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State Renewable Energy Requirements and Goals: Status Through 2003 |
As of the end of 2003, 15 States had legislated programs to encourage the development of renewable energy for electricity generation. Of the 17 programs (two States have multiple programs), 9 are renewable portfolio standards (RPS), 4 are renewable energy mandates, and 4 are renewable energy goals.
Renewable Portfolio Standards The type of program used most frequently by the States is an RPS requiring that some specified percentage of electricity supply be provided by qualifying renewable energy sources (Table 6). Most State RPS programs were initiated when privately owned electric utilities were being deregulated, in order to ensure their continued investment in renewables. Key differences among the State RPS programs include their definitions of qualifying renewables, alternatives to new renewable capacity, approaches to cost recovery, opt-out provisions, and enforcement mechanisms. For example, RPS definitions of qualifying renewable technologies vary widely among the States. Landfill gas, solar thermal electric, solar photovoltaic, and wind energy are acceptable in all nine RPS States, but the rules vary for other technologies. Some also include alternatives to new capacity, such as natural-gas-powered fuel cells or solar thermal water heating. Some favor certain renewable energy technologies, especially solar, by offering more than one credit per kilowatthour. This practice may stimulate favored technologies but reduce the effective size of the RPS if they are developed. The States use several approaches for funding their RPS programs, including passing the higher costs directly to all utility ratepayers, applying charges on selected categories of sales, or encouraging voluntary purchases through “green power” programs. Most call for reducing or delaying RPS requirements if costs are excessive (“cost-outs”). They may also reduce or eliminate RPS requirements for non-cost reasons, such as if the entities are deemed not creditworthy or if existing contracts meet all the utility’s requirements. Most State RPS programs do not appear to have specific enforcement procedures, except for revoking operating licenses. Some provide for cost penalties for unmet requirements, payments into research and development funds, fines, and other sanctions; however, collaboration and cooperation appear to be the preferred enforcement tools. Through the end of 2003, no electric utility in any State had incurred a penalty for noncompliance with a State RPS. Mandates Four States have mandates that narrowly specify the new renewable capacity required (Table 6). Iowa’s 1983 mandate, the oldest, ordered its three investor-owned utilities to develop 105 megawatts of new renewable energy capacity, with each utility’s share based on its share of peak demand. Minnesota’s 1994 mandate required Xcel Energy to acquire 425 megawatts of wind capacity by December 31, 2002, plus 125 megawatts of biomass capacity, in exchange for storing additional nuclear waste at its Prairie Island plant. An additional 700 megawatts of new wind capacity has since been added to the mandate, some of which must come from small facilities (2 megawatts of capacity or less). The wind requirements are being met, but Minnesota’s biomass requirements have not been met because of technological and financial difficulties. Additional legislation in 2003 requires a power purchase agreement for 10 to 20 megawatts of biomass energy, operational by 2005, at no more than $55 per megawatthour. The 1999 renewable energy mandate in Texas requires the installation of 2,000 megawatts of new renewable generating capacity by 2009. The Texas mandate has resulted in more new renewable capacity than any other State-level requirement to date, including 1,180 megawatts of new wind capacity installed by the end of 2003 as well as small amounts of landfill gas and other renewable capacity. A fourth State, Wisconsin, in 1998 required four eastern utilities to install 50 megawatts of new renewable energy capacity by December 31, 2000, a requirement that was met by the utilities.
Voluntary Goals, Objectives, and Settlements Four States—Hawaii, Illinois, Minnesota, and Pennsylvania—have instituted programs that encourage, but do not require, new renewable energy capacity (Table 6). Hawaii’s 2001 goal resembles a typical RPS, except for the absence of penalties and the inability to obtain supplies from other States. Illinois in 2001 set targets for electricity production from qualified renewables; however, the goal is not supported by schedules, a menu of acceptable renewable technologies or alternatives other than solar and wind, compliance mechanisms, credit trading, or most of the other features of State RPS programs. In Minnesota, utilities other than Xcel are subject to the State’s 2001 Renewable Energy Objective, which requires a “good faith effort” to increase renewable energy’s contribution. The objective is considered a mandate for Xcel. In 1996, five Pennsylvania utilities settled restructuring cases on terms requiring a minimum percentage of renewables. Among these settlements, only the Pennsylvania Electric Company (PECO) energy program was implemented; however, the five utilities also established four sustainable energy funds that are reported to have supported development of significant amounts of new wind and other generating capacity. Results State renewable portfolio standards, mandates, and goals are all relatively new, with the majority just now entering their initial compliance years. Because of alternative compliance options and adjustments that would likely be made if renewable energy costs are found excessive in the future, it is difficult to assess the future impacts of these programs. Nevertheless, through the end of 2003, requirements or goals for new renewable energy capacity in 15 States has resulted in an estimated 2,335 megawatts of new renewable electricity supply (Table 7). Most of the new capacity is fueled by wind power (2,183 megawatts), with smaller amounts of landfill gas, hydroelectricity, biomass, and solar photovoltaic technologies. The 321 megawatts that entered service in the nine RPS States accounted for 14 percent of total new renewable energy capacity from RPS, mandates, and goals through 2003. State mandates—especially in Texas—have led to the development of 2,004 megawatts of renewable capacity, 86 percent of the total. Nearly 51 percent (1,186 megawatts) of all the new capacity was installed in Texas. Recognizing that States with renewable energy requirements have not added capacity as rapidly as projected in earlier forecasts, projections for new renewable energy capacity resulting from State RPS programs, mandates, and nonmandatory goals are reduced in AEO2005.
Contact: Robert Smith |
