are already unhappy with the big increases they will pay for Deepwater Wind’s Block Island Wind Farm, especially since the energy from the five turbines will have limited benefits for ratepayers on the mainland.
But companies and municipalities that have embraced renewable energy, along with energy-efficiency upgrades, have seen big savings. Manufactures such as Toray Plastics in North Kingstown, R.I., and Hodges Badge Co. in Portsmouth, R.I., have dramatically cut their energy bills and improved their bottom line with large utility-scale projects.
A solar farm built atop a landfill in East Providence in 2014 is one of the biggest solar arrays in Rhode Island. The 22-acre project saved the city the expense of capping the landfill and brings in more the $100,000 annually from lease fees and other payments. East Providence is looking to expand the solar field, and is studying a hydropower project for a dormant dam on the Ten Mile River.
West Warwick and Providence also are planning to invest in renewable energy.
Residential solar is a good investment. Solar panels can be bought with an upfront payment, leased for little or no down payment or funded through a loan. All of these options offer a return on investment by shrinking energy costs.
The payback for a new installation is between 4 and 10 years. Leasing simply reduces the monthly electric bill for the life of the lease, which is typically 20 years. The lessee often has the option to buy the panels at the end of the contract.
Leasing isn’t available in Rhode Island, but the option will be investigated this year by the OER. Many of the players in the leasing market, however, are big national solar installers such as Solar City, so leasing tends to reward shareholders more than local businesses.
Subsidies. The federal government gives tax breaks to both renewable energy and fossil fuels. An investigation by Mother Jones magazine found that the renewable-energy sector gets about $7.3 billion in annual subsidies compared to $4.8 billion for oil. Renewables also get another $6.2 billion in direct subsidies, research and development funds and loan guarantees. Renewable tax breaks, like the investment tax credit, however, expire every few years, causing political strife and uncertainty in the industry. Oil subsides are permanent.
Oil companies can write-off 70 percent of their drilling expenses and depreciate the remaining 30 percent. The controversial natural-gas extraction technique called hydraulic fracturing, also known as fracking, received massive upfront subsidies in the 1970s.
In Rhode Island, ratepayers also subsidize a program that offers funds for new natural-gas connections to homes and businesses.
Electricity customers subsidize Rhode Island’s Renewable Energy Fund, which supports small and medium-sized solar and wind projects. The state also promotes federal programs that offer additional breaks for schools and farmers. In fact, each year the state turns down money due to the lack of applications from farmers. Funds from the American Resource and Reinvestment Act also support local renewable projects, as do proceeds from the Regional Greenhouse Gas Initiative, a seven-state, cap-and-trade program that gets money from fossil-fuel power plants.
Getting cheaper. The cost of renewable electricity subsidies, however, is dropping. Rhode Island’s DG program has seen solar price agreements cut in half, to about 15 cents per kilowatt-hour in four years — a price so low that it competes with standard electricity rates.
Solar panels are becoming more efficient and less expensive. In fact, even without subsidies, and ignoring the environmental and health benefits, solar and land-based wind power are as cost effective as fossil fuels, according to a 2014 report by the International Renewable Energy Agency, an organization that supports solar energy and land-based wind power. Incentives and the worldwide adoption of solar energy has helped cut the price of solar panels by 50 percent since 2010, according to the report.
At the same time, employment in the solar sector rose 22 percent in 2014, to 174,000 jobs nationwide. That’s six years of 20 percent-plus growth. Installers earn between $20 and $24 dollars an hour, which is on par with the national average hourly wage.
Wind. While public resistance to new land-based wind turbines has slowed development in southern New England, Wind Energy Development LLC (WED) of North Kingstown, R.I., has plans to erect dozens of land-based turbines in the region.
WED owner Mark DePasquale intends to build eight to 10 wind turbines per year for eight years. In Rhode Island, projects are already moving forward in Tiverton and North Smithfield, with an additional 10 turbines approved in Coventry.
According to DePasquale, a German turbine maker is opening an office in Rhode Island to meet WED’s building needs and serve as a supplier for the region. As a result, DePasquale expects to create dozens of new jobs.
“In the next few years, it’s going to get a lot easier for us to permit, and people are starting to accept (wind energy) more than they did in the past,” he said.
Seth Handy, an energy lawyer who is counsel to WED, believes wind energy will make a comeback in the region. The public, he said, is getting more savvy about the economic benefits of renewable energy, and wind energy in particular, which is considered one of the most cost-effective of all energy sources.
Rhode Island also has plenty of wind to harness, not just the in coastal regions, Handy said. “We haven’t found a site where we can't do wind economically.”
Offshore wind is still in its infancy, as the United States has yet to build its first offshore wind farm. Providence, though, is home to Deepwater Wind, a company with huge ambitions for this sector. Its five-turbine demonstration project off Block Island is on track to be the first wind farm in the nation. The company predicts that at least 200 local jobs will be needed this summer when construction begins. Preliminary work is expected to start soon at the company’s 60-acre facility in the Quonset Business Park in North Kingstown, R.I.
Deepwater Wind also has a massive wind farm in the works for federally owned waters between Massachusetts and Rhode Island. This 150- to 200-turbine project will need 1,000 workers during construction and dozens of permanent jobs over the life of the turbines, according to company officials.
Currently, the company has 10 full-time employees in Rhode Island and relies on dozens of local engineers, surveyors, oceanographers, marine scientists, fisherman, biologists and legal professionals.
