Ivan Gold, Senior Counsel, posed these questions to the audience in Williamsburg, Virginia, are federal RPS standards necessary to support renewable energy goals? Will state standards be able to be met with the current system in place?
He discussed how Renewable Portfolio Standards work. The government requires utility companies to use renewable energy for a percentage of electricity supplied during a specified period. At the end of each period, utility companies surrender Renewable Energy Certificates (RECs). From a business standpoint these certificates represent an economic value and encourages the development of renewable energy. Each REC is evidence of 1 mWh produced by a renewable resource. At the end of the compliance period, states report how much energy they made and how much of it was renewable (using the REC’s as proof).
In 1978 the Public Utilities Regulatory Policy Act made utilities buy renewable energy at avoided costs. In 1999 Texts put its RPS standards into place. By 2009, 29 states had mandatory RPS in place. A federal RPS program would force standardized rules national and would help to drive down GHG emissions. Increased financial support has helped to move programs along and loan guarantee programs are helping to build projects. On the other hand, it would require more transmission construction. Many states currently have regional transmission systems but there is no national transmission system to help administer a federal standard. Utility clients in the northeast for example, are finding it hard to buy renewable energy. Moreover, many states already have an RPS system in place-which would all need to be taken into account when crafting a federal RPS program for all states.
There are currently 2 pending federal actions to force renewable standards.
HR2454– the American Clean Energy and Security Act would reduce CO2 to 83% of 2005 levels by 2020.
SR1738–the Clean Energy Jobs and American Power Act has already been passed in the Senate and would reduce CO2 to 80% of 2005 levels by 2020 with an electricity target of 15% by 2021.
In 2007, wind energy represented about 30% of all new generation coming on line.
When thinking about which Renewable Portfolio Standard legislation would best fit, several considerations should be taken into account.
Is it likely that the goals state legislatures have set are going to be achieved? Are there enough renewables? Can they be developed in time? Can they be delivered to where they can be used? Can they be integrated? Can we pay for them?
Full compliance is estimated to produce 77,000 megawatts of new renewable generation by 2025. To reach that goal, these questions will need to be examined thoroughly.
If federal RPS legislation were enacted, is there enough time to set up a viable national infrastructure to meet 2020 goals already set? Even if legislation was successfully passed, building–and rebuilding in many places–a proper infrastructure alone could take us well into 2020.
The vast discrepancy that exists between individual states RPS’s, particularly in regards to what constitutes a renewable energy source and the percentage point requirements creates a plethora of issues that may result from federal legislation. First, any federal legislation must find a feasible and achievable medium for the percentage of renewable energy required. The states that have maintained proactive and aggressive RPS’s will advocate against the adoption of any federal standard that is significantly below their previously adopted standards. The market for REC’s would become of even greater importance if federal legislation were adopted. In this market, would customers in certain states face significant increases in prices for power as a result of the REC market, necessary infrastructure investment and necessary technological investments? Considering this potential increase in prices, taking into account the difficult economy, is federal legislation too risky?
Existing state RPS standards regulate about 20% of the nation’s total 2008 CO2 emissions, and about 24% of electric sector CO2 emissions. Reducing those emissions by 10-20% by 2020 would be a significant step. And, the mechanisms are in place now. Assuming any federal RPS which would affect approximately 40% of total US CO2 emissions would take at least two years to implement, i.e., not before 2013 at the earliest. The state programs are the best GHG reduction programs inplace now. infrastructure changes to make 17% of energy from renewables by 202, may be difficult, but I think, certainly worth the effort.
The latest climate change edition of the Economist makes clear that it’s too risky not to take such action as the potential result of global warming can’t be precisely predicted.
Proposed Federal RPS legislation would permit individual states to maintain stricter standards if they choose. There is no question that wealth transfers betwen states and regions will occur. Legislative attempts to mediate these transfers only will disguise the real economic price of changing the present treatment of GHG emissions asd an externality (i.e., not included in prices).