Environmental Law

Going Green: A Guide to Financial Incentives for Renewable Energy Development in New Hampshire

August 2008

By Erik Newman* and Heidi Kroll, Market Analyst

We all have experienced the unpredictable and extreme weather attributed to climate change, perhaps have seen "An Inconvenient Truth," and considered ways to use renewable energy sources at home and work to save on energy costs. The financial viability of developing solar, wind, or other alternative energy infrastructure largely depends on tapping into the many financial incentives available through federal, state and local programs.

This article focuses on programs intended to encourage investment in renewable energy development.

New Hampshire Incentives

Renewable Portfolio Standards. The New Hampshire statute on Renewable Portfolio Standards (RPS) requires regulated public utilities and competitive suppliers that sell electricity to homes and businesses to include a certain percentage of renewable power in their annual supply mix. Local electric utilities and suppliers can comply with RPS laws by acquiring Renewable Energy Certificates (RECs).

When a renewable generator, such as a wind farm or a solar field, produces a megawatt-hour of electricity, it also "produces" an REC. If utilities and suppliers serving New Hampshire are unable to acquire enough RECs to comply with the RPS law, then they must make Alternative Compliance Payments ("ACPs"). In New Hampshire, the ACP payments are deposited into the Renewable Energy Fund administered by the Public Utilities Commission (PUC).

Land owners, businesses, and homeowners that are considering installing renewable power facilities in New Hampshire have two financial opportunities under the RPS law; one is access to money in the Renewable Energy Fund, and the other is to sell RECs to electric utilities and suppliers. Regarding the first opportunity, pursuant to New Hampshire's RPS law (RSA 362-F) and the PUC's RPS rules (2500 rules), the PUC will periodically issue requests for proposals for initiatives to be supported by the Fund. To receive money from the Fund, all initiatives must be located in New Hampshire and primarily focused on increasing the supply of renewable power. In addition to issuing grants, the RPS rules call for the Commission to establish a rebate program to allocate at least 20% of the annual RPS Fund to qualified customer-sited thermal and renewable energy projects of up to 100 kilowatts. Bear in mind that while access to money in the Renewable Energy Fund may afford an opportunity to reduce initial investment costs, the economics of developing and operating a renewable energy project would need to be carefully studied.

Regional Greenhouse Gas Initiative (RGGI). RGGI is an agreement among ten Northeastern and Mid-Atlantic States to establish a market-based "cap and trade" program to reduce carbon dioxide (CO2) emissions from the region's fossil-fuel power plants. Under RGGI, NH will establish a Greenhouse Gas Emissions Reduction Fund.

This Fund is limited by law to energy efficiency and conservation programs that target residential housing and commercial building stock. The Fund cannot be used on renewable energy projects. As much as $60 million could be collected in the Fund in 2009 alone, and the amount collected could be even greater each year thereafter.

RGGI may also present an opportunity for home and business owners to sell so-called "offset allowances" to fossil fueled power plants that must comply with the cap under RGGI, or even to entities seeking to reduce their "carbon footprint." Projects must meet certain specifications in order to qualify as producers of "offset allowances." Based on currently-available information from NH's Department of Environmental Services (DES), such projects must be undertaken outside of the electric power sector to reduce or avoid CO2 emissions and may include home heating energy efficiency projects and sustainable forestry projects, among others. It is unknown at this time what the demand for offset allowances might be under RGGI, but it may be relatively limited. A power plant that is required to comply with RGGI can only use offset allowances for up to 3.3% of its compliance obligation, and up to 10% if certain conditions occur in RGGI.

RGGI is a regional plan, but each state must adopt its own laws and regulations in order for RGGI to be in effect in each state. House Bill 1434, the RGGI bill, was signed into law by Governor Lynch on June 11th. The next step is for the NH Department of Environmental Services (DES) and the NH Public Utilities Commission (PUC) to develop rules by the end of 2008.

