Renewable Portfolio Standards across the nation are under re-examination by state lawmakers, aiming to diminish or eliminate these Blog-Image-2-Feb-10-2012programs. Despite benefits to local economies and environments, some politicians and lobbyists feel the programs are unimportant. To date, a number of proposals have reached State Senate and House floors throughout the country. Many lawmakers hold that RPS programs across the board create unduly costs for electricity consumers and taxpayers in order to support an industry that should be able to stand on its own. However, organizations funded by oil and gas interests like the American Legislative Exchange Council (ALEC), the Heartland Institute, and others have also played a strong role in fostering anti-renewables legislation across the country. Our company has been tracking the movement in many states and provides an overview of legislative progress thus far.

The Virginia legislature has failed to modernize and restructure the state’s current RPS. In 2012, the state voted to remove “adders” for utilities meeting their renewable portfolio standards that incentivized the voluntary targets. In reality, the adders did little to encourage new investment in renewables; however, the legislature has made no progress on developing a mandatory and strict RPS program. Now, utilities are only encouraged to participate in the program, and face no punishment for not doing so. Additionally, up to 20% of the standards for investor-owned utilities (IOUs) can be met through “certificated research and development activity expenses”, not solely new renewable energy, a significant loophole. Ideally, Virginia would have developed a more rigorous RPS program in its last legislative session to replace its voluntary targets. Additionally, IOU’s are still allowed to purchase renewable energy credits (RECs) from aging, out of state renewable generation facilities. This policy does not incentivize new development of renewable energy. And because the utilities are allowed to pass on costs of meeting the renewable standards to customers, consumers are paying higher rates while little development is taking place.

In February, State Senator William Seitz, the current chair of the Public Utilities Committee in Ohio, introduced a bill that would review the merits of the state’s RPS program, calling into question costs placed on consumers and effects on the Ohio job market. The mandate has reached committee, and testimonies are being taken on the merits of the RPS. The current renewable energy portion of S.B. 221, an overarching law mainly outlining acceptable utility rates, contains a 25% requirement for all investor owned utilities, of which 12.5% must be filled by renewable energies and the other portion can be any “advanced” energy, namely certain types of coal and nuclear. The law mandates that utilities help consumers to decrease certain types of consumption by 22%by 2025 by increasing efficiency. The law also contains a 3% percent cap on the increase in electric rates charged to consumers as a result of renewable efforts by the IOUs. If costs exceed this limit, the renewable requirement is no longer imposed. Seitz and others have interpreted this portion of the bill, however, to indicate that renewable energy production costs must not exceed the costs for fossil fuel production by more than 3%. The current program has succeeded in fostering renewable energy development, as Sol Systems has experienced first-hand through the state’s SREC market. Ohio has experienced significant success under its current RPS program while limiting costs to ratepayers and it is prudent that Ohio maintains its current incentive structures.

The Kansas state legislature recently voted to table House Bill 2241, which would have dismantled the RPS program. The Committee on Energy and Environment of the Kansas House also rejected two amendments to the bill…. One of these would have frozen the RPS requirement at 15%, another would have brought the 2020 goal down from 20% to 17.5%. While no efforts to repeal the RPS in Kansas have passed, efforts to undermine renewables incentives continue. State Senator Grothman of Wisconsin has proposed similar legislation to that in Kansas. His revisal of Wisconsin’s RPS would freeze the percent of electricity sold by utilities that is derived from renewable energy at current levels. This proposal solely mandates that utilities do not go below their current levels, requiring no further investment in renewable energies. These measures would undermine the renewable energy economy in both states and halt progress towards an independent, sustainable energy future.

Five more states have introduced bills based off of legislation designed by conservative activist group ALEC that aim to water-down the RPS programs. They are all similarly aimed at allowing hydropower to consist of a larger portion of the renewable energy requirements necessitated by the RPS of each state, to the detriment of other types of renewable energies.

In Missouri, legislation has been approved intending to broaden the scope of what is classified as “renewable energy”. Under H.B. 44, “renewable energy” would include large hydropower plants, removing the 10 MW limit on hydropower plants’ nameplate capacity for eligibility as a renewable energy. Removing the megawatt cap would only serve to “water down” the state’s RPS, decreasing investment in  distributed renewable energies as utilities choose to purchase from hydropower facilities. House Bill 44 has passed the Senate and House on April 5th, 2013, and is awaiting the governor’s signature.

Senator Jon Kean of Montana introduced an almost identical bill. It did not qualify existing large hydropower stations – only upgraded systems and those built since 2009 with a capacity below 15 MW. Apart from this stipulation, the two bills appear to be the same, removing the current cap of 10MW for hydropower plants. Montana has the least extensive wind program in the Northwest region, and continuing or expanding, not diminishing, its current RPS policy could unlock its potential in wind and other renewable technologies. The bill, S.B. 31, passed the state legislature, but was vetoed by the governor, Steve Bullock. The governor praised the success of the state’s current program in his justification for vetoing the bill.

Governor LePage of Maine has introduced a very similar bill. This update to the state’s RPS would increase the cap on all qualified renewable energies from 100MW to 400MW. This would allow utilities to meet their requirements through large-scale Canadian hydro projects from Quebec, Nova Scotia and New Brunswick. Currently, the Canadian suppliers are unwilling to provide energy to Maine because their projects are larger than the 100MW cap installed by the program. One lawyer has pointed out here that those Canadian suppliers do in fact have several projects less than 100 MW that could be used by Maine distributors. Maine has relatively high electricity costs and the governor has made it one of his goals to find cheaper sources of clean electricity consumers for his constituency. Producers of other major renewables fear the new legislation would disrupt the progress that they have made under the program.

Sen. Doug Erickson has introduced yet another similar bill to the Washington State Senate. It would recognize all forms of hydroelectricity as a form of renewable energy for the purposes of Washington’s Renewable Energy Standard. The bill is in its first reading in the Senate Energy, Environment and Telecommunications committee as of this writing.

Oregon’s Senate Bill 121, introduced in January and still in committee, would minimize restrictions on the type of hydropower that would qualify for Oregon’s RPS. Oregon currently allows hydroelectricity to qualify if the plant was built after 1995. The proposed legislation would do away with this stipulation, weakening the market for renewable energy credits (RECs) produced through the RPS. It was referred to committee in January, and has thus far not received a vote.

Although it is crucial to continually review RPS programs in order to assure efficient development of renewable energy at minimal cost, diminishing or overhauling completely the programs in states where they have had acknowledged success is likely unnecessary. These policies create job growth in the renewable sector while keeping costs low for consumers and becoming less dependent on fossil fuels. Sol Systems believes in the merits of RPS programs that aid nascent renewable energy industries, and will continue to monitor the proceedings in state legislatures across the nation.

 

About Sol Systems

Sol Systems is a boutique financial services firm that offers investor clients direct access to the renewable energy asset class and provides developers with sophisticated project financing solutions. Founded in 2008, Sol Systems focuses on meeting the most critical needs of the industry, including SREC monetization, capital placement, tax equity, and New Market Tax Credits. To date, the company has arranged financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals. For more information, please visit www.solsystemscompany.com.