More states consider boosting renewable fuel mandates

Source: Benjamin Storrow, E&E News reporter • Posted: Thursday, March 16, 2017

If climate change was a nail, a renewable portfolio standard would be policymakers’ favorite hammer. No tool is more popular in America for tackling a global rise in temperature.

Today, 29 states require utilities to secure a certain percentage of their electricity from sources like wind and solar.

And with President Trump rolling back federal climate initiatives in Washington, states are considering their renewable energy requirements with renewed vigor.

Massachusetts and California lawmakers are contemplating proposals to go 100 percent renewable (Climatewire, March 13). Legislators in Nevada and New Jersey have laid out plans to get 80 percent of their power from low-carbon sources. Efforts in Connecticut and Minnesota, where policymakers are debating boosting renewable energy mandates to 50 percent, are relatively modest by comparison.

In all, 10 states are considering an increase in renewable portfolio standards, according to the National Conference of State Legislatures.

“Are they effective? Yes, they are,” said Jay Apt, co-director of the Electricity Industry Center at Carnegie Mellon University. “Are they the most effective? Certainly not. Are they the most effective likely to be enacted? They probably are.”

The sentiment hints at the wider debate over RPS requirements, as the standards are most commonly known.

Many economists would prefer a carbon tax or cap-and-trade regimen to a mandate. A carbon price is more flexible and less costly, they reason. Instead of requiring power companies to adopt technologies like wind and solar, a cap or tax leaves it to the market to identify the least-costly compliance options.

Another common argument: RPS standards frequently leave out existing sources of low-emitting power.

“If the goal is bringing low-carbon energy technologies to scale and lowering cost so we can decarbonize the grid, then the most appropriate mechanism for a low-emissions carve-out would include all sources such as nuclear and fossil energy with carbon capture,” said Armond Cohen, executive director of the Clean Air Task Force.

Pushback in many states

Those opinions are largely couched within the framework of improving RPS requirements. Others express outright hostility to the standards.

Four states are considering bills to lower their current standards. Ohio and New Hampshire are considering full repeals. Concerns over costs are driving those debates.

The Buckeye Institute, a free market think tank, estimates Ohio’s standard, requiring that 12.5 percent of the state’s power come from renewables by 2025, would result in 134,100 fewer jobs and cost the state gross domestic product $15.5 billion.

Advocates of the New Hampshire repeal cite the decision of Sig Sauer to expand operations outside the Granite State. The gun maker said it was expanding its operations in Arkansas because New Hampshire’s electric rates were too high.

Americans for Prosperity, a conservative advocacy group funded by the Koch brothers, has been instrumental in many of the efforts to reduce or repeal state RPS mandates.

“Policies like RPS end up restricting Americans’ access to affordable and reliable electricity,” said Christine Harbin, Americans for Prosperity vice president for external affairs. “That’s because of requiring utilities to purchase certain amounts of electricity from sources like wind and solar, which are inherently less affordable and reliable than more conventional sources.”

RPS advocates scoff at such claims. They point to a 2014 study by the National Renewable Energy Laboratory that concluded RPS compliance costs between 2010 and 2012 were the equivalent, on average, of 1.2 percent of retail electricity rates. A 2016 NREL study predicted meeting states’ existing RPS requirements prior to 2050 would have little impact on power prices, with compliance costs ranging from -2.4 cents to 1 cent per kilowatt-hour. In the event of widespread renewable deployment, costs could vary from -1.9 cents to 4.2 cents per kWH, NREL found.

A carbon tax? ‘I live in the real world’

Trading systems, which allow utilities to swap renewable power credits, have proved particularly effective, helping to boost renewable generation outside the RPS mandates and temper costs, advocates say.

They contend mandates have allowed technologies like wind and solar to achieve economies of scale, lowering costs and making renewables more competitive against traditional sources.

States initially set modest RPS goals but have become more ambitious in recent years. In 2015, Hawaii approved a proposal to generate 100 percent of its power from renewables by 2045. California soon followed, with a plan to secure half its electricity from renewables by 2030. And Maryland lawmakers in February overrode a veto by Gov. Larry Hogan (R), boosting the state’s RPS to 25 percent by 2020.

Still, higher requirements are needed in most states to achieve deep decarbonization of the electric grid, RPS advocates say.

“The prices have fallen, the mechanisms have been shown to work, consumers have confidence to try for more,” said Karl Rábago, executive director of the Pace Energy and Climate Center. “We brought home a C, now we’re going to try for a B on our way to being an A student.”

RPS advocates like Rábago acknowledge the theoretical benefits of a carbon tax or cap and trade. But, he adds, “I live in the real world.”

An easier pill for policymakers to swallow

Indeed, convincing voters of the benefit of carbon pricing has proved a daunting task.

Washington voters resoundingly rejected a ballot measure seeking to impose a revenue-neutral carbon tax in November (Climatewire, Nov. 9, 2016). Several bills calling for a carbon tax are now making the rounds in blue-state legislatures, but all face long odds (Climatewire, Feb. 22).

Samuel Stolper, a researcher at the Massachusetts Institute of Technology, framed the dynamic like this. At a recent meeting of the Massachusetts Department of Public Utilities, there was clamor for a higher renewable mandate.

The problem in Stolper’s view: Massachusetts belongs to a regional power market. Increasing the state’s renewable standard may only succeed in pushing utilities toward traditional fossil resources outside Massachusetts.

The Bay State would be better placed seeking a greater decrease in the Regional Greenhouse Gas Initiative’s carbon cap. The regional cap-and-trade system encompassing Massachusetts and eight other Northeastern states is now contemplating an annual CO2 reduction of 2.5 percent after 2020.

“But that’s a difficult proposition because there are eight or nine states involved,” Stolper said. “It seems clear the political palpability of an RPS is greater in most cases than a tax or a cap and trade.”