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Where the Wind Blows and Sun Shines

America's state governments are at the forefront of efforts to expand the nation's supply of renewable energy. Renewable energy standards (RES) comprise the cornerstone of these initiatives. RES is by far the most widely used mechanism by states to expand renewable energy production and consumption. Fully 29 states have adopted some form of a mandatory RES. RES is also in place in the District of Columbia. And Vermont has a goal that so far has been voluntary, but which may become mandatory by 2013.

What follows is an assessment of how different states have structured their RES programs, what similarities they share and what differentiates them. Renewable energy standards are complex instruments and this assessment is not intended to be exhaustive. It focuses on five selected examples of state RES initiatives to highlight key features upon which these programs are founded. States use a number of different names for their RES programs including renewable energy portfolios. For simplicity, all will be referred to as renewable energy standards. A primer on how RES is supposed to work offers a useful point of departure.

How Renewable Energy Standards Work

State RES programs share a basic common thread. They place a mandatory obligation on electric utilities to generate a specified percentage of the electricity they sell to their consumers from renewable energy technologies. The underlying concept is that RES will foster competition, efficiency and innovation to create a market that expands renewable energy generation and drives economies of scale that lower the cost of renewable production such that it is competitive with conventional fossil fuel generation.

RES mandates vary from state to state. Each state has designed its RES to account for a range of state-specific conditions and policy priorities. These include available wind, solar and other renewable energy potential in a state; reducing greenhouse gas emissions and mitigating other environmental externalities associated with fossil fuels; and lowering electricity costs to consumers. Other goals include diversifying the energy mix to protect against potential fuel interruptions and attracting wind and solar farms, product manufacturers and research and development facilities to promote economic development and job creation.

Every state with RES includes photovoltaic solar, wind, hydropower and biomass as qualifying renewable energy generating technologies that utilities may use in meeting their RES obligations. Other technologies are qualified on a state-by-state basis. Included are anaerobic digestion, geothermal, ocean and tidal energy, municipal waste incineration, ocean and solar thermal, cogeneration, fuel cells and distributed generation through net metering. Ohio alone qualifies advanced nuclear generating technology as an eligible RES resource.

Table 1 summarizes principal features of the RES programs enacted by the 30 states (including Vermont) and the District of Columbia. Several states have revised their RES requirements since they were first adopted, usually to advance compliance dates, raise compliance targets or add carve-outs for specific technologies. The figures depicted under the "Goal" column represent a state's final-year renewable energy mix objective. Many states also set interim yearly goals not reflected in the table.

 

Comparing Standards

California has adopted the most ambitious RES of any state. When established in 2002, it obligated the state's three large investor owned utilities (IOUs)-Pacific Gas and Electric, Southern California Edison and San Diego Gas and Electric-to utilize qualified renewable generation for 20 percent of their total electricity sales by the end of 2010. Several IOUs with smaller service areas were also subjected to the RES. Regulatory oversight for ensuring that California's IOUs comply with their 2010 obligations lies with the California Public Utilities Commission (CPUC).

In 2009, Governor Arnold Schwarzenegger signed an executive order raising the state's RES target to 33 percent by 2020. The order was closely tied to AB 32, the state law adopted in 2006 to limit emission of global warming greenhouse gasses. In contrast to the CPUC, the California Air Resources Board (CARB) was given primary authority for overseeing compliance with the 2020 mandate. The order also extended the RES obligation to California's two large municipally owned utilities, the Sacramento Municipal Utility District and the Los Angeles Department of Water and Power. They are required to self-implement their own RES programs. SMUD has obligated itself to meet the 2010 and 2020 targets. LADWP aims to attain a more ambitious 35 percent target by 2020.

According to the CPUC, the state's IOUs are unlikely to meet their 2010 mandates until a 2013-2014 time frame. This casts doubt on their ability to achieve their 2020 targets as well, as doing so will require the utilities to expand their procurement of energy generated by qualified resources by an additional 60 percent above the 2010 target in just seven years.

