- Policy Resources
- News & Analysis
- Your State
PSN on December 18, 2006 - 10:37am
State governments are not waiting on D.C. to develop an energy independence policy for their states. Instead, almost half the states have taken the lead on promoting and utilizing renewable energy.
A popular tool, used by twenty-three states and the District of Columbia, is setting some type of standard specifying that electric utilities generate a certain amount of electricity from renewable sources. Such Renewable Portfolio Standards (RPS) work to increase the share of a state's electricity that comes from renewable sources. RPS has become increasingly popular and is an efficient method of meeting policy targets for greater renewable energy use.
This dispatch will look into the different ways that RPS have been implemented across the country. RPS standards can be tailored for specific states needs. For instance, several states provide incentives for promoting specific renewable technology to capitalize on resource availability. Nevada, a state with abundant sunshine, requires that 5 percent of the RPS requirement come from solar energy. As will be seen below, RPS standards promote job creation by providing a market for clean, renewable energy, thus proving that environmental sustainability is not at odds with economic development.
Setting Goals for Renewable Energy Production
Renewable portfolio standards work in several ways. Some standards, like in Texas and Iowa, call for a certain amount of energy to come from renewables. Texas's capacity standard, for instance, requires a cumulative installed renewable capacity of 2,880 MW by 2007, increasing to 5,880 MW by 2015. Iowa has a much lower capacity standard at 105 MW each year, but the policy has been in place since 1983.
More commonly, other states require that a certain percentage of energy comes from renewables. The highest standard is in Maine, which requires 30% of its energy to come from renewables with Maine actually purchasing up to 40 percent of its electricity from renewables. Examples of other state requirements are:
- The most ambitious standard is in California, which requires an annual increase in renewable generation by utilities that is equivalent to at least 1 percent of sales, reaching a total goal of 20 percent by 2017. The California Public Utilities Commission is currently considering ways to increase the percentage of renewables to 33 percent by 2020.
- Massachusetts focuses exclusively on new sources of renewable energy or expanding the generating capacity of existing renewable energy facilities to an initial total of 4 percent of the electricity produced by 2009. However, the percentage then has an open-ended increase, increasing by 1 percent every year until the Massachusetts Division of Energy Resources decides otherwise.
- New York has a unique RPS standard implementation program. NY requires a total of 25 percent of energy to be from renewables. Under NY's program, the New York State Energy Research and Development Authority acts as a central procurement authority. It receives all the funds collected by the utilities to support the RPS program, and then administers incentives to providers to reach the incremental targets for a given year. The program also adopts an effective RPS target of 24 percent renewable sales and the remaining one percent to be achieved through voluntary markets for green power. The one percent voluntary standard is meant to encourage the development of a self-sustaining market with participation from all energy stakeholders for renewable energy.
Colorado was the first state to pass an RPS standard through ballot initiative. Colorado's RPS requires 10 percent renewable use by 2015. There is a big push for the upcoming legislative session to increase the RPS standard to 20 percent. Just this past November, voters in Washington approved a ballot initiative that requires an RPS standard of 15 percent by 2020. I-937 promotes the use and development of wind power, solar, geothermal and tidal energy, combustion of landfill and sewer gas, biodiesel and biomass.
Promoting High-Quality Renewable Sources
States often don't want to treat all renewable energy sources the same, but instead give higher priority to the cleanest energy sources such as solar or wind. For example, Colorado's RPS has a "carve out" or "set aside" provision that requires that 4 percent of the RPS must be met with solar technology. The carve out provision is a way that states can tailor the renewable energy requirement to what is best suited for the state.
Colorado is not the only state with carve out provisions. Nevada, for instance, requires that of the total RPS standard, to reach 20 percent in 2015, not less than 5 percent must be from solar energy. New Jersey requires that 2.12 percent of retail electricity supply be generated by solar by 2021. Connecticut, which also has a two tier renewables system dividing different energy sources into different classes with different requirements, requires a minimum percentage of Tier 1 renewables, which include solar, wind, biomass, and fuel cells. Other examples of two tier classifications include:
- Pennsylvania, which has a two tier system and requires a set-aside percentage requirement for solar generation within its Tier 1 requirements. In Pennsylvania, Tier 1 energy sources are pure renewable energy sources, such as wind, solar, and hydropower. Tier 2 energy sources, on the other hand, includes waste coal and coal gasification. Tier 1 generation begins at 1.5 percent of the total energy produced in 2007 and increases incrementally to 18 percent in 2020. Tier 2 generation must contribute 10 percent by 2020. The heavier emphasis on coal-based alternative energy is an indication of the large role coal production politics plays in the state.
- New Jersey also has two classes of renewables. The total renewable generation requirement starts at 3 percent in 2001 and increases to 6.5 percent by 2012. Class II renewables comprise 2.5 percent of the portfolio for all years while Class I renewables increase from 0.5 percent to 4 percent over the first ten years of the program. Class II resources includes resource recovery facilities and hydro power facilities with 30 MW capacity or less. All other renewables, such as solar, photovoltaic, wind, fuel cells, and geothermal, are listed in Class I.
- Maryland's two tiers add up to an eventual RPS standard of ten percent. The contribution of Tier 1 resources to the RPS standard begins at 1 percent in 2006 and increases to 7.5 percent in 2019. Tier 2 resource contribution remains static at 2.5 percent. Tier 1 resources include solar energy, wind power, biomass, methane, and tides and currents, while Tier 2 energy sources are not as resource based and include incineration of poultry litter as fuel and waste to energy electric generators.
