In one surprisingly bold critique, Felix Mormann has incisively slaughtered two sacred cows of US renewable energy policy in the journal Environmental Law: Renewable Portfolio Standards (RPS) and tax credits.
Make no mistake, the innocuous sounding title of this academic paper harbors an intellectual assault on public policy created by long-held beliefs in neoliberal ideology. Mormann certainly will not endear himself to AWEA, SEIA, SEPA and the alphabet soup of K Street lobbyists with his unambiguous call to end tax credits: “In light of the conceptual superiority of a feed-in tariff over the current tax credit regime, tax incentive support for US renewables should be phased out as the feed-in tariff goes online.”
Mormann, an associate professor of Law at the University of Miami and fellow at the Center for Energy Policy and Finance at Stanford University, isn’t content to antagonize only industry lobbyists, he takes aim at the principle policies favored by the Union of Concerned Scientists (UCS) and the Environmental Defense Fund (EDF-US), two En-NGOs influential in US energy policy.
Using IEA deployment data, Mormann explains the superior performance of feed-in tariffs in mitigating market and investment risk relative to RPS and tax credit policies in the US. Feed-in tariffs are the clear winner. They are the superior market instrument.
Though Mormann is not the first to explore the inequality of using tax credits to subsidize renewable energy in the US, his analysis is one of the few in a law journal. He notes for example, that tax credits have created the reasonable perception that they are a “rich man’s” policies by enabling the wealthy—those with a tax liability–to enrich themselves at the taxpayer’s expense.
Mormann skewers both tendering and RPS programs that are sold to Americans—and their politicians–as more “market-oriented” than feed-in tariffs. Under closer scrutiny, however, RPS and tendering programs–because they rely on trading of renewable energy certificates—entail “considerable transaction costs,” earning them the reputation of policies designed by and for big corporations. These policies, charges Mormann, provide little opportunity for local investors to profit from renewable energy. The lack of transparency in tendering awards and in trading of renewable energy certificates further fuels suspicion that renewable energy in the US was never intended to benefit common citizens.
FITs in contrast, because of their transparency, can improve public perception of renewable energy by enabling greater participation than tendering, RPS policies, or tax credits. Mormann cites Danish and German success with feed-in tariffs at eliciting investment from community groups and local citizens to make his point. Both countries have a much higher percentage of their electricity generated by new renewables than the US.
Mormann doesn’t waffle or go soft in the knees as he reaches his conclusion with an unusually strong recommendation for an academic paper on public policy.
“It is time, indeed, that the United States make the same commitment and adopt the very policy that has propelled its competitors to become leaders in the Race to Renewables. It is time to adopt a feed-in tariff that has the ability to cost-effectively enhance the investor appeal of renewable energy in the United States.”
Now only if President Obama would call Mormann for advice on renewable energy policy–or better yet–a conference call from President Obama and Speaker of the House John Boehner maybe something concrete would come of Mormann’s research. . .
Enhancing the Investor Appeal of Renewable Energy [with FITs in the USA] by Felix Mormann, Environmental Law, August 8, 2012.