OER’s Gold, however, is cautious about the immediate prospects for offshore wind. The Block Island project was granted a generous price of 24.4 cents per kilowatt-hour to sell its electricity, almost twice the price for standard electricity and land-based wind energy. The Deepwater Wind price also increases 3.5 cents annually for 20 years, a cost that is funded by Rhode Island ratepayers.
Gold maintains that artificial pricing and subsidies are one of the biggest impediments to a broader expansion of renewable-energy programs.
“If we don’t reduce the cost (for offshore wind power) it’s not going to be a cost-effective resource for us,” she said. “We can’t ignore that. That’s important for a stable environment and a stable economy.”
Opposition. Opponents of wind energy and large solar arrays have prevented several financially viable projects from advancing. As one of the most populous regions in the country, southern New England has limited space for renewable projects, and residents are more often than not abutters to proposed sites. In Rhode Island, wind and solar projects have been turned back by public opposition in at least 20 communities.
Anthony Baro, co-founder of solar developer E2SOL in Providence, is optimistic about the solar sector but he believe's Rhode Island’s manufacturing and industrial companies, which typically have the real estate and rooftops for larger renewable-energy projects, simply can’t afford the upfront costs for renewable-energy systems, even though they save money in the long run.
“Many of our small to medium size businesses are still struggling in the state to stay competitive and profitable, and are very cautious with their discretionary spending,” Baro said. “I believe our great potential is limited at this time by our business and financial well being and the ability to secure long-term financing terms.”
Is help on the way? While popular programs are underway, new ones are still being planned. Gov. Gina Raimondo’s green bank is in the works and it would offer low-interest loans for renewable-energy projects to homeowners, businesses and municipalities. The details are also being worked out for the Property Accessed Clean Energy (PACE) program, that allows renewable-energy loans to be tied to a property instead of a person or a business.
Community-driven bulk purchasing and discount programs, such as the Solarize and Green Communities initiatives, have had considerable success marketing solar energy in Massachusetts and Connecticut. They are just getting underway in Rhode Island.
In Massachusetts, virtual net metering is fostering community or shared solar farms. The program offers cost savings and other benefits of renewable energy for residential and commercial ratepayers who don’t have the space or income for a renewable-energy system.
The program is expected to get serious consideration in Rhode Island. However, virtual net metering is unpopular with utility companies that claim the program shifts more costs to the utility and other ratepayers.
The environment. The health and environmental benefits of local renewable energy, as well as the cost of inaction on climate change, are often overlooked in the economic debate. Wind and solar energy reduce greenhouse-gas emissions by reducing pollution from transportation, refining, extraction and the burning of fossil fuels.
The OER and Commerce RI report predicts 130,000 tons of annual emission cuts through the DG and Renewable Energy Fund programs.
“Would you rather invest in solar panels to generate clean electricity, or pay to build retaining walls for our diminishing coastline?” Eric Beecher, owner of solar developer Sol Power in Providence, wrote in a 2014 op-ed.
“The clean energy industry in Rhode Island,” he wrote, “has only scratched the surface of its full potential. Not only is alternative energy a critical component to fighting climate change, but the development of an industry to generate clean energy serves as a source of job creation and economic growth.”
Beecher is living up to his words. In 2013, the year he founded Sol Power, he installed two solar arrays. In 2014, he installed five. This year, as one of the preferred solar developers for Solarize RI he expects to install more than 50 and now has seven coworkers.
"The more (customers) that sign up, the more prices come down," he told ecoRI News.
These benefits, however, are often low priorities for top policymakers and lawmakers who claim programs and incentive for renewable energy harm the economy. Governors across New England are intent on expanding pipelines to bring more natural gas to the region and beyond our borders for export.
Recent research, from Wall Street investment bank Sanford Bernstein, refutes the claim that renewable energy is too expensive by showing that solar and wind energy provide a hedge against fossil-fuel price spikes as well as a hedge against peak-hour energy price increases. The 2014 report concludes that solar and wind help smooth out winter and summer electricity cost increases. Long term, according to the 13-page report, the rapid expansion of solar power will significantly lower fossil-fuel prices and erode profitability.
The renewable sector, on the other hand, continues to create new jobs and businesses, and greater political influence.
“Clean energy is beginning to become mainstream,” Gabe Elsner, executive director of the Energy & Policy Institute, told The Washington Post. “Renewable energy is popular and has increased political power now,” but, he added, “that power is still eclipsed by the resources of the fossil-fuel industry.”
OTHER STORIES IN THIS SERIES
"First, there is the power of the Wind, constantly exerted over the globe. ... Here is an almost incalculable power at our disposal, yet how trifling the use we make of it! It only serves to turn a few mills, blow a few vessels across the ocean, and a few trivial ends besides. What a poor compliment do we pay to our indefatigable and energetic servant!"
— Henry David Thoreau
“The U.S. economy, because it’s so energy wasteful, is much less efficient than either the European or Japanese economies. It takes us twice as much energy to produce a unit of GDP as it does in Europe and Japan. So, we’re fundamentally less efficient and therefore less competitive, and the sooner we being to tighten up, the better it will be for our economy and society.”
— Hazel Henderson, author
“Anyone who has studied the universe knows that there is no shortage of sources of energy in the universe, and that there is no shortage of energy sources on Earth. And yet, here we are, crawling on the surface of this dot we call Earth, extracting caloric content that’s buried in the soil, and when you look at that, you can’t help but reflect on how primitive that behavior is.”
— Neil deGrasse Tyson, astrophysicist