Similar to carve out provisions are distributed renewable energy provisions. Distributed renewable energy resources are small-scale technologies located close to where energy is used, such as solar hot water projects. In Arizona, the total RPS requires 15 percent by 2025. Of that, 30 percent must be derived from distributed renewable energy. The requirement helps Arizona keep more energy dollars in the state, which leads to job creation and economic development.
Renewable Energy Credits as a Tool
Other states do not mandate the use of certain renewables, but give additional credit for the generation and use of specific renewable energy. Renewable energy credits are one key tool for promoting an RPS. A credit is a tradeable certificate of proof that one kWh (kilowatt hour) of electricity has been generated by a renewable-energy source. The credits are a separate commodity from the power itself. Credits can then be traded and acquired to meet the RPS standard. This allows parties to purse the cheapest options in the market by allowing a flexible system by which the RPS standard can be met. In Maryland, suppliers receive 200 percent renewable energy credit (REC) for solar, 110- 120 percent REC for wind and 110 percent for methane.
In addition to requiring a minimum use of solar energy, Nevada uses its REC system to further develop solar energy. Generators are awarded 2.4 RECs for each kWh of solar electricity, while other renewable energy sources are only credited 1 REC per kWh generated. In New Mexico, one kWh of electricity generated by biomass, geothermal, landfill gas or a fuel cell is worth two kWh towards the RPS. One kWh of electricity generated by solar resources is worth three kWh.
Another way to use RECs is highlighted by Washington State's 2002-2003 Energy Portfolio bill. The bill included an apprenticeship provision that would multiply the RECs awarded to an electric utility by 1.2 times if the utility utilized state-approved apprenticeship programs on its renewable energy projects.
Responding to the Opponents of Renewable Energy
The most common opposition to renewable energy is that it is supposedly more expensive than fossil fuels.
"Anti-fossil fuel activists", as they are referred to by the right, have been accused of trying to force consumers to spend more money on technology that may not be environmentally sound.
Yet the supposedly "low cost" of fossil fuels ignores are the heavy subsidies already offered to oil, gas and coal industries and, more importantly, the heavy economic costs of repairing the environmental and health damage from fossil fuels. As the Union of Concerned Scientists documents in their Hidden Costs of Fossil Fuels, consumers pay an additional price in polluted air and water, higher health care costs, the rising costs from climate change, and national security costs of America lacking energy independence.
Some accounts put the annual cost of powering with coal, natural gas and petroleum at 3 trillion US dollars, or $15.58 for each gigajoule of energy generated, once damage to the environment is factored in. Switching to solar hydrogen, by contrast, would cost only $13.55 per gigajoule. To account for these costs, the California Public Utilities Commission in December 2004 began requiring state utilities to begin factoring in the costs of carbon emissions from fossil fuels in pricing the relative costs of different energy sources.
Opponents of renewable energy don't like to acknowledge the tax concessions and direct grants that fossil fuel production receives. The global estimate for fossil fuel subsidies is $300 billion per year, with $20 billion coming from the U.S. government alone. The same amount of subsidies given to renewable energy production would provide major incentives for the world's energy companies to invest in renewables and make renewables a viable, competitive energy option.
Other opponents of renewable energy argue it will cost consumers too much and undermine job growth.
In fact, in Texas, for instance, wind development is providing the tax base in rural West Texas and supporting manufacturing jobs statewide. Additionally, the use of renewable energy credits helps to lower the cost of RPS. In fact, a recent study concluded that for an average residential consumer, a 10 percent RPS standard would result in an increase of $2/ month, a figure that is sure to go down with the increased production and development of renewables.
Furthermore, a recent study found that wind and photovoltaic production offers 40 percent more jobs per dollar than coal. The study estimated that a 37.5 MW wind farm would create over 356,250 hours of work, or 180 person-years. In the Texas example, with an expectation of 2,000 MW of wind power, 19 million hours of work, or 9,364 person-years would be created. Renewable energy development offers an opportunity for organized labor and the renewable industry to create a strong partnership. The renewable industry offers jobs and growth and organized labor can provide the manufacturing, installation, and servicing skills.
A few opponents claim that renewables are not environmentally sound.
Ironically, renewable energy opponents claim that renewable technologies create few environmental benefits. However, wind energy and solar power, for instance, do not produce emissions, generate solid waste, or use water. Biofuels can reduce greenhouse gas emissions by 1.7 billion tons per year, equal to more than 80 percent of current transportation-related emissions. Plus, renewable energy use does not create the same air pollution problems as burning fossil fuels, such as release of sulfur oxides, nitrogen oxides, carbon monoxide, hydrocarbons, large particles of dust, soot, smoke, and small particles that have been linked to chronic bronchitis, aggravated asthma, and premature deaths. Not to mention that renewable are sustainable energy resources, they do not deplete natural resources.
There is therefore a clear gain for the environment from replacing fossil fuels like coal, currently the largest source of electricity in the United States and a leading cause of acid rain, the largest source of global warming emissions and a significant source of smog, toxic metals and tiny-particle pollution.
RPS standards are an easy way for states to encourage the development and use of renewable energy. With ever rising gas costs and a need for energy independence, RPS provides a way for states to move towards energy independence while creating jobs and boosting local economy.