Case Study: Wisconsin

Introduction

Wisconsin's electricity use per customer rates rank 34th in the nation. Total energy consumption is 18th in the country, while total energy expenditure ranks 19th nationally. The state's average residential, commercial and industrial electricity rates are among the nation's ten least expensive.

The Badger State has a population of about 5.25 million. Towns of less than 1,000 people dot the state's expansive rural areas. Most of the larger cities, industry and population centers are in the southeast. Wisconsin has long, cold winters and warm but relatively short summers. Average January temperatures range from 10° F (-12° C) in the north to 22° F (-6° C) in the southeast; in July, from 66° F (19° C) in the north to 72° F (22° C) in the southwest. Wisconsin uses more electricity in the summer months than in wintertime.

Coal provides the vast majority of the state's electricity generation. Wisconsin also relies on its two nuclear power plants, Kewaunee and Point Beach, which are among the state's largest producers. Hydro-power, natural gas, and petroleum round out the fuel mix. In 1998, Wisconsin generated its electricity with the following fuel sources (numbers in parenthesis are net generation in million kilowatt hours):

Wisconsin's 1998 renewable energy portfolio included elements of geothermal, biomass, wind, solar thermal, and photovoltaics. Two new wind farms, completed in June 1999, now contribute about 20.4 MW to the state's electric grid. The wind farms were built as a result of a legislative mandate, known as "Reliability 2000." In addition, one utility built more wind capacity than specified in the bill and is being partially funded through a "green pricing" program. Reliability 2000 also included several other measures to promote renewable energy.

Electric Utility Industry Restructuring

In November 1997, the Wisconsin Public Service Commission (PSC) issued a major policy report on restructuring. The plan did not recommend retail access, but focused on improving the utility infrastructure. Although the PSC did not implement restructuring, it seems likely that legislative and PSC mandates of recent years are preparatory measures to allow adoption of retail competition if it is in Wisconsin's interests. Incentives and policies outlined below create incremental conditions that, in other states, have prefaced restructuring.

Reliability 2000

PSC recommendations of 1997 included improving transmission facilities, developing an independent system operator (ISO), removing barriers to open transmission access, promoting construction of merchant plants, promoting the development of renewable energy resources, and relieving the 'asset cap' which had restricted holding company investments. Consumers First- a lobbying coalition of environmental and labor groups, a low income service provider association, one small investor-owned utility, a municipal utility association, a public power corporation, and a rural coop- joined forces with Energize Wisconsin, a group of large industrial users and investor owned utilities to support Reliability 2000 legislation. Together, they directly influenced the composition of that bill.

Reliability 2000 legislation moved quickly through the process also as a result of reliability crises that occurred in the summers of 1997, 1998 and 1999. (Other aspects of the plan dealt with system planning, construction equipment, and siting and building.). The bill mandated that 50 MW of new renewable energy had to be on-line by December 31, 2000. In response, 42.5 MW of wind and 7.5 MW of biomass resources will become available. These numbers will increase as the state complies with its new renewable portfolio standard described below.

Renewable Portfolio Standard

Wisconsin is the only state that has enacted a Renewable Portfolio Standard (RPS) but not retail electric competition. The RPS is a requirement that electricity retailers (in Wisconsin, utilities and cooperatives) include some percentage of renewable energy in the mix of resources they sell to customers. By the end of 2001, this percentage must be 0.5%. Required percentages increase biannually until December 31, 2011, when renewables must comprise 2.2% of sales. According to the Union of Concerned Scientists, the RPS is expected to triple the state's non-hydro renewable capacity by adding about 400 MW of new renewables.

Financial Incentives and Regulatory Policies

The PSC's goal in implementing the renewable energy initiatives was to lower renewable energy costs and to stimulate demand for renewable resources. Programs will concentrate on development of renewable energy applications on customer sites and small-scale renewable generation technologies. Grants given through the program must enhance customer usage of renewable energy.

Demand-Side Management Mandates

In 1998, the Wisconsin Department of Administration was awarded a two-year, $16.7 million energy efficiency pilot project to determine if state government could be a more efficient administrator of energy efficiency funds than utilities. The pilot is to last until June 30, 2000 and includes a $1 million renewable energy market preparation effort.

Also, Wisconsin allowed incentive payments for utilities that installed renewable energy technologies before December 31, 1998. Utilities that install wind, solar thermal, or photovoltaic systems will receive payments of $0.75/kWh for electricity the facility produces. Wood, hydropower, landfill gas, waste water gas, and refuse-derived fuel systems earn payments of $0.25/kWh. These payments will continue for twenty years beyond the cutoff date. However, this provision was never used to support renewable energy resources due to utilities trying to hold costs down as much as possible. It is not expected to be used in the future either, as utilities focus more on market competitiveness.

Property Tax Incentive

A property tax incentive in Wisconsin exempts taxpayers from any value added by a qualified renewable energy source for property tax purposes. This exemption mainly encourages the use of passive solar space heat, active solar space heat, active solar water heat, solar thermal electricity, photovoltaics, and wind energy equipment. It applies to industrial, utility, residential, and commercial sectors.

Net Metering

Wisconsin PSC enacted net metering (net billing) in 1993. Utility customers who own renewable energy facilities of 20kW or less are rewarded by the utility for net excess generation. Net metering also increases the economic benefit of small renewable energy technologies for customers by allowing them to use the grid to 'bank' their energy, producing electricity at one time and consuming it later. This incentive works particularly well for solar and wind energy producers, since their sources are intermittent.

Green Pricing

'Green pricing' refers to a utility program through which utilities charge a small premium to customers who volunteer to pay one. In exchange, the utility supplies the power grid with a pre-determined amount of renewable energy. There are three active and successful green pricing programs in Wisconsin. One program supports the incremental increase in renewable energy not required by Reliability 2000. For example, Madison Gas and Electric's aforementioned new 600 acre wind farm produces 11.25 MW at 25-30% capacity. About 8.25 MW of this is supported through green pricing. Business and residential users will have the option of purchasing 150 kWh blocks for a monthly premium of about $5 per block. This program has the highest customer participation percentage in the country.

Wisconsin Electric is also implementing its "Energy for Tomorrow" green pricing program. Customers can choose fuel mixes of 25%, 50% or 100% renewable, and will pay a corresponding monthly premium. Currently, buyers have access to hydropower, wood waste, wind and landfill gas-produced electricity. An advisory panel governs Energy for Tomorrow, made up of environmental groups, businesses, and the Wisconsin Energy Bureau. The Energy for Tomorrow program has over 12,000 subscribers.

Wisconsin Public Service Corporation manages the "Solar Wise for Schools" green pricing program. Customers can pay $1, $2, or $4 extra per month to support installation of photovoltaic electric systems on local high schools. Thus far, nine systems have been installed. Solar energy curricula are supplied to science teachers and an annual 'Solar Olympics" is held each year.

U.S. Department of Energy