The (Running) Renewable Energy Dictionary
Here’s a running list of key terms, players, and concepts I’ve come across that have helped me understand the renewable energy industry more. If there’s something you think should be added, I’d love to hear about it!
base-loading: refers to the portion of the power generation market responsible for meeting the base demand (load). It satisfies the minimum, near-constant demand and continuously operates in peak and non peak hours (see peaking)
capacity markets: host the sale of electricity for future load reserves, as Load Serving Entities (LSEs) are required to have a reserve margin.
cooperatives (co-ops): a not-for-profit utility owned by its members, typically in rural areas that no other utilities serves; all excess revenue is returned to its members
distribution: the segment of the power market where energy is delivered to end retail customers. Think telephone poles in residential areas. The voltage for distribution typically ranges from 15–34.5 kV. (see generation, transmission)
FERC (Federal Energy Regulatory Commission): an independent regulatory committee responsible for regulating interstate transmission of electricity, reviewing M&A activity by electricity companies, and establishing financial reporting regulations. It does not regulate retail electricity sales or approve generation construction, but it does handle siting applications for transmission projects.
generation: the segment of the power market where energy is created. Think solar farms, wind farms, hydroelectric plants, or geothermal stations. The voltage for generation typically ranges from 5–34.5 kV. (see distribution, transmission)
IOU (Investor-Owned Utilities): for profit companies owned by shareholders; receive a license to operate in a specific area from state commissions. Interstate generation and transmission sales are regulated by FERC, distribution and retail sales are regulated by state commissions
ISO (Independent System Operator): operates regional electricity grids, administers wholesale energy markets, and provides reliability planning to meet NERC requirements. In areas without an ISO or RTO, the local utility is responsible for transmission planning. Projects in the West and Southeast are more likely to encounter territories without an ISO/RTO.
ITC (Investment Tax Credit): allows commercial, industrial, and utility owners to take a one-time tax credit of 30% of the qualified installed cost of a photovoltaic (PV) system. The ITC is set to step down to 26% in 2020, 22% in 2021, and 10% thereafter. For passive investors in a solar project, the ITC can only be applied to passive income, which typically reduces the number of investors with a tax appetite––since most individuals have minimal passive income.
LSE (Load Serving Entity): a load refers to an amount of power, so a LSE oversees the delivery of power to customers; typically utilities, these purchase energy on the wholesale electricity market and sell it on the retail electricity market to end users.
mandatory markets: exist because of a policy decision (like a Renewable Portfolio Standard); require a minimum amount of renewables in the power supply (see voluntary markets)
NERC (North American Electric Reliability Corporation): develops and enforces reliability standards for bulk power systems in the United States, with their authority coming from FERC. NERC also trains and certifies industry personnel.
net metering: a method of valuing solar when production exceeds demand from an end user; essentially a meter “running backwards” where power is sold into the grid, valued at the price of retail power. Most utilities have a size limit for net metering. Think about owning a rooftop solar, but only using half of the energy it generates. Net metering allows you to sell that other half of the energy back into the grid.
peaking: refers to the portion of the power generation market responsible for meeting the peak energy demand (which exceeds the base-load). These generation facilities come online as needed and usually have higher costs given the short-response nature of their operation. These are typically natural gas facilities.
photovoltaic (PV): the scientific term for a solar panel. Refers to the photovoltaic effect, where an electric current is generated when light is shone on a surface. This is how most solar panels work (apart from solar thermal, which heat water using sunlight).
PPA (Power Purchase Agreement): between a wholesale energy producer and a utility (or other end-power-purchaser); the utility agrees to purchase a certain amount of power, at a certain rate, over a specified period of time from the power producer. The sale of RECs are usually also specified in the PPA.
Public Power Utilities (“Municipals”): not-for-profit utilities owned by the cities and counties; regulated by the local government, not FERC or state commissions.
REC (Renewable Energy Certificate): These verify that a certain amount of energy (normally in 1 MWh increments) came from a source of clean energy. Since power from solar, wind, coal, or natural gas may all be combined on the same transmission and distribution systems before reaching the end user, these verify that the quantity of power used came from a renewable source. As on operator, these certificates can be separated from the power produced and sold for monetary value to a separate buyer than the power purchaser. RECs can be sold on a per-installed-watt basis — a one-time sale — or on a per-MWh-produced basis. (see REC Arbitrage, PPA)
retail electricity markets: connect Load Serving Entities (LSEs) with the end power users. All states regulate the price of electricity for end users, and certain states allow customers to choose their power suppliers (full retail competition).
RPS (Renewable Portfolio Standards): require states’ utilities to generate or purchase an increasing number of RECs annually. These standards define the project types and geographic locations that utilities must source their RECs from.
RTO (Regional Transmission Organization): operates regional electricity grids, administers wholesale energy markets, and provides reliability planning to meet NERC requirements. RTOs also have greater responsibility for the transmission network and ensure fair transmission access for all generation projects. In areas without an ISO or RTO, the local utility is responsible for transmission planning. Projects in the West and Southeast are more likely to encounter territories without an ISO/RTO.
solar carve-out: require utilities to generate or purchase RECs from in-state or in-region solar facilities. Usually part of a RPS, these drive up the price of solar RECs and create large price differentials between projects (see REC Arbitrage)
SSA (Solar Services Agreement): between the system owner (solar panel owner) and the site host (land owner); this agreement states that the system owner will continue to provide necessary services (like maintenance) so that the solar system continues to produce power, ensuring that the site host’s land is properly used.
State Department of Environmental Protection: regulates the state’s air, land, and water resources/use
State Public Service Commission: regulates what are fair and reasonable rates for electric service under their jurisdiction
substation: essentially a transformer, these stations change the voltage between different components of the power market. Step-up substations raise the voltage, usually from generation to transmission (this minimizes power loss). Step-down substations lower the voltage, usually from transmission to distribution (for safer power delivery in residential areas).
tax appetite: if someone has a large tax appetite, they have a strong interest in acquiring tax credits to offset their taxable income. For a tax credit to have value, an organization or individual must owe taxes (have a tax appetite). A steak has no value to you if you’re a vegetarian. Similarly, since public and nonprofit organizations don’t pay taxes, they have no tax appetite. (see ITC)
transmission: the segment of the power market where power is brought from generation facilities to distribution centers. Think of those really big steel structures through large, cut-away paths with buzzing power lines. If a solar farm (generation) produced energy in a desert, transmission lines would carry that power to a nearby town where the power would go through a local substation and end up in distribution lines to customers. **This helped my understanding: transmission is the highway, distribution is the neighborhood street. Substations are the off and on ramps.** Voltage typically ranges from 69–765 kV. (see distribution, generation)
utility: a power company that generates, transmits, and/or distributes electricity for sale to customers. Various types of utility models exist, such as IOUs (Investor-Owned Utilities), Municipals (Public Power Utilities), and Co-ops
voluntary markets (“green power markets”): driven by consumer preference for certain types of renewable energy, not required. Think Apple wanting to be 100% renewable powered — not required, but they voluntarily participate, contributing to the voluntary market. Represent a theoretically unlimited ceiling above the mandatory market floor. (see mandatory markets)
wholesale electricity markets: connect electricity producers with Load Serving Entities (LSEs)and power marketers (who may resell the power again at a margin). The wholesale market is regulated by FERC and administered by ISOs and RTOs.
If you have any comments, questions, or insights, we’d love to hear them! Comment below or send us an email | Follow The DIFEI Research Project to get regular updates about renewable energy, blockchain, and our research.
