States Fire up Renewable Standards
Are utilities buying into them?
Renewable energy mandates have been around for about 10 years, pioneered by the states with important milestones coming due in the next few years.
The faint hope for a national renewable energy standard persists, but the states are really where the action is. And with waning federal support for renewables, that will not change anytime soon.
The topic was discussed in the recent American Council on Renewable Energy webinar “State Renewables Policies – Lessons Learned After A Decade of Success.”
The small incremental increases in renewable portfolio standards (RPS) in 29 states have created a multi-billion industry. But the percentages for green power are increasing.
“2010 was one of the first large compliance years that we saw and many are expected to ramp up over time. Many are expected to ramp up in 2015 to 2020,” said Lori Bird, Senior Analyst, National Renewable Energy Laboratory (NREL). “We have a lot of experience with these policies but some have just begun to be implemented.”
A key issue is whether resources are developed locally or can be traded across state borders. Resource definitions have been broadened to include energy efficiency or combined heat and power. Solar carve-outs have been popular ways to motivate that resource, though there have been some questions.
“There has been concern with large projects coming in and swamping the market, which could push out some of the residential and smaller commercial scale projects,” Bird said. Carve-outs have been on means to support renewables, but funding sources are always a question, especially if federal support lapses.
But there’s an element of public support that was absent when states started on the path to cleaner energy, said Lewis Milford, President, Clean Energy Group (CEG).
“Politically, they represent a very significant change in the way we view energy policy at the state level. Ten years ago (RPS) was solely the province of the public utility commissions, but now the legislatures are fully involved in these decisions,” he said. “Not only do they see the environmental benefits, but also the economic benefits, so there has been a democratization of renewables policy.”
To gain further traction, and to replace the tax equity markets that have proved insufficient for project finance since the recession, new models must be found.
"We have discussed infrastructure finance for years, but I think it’s now time to take this seriously, and to look at the thousands of state and local government authorities that used tax-exempt bonds to invest in the U.S. infrastructure for everything from roads to bridges to airports and to consider how to use that infrastructure finance to support the clean energy industry,” he added.
A utility industry representative worried that the RPS mandates were getting ahead of the industry’s ability to deliver clean power cost effectively. “From a utility perspective, the RPS standards are so aggressive as to raise questions about their feasibility,” said Eric Ackerman, Director, Alternative Regulation, Edison Electric Institute (EEI).
Renewable power has to be incorporated into the utilities’ mix to make it a viable fixture, not just a way to satisfy state rules.
“The challenge has been to change how we deal with renewables, to build it into our business so we make it into a profitable business for our shareholders,” he said. Another challenge utilities will face as they comply with increasing mandates is the need for increased capital spending in an era of slow revenue growth, Ackerman said.
Industry thought leaders will be discussing this topic and more at the upcoming EnergyBiz Leadership Forum, Harnessing Disruption, taking place in Washington D.C., March 19-21, 2012. Review full conference details by visiting www.energybizforum.com