Political Concerns Rural IPPs

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Permalink Reply by David Karabelnikoff on March 27, 2010 at 8:28am

economic viability, is largely determined by regulatory policy which structures compensation rate, grid connection (requirement) Presently there are no regulatory policies which are devoted to rural Alaska, rather the lack of state ruling has left a industrial clause in PURPA 208 the regulatory ruling which requires utilities to allow Industrial producers of electricity grid connection and compensation at cost avoided.

A 2kw micro-hydro might be undertaken by an individual -

Rail Belt:
2kw * 8760 = 17,520 kwh @ cost avoided $0.03 = $525
2kw * 8760 = 17,520 kwh @ retail rate $0.13 = $2277

Rural
2kw * 8760 = 17,520 kwh @ cost avoided $0.05 = $875
2kw * 8760 = 17,520 kwh @ rate $0.5 = $8760

Economies of scale are important to consider as a factor in this case, and fixed costs may be the same for any power production facility wither it is 2 kw or 20 kw.

In a broader context of energy - electrical production regulation: economic environments .
I think that the topics can be better dealt with if looked at regulatory policy (which is made by political appointment) Gives rise to the Economic environment of the rural utilities. Such as to effect competition in the market, regulatory policies serve to encourage or make barriers for entering the market - this is the case of the IPP with a small set up but also scales up to what a commercial operation might be done by a village cooperation or regional. This could go up in scale to the formation of competing utilities, economic theory says that competition serves public interest & will pass along the savings (improvements in economic or technological efficiency) to the customer. With out competition (monopolies) the market is stagnate, and no market signals have been sent to the utilities to innovate, improve efficiency exc.

The most open market is with the regulatory policy allowing if not requiring a grid connection and possibly the rate of compensation. In the case of net metering this is the retail rate which has been introduces in many countries and in many states or by utilities or cooperatives.

Next there is regulatory policy which is distinguished regulatory policy by technology classification and application (concentrated solar and PV solar) - The reason for doing so it so see competition within the technological classifications, this helps to move along technological development and maturity of various technologies. There are benefits to distributed technological pathways which are not realized in cost minimization approach which will select the lowest cost technology on short term basis but not technological lifecycle potential.

This is the case with the Feed in Tariff widely used in European countries due to their empirically documented economic efficiency of attracting private investment and developing the technology.

I find the paradox of coming to Europe to learn about the benefits of market liberalization and economic competition. If only the regulatory environment in Alaska had been encouraging competition and deployment of various technologies rather than supporting technological hegemony and monopolistic markets.

Note that wind turbines have become commercially competitive while receiving ~10% of R&D funding for energy technologies & PCE which is for 75% diesel generating has been increased to $1 kw which is almost twice as high as German solar FIT. Further in calculating conventional electrical connections grid and transmission lines are considered as separate line items and while in renewable projects the infrastructure is included into the economic feasibility. If public interest is served in the connection of a energy source than that should be done for all electrical production facilities.