Overturning the 8 biggest myths in renewable energy

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By Peter Gardett

Managing Editor, AOL Energy

 

Misconception and myth hang over the entirety of the US energy sector, but with renewable energy equally likely to get bogged down in political wrangling over subsidy levels and climate change, getting to the truth remains a particular challenge.

Accounting firm Ernst & Young is accustomed to crunching data from a wide range of sources and sorting it into manageable categories. The company has taken an increasing thought-leadership profile in energy, and recently released an update to its substantial renewable energy attractiveness indices as part of that practice.

The surprisingly-bullish report includes scores for state renewable energy markets, renewable energy infrastructure and their suitability for individual technologies. The indices provide scores out of 100 and are typically updated on a biannual basis.

In discussing the report, the indices and the results this year that placed California at the top of the heap  had some surprising breakouts. Ernst & Young LLP Senior Manager, National Tax Michael Bernier dispelled some of the most entrenched myths in the renewable energy business.

Myth 5: Transmission can always be developed once the big renewable energy projects are built.

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The challenge in the U.S. for renewable energy is that it is a large country with many different power market regimes, Bernier said. "Transmission is a big factor in moving up or down the attractiveness index...if you don't have transmission you can't build a large-scale project," he said.

Myth 6: National players in renewable energy can only succeed in their own markets

"We are seeing our client base across a much-larger swath of the globe than it has been previous years," Bernier said. New entries from international markets are entering the U.S. and competing on price and scale with U.S. firms, in part because they are becoming accustomed to the tax-code-based US incentive system.

Myth 7: Infrastructure funds are the shining hope for a second boom in renewable energy financing

While completed renewable energy assets are attractive to many "second-level funding sources" looking for reliable, long-term returns, many infrastructure funds and pension funds are actually limited in their ability to take on early-stage funding of new renewable energy projects. Many of them do not pay taxes because they hold pension funds or retirement funds, and thereby cannot use the tax incentives that are used to fund new projects. The tax equity market, in which taxpayers assume the incentives, continues to play a role but has struggled to grow since 2007 even as the pipeline of qualifying renewable energy projects has grown.

Myth 8: The U.S. military's renewable energy efforts will boost the market for renewable energy before 2015

The military's role as a purchaser of renewable energy is important because it is less price-sensitive than private sector buyers; it is focused on other mission goals as well, like fuel security. But the investments the military is making are "really cutting edge," Bernier said. "[They] have the ability to spend to fix those needs, but all that is beyond the three to five year window the market is currently looking at."

 

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