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January 25, 2006...In this guest editorial our news editor, Scott McMahan, looks at economic incentives that promote energy efficiency and indirectly help the compound semiconductor and solid state lighting industries. He provides his opinions on which types of incentives might work best to promote energy conservation measures and the increased adoption of new products... JMcD

Compound semiconductors play an important role in both energy production (such as high-efficiency solar photovoltaics), and more efficient end-user applications including solid state lighting. The state of Washington (in the far Northwest in the USA) has enacted some of today's most innovative legislation when it comes to promoting renewable energy. The legislation was outlined recently in a newsletter called “Renewable Energy Access.” (Ref: Renewable Energy Access article). The legislation goes above and beyond the usual one-time incentives and includes a provision giving consumers actual money for continued usage of renewable energy sources. This is a model that will likely become especially effective for other states.

If left to our own decisions, people do not necessarily choose the most efficient technology by any means. However, economic incentives can help promote renewable energy, renewable energy applications, and alternative lighting among consumers and manufacturers. It can force consumers and manufacturers to see the benefits of the new technology in a way they are most likely to pay attention to, with actual money as the incentive. Effective promotions leave more money in consumer’s wallets while helping industries earn more.

A number of USA states have begun an important trend in promoting energy conservation efforts nationwide. Some have adopted legislation that takes a variety of approaches including using economic and tax incentives for purchasing and using applications requiring less reliance on oil and non-renewable energy sources. One law enacted in the state of Washington is a perfect examples of providing economic incentives for continued usage in addition to one-time tax breaks for investing in the technology. Washington's recently enacted law, SB 5101, established a “feed in” production incentive in which homes and businesses with solar photovoltaic (PV) and wind power systems would earn a credit of $.15 cents per kilowatt hour (kWh) of electricity usage, amounting to up to $2000 annually. This represents the first time such an incentive program has been enacted in the United States. It was reportedly roughly tailored to use of a 3.5 kilowatt PV system. Additionally the law multiplies the credit if the components are manufactured in Washington, up to $.54 per kWh. This rate will be made available through the end of June 2015.

A conservation law on the supply side, SB 5111, provides tax breaks for renewable energy businesses that reside in the state or choose to relocate there. It gives further incentives if the companies relocate in economically depressed areas. According to the article, in Renewable Energy Access, Denis Hayes, founder of Earth Day, former director of the federal Solar Energy Research Institute, and current President of the Bullitt Foundation, described SB 5101 "as the most important solar legislation ever introduced in any American state legislature.” The article also reported that Germany has used such legislation very effectively.

This is an improvement over the one-time capacity-based incentives being attempted in California. The state of California or the utilities give one-time rebates for each watt of solar power (solar power capacity) that can continue to be produced over a fixed period of time. (Ref: Renewable Energy Access article). For example at the current rate of $2.80 per watt of capacity, for a 3kWh system, the rebate would be $8400. Unfortunately, this one-time payment approach does not guarantee that the renewable energy source will continue to be used. If the programs do not grant money for continuing usage, companies and consumers are likely to purchase the technology, and try it, but they may find that it was easier to actully slide back to the old technology. Then there would be less economic incentive to continue using what ever application it may be.

In addition to the Energy Bill of 2005, another federal government program to promote efficient use of energy is the Energy Star Challenge, continued in 2005. (Ref: EPA news release) With the Energy Star Challenge, the United States Environmental Protection Agency is working to promote greater energy efficiency in homes and offices in: Alabama, Arizona, California, Delaware, District of Columbia, Connecticut (through the Institute for Sustainable Energy, Eastern Connecticut State University), Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Mississippi, Michigan, Minnesota, New Hampshire, New Mexico, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, and Vermont (through "Efficiency Vermont"). The goal of the program is to improve energy efficiency in buildings and homes by 10%. Products that conform to the Energy Star electricity usage guidlines are designated as Energy Star products with the accompanying promotion privileges.

So far there are no Energy Star certified SSL products on the market. While the current USA President, George W. Bush signed the Energy Bill of 2005 into law, which initiated the Next Generation Lighting Initiative and the Next Generation Lighting Industry Alliance, it for the most part only looks at research and development and the industry, and does not directly address consumers purchases. In this way, it does not go nearly far enough as yet to promote the use of solid state lighting alternatives.

The industrial sector, especially, has much economic incentive to keep the status quo surrounding energy efficiency. Autoworkers could keep their jobs, oil producers would stay in business, and conventional light manufacturers would continue to profit. Effective energy conservation promotional efforts must reduce the economically painful change required for fully adopting more energy efficient technology. For the same reasons, consumers and industry may have economic incentive to go back to the old technology, to produce electricity from burning oil, to go back to using conventional lighting to gain back the jobs and the profits for the lighting industry. This is why Washington state's approach with continuing incentives will prove to be the more effective course of action.

I think one-time incentives will only work well in promoting buying of products in the short term. What are needed are long-term incentives for their usage. Overall if legislators want to help promote new, more efficient, and “cleaner” energy sources and applications, the incentive that people and industry are most likely to respond to is... money. And the most effective kind of incentive for promoting sales and usage of more efficient products and renewable energy pay both at the time of purchase and over the life of the product beyond just savings on cost of ownership.

The above editorial authored by Scott McMahan, news editor of CompoundSemi News & LIGHTimes

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