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 States 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 States 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 Californias 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 States 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]. Maines 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
specificationsto 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 States 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 Nevadas renewable energy target.
The New Jersey Board of Public Utilities adopted regulations in 2006 that
increase the States 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 States 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 Californias
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 States
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 |