Ratepayer Funded Efficiency Programs. As part of the Electric Utility Restructuring Act, RSA 374-F, a charge called the Systems Benefits Charge has been included for many years in consumers' electric bills to fund certain public benefits including energy efficiency programs. Such programs are also funded by and available to natural gas consumers. The funds generated under these ratepayer programs are applied by utilities in providing homeowners and business with information and technical expertise on energy efficient products and practices. Funds are also utilized to defray the cost of purchasing and installing energy efficient products and services for homes and business. These programs offer something for everyone and save consumers energy and money.

Investment in Distributed Energy Resources. Senate Bill 451, which was enacted this session, allows electric utilities to invest in "distributed energy resources" once the resources are approved by regulators. "Distributed energy resources" include electric generation equipment, with an emphasis on clean and renewable generation; energy storage; energy efficiency; and technologies that control the timing of a customer's energy usage. Electric utilities that invest in distributed energy resources may seek to recover their investment by making a rate filing with the Commission. Electric utilities will work with customers to identify opportunities on the customer's premises to integrate distributed energy resources and then submit proposals for regulatory approval. The level of technical and financial assistance under this program is expected to vary by project.

Net Metering. Net metering refers to the practice of selling any excess power generated by an electric customer back to the electricity distribution system, or "grid," when the power is not needed on the customer's premises. Wind power, small-scale hydropower and photovoltaic (solar) power all represent opportunities for customers to generate power for on-site use and net metering. Net metering uses a bi-directional meter that registers the flow of electricity both to and from the grid to the customer's home or business. During each billing period, the customer is billed based on the net energy consumed from the utility. When the electricity generated by the customer exceeds that supplied by the grid, the customer is credited during the next billing period for the excess kilowatt-hours generated.

Under RSA 362-A:9, utilities are required, upon request, to make net metering available to customer-generators of less than 25 kilowatts on a first-come, first-served basis within each distribution utility service area. While the law caps the amount of net metering that can take place in each service area, net metering activity remains well below the caps. Net metering requires that the customer file an application with its distribution utility to install the appropriate metering equipment. The application requirements and procedures are detailed in PUC rules Chapter 900.

Local Incentives

Renewable Energy Property Tax Exemption. New Hampshire statutes at RSA Chapter 72:61-72 authorize cities and towns to adopt exemptions for local property tax purposes for certain renewable energy systems. Solar powered systems, including photovoltaic panels for producing electricity and solar thermal for heating water, wind powered systems that generate electricity and wood heating systems that are designed to operate as a building's central heating system, are all eligible under the statutes. According to the New Hampshire Office of Energy and Planning, as of May 30, 2008, 69 cities and towns in New Hampshire have adopted one or more renewable energy property tax exemptions. The local assessor's office can be consulted to determine how a property owner may take advantage of the exemption, the amount of the exemption, and its manner of determination.

Federal Incentives

Energy Policy Act of 2005 (EPACT). The EPACT provides income tax credits for certain energy efficient purchases. The availability of many of the tax credits expired at the end of 2007, including credits for energy efficient home improvements. However, credits for qualified solar water heating and photovoltaic systems that are placed in service through December 31, 2008 for 30% of the cost of the system, up to $2,000, are available through the end of this year. Also, a tax credit of up to $2,000 for homebuilders was recently extended and applies to new homes for which construction is substantially completed after August 8, 2005, and which are purchased after December 31, 2005, and prior to January 1, 2009.

In general, to meet the energy savings requirements, a home must be certified to provide a level of heating and cooling energy consumption that is at least 30 to 50 percent below that of a comparable home. A tax deduction for certain energy efficient improvements to commercial buildings placed in service from January 1, 2006 through December 31, 2008 of up to $1.80 per square foot also remains available. We will continue to monitor developments in Federal programs that offer additional incentives for green investment and development.

Conclusion

No single incentive program is guaranteed to make your renewable energy project economically feasible. However, by drawing from one or more of the incentives that best suit your project and implementing an organized development plan, significant cost savings are possible, along with other potential benefits to your home or business. Development planning may involve the assistance of economic advisers to analyze the incentive programs' costs and benefits, as well as legal counsel to navigate the regulatory process.

* Erik Newman is admitted in New Hampshire.

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You may contact Erik Newman
or Heidi Kroll at
603-228-1181