Los Angeles Launches Carbon Reduction Surcharge Dedicated for Renewable Investment

March 16th, 2010 by Susan Kraemer

Yesterday the Mayor of Los Angeles unveiled a proposal for a Carbon Reduction Surcharge to raise an estimated $170 million a year to be placed into a Renewable Energy and Efficiency Trust Fund set aside to provide dedicated revenue for renewable energy and efficiency investment. The trust fund will specifically invest in two types of programs: energy efficiency and a solar feed-in tariff.

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The dedicated carbon tax will cost Los Angeles residents $2.50-$3.50 extra on their monthly Los Angeles Water & Power bill. The arrangement has the approval of a large coalition of business, labor, and environmental leaders who worked out an unprecedented level of transparency and accountability to disburse the funds by the Board of Commissioners.

Small businesses would be eligible for $2,500 worth of free energy-efficiency upgrades in lighting, paid by the carbon surcharge – which would lower energy costs up to 25% to offset the higher (20%) increase in small business bills: an average of $54.

In addition, the new solar Feed-in-tariff would pay both residents and businesses for their generated electricity – in the area of California that boasts some of the nation’s best solar insolation in the USA, and where big box buildings for distributed solar power is in demand by utilities.

Says Mayor Antonio Villaraigosa:

“Because the price of energy has been rising, our Water and Power department needs a significant rate increase to keep the lights on and to get out of a financial hole. But raising rates only to continue to invest in dirty fossil fuels that we know are only going to become more scarce and more expensive makes no sense.”

By assigning the rate raise to a lock-box to provide dedicated revenue for green energy, the Mayor is creating a new, very direct form of a cap and trade carbon tax.

The funding created is expected to generate 18,000 green energy jobs over ten years. Renewable energy is the fastest-growing employment sector in California with 36% green jobs growth, providing the only bright spot in California’s employment data.

Villaraigosa is correct as envisaging this as a long-term solution to energy costs, because once renewable energy sources like wind and solar and geothermal power are paid for, rates can indeed go down, because renewable energy has free fuel.

An example is the Island of Alameda next to Oakland in Northern California. Decades ago, it locked in a supply of geothermal energy from The Geysers, and its electricity rates are now lower than those of its neighbors.

Under the pending AB32 cap and trade supported by one potential next governor (Attorney General Jerry Brown) and opposed by the fossil industry groups backing the other (Meg Whitman) if LADWP does nothing – it would otherwise have to pay carbon fines starting at $300 million a year, doubling to $600 million a year.

This would have a much less concentrated return as local green job benefits, because the benefit would be spread throughout the state.

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Source: Huffington Post

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Tags: California legislation, Carbon Reduction Surcharge, Kraemer, Los Angeles, Mayor Villaraigosa, progressive legislation, solar feed-in-tariff

About the Author

Susan Kraemer writes at CleanTechnica, CSP-Today, PV-Insider , SmartGridUpdate, and GreenProphet. She has also been published at Ecoseed, NRDC OnEarth, MatterNetwork, Celsius, EnergyNow, and Scientific American. As a former serial entrepreneur in product design, Susan brings an innovator's perspective on inventing a carbon-constrained civilization: If necessity is the mother of invention, solving climate change is the mother of all necessities! As a lover of history and sci-fi, she enjoys chronicling the strange future we are creating in these interesting times. Follow Susan on Twitter @dotcommodity.

http://powersmithgroup.com Robert Emery

A feed-in tariff (FiT is a policy mechanism designed to encourage the adoption of renewable energy sources by imposing an obligation on regional or national electric grid utilities to buy renewable electricity. The cost-based prices therefore enable investors to obtain a reasonable return on their renewable energy investments considerably higher than prevailing rates. Who eventually pays?
http://powersmithgroup.com Robert Emery

A feed-in tariff (FiT is a policy mechanism designed to encourage the adoption of renewable energy sources by imposing an obligation on regional or national electric grid utilities to buy renewable electricity. The cost-based prices therefore enable investors to obtain a reasonable return on their renewable energy investments considerably higher than prevailing rates. Who eventually pays?
SallyVCrockett

Hopefully, our representatives in DC follow LA’s lead.
http://cleantechnica.com/author/susan Susan Kraemer

William; not only businesses are benefiting through the efficiency subsidies paid for by the pollution surcharge. The solar FIT will also be paid to individuals who install solar.
William Coffin

It seems to me the Los Angeles mayor’s proposal is a win-win: residents will use less energy and more of this energy will come from renewable sources. Of course, it’ll take a few years to see the effects.

Financially it looks like individuals are paying through higher bills and businesses are benefiting through subsidies. That doesn’t seem quite right. Ecologically, however, if a person (or a business) installs solar panels, everybody benefits, whether they live in LA or Laos.
http://powersmithgroup.com Robert Emery

80 or 50 cents/kWh is irrelevant when the Utility (Consumers) is selling electricity for 10-11 cents/kWh. The bottom line is someone somewhere makes the difference up.

