Letter Supporting the Renewable Integration Credit (RIC) Concept

TO THE MEMBERS OF THE U.S. HOUSE OF REPRESENTATIVES:

The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, supports the Renewable Integration Credit (RIC) concept and believes the RIC should be included in bipartisan energy, climate, or other legislation that moves through Congress.

The RIC is needed to offset the substantial costs associated with integrating and deploying increasingly large amounts of solar and wind power into the nation's electric power system. Renewables integration costs, which have a significant impact on utilities, include:

• Load following (adjusting generation to match demand changes) and regulation (adjusting outputs of generation units to maintain system frequency);
• Unit commitment (determining which generators should be operated to meet demand);
• Investments in quick-start baseload generating facilities (natural gas or other resources) to balance intermittency of wind and solar generation;
• Investments in energy storage; and
• Increased O&M costs in baseload facilities to balance renewable generation.

A recent U.S. Department of Energy report¹ found that the costs of integrating wind resources into the grid average more than $5 per megawatt hour of electricity for wind capacity penetrations up to about 30 percent of peak load. It is reasonable to assume that there are similar costs associated with integrating solar electricity into the power system. These costs, which are all imposed on utility systems and not on independent developers and owners of individual renewable generating facilities, escalate as the amount of renewable energy increases. Moreover, integration costs will become extremely burdensome to utility customers unless they are incorporated through the tax code or in some other manner because the costs of integrating intermittent renewable generation like wind into the grid are mostly borne by a purchasing utility's customers, regardless of the structure of the market in which the utility is operating.

The RIC is desirable because it allows these costs to be partially offset through the tax code. In essence, a legislatively mandated tax credit (the RIC) that offsets such renewables integration costs, one that is configured to increase with rising levels of renewables penetration, would incentivize utilities to maximize their renewable potential while at the same time ensuring that higher levels of renewables use do not translate into higher consumer energy bills. In other words, the RIC concept provides a viable means of controlling customer costs on systems that integrate large percentages of intermittent renewables.

In sum, the RIC is a win-win opportunity for utilities and utility customers and would strengthen the ability of the United States to expand its renewable energy resource use. Without such relief, utilities that integrate significant percentages of wind and solar generation onto their systems will find it difficult to keep costs low for their customers. As such, the Chamber urges you to incorporate an RIC into energy, climate, or other legislation that moves through Congress.

Sincerely,

R. Bruce Josten

¹ Ryan Wiser and Mark Bolinger, 2008 Wind Technologies Market Report, Lawrence Berkeley National Laboratory, July 2009; http://eetd.lbl.gov/EA/EMS/reports/2008-wind-technologies.pdf.