Monday, February 27, 2012

PURPA at a Glance

Of the river of energy and environmental regulation that flowed from Rachel Carson’s Silent Spring, perhaps one of the least understood is the Public Utility Regulation Policy Act, or PURPA.

PURPA at is simplest form required energy generators to compare the cost of adding new capacity with the cost of purchasing the new electricity from a domestic renewable (or efficient) energy producer. This production included production emanating from cogeneration plants (http://energygridiq.wordpress.com/2012/01/30/cogeneration/)
After comparing the prices, the energy utility had to chose the cheaper of the two options, which often was purchasing energy from renewable sources.

After PURPA was enacted at a federal level in 1978, there has been a trickle of state-by-state adaptation as well as supplementations. However, wherever PURPA was adopted to a degree, it resulted in an increase in the number of independent energy producers in that region.

This was a huge shift in how the energy market had previously operated. Prior to 1978, almost all of the energy generated (and used in the public grid) throughout the United States was controlled by massive utility generation facilities. However, after PURPA, the number of independent power producers rose exponentially. In fact, in terms of added capacity, independent energy producers account for around half of all added capacity on an annual basis today.

Furthermore, independent energy producers now account for roughly 1/3 of the total energy capacity within the United States.

What are the implications of this? Simply, PURPA opened up the door and facilitated the rise of a deregulated energy market. Through the encouragement of small independent energy producers, PURPA showed that a situation with competition could create a more fruitful energy community.

It should be noted that many of the original tenants within PURPA have been altered both through the Energy Policy Act of 1996 and the Energy Policy Act of 2005.

To read more about PURPA please take a look at:

http://energy.gov/oe/services/electricity-policy-coordination-and-implementation/other-regulatory-efforts/public

For more about the Energy Policy Act of 1996 and 2005:

http://www.ferc.gov/legal/fed-sta.asp

And of course for any news about energy policy, regulations, or updates take a look at www.energygridiq.com today. 

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