The problem you have in referencing Germany and Spain is that I participated in meetings with Ministers of Germany and Spain to develop a global solar marketing initiative and know. I was THERE. Obviously you haven’t visited my web site.

Electrical demand in the US declined 3.6% last year and there is not any electrical shortage. CSP Solar has a capacity factor of 25-30% unless thermal storage is added. Many of the large so-called solar plants have the capability of burning natural gas at less than half the efficiency of a combined cycle gas turbine. California asked the EPA to delay Green House gas regulations so as not to delay solar plant construction, you know Carbon Free SOLAR.

Achieving energy independence by renewables is many years into the future. The US does not produce electrical power from foreign oil. Energy independence will require transitioning the entire automobile industry to electric cars. Oil and Gas are hydrocarbons and the basis for Plastics, Nitrogen Fertilizers and many other industries of our economy. For example, Sodium and Potassium Benzoate are food preservatives used in soft drinks and other foods that is produced from toluene which occurs naturally in crude oil and is extracted when producing gasoline. So tell me what this carbon base society will do?

Years ago I contacted United States about installing a gas turbine generator at their Plaster City operation and use the exhaust to dry gypsum board. USG used the threat of self generation to negotiate lower electrical rates that the average consumer. So tell me how the rich pay?

I would suggest we go private, I am proponent of solar but a realist as to what it can accomplish.
http://powersmithgroup.com Robert Emery

80 or 50 cents/kWh is irrelevant when the Utility (Consumers) is selling electricity for 10-11 cents/kWh. The bottom line is someone somewhere makes the difference up.

The problem you have in referencing Germany and Spain is that I participated in meetings with Ministers of Germany and Spain to develop a global solar marketing initiative and know. I was THERE. Obviously you haven’t visited my web site.

Electrical demand in the US declined 3.6% last year and there is not any electrical shortage. CSP Solar has a capacity factor of 25-30% unless thermal storage is added. Many of the large so-called solar plants have the capability of burning natural gas at less than half the efficiency of a combined cycle gas turbine. California asked the EPA to delay Green House gas regulations so as not to delay solar plant construction, you know Carbon Free SOLAR.

Achieving energy independence by renewables is many years into the future. The US does not produce electrical power from foreign oil. Energy independence will require transitioning the entire automobile industry to electric cars. Oil and Gas are hydrocarbons and the basis for Plastics, Nitrogen Fertilizers and many other industries of our economy. For example, Sodium and Potassium Benzoate are food preservatives used in soft drinks and other foods that is produced from toluene which occurs naturally in crude oil and is extracted when producing gasoline. So tell me what this carbon base society will do?

Years ago I contacted United States about installing a gas turbine generator at their Plaster City operation and use the exhaust to dry gypsum board. USG used the threat of self generation to negotiate lower electrical rates that the average consumer. So tell me how the rich pay?

I would suggest we go private, I am proponent of solar but a realist as to what it can accomplish.
http://powersmithgroup.com Robert Emery

Those that do not install solar will pay for those that do. Consumers in Michigan is paying up to 80 cents/kWh for electricity from PV solar and sell the electricity for 11 cents/kWh. How long can a utility pay more for electricity under FIT than the it sells it for. The poor will eventually pay and they will pay for the higher costs of goods from businesses who pass along the costs that more likely will be food.

I am Robert Emery, a former Engineer and Luz Project Manager of the first utility scale solar plants in the world. Since then I have developed solar plants including PV when no one cared. But I draw the line when promoting technology that will benefit a few at the expense of the poor by a number of so-called experts with an agenda.
- http://cleantechnica.com/author/susan Susan Kraemer
  
  No, Michigan pays not 80 cents but 53 cents per kilowatt hour for residential solar and 38 cents per kilowatt hour for commercial solar. But that is a temporary pilot program at high initial rates to jump start it.
  
  FITs only need to be 2-3 times the retail to take off: (Germany and Spain initially offered people 3 X, but now ratcheting down) a higher payment rate than that (like 80 cents for 11 cents) would be redundant.
  
  Michigan rates are not rising faster than any other state (EIA link)
  
  As to the poor “paying” more – the poor are the worst hit by polluter-power by a long shot. They typically live in the polluted areas where gas plants and oil refineries get located, have the highest asthma rates and other ill effects of fossil energy, so they pay more in emergency room visits, insurance premiums, uninsurability and thus deaths from fossil energy. (link)
  
  In fact, in California, it is the rich who pay more for electricity, because we have tiered rates. You can use a baseline amount of energy (about 300 kwh a month I think) and pay 11 cents a kwh, or you can live in a mansion using exorbitant gobs of energy (like people who use over 1,500 kwh a month) and pay 40 cents a kwh or more.
http://powersmithgroup.com Robert Emery

Those that do not install solar will pay for those that do. Consumers in Michigan is paying up to 80 cents/kWh for electricity from PV solar and sell the electricity for 11 cents/kWh. How long can a utility pay more for electricity under FIT than the it sells it for. The poor will eventually pay and they will pay for the higher costs of goods from businesses who pass along the costs that more likely will be food.