California's utilities face several barriers to achieving their RPS goals. A significant one stems from delays utilities face in processing power flow studies to gain access to the transmission grid operated by California's Independent Service Operator. Another is grounded in environmental disputes. Utilities aim to meet their RES obligations in part by installing new concentrated solar power generation in the Mojave Desert. Environmentalists have filed lawsuits to stop these projects on the grounds that they threaten desert wildlife. Senator Diane Feinstein (D-Calif.) is attempting to set aside 500,000 acres of the Mojave Desert as a national monument, thereby precluding solar farming on these lands. Other states face similar types of barriers. An example is Massachusetts, where local opposition founded in environmental and aesthetic objections long delayed development of the Cape Wind offshore farm on Nantucket Sound.

In 2007, Minnesota adopted an RES. All of the state's 19 electric utilities are required to comply. Minnesota requires Xcel Energy, the state's largest utility, to meet a 30 percent mandate by 2020. Of the 30 percent, a minimum of 24 percent must come from wind energy. The state's other utilities are subject to a less demanding mandate: they must obtain 25 percent of the electricity they sell from renewable generation by 2025.

Minnesota currently generates more than 7 percent of its electricity from wind power and Excel derives a greater percentage of the energy it sells from wind than any other distribution utility in the U.S. A 2009 Minnesota Office of Energy Security report projected that most utilities appeared on track to meet their interim 2010 RES obligations.

In 2004, the New York Public Service Commission (PSC) instituted an RES requiring the state's IOUs to use qualified technologies to meet 25 percent of their electricity sales by 2013. In January 2010 the mandate was raised to 30 percent in 2015. Driving the increase was concern about global warming and the recent adoption by the state of an energy efficiency portfolio. Another factor was the desire to protect against price spikes in the cost of natural gas, which reached a high of $11.26 per thousand cubic feet in 2005. Municipal utilities including the New York (City) Power Authority and the Long Island Power Authority (LIPA) are exempt from the RES but have voluntarily agreed to contribute to attainment of the state's renewable energy goal.

New York's RES requires that new resource acquisition for projects of over 80 MW be centrally procured and allocated to utilities by the New York State Energy Research and Development Authority (NYSERDA). Funding is from a surcharge levied on each kilowatt-hour sold by the state's investor-owned utilities. The standard identifies two tiers of resource acquisition. Tier 1 accounts for 98 percent of resource generation to be acquired by NYSERDA. Tier 2 includes behind-the-meter customer-sited photovoltaic and wind energy, methane digesters and fuel cells purchased by consumers with NYSERDA subsidies.

According to the NYPSC, Tier 1 procurement solicitations generated only about 62 percent of the interim 2009 Tier 1 goal. New wind farm development in upstate New York accounts for much of the state's newly procured renewable generating capacity. The wind farms generated controversy when evidence emerged that project developers had acted improperly in obtaining needed land use approvals, leading to local government efforts to zone out or ban new wind farm projects. State Attorney General Andrew Cuomo reacted by promulgating a code of conduct to guide new project development that developers have agreed to abide by in the future.

The approach Texas has taken differs from other states in that its mandate is set not in terms of the percentage of electricity delivered to customers but in terms of renewable energy generating capacity in absolute megawatts. The state first adopted an RES in 1999 at 2,000 MW in 2009. Legislation in 2005 revised the production goal to 5,880 MW in 2015. Subject to the mandate are the state's IOUs, including TXU Energy and Reliant Energy, which respectively serve the Dallas-Fort Worth metroplex and Houston. Municipal utilities are exempt from the RES. The 2005 legislation also set a target of 10,000 MW in 2025. The Public Utility Commission of Texas allocates the mandate among regulated utilities based upon the pro-rata share of retail energy sales accounted for by each.

Texas deserves credit for having installed more wind energy generation than any other state. Its 9,400 MW of nameplate capacity exceeds that of the next three leading states combined. Still the 5,880 MW RES target is equivalent to 5 percent of the state's 2005 peak demand for electricity. Assuming load growth by 2015 and given the state's size, this may well be the least ambitious RES goal set by any of the 29 states. Wind also accounts for nearly all of the renewable energy on the state's grid. The 2005 revisions also require that of the 5,880 MW, 500 MW come from resources other than wind. But little in the way of other renewable energy has come online; less than 10 MW of solar energy is currently tied to the state's grid. Texas will need to find a way to induce development of other renewable technologies if the 500 MW carve out contained in its RES is to be achieved.

