There Must Be a Better Way

Politics by Emerson Lynn


It could be called an embarrassment of riches. The Legislature, in its zeal to promote renewable energy projects, passed Act 159 which requires the certification of no more than $9.4 million in tax credits. The problem: When the Clean Energy Development Board convened its meeting this week, it had 208 projects to consider with a combined total of $28.8 million in requested tax credits.

That’s a good thing. It’s encouraging that the interest in solar projects is so high. But as you dig into the story, the enthusiasm begins to wane. The board struggled with how to disburse its limited funds. It had to endure a temper tantrum from the founder of NRG Systems, David Blittersdorf, who told the board he might consider pulling his company out of Vermont if he didn’t get what he thought he had been promised. (Mr. Blittersdorf had also proposed 130 of the 208 projects and his tax credits would total $8.6 million.)

Confusion also marked the process. Apparently, several of those applying didn’t understand the July 15th deadline, and others didn’t understand the Legislature had capped the level of tax credits that could be offered. Those applying thought the 30 percent tax credit was guaranteed. To compound the problem, the board had only $7.5 million to hand out because the Legislature had obligated $2 million of the fund for a project in Bennington.

The process has exposed serious flaws at several levels, and it gives us the opportunity to revisit the process when the Legislature convenes in January.

First, the Legislature should not appoint members to the board who have demonstrable conflicts of interest. Mr. Blittersdorf, for example, was appointed to the board (and resigned this July), but obviously his influence on other board members should not have been allowed. It will be interesting to see how much of the $7.5 million in tax credits eventually go to Mr. Blittersdorf.

Second, the board said it would allocate the tax credits based on a first-in, first-out basis. Going forward, that should not be allowed. The board should follow the lead of one of its members, Tom Evslin, who said the credits should be based on which project offers the best value for the tax dollar expended. According to the fund’s website, that’s its purpose, to “increase the development and deployment of cost-effective and environmentally sustainable electric power resources…”

Third, the Legislature should review and then acknowledge the costs of the program, its benefits, and how it could be restructured to better serve the industry and the taxpayers.

It should be understood that when we offer a 30 percent state tax credit, it’s also backed by a similar tax credit at the federal level, thus 60 percent of the construction cost is absorbed. It’s also Vermont law that when a solar project begins to produce power that our utilities are forced to pay an in-tariff fee that can be several times what they pay for their baseload power. In other words, these companies enjoy a triple subsidy – all coming out of the little old lady’s Social Security check.

It should also be acknowledged that we’ve been down this path before. This process is basically a reincarnation of the Public Utility Regulatory Policies Act (PURPA) passed in 1978 which required the utilities to buy the power produced by non-utility power producers (like small hydro-projects.) It was a cost borne by the ratepayers.

Obviously, there is a strong need to focus on the development of renewable energy sources, and we understand perfectly that the upfront costs are high and that the industry needs support early on if it is ever to achieve any level of sustainability.

But that doesn’t excuse a process that ignores the value of figuring out the best deal for taxpayers, and for the renewable energy industry itself.

One would hope the Legislature would correct its process and require from this point forward that the tax credits are awarded based on which project costs the taxpayer least. It doesn’t make sense to reward a developer who proposes a project that costs several times what another developer proposes. Why would the board give the nod to a developer with a 15 cent per kilowatt-hour proposal when someone else has a project for 6 cents per kilowatt-hour?

It also makes more economic sense to parcel the money out in loans, not grants. If loans are offered, then the fund keeps restoring itself. With grants, the fund has to be replenished and there is a greater chance the fund will eventually disappear. Loans also serve as a filter necessary to sift through those projects that are defensible, and those that are not.

It’s also clear that the Legislature and the Clean Energy Development Fund Board, need to do a much better job communicating what is available, what isn’t, and the rules that govern both.

It’s another of the many tasks that await them in January.

(Emerson Lynn is editor & publisher of the St. Albans Messenger where this essay first appeared.)
 

Comments

[Bill]

Thank you for this enlightening article.

In the long run clean energy would be better served to let private equity and bond investors pick winners and losers instead of all this unseemly haggling for government largesse--with all its attendant favoritism, threats, bribes, kickbacks, graft, and cronyism.

The money can come out of the little old lady's social security check if she so chooses instead of government meddlers, manipulators, and bureaucrats taking it away from her.

Give it a few years and you will see a marred landscape littered with government financed windmill and solar panel outmoded junk as the state of the clean energy art moves forward. We can no longer afford to let government screw up this industry.

Demand your legislature give us--the taxpayers--relief from the excessive cost and misallocation of valuable resources caused by government subsidizing of the clean power industry.

[Cheshire Cat]

Bill, you're getting dangerously close to the rack. That "...clean energy would be better served to let private equity and bond investors pick winners and losers..." statement reeks of heretical rantings. Very close to the banned words: profit, free enterprise, self-regulated.

That detritus you belittle becomes another method for the state to get the non-profits to write flowery grant proposals and form committees to study the removal of said detritus.

[milton newport]

Let me get this straight -

- 30% off from the feds?
- another 30% off from the state?
- and huge price subsidies?

No WONDER Dave B. is upset. All that time sitting on the board to set up deals for his industry, and now - the state won't pony up! Sometimes being really, really clever isn't enough.

[aynerand]

The sort of blatent corruption that went on here is an affront to all the honest, hard working folks out there. This was clearly an inside game from the start. Legislature takes over program from state government, appoints their friends (like Blittersdorf) to the Board. Limit access to the credits to a 10 day window starting right after the 4th of July and have limited funds to hand out.

Mr. Blittersdorf, a man with no moral compass whatsoever, complains when he fears his special treatment is at risk, but quiets down like a toddler given their bottle when his credits are assured.

I hope Legislative leaders responsible for this scam are taken to account. Especially ironic Senators Schumlin and Illuzzi explained the transfer of the program to their control was because the Department of Public Service wasn't doing their job running the program. Good call fellows.