I am Robert Emery, a former Engineer and Luz Project Manager of the first utility scale solar plants in the world. Since then I have developed solar plants including PV when no one cared. But I draw the line when promoting technology that will benefit a few at the expense of the poor by a number of so-called experts with an agenda.
- http://cleantechnica.com/author/susan Susan Kraemer
  
  No, Michigan pays not 80 cents but 53 cents per kilowatt hour for residential solar and 38 cents per kilowatt hour for commercial solar. But that is a temporary pilot program at high initial rates to jump start it.
  
  FITs only need to be 2-3 times the retail to take off: (Germany and Spain initially offered people 3 X, but now ratcheting down) a higher payment rate than that (like 80 cents for 11 cents) would be redundant.
  
  Michigan rates are not rising faster than any other state (EIA link)
  
  As to the poor “paying” more – the poor are the worst hit by polluter-power by a long shot. They typically live in the polluted areas where gas plants and oil refineries get located, have the highest asthma rates and other ill effects of fossil energy, so they pay more in emergency room visits, insurance premiums, uninsurability and thus deaths from fossil energy. (link)
  
  In fact, in California, it is the rich who pay more for electricity, because we have tiered rates. You can use a baseline amount of energy (about 300 kwh a month I think) and pay 11 cents a kwh, or you can live in a mansion using exorbitant gobs of energy (like people who use over 1,500 kwh a month) and pay 40 cents a kwh or more.
http://cleantechnica.com/author/susan Susan Kraemer

If you’d rather close your doors, but you could add clean energy instead and earn it back and more through the Feed-In Tariff and energy reductions through efficiency that this funds per the the Mayor (link):

“For small businesses, this increase would mean a monthly increase of approximately $54.00, or 20%.

However, the objective of this initiative is not to charge more, it is to use less. So we are dedicating 100% of the Carbon Reduction Surcharge to renewable energy and energy efficiency.

To mitigate the impact of the increase, LA residents will have access to the Green Doctor program, where the DWP will conduct house-calls for energy audits and offer free energy efficiency improvements, and other energy efficiency programs.

And small businesses will qualify for up to $2500 in free energy-efficiency lighting upgrades – which could lower your energy costs by up to 25%.

Even more importantly, the DWP will institute a Solar Power Feed in Tariff program (FiT), to allow users to sell solar power back to the DWP. The FiT program will not only enable users to drastically cut their rates, but it will incentivize the installation of solar panels, creating good, green-collar local jobs.”
http://cleantechnica.com/author/susan Susan Kraemer

If you’d rather close your doors, but you could add clean energy instead and earn it back and more through the Feed-In Tariff and energy reductions through efficiency that this funds per the the Mayor (link):

“For small businesses, this increase would mean a monthly increase of approximately $54.00, or 20%.

However, the objective of this initiative is not to charge more, it is to use less. So we are dedicating 100% of the Carbon Reduction Surcharge to renewable energy and energy efficiency.

To mitigate the impact of the increase, LA residents will have access to the Green Doctor program, where the DWP will conduct house-calls for energy audits and offer free energy efficiency improvements, and other energy efficiency programs.

And small businesses will qualify for up to $2500 in free energy-efficiency lighting upgrades – which could lower your energy costs by up to 25%.

Even more importantly, the DWP will institute a Solar Power Feed in Tariff program (FiT), to allow users to sell solar power back to the DWP. The FiT program will not only enable users to drastically cut their rates, but it will incentivize the installation of solar panels, creating good, green-collar local jobs.”
Robert Emery

The $2.50-$3.50/month is for low users at a 8% increase. Businesses will enjoy the benefit of a 28% increase in electricity which will be passed to the consumer or close their doors.

PV solar installer and manufacturing jobs are like a Presidential Campaign, once the mandate is reach or the election is over, these people will be looking for work.

Comparing geothermal to solar is not a valid comparison. Geo operates 24/7 and PV solar has a capacity factor 20%. Solar will require subsidies for decades into the future.

IN a Global economy, the only Real jobs are jobs that produce a product for export. Anything else only redistributes wealth. Countries are like households that spend more than they make, they go bankrupt. Like lemmings rushing to the sea.
Robert Emery

The $2.50-$3.50/month is for low users at a 8% increase. Businesses will enjoy the benefit of a 28% increase in electricity which will be passed to the consumer or close their doors.

PV solar installer and manufacturing jobs are like a Presidential Campaign, once the mandate is reach or the election is over, these people will be looking for work.

Comparing geothermal to solar is not a valid comparison. Geo operates 24/7 and PV solar has a capacity factor 20%. Solar will require subsidies for decades into the future.

IN a Global economy, the only Real jobs are jobs that produce a product for export. Anything else only redistributes wealth. Countries are like households that spend more than they make, they go bankrupt. Like lemmings rushing to the sea.