Any investment decisions are
affected by two major factors- certainty in the recovery of their investment
and the size of return for their investment. Investment in renewable greatly depends on the government policy, technology
and resource availability. The State of Vermont offers some of the most
favorable places for renewable energy investment.
Advantages of Investment in
Vermont
Strong
State commitment towards renewable energy: Vermont is among the progressive
States that is leading clean energy
development. Vermont has a set a goal to achieve 90% of its energy by renwables
by 2050. In 2005 Vermont instituted its voluntary RPS program (SPEED program)
with the goal to generate 20% of its electric consumption through renewables by
2017.[1] In
order to achieve this goal the State requires the state utilities to purchase
electricity from qualified SPEED resources through long term contracts with
fixed standard rates. The rates and contract length differ by technology and
size but is intended to offer reasonable return on investment for the renewable
energy developers.[2]
The State also offers a net-metering for facilities upto 500kW in capacity.
Small projects less than 15kW qualify for “fast-track” permitting process where
the utility has to approve the project within 10 days. The net-metered
customers in the state are offered a Solar-Adder where the utilities are
required to by the electricity at 20c/KWh. This generous feed in traiff program
has spurred growth in small solar PV installations in the State. Because of the
increased popularity of this program the PSB increased the initial cap of 4% of
peak demand to 15% of the utility’s peak demand. The law also allows for group
net-metering arrangement where the group of customers can sign up for
electricity from a large renewable energy facility.
Support
from the Utility: In addition
favorable state policies, Vermont also has electric utilities that are
favorable to renewable energy. Green Mountain Power- which serves 75% of the
customers in Vermont was recently awarded the “Utility of the Year” for 2013
for its incentive to incorporate solar.[3]
Several other cooperatives that serve in the region also have programs that
have instituted favorable programs for solar PVs.
As an investor these factors
provides a reasonable certainty for the investor and decreases the regulatory
and policy uncertainty for the investor. The favorable regulation for renewable
energy is likely to continue in Vermont which is attractive to making any
investment in the State.
Technology and Timing for
investment: Solar PV is the most cost effective technology that can be
invested in Vermont. The net-metering for solar adder of 20c/KWh, ITC of 30% of
the tax rebate and the decreasing cost of solar PV makes it a lucrative
investment. The recent increased cap of 15% of the utility peak for renewables
provides plenty of market opportunity for a new investor. New investments in
Solar PV could be carried out through 3 types- i) by submitting could an RFP to
the PSB to quality as a SPEED resource, ii) invest in companies that provide
small capacity net-metering to the residential customers, and/or iii) act as an
aggregator to sign up group net-metering. In all three of these decision, the
investor is guaranteed stream of reasonable return on their investment.
The timing is perfect for the
investment in Solar PV. As discussed in the market section, the cost of solar
worldwide has fallen dramatically. The Federal ITC of 30% is set to expire on
2016 similarly the solar adder in Vermont is also set to expire in 2016. This
allows for the investor period of 2 years to complete its solar PV project
inorder to get the solar subsidy.
Barriers for Investment: Before investing in Solar PV in Vermont, the
investor needs to be concerned about some of the barriers for investment.
Saturated
Market: Since Solar PV is a lucrative market in Vermont, there are already
plenty of competitors in market. There are currently more than 45 solar
companies in Vermont making it the higher per capita in solar jobs in the US.
The investor needs to find a niche market or invest in its own generation
facility inorder to make a successful investment.
Timing:
As mentioned above the time is against the investor. The generous state and
federal subsidies are set to expire at the end of 2016 leaving only 2 years for
the investor to gain benefit from the subsidies.
Land
use and Interconnection requirements: Interconnection for larger solar PV
facility needs to be connected to a three-phase line. In Vermont there are
limited properties that are close to the three phase line where the solar farm
can be put in. There has also been a rising concern in Vermont about the land
use concerns by large solar farms. One of the major challenges for the investor
would be find appropriate land to site their facility.
The regulatory
policies, cost of solar and State’s strong commitment towards renewable
electricity makes Vermont an idea place for investment for renewable energy.
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