State Renewable Energy Requirements and Goals: Update Through 2008 |
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State Renewable Energy Requirements and Goals: Update Through 2008 State RPS programs continue to play an important role in AEO2009, growing in number while existing programs are modified with more stringent targets. In total, 28 States and the District of Columbia now have mandatory RPS programs (Table 3), and at least 4 other States have voluntary renewable energy programs. In the absence of a Federal renewable electricity standard, each State determines its own levels of generation, eligible technologies, and noncompliance penalties. The growth in State renewable energy requirements has led to an expansion of renewable energy credit (REC) markets, which vary from State to State. Credit prices depend on the State renewable requirements and how easily they can be met. In the AEO2009 reference case, most States are projected to meet their RPS targets. California is an exception, as a result of limits on State funding for renewable projects. Therefore, for California, the cost of achieving each target increment is estimated, and the amount of renewable capacity that exhausts the renewable funding is assumed to be built. Renewable generation in most regions is approximated, because NEMS is not a State-level model, and each State represents only a portion of one of the NEMS regions. Compliance costs in each region are tracked, and the projection for total renewable generation is adjusted as needed to be consistent with the individual State provisions. In 2008, three States (Michigan, Missouri, and Ohio) enacted new renewable legislation, and three others (Delaware, Maryland, and Massachusetts) modified existing legislation. Missouri’s new RPS was approved by voters in the November 2008 election. In California, voters rejected two propositions that would have strengthened the State RPS. One would have increased the renewable requirement to 50 percent of electricity generated by 2025 and allowed for the use of a 20-year feed-in tariff [38]; the other would have established a $5 billion fund to support renewable electricity generation and transportation projects. The propositions were not supported by many environmentalists, who saw them as poorly written and potentially causing harm to the renewable industry. Both were defeated easily. Michigan. Public Act 295 [39] established Michigan’s first RPS. Signed into law in October 2008, the Act requires that all electricity suppliers generate 10 percent of their electricity from renewable sources by 2015. There are also intermediate benchmarks. Each supplier has its own standard, based on current levels of renewable generation. Coal-fired plants that sequester at least 85 percent of their emissions also qualify toward the target, as do all renewable technologies except new hydroelectric facilities; however, improvements on existing hydroelectric facilities will receive energy credits. Like most programs, Michigan’s RPS will use RECs to promote compliance. Bonus credits are given to solar generators as well as facilities using in-State labor and manufactured equipment [40]. Up to 10 percent of the total requirement may be met through energy optimization and advanced system credits, which lower electricity demand. Missouri. On November 4, 2008, voters approved Proposition C [41], changing Missouri’s renewable goal into an enforceable mandate. The requirement goes into effect in 2011 with a 2-percent renewable target, which increases in four phases to reach the final 15-percent target by 2021. REC trading will be used, with in-State renewable generation eligible for 1.25 REC for each megawatthour of electricity generated. A small percentage of the overall renewable requirement must be met through solar generation. Suppliers subject to the RPS are required to offer their retail costumers a rebate of $2.00 per installed watt of small-scale solar systems. Ohio. In May 2008, Ohio enacted legislation [42] that requires most retail electricity providers to produce 25 percent of their electricity from alternative energy resources by 2025. Alternatives are defined as low-carbon technologies, including nuclear energy and coal with carbon sequestration. Plants that come on line after 1998 are considered eligible toward meeting the target. Within the 25-percent requirement is a separate provision that increases the required renewable share of annual generation from 0.25 percent in 2009 to 12.5 percent in 2024. There are also energy efficiency and load-reducing requirements. Municipal and cooperative suppliers are exempt from all provisions. REC trading is expected to help Ohio achieve its requirements. The REC prices will be capped at $45 per megawatthour, with more severe penalties incurred if the solar requirement is not met; however, there is also a provision that exempts suppliers from the mandates if they can show that they would incur incremental costs 3 percent above the total cost of a conventional alternative. Suppliers exempted from the annual requirement may have to meet stiffer compensatory targets in subsequent years. Delaware. Senate Bill 328 [43] amended Delaware’s existing RPS by awarding offshore wind 3.5 times as many credits as are received by conventional renewable technologies toward meeting the mandate. Analysis has shown that this provision makes offshore wind development economical under business-as-usual assumptions. Maryland. House Bill 375 [44] increased the State’s renewable energy requirement to 20 percent of total generation by 2022. The requirement must be met with resources classified in the legislation as “tier 1,” which include all renewable forms of generation except existing large hydroelectric facilities. Senate Bill 348 [45], also enacted in 2008, expanded the definition of tier 1 resources to include “poultry litter-to-energy” facilities. Also included in the tier 1 resource target is a solar energy mandate that increases annually until it reaches 2 percent in 2022. Smaller amounts of electricity generated from tier 2 resources (large hydropower facilities) are included until 2019. Along with its increased mandatory target, House Bill 375 includes higher compliance caps. A shortfall in renewable generation from tier 1 resources other than solar energy will cost a supplier 4 cents per kilowatthour. If it can be shown, however, that achieving the target would cost more than one-tenth of the supplier’s total energy sales, the target may be deferred until the next year (an “off-ramp” that was added with the higher compliance caps in House Bill 375). Penalties for solar shortfalls are much larger, 45 cents per kilowatthour in the initial shortfall year, but they decrease by 5 cents annually until they reach and remain at 5 cents per kilowatthour beginning in 2023. Funds generated from the penalties will go to an energy investment fund for support of renewable energy technology advancement and deployment. Massachusetts. The State RPS requirements are modeled through 2014 in AEO2009. Electricity suppliers in Massachusetts are required to increase their annual renewable generation from 4 percent of total generation in 2009 to 9 percent in 2014. The State DOER has the option of extending the 1-percent annual increase through 2020. Renewable requirements beyond 2014 are not assumed in AEO2009. In December 2008, the DOER enacted regulations establishing a target of 15 percent renewable generation by 2020, with the presumption of increasing the target thereafter. AEO2009 is based on regulations in effect as of November 2008 and does not include the new target.
Contact: Robert Smith/Chris Namovicz
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