In 2007, New Mexico approved an RES requiring PNM and the state's other two IOUs to generate 20 percent of their total retail electricity sales from qualified renewable energy technologies by 2020. Rural electric cooperatives must use renewable energy to fuel 10 percent of their retail sales by 2020. Under the RES, utilities and co-ops must also reduce their total retail sales of electricity by 5 percent by 2020, adjusted for load growth, incorporating energy efficiency improvements into the New Mexico RES. Compliance is overseen by the New Mexico's Public Service Commission.

One feature of New Mexico's RES is that it aims to broadly diversify state energy supply by mandating technology-by-technology minimum requirements that must be met in certifying utility and co-op compliance. Twenty percent of the overall 20 and 10 percent targets must be generated by solar power, 20 percent from wind power and 10 percent from biomass, geothermal energy or new hydropower. Utilities may be excused from these diversification targets if the cost of attaining them raises the cost of electricity by more than 2 percent or if the targets cannot be accomplished without impairing system reliability.

Commonalities and Differences

It's not possible here to evaluate all of the state RES programs currently in place. Instead, the aim has been to highlight principal similarities and differences that define these programs. The most basic commonality is the imposition of an obligation upon retail utilities to incorporate renewable energy generation into the electricity they sell. Beyond this, differences abound.

There is great variation in terms of how aggressively different states seek to use RES to bring new renewable energy assets onto the grid. IOUs are treated differently than publicly owned and co-op utilities, as are large and small utilities. Most states bestow regulatory authority for overseeing RES mandates upon their public utility commissions or similar bodies. But California has divided this responsibility between its PUC and air resources board. Most states leave it up to utilities to procure qualified RES resources. By contrast, New York mandates that procurement be made by a state agency. The states are also selective in what technologies they qualify as eligible in meeting their mandates and use of carve outs.

States also vary in terms of how they treat distribution utility and merchant owned power generation, use of renewable energy credits to comply with RES mandates and penalty and other enforcement mechanisms they may impose upon utilities that fail to meet their obligations They also differ in the degree to which they allow renewable generation installed prior to adoption of their RES laws to be counted towards goal attainment. Space limitations preclude discussion of these topics here.

Barriers states face in successfully attaining their RES goals have been highlighted. Delays in grid access and local concerns over land use, the environment and aesthetics have affected RES implementation.

One last barrier not previously discussed is how federal action may impact these initiatives. Legislation approved by the U.S. House of Representative last June would require that 20 percent of the nation's electricity be generated by renewable energy by 2020, with energy efficiency improvements allowed to account for a quarter of this. A bill reported out of the Senate Energy and Natural Resources Committee last July would set a national standard at 15 percent. The House bill does not contain a preemption clause that would override state mandate goals. The full Senate has yet to complete work on its version, but there is concern that preemption could be included in the chamber's final product. States with ambitious RES goals are paying close attention to this. So are the renewable energy industry and other advocates of expanding use of clean renewable energy in the United States.


Author: Matt Slavin, Ph.D. is principal of Washington D.C.-based Sustaingrup, advising business and government in energy and the environment, clean-tech and sustainability.

*Year signifies when RES first enacted. This may differ from the year RES went into effect.
**Goal is final year target based upon latest revisions to state RES. Many states include requirement for wholesale suppliers in addition to distribution utilities.
*** Vermontís SPEED program is voluntary. If the Public Service Commission determines in 2012 that utilities are lagging, the requirement becomes mandatory in January 2013

Qualifying Resources:
All States: PV, wind, hydro, biomass, landfill gas, biofuels.
Other resources include anaerobic digestion, fuel cells, geothermal, municipal waste, hydropower, ocean thermal, wave, tidal, solar space, solar thermal, solar water, distributed generation, cogeneration.

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