December 03, 2010

Western states out front on Renewable Electricity Standards

Some are more strict than federal proposal

By Ben Machlis

U.S. Sen. Byron Dorgan (D-N.D.) and U.S. Sen. Jeff Bingaman (D-N.M.) announced in November that they would continue to push for passage of legislation to implement a federal Renewable Electricity Standard (RES) during the lame-duck session.  The legislation, proposed back in September, and called the Renewable Electricity Promotion Act of 2010, would require utilities to acquire 15 percent of the electricity they sell to retail consumers from renewable sources by 2021. 

Details of the bill include:

• an exemption for utilities that sell less than 4 million MWh; 
• a renewable energy credit trading scheme that allows utilities that are exceeding the standard to sell their excess credits to utilities not meeting the standard;
• and a broad definition of renewable energy that includes standard renewable sources such as wind, solar and geothermal, and also includes non-renewable resources such as coal-mined methane and improved energy efficiency. 

Tom Udall (D-N.M.), another co-sponsor of the bill, heralded the bill as being an important step in positioning America “as a global leader in renewable energy manufacturing.” The big question  for many in the west, which has seen a boom in the renewable electricity generation business over the last decade, is whether a national RES will actually have any effect in their state.  For most, the simple answer is no.

Most western states already have Renewable Portfolio Standards (RPS) which require utilities to acquire a percentage of their electricity from renewable sources; Oklahoma, Nebraska, Wyoming, Idaho and Alaska are the only western states yet to adopt an RPS.

A survey of western states further reveals that most have adopted  RPSs far more stringent than the proposed federal standard.  Colorado and California have adopted the most aggressive standards, requiring 30 percent and 33 percent, respectively, of electricity to come from renewable sources by 2020.

Oregon and Nevada have both adopted RPSs requiring 25 percent of electricity to be from renewable sources by 2025, and Washington, Montana, Arizona, Utah (voluntary program that offer utilities incentives to participate) and New Mexico all have adopted RPSs requiring the same or higher percentages of energy from renewable sources than the standards proposed in the Senate bill. 

Only North and South Dakota have adopted RPSs requiring 10 percent of electricity from renewable sources by 2015, and Arizona, which requires 15 percent of electricity from renewable sources by 2025, have adopted standards that are arguably less stringent than the proposed federal standard.

These more stringent standards will stay in effect since the proposed legislation specifically provides that it “does not diminish any authority of a state or political subdivision of a state to adopt or enforce any law or regulation respecting renewable energy or energy efficiency.”  Despite this unambiguous waiver of the preemptive power of federal legislation, there is a concern that a federal RES will subvert these more stringent state standards by confusing the regulatory environment.

Despite these shortcomings, the federal RES and its credit trading program proposed in the bill may spur development of renewable energy in some western states, as utilities look towards purchasing credits from utilities in states such as Wyoming, Utah, and Colorado, whose proven capabilities to cost effectively produce wind and geothermal power, are more attractive options than building more expensive renewable projects in their own states.