As States Retreat, NASEO Touts Current Policies For ESPS Compliance
“Overall this report finds that state energy efficiency and renewable energy policies can likely play a critical role in meeting the nation’s energy security, economic development, and greenhouse gas reduction goals,” David Terry, executive director of the National Association of State Energy Officials (NASEO), said in the Feb. 12 report, which was co-authored by the consulting group M.J. Bradley & Associates.
The study reviewed existing policies for three states — Arizona, Minnesota and Pennsylvania — focusing only on their renewable energy standards (RES) and energy efficiency resource standards (EERS) because their contributions to GHG reductions under EPA’s existing source performance standards (ESPS) are relatively easy to quantify.
In particular, the study finds that existing policies would allow Pennsylvania to exceed the goal EPA has proposed and would get Minnesota close to meeting its ESPS target. Arizona’s existing policies would achieve roughly 25 percent of its target, meaning it would have to consider additional measures for compliance.
Part of the difference stems from the “relatively stringency” of the state goals, Chris Van Atten of M.J. Bradley and Associates said during a Feb. 5 NASEO conference.
The report comes as several states are reconsidering their existing RES or EERS. For example, West Virginia recently became the first state to repeal its RES, with the legislature voting overwhelmingly to scrap the law, which would have required 25 percent of electricity sales to come from renewable or alternative sources by 2025.
Environmentalists had earlier criticized the standard for failing to substantially drive new renewable generation because it could entirely be met through “alternative” resources such as fuel produced by coal gasification, synthetic gas, waste coal or tire-derived fuel.
Colorado’s new Republican state Senate recently gave initial approval to a bill that would cut in half the state’s 30 percent renewable requirement, though the legislation likely faces an uphill battle in the Democratic House and with Gov. John Hickenlooper (D). A greater threat to Colorado’s standard could come in court, where the U.S. Court of Appeals for the 10th Circuit is grappling over whether to repeal the law based on arguments from a free-market institute that the standard violates the Constitution’s dormant Commerce Clause.
A similar fight is playing out in the 8th Circuit, which is hearing Minnesota’s appeal of an adverse ruling striking down its law that requires local generation of carbon-free electricity, though that suit is not specifically focused on an RES. North Dakota successfully challenged the law in district court but Minnesota’s appeal is now pending.
In Ohio, lawmakers voted last year for a two-year freeze of its renewable and efficiency standards, which left the standards in place but stopped the law’s annual increases. The law also called for a commission to study the consumer impact of the standards.
And in Kansas, lawmakers last year narrowly rejected a proposal to scrap the state’s 20 percent renewable requirement by 2020, which is mostly met through wind power. Environmentalists are concerned that the legislature could attempt to rescind the law again this year.
Pending Litigation
Some sources say the pending litigation against the Colorado and Minnesota laws appear to be aimed at killing programs that critics have been unable to repeal in legislatures. And they expect such litigation to continue regardless of the outcome of the pending suits.
But the attacks could jeopardize states’ ability to comply with the ESPS, even in cases where states may allow non-renewable fuels to qualify for credit under their rules.
For example, Van Atten noted that Pennsylvania’s RES would help the state over-comply with EPA’s interim standards, even after removing roughly 15 percent of its contribution, because that is the historical level of “alternative” resources such as coal mine methane and black liquor used to meet the state standard. Such resources likely would not qualify as zero-emitting renewables under EPA’s rule.
The study finds that the Keystone State’s existing renewables requirement, an extension of current efficiency targets of 1 percent annual savings through 2030, and scheduled coal plant retirements would achieve the state’s proposed interim ESPS target of 1,179 pounds of carbon dioxide (CO2) per megawatt hour (lbs/MWh), though the state would be short of its final 2030 limit of 1,052 lbs/MWh.
Conversely, Arizona’s ESPS limits are sharply lower, driven by an EPA assumption that the state can quickly ramp up its relatively low capacity rates for existing natural gas plants. The state’s interim limit is 735 lbs/MWh and its final target is 702 lbs/MWh. Those figures are roughly half of the state’s current emissions rate of 1,453 lbs/MWh.
Existing policies, the report finds, would reduce the state’s emissions rate by 12 percent to 25 percent. “Given the stringency of Arizona’s proposed performance targets, the state would still need to reduce its CO2 emissions by roughly 14 million tons to meet its interim goal,” the study says.
Although Arizona likely must consider “additional control measures” to comply with the ESPS, if it maintains existing policies, “they could significantly contribute to Arizona’s compliance with the proposed rule.”
Minnesota’s existing RES — expected to require an additional 20.7 million MW of renewables — and EE standards — which require an annual 1.5 percent reduction in power use — would bring the state’s emissions rate from its current level of 1,450 lbs/MWh to a rate between 1,168 lbs/MWh and 969 lbs/MWh. That is shy of the state’s interim limit of 911 lbs/MWh and its final target of 873 lbs/MWh.
“Minnesota shows good progress toward the interim goal,” Van Atten said. “But based on this analysis, it would need to consider some additional policies for reductions in CO2 emissions to close the gap and come into compliance.”
The report cautions that it only considered EERS and RES, and did not include non-ratepayer policies such as building codes, energy savings performance contracting, state tax incentives, industrial efficiency or combined heat and power projects, which NASEO believes are “a vital strategy that many states should consider.”
The NASEO report also notes that there are key compliance questions, including how state programs will interact with each other. For example, a state that is part of a cap-and-trade program would “automatically benefit” from building a renewable facility, though the same project could be spurred by another state’s RES.
“One possible solution that could mitigate this concern would be to establish regional programs so that there is consistent treatment across states,” the report says.
Further, the study notes that while EPA is slated to issue guidance on how to evaluate and verify efficiency cuts, “these issues are dramatically simplified by adopting a mass-based target and mass-based trading system because tracking and reporting renewable generation and energy efficiency savings is really only necessary in the context of rate-based compliance where emissions and MWhs are needed to derive the state’s average emission rate.”