AEO2006 provided a review of renewable energy programs that were in effect in 23 States at the end of 2005 [37]. Since then (as of September 1, 2006), no new State programs have been adopted; however, several States with renewable energy programs in place have made changes as they have gained experience and identified areas for improvement. Revisions made over the past year range from clarification or modification of program definitions, such as which resources qualify, to substantial increases in targets for renewable electricity generation or capacity. The following paragraphs provide an overview of substantive changes in the design or implementation of State renewable energy programs. 

The Arizona Corporation Commission currently is engaged in a rulemaking process for the State’s energy portfolio standard (EPS), scheduled to run through the end of 2006 [38], which could lead to substantial changes in the Arizona program [39]. The most significant change proposed is an increase in the State’s renewable electricity generation target. Pending final approval by the Commission and the Arizona Attorney General, the EPS target would increase from 1.25 percent of affected electricity sales to 15 percent. The new requirement would also allow trading of renewable energy credits among utilities to facilitate compliance. In addition, several new resources would be qualified to meet program requirements, including new small hydroelectric facilities (less than 10 megawatts) and geothermal power. 

The original legislative authority for California’s RPS, Senate Bill (S.B.) 1078, established a target of 20 percent renewable electricity generation by 2017. Subsequently, the California Energy Commission and California Public Utility Commission set an administrative goal of 20 percent by 2010 and 33 percent by 2020 [40]; however, key funding mechanisms were still tied to the legislative 2017 target [41]. On September 26, 2006, Governor Schwarzenegger approved S.B. 107, which codifies the target of 20 percent by 2010 and calls for a formal study of the 2020 target [42]. S.B. 107 also modifies requirements for electricity generation from other States to qualify for the California RPS. Out-of-State generators are now limited to 10 percent of associated supplemental energy payments (SEPs) but have fewer restrictions on physical deliveries of power into the California market. 

Connecticut has received new statutory authority to expand the area in which qualifying credits can be generated for the State’s RPS program and to use renewable energy credits in lieu of physical energy delivery for program compliance [43]. In addition to the New England Independent System Operator territory, credits generated in New York, Pennsylvania, New Jersey, Delaware, and Maryland may also be used to satisfy program requirements, upon a finding that each State has a comparable RPS program. 

With one of the oldest RPS programs, Maine has passed an additional requirement that 10 percent of all electricity generation growth must come from renewable resources [44]. Maine’s existing target, 30 percent of total generation, had already been exceeded when the original RPS-enabling statute was enacted. The new law presumably will require the addition of new generating resources to meet the incremental requirement. 

Changes in the Massachusetts RPS program, although more incremental than structural, have received significant notice among the affected parties. The changes refine the rules governing the types of biomass electricity generation facility that can qualify for the RPS program [45]. Previous regulations did not allow generation from “retooled” biomass plants —those in service before 1998 but subsequently upgraded to meet current environmental specifications—to qualify for the RPS, except by waiver. The changes allow that portion of the output from retooled biomass plants that is in excess of historical generation levels to qualify. This clarification is particularly significant given the importance of biomass electricity generation in meeting the Massachusetts target. In 2004, the latest year for which data are available, 35 percent of the compliance target came from biomass generation [46]. 

Nevada has issued a number of new rules within the context of the current statutory authority for the State’s EPS [47]. Perhaps most significant is the establishment of a credit trading system to facilitate compliance by individual utilities. Credit trading is a common feature of State RPS policy, which allows utilities to purchase compliance credits from other utilities that have excess renewable electricity generation, in lieu of actually generating renewable electric power. Energy efficiency programs can now also be used to offset a portion of Nevada’s renewable energy target. 

The New Jersey Board of Public Utilities adopted regulations in 2006 that increase the State’s renewable electricity generation target from 6.5 percent of sales by 2008 to 22.5 percent by 2021 [48]. The new requirement includes 17.88 percent of sales from “Class I” renewable resources, 2.5 percent of sales from “Class II” resources, and the remainder (2.12 percent of sales) from solar resources. Solar generation in excess of the target may be used to meet Class I or II requirements, and excess Class I generation may be used to meet Class II requirements. Class I facilities can use a broad range of renewable resources, including wind, ocean, geothermal, LFG, and approved biomass resources. Class II facilities include hydropower facilities less than 30 megawatts and approved “resource recovery” facilities (trash incinerators). 

Wisconsin has passed new legislation increasing the State’s RPS target from 2.2 percent of electricity sales by 2012 to 10 percent by 2015 [49]. Under the new legislation, the Wisconsin Public Service Commission is required to provide a report by 2016 indicating whether the goal of 10 percent has been achieved and, if not, what steps are required to achieve it. 

The AEO2007 reference case includes new renewable electric power projects that have been identified. It does not include additional renewable projects that might be required for full compliance with some State programs, because it is not clear whether those requirements will be enforced, in light of provisions for granting of compliance waivers, alternative compliance mechanisms, and other discretionary enforcement options. A case where compliance with nondiscretionary enforcement is assumed projects that most State renewable energy targets should be achievable, with varying impacts on regional electricity markets. 

Some regions with State targets could see substantially more renewable electricity generation with nondiscretionary compliance than is projected in the AEO2007 reference case. State standards in the Mid-Atlantic and New England regions could result in approximately 350 percent and 20 percent more renewable generation by 2030, respectively, than projected in the reference case. Biomass is expected to predominate as the fuel of choice in those regions, which lack exploitable geothermal resources and have only limited low-cost wind resources. While the total increase in renewable generation in New York is just over 10 percent by 2030, generation from nonhydropower renewable resources is nearly double the reference case projection. 

In other regions, the impact of the standards is projected to be less pronounced. For example, Texas, the Southwest, and the Northwest have either largely met their renewable electricity requirements with existing and planned capacity or are projected to build sufficient renewable capacity based on economic merits within the reference case. Aggregated nationally, State renewable energy standards would result in approximately 30 percent more electricity generation from nonhydropower renewables in 2030 than is projected in the AEO2007 reference case. 

Although this analysis projects that most States would meet their RPS targets without triggering compliance “safety valves” (such as alternative compliance payments), it also suggests that limitations on the funding of California’s RPS program could cause that State not to reach its legislated targets [50]. Under current law, California utilities may apply for SEPs from the State to cover above-market costs of acquiring renewable energy resources. The SEPs are funded through a dedicated surcharge on consumer utility bills. As of September 2006, the California Energy Commission, which is responsible for administering the SEP program, had not awarded any SEPs and had developed a current account of around $300 million. Funding authorizations through 2011 should provide an additional $77 million per year in new funds. The surcharge authority must be renewed by 2012. 

With the expiration of the Federal PTC at the end of 2007, as assumed in this case, and limits on supplemental funding (without which compliance is waived), California is projected to achieve a nonhydropower renewable electricity generation share of 12 percent by 2012. Thereafter, the State’s qualifying renewable generation is projected to grow only to the extent that such power is economically competitive without the SEP. This projection may underestimate overall compliance with the California RPS program, however, to the extent that recently passed program modifications facilitate increased use of resources from other States.

Notes and Sources

Contact: Chris Namovicz
Phone: 202-586-7120
E-mail: chris.namovicz@eia.doe.gov