When state lawmakers went scouting for cash last month to offset budget shortfalls, the Massachusetts renewable energy trust caught their attention. It was sitting on a pool of more than $160 million.
In the five years since it was established, the trust had paid out only a little over $9 million for renewable energy projects. And when it came to what most people would consider classic renewable energy – rooftop solar panels on schools and public buildings, for instance – a mere $6,357 had been spent. On March 5, state Senate leaders pushed through a $17 million withdrawal from the trust, and the chamber’s top budget writer won’t rule out coming back for more this year. The trust is funded by a small tax on electric bills, amounting to about 40 to 50 cents a month for the average residential customer.
The Senate’s move has raised tough questions about the future of the fund, which is supposed to promote “green power” technologies such as solar and wind generating projects, and why it has become such an inviting target for budget-balancing legislators. At least one top business leader who had been a reluctant advocate for the fund now thinks the state should consider abolishing it.
“If there’s another diversion of any significant magnitude, I'd be in favor of abolishing the trust and ending the charge on bills,” said Christopher R. Anderson, president of the Massachusetts High-Tech Council. “Otherwise, it’s just acting as a pass-through vehicle in our tax system with an overhead charge.” Anderson said he became a supporter of the fund only after seeing its potential to support new technologies and jobs.
The $17 million tapped from the fund this spring “may be just the tip of the iceberg,” Anderson said. “That’s my concern. It’s got over $160 million, and it’s an obvious target when the cash is just sitting there.”
The trust was created in 1998 by Beacon Hill leaders bidding to win environmental support for an electric industry restructuring act widely panned as a bailout for utilities. “We have the potential to be the center of the global renewable energy industry,” Joseph D. Alviani, who was then running the state agency overseeing the fund, predicted.
That vision has yet to be realized, however. Just $43.3 million has been disbursed from the fund to date, three-quarters of that as aid to cities and towns for their share of the cost of air-pollution upgrades at electric-generating incinerators. Dioxin- and mercury-spewing “trash burners” are few environmentalists’ idea of a “green power” source – though they have accepted the political value of sending aid to 130 cities and towns to, in effect, buy wide legislative support for the fund.
Officials with the Massachusetts Technology Collaborative, the Westborough-based quasi-public agency overseeing the renewable energy trust, say they are finally on the verge of consummating several major deals that will provide more tangible evidence of the trust’s value.
“We couldn’t be happier with the way this is going,” said Mitchell Adams, who became executive director of the tech collaborative in October 2001 and brought in renewable-energy entrepreneur Robert L. Pratt as trust manager last June.
The fund was initially paralyzed by a lawsuit over the funding mechanism. The issue wasn’t resolved until the state Supreme Judicial Court upheld its legality in April 2000.
Many environmentalists acknowledged the lawsuit limited the trust’s activity through 2000. But they have been frustrated that the trust had so few accomplishments to show over the past two years. Few have spoken out publicly, however, either because they wanted grants from the trust or because they didn’t want to air criticisms that could become fodder for the trust’s opponents.
Adams said the agency’s focus has been on spending the money wisely, not quickly. “We’re not apologetic about being good stewards of the ratepayers’ dollars,” he said.
Alviani, who left the trust two years ago, said that adding to the fund’s slow start were the need to establish an advisory committee and to distribute the incinerator funds to cities and towns.
Much of its subsequent caution in awarding funds, Alviani said, was driven by a report the trust commissioned from Bain & Company consultants in late 2000. As the Bain study warned, Alviani said, “there were not, early on, a large number of projects in which these investments could be made . . . and produce the kind of public returns the Legislature intended.”
Senator Therese Murray, a Plymouth Democrat and chairwoman of the budget-writing Ways and Means Committee, which pushed for tapping $35 million from the trust but compromised with the House on taking $17 million, said, “I honestly can’t tell you whether we’ll look at that fund again” for the coming year.
Governor Mitt Romney agreed to sign off on the $17 million shift by promising to file legislation soon that will commit the state to buying at least an equivalent amount of “green power” from renewable-based generating sources over the next decade.
Similar renewable energy trusts in other states have also become budget-balancing fodder for governors and legislators facing some of their worst fiscal crises since the Great Depression. Connecticut Governor John Rowland, for example, has moved to grab that state’s “clean energy” and energy conservation fund assets, and California’s renewable trust is facing a $150 million hit.
Deborah Donovan of the Union of Concerned Scientists in Cambridge, a leading backer of the energy trust, said last month’s legislative withdrawal from the fund “sets a terrible precedent for fiscal 2004,” which begins in July. “To a lot of people, it does look like a sitting duck because all the money is still there,” Donovan said. But, she said, “There are some really excellent things that are coming to fruition right now” after 18 months of planning.
Pratt, the current trust manager, said global energy markets also play a role. Only recently has the price of natural gas, which generates nearly half of all electricity used in New England, soared to levels that make renewable energy sources more competitive and attractive to investors and developers, with the benefits of tax incentives included. It also has taken time to find people with the right skills and background to oversee the trust, a staff now numbering 45, Pratt said.
Adams and Pratt say they are confident they can meet a goal of using the trust to help fund 1,000 megawatts of power generation capacity from renewable sources over the next decade, an amount comparable to the Seabrook nuclear power plant. That could represent $1.5 billion in total investment and thousands of jobs.
Pratt said he expects 80 percent of that will be from wind and another 15 percent from “biomass,” including generators that run on the methane from closed land fills or “gasified” biomass such as wood products. Solar power, he said, remains suitable only for “niche” applications, with construction costs running six to seven times those of wind projects.
Later this month, Pratt said, the agency expects to approve a $30 million plan to buy state-mandated renewable energy certificates associated with green power projects, creating, in effect, loan guarantees for tens of millions of dollars worth of wind, biomass, and other projects. A Romney move in January to take $15 million from the fund to invest in start-up solar and wind companies will probably get another $10 million in follow-up funding.
Because it does not write checks for solar projects until they are fully installed and operational, the trust should increase greatly the amount of money it pays out in the coming year, from the current $6,357 to over $2.5 million in solar projects that it has authorized.
“By two years from now, these percentages [of funds disbursed from the trust] are going to look quite reasonable,” Pratt said. “Distributing the money is the easiest thing we do.”
