Tough Economic Times Make States Reconsider Their Renewable Energy Policies

Angela Beniwal, Thursday 29 March 2012 - 12:30:09

Renewable portfolio standards (RPS) have been a big driver of getting more renewable energy onto the electric grid. The National Renewable Energy Laboratory has estimated that by 2015, generation resulting from RPS mandates will surpass 150 million MWh.

However, a soft economy has led some states to water down their mandates, while the current political situation makes passage of a federal renewable energy standard next to impossible, renewable energy experts explained at a recent webinar sponsored by the Renewable Energy Markets Association.

"Modifications to eligible generation technologies, sourcing requirements and other revisions are changing the face of renewable energy in the states," said Justin Barnes, senior policy analyst with the North Carolina Solar Center.

For instance, Maine introduced legislation in 2011 that would significantly reduce its RPS. A 2007 law increases the amount of renewable energy that utilities must obtain by 1% each year until they reach 10% by 2017. The new law would cap the RPS at 4%.

Another bill proposed in Washington state in 2011 could temporarily suspend the state's 15% by 2020 RPS during the slow economy.

"It is the legislature's intent to provide utilities with more time during the continuing economic downturn to meet certain mandates of the [act] and thereby delay the rate impacts that would be caused by the capital investments to meet such mandates," the bill states.

Other states have tried to expand the definition of "eligible resources" in order to make compliance easier. Iowa includes plasma gasification, Maryland considers waste-to-energy a Tier 1 resource, and Oregon now includes nuclear and hydropower.

"As long as we have a sluggish economy and the focus is on jobs, then we'll continue to see pushes against [RPS] portfolio implementations," said George "Chip" Cannon, a partner with Patton Boggs LLP.

But even if the economy improves, he added, the political climate is not favorable for renewable energy.

"At the risk of wading into some dangerous political waters, I think it's also worth noting the partisan rhetoric that often accompanies some of the regional efforts," Cannon said. "Efforts to repeal or push back some of the standards in certain states will continue. We'll just have to see what happens during the next couple of election cycles."

Nonetheless, politics did not prevent Sen. Jeff Bingaman, D-N.M., chairman of the Senate Energy and Natural Resources Committee, from recently reviving clean energy legislation.

The Clean Energy Standard Act of 2012, introduced by Bingaman in late February, amends the Public Utility Regulatory Policies Act to include a federal clean energy standard (CES).

In addition to renewable energy, such as wind and solar, the legislation includes other low-emissions and clean energy resources such as renewable biomass, natural gas, hydropower and nuclear power, as well as "clean" coal with carbon-capture technology.

Before proposing the legislation, Bingaman asked the U.S. Energy Information Administration (EIA) to analyze the impacts of a CES. The EIA created a base case for the CES, which stated that the standard would include full credits for all renewable resources and would apply to all utilities, regardless of ownership and size.

The bill, as introduced, differs from the base case, and would require that beginning in 2015, all large retail utilities - excluding those in Alaska and Hawaii - obtain 24% of their electricity through clean energy sources, with the mandate increasing by 3% each year through 2035. In addition, the federal CES would not replace or have additional authority over state mandates.

Cannon said odds are slim that the legislation will be enacted.

"Given that it's an election year, it really has no chance of passage," he said. "There were no Republican co-sponsors, but it is significant in that it places a marker for continued congressional discussion on a clean energy standard."

State successes
Although things look bleak at the federal level, and despite efforts by some to weaken state mandates, progress is being made in meeting the targets that currently are on the books. Twenty-nine states plus Washington, D.C., have an RPS, while eight states have voluntary goals or targets. California has the most ambitious RPS - 33% by 2020 - which was signed by Gov. Jerry Brown, D-Calif., in 2011.

The state must hit a 20% target this year. As of 2010, California is at 86% compliance.

"That's not necessarily a measure of whether a utility has been deemed non-compliant by the regulatory entities in California," he added. "It's a measure of the amount of renewable electricity actually delivered in comparison to the percentage-based standard."

California utilities are able to borrow renewable energy credits (RECs) from some of the renewable energy contracts for projects that are expected to come online in the near future, Barnes explained, so even though some of the targets may not have been met, utilities will not be considered non-compliant by regulators.

Changes are also ahead in California. Legislation signed in 2011 means that the state's RPS applies not only to publicly owned utilities, but also retail sellers. As a result, the Southern California Public Power Authority issued a request for proposals seeking a total of 5 GW of renewable energy to be placed in service by 2020.

Colorado is another state with an impressive RPS. Investor-owned utilities must obtain 15% of their electricity from renewable resources in both 2012 and 2013, with the mandate ramping up to 30% in 2020.

According to Barnes, Xcel Energy - Colorado's largest utility - is in good shape to meet the target, which means that there may not be any new opportunities for wholesale generation in the state.

"If you look at [Xcel's] most recent 2012 RPS compliance plan, it indicates that [the utility] has the resources that it needs to meet compliance with this standard through 2020," he said.

As of 2010, Minnesota was in complete compliance with its RPS, which is 30% by 2020 for Xcel Energy and 25% by 2025 for all other utilities. For 2012-2013, Xcel's RPS increases to 18%, while other utilities have to reach 12%.

"While there is a pretty substantial increase coming down the pike for 2012 to 2013, there's also a fairly substantial amount of banked renewable energy credits that will be used to meet that standard," Barnes said, adding that utilities in the state currently hold 12.8 million RECs.




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