Sorgo Fuels has modified Brazilian sugar cane technology for the low-cost production of ethanol vehicle fuel, cogenerated electricity and heat, and protein feed from sweet sorghum (“Chinese sugar cane”). The company is in the process of relocating from the U.S. to Europe.
The failure to set fair power prices has been the most significant barrier to achieving a reliable, cost-competitive, clean and innovative electricity industry in the U.S. Until the 1980s, the traditional regulated and vertically-integrated utility monopoly system failed because there was no competition. Since the 1980s, several pricing models have been tried in an attempt to introduce competition, but with limited success.
During the implementation of PURPA [the Public Utility Regulatory Policies Act of 1978] in the 1980s, power markets were finally opened to independents using renewable energy and cogeneration. Theoretically, PURPA provided independents with a price equal to the cost the utility would need to build a new plant when the utility needed additional power. But PURPA was flawed because it was difficult for regulators to determine both the need for new capacity and the price. The need to challenge utilities in expensive regulatory hearings closed markets to independents in most states. Other regions, where regulators tried to make these determinations themselves, often suffered from the overbuilding of expensive new capacity.
During the 1990s, competitive bidding was introduced in some regulated states in an attempt to prevent these problems. But since some power producers were offered a fair price while others were offered no price at all, favoritism was most often the result, especially since the utilities were given the power to select the bids of their friends.
Competitive bidding is a misnomer since competition cannot exist in an environment of favoritism. While competitive bidding could be limited to objective bidding criteria such as price (like PURPA), a potential problem is that winners could be unreliable suppliers while reliable suppliers are blocked out of the market.
During the 1990s, deregulation was also attempted in many states. Theoretically, free markets could send the proper price signals to all potential generators within a competitive marketplace for the building of new low-cost capacity. But deregulation has failed largely because the siting of power plants and transmission lines has remained tightly regulated.
Feed-in tariffs, which set a fair price for all renewable energy producers, could prevent the expensive regulatory hearings of PURPA, the favoritism of competitive bidding, and, unlike markets, can function well while siting problems persist. While it is still difficult for regulators to set a fair price that prevent under-building and overbuilding, feed-in tariffs likely offer the best solution until siting problems can be worked out for the introduction of free markets – which is exactly what Europe is doing.