Ohio may find that its ‘timeout’ for renewable energy standards was expensive — study

Source: Daniel Cusick, E&E reporter • Posted: Monday, March 16, 2015

Ohio’s decision to freeze for two years the state’s renewable energy and energy efficiency standards has cost the Buckeye State hundreds of millions of dollars in energy investment and “will come to represent a missed opportunity for Ohio to lead the country in building a clean energy economy.”

That is the finding of a new analysis from the left-leaning Center for American Progress, which draws its conclusions from surveys and interviews with Ohio business leaders and energy experts who have witnessed what CAP describes as the Ohio’s retrenchment on clean energy policies.

“Without the clean energy standards that drove Ohio’s positive economic trends, many Ohioans fear that the trends could stall or reverse,” CAP policy experts Gwynne Taraska and Alison Cassady wrote in an 11-page analysis of Ohio’s clean energy policies published this week.

Moreover, representatives of the state’s wind, solar and energy efficiency sectors interviewed by the group across Ohio “spoke to the uncertainty created in the clean energy sector, and all reported negative impacts of the recent legislation,” the group said.

“For example, some have had to stall hiring or lay off employees; some are shifting their operations to other states; some are experiencing a downturn in business or difficulty attracting new investment; and some have had to cancel projects that the new legislation made economically unviable,” states the analysis.

Debate over Ohio’s 7-year-old renewable energy and energy efficiency laws reached a fever pitch last year after the Ohio Legislature took up and then passed two bills, S.B. 310 and H.B. 483, that effectively rolled back one of the nation’s most ambitious renewable energy and energy efficiency standards.

The 2008 standards required utilities to meet 12.5 percent of electricity demand with renewable resources and to decrease energy use by more than 22 percent through energy efficiency programs by 2025, with interim targets set for each year leading up to 2025. With last year’s reforms, Ohio’s interim targets will remain at 2014 levels for both 2015 and 2016, and the Legislature could make further changes to the program before 2016, including scrapping it altogether.

Other state actions pending

Only one state, West Virginia, has repealed renewable energy and efficiency standards to date, but measures to undo or scale back such programs are pending in other states from Connecticut to South Dakota, while at least two recent attempts at rollbacks have been defeated in Colorado and New Hampshire, according to CAP.

The primary Ohio reform bill, S.B. 310, signed by Gov. John Kasich (R) last June, placed the two-year freeze on key provisions in the 2008 law, most notably its ambitious efficiency targets. It also eliminated a provision requiring the state’s utilities to meet clean energy goals using in-state renewable resources.

The bill also charged a newly formed Energy Mandates Study Committee — made up of 12 legislators and the chairman of the Public Utilities Commission of Ohio — to perform a cost-benefit analysis of the standards and report its findings back to the Ohio General Assembly by September 2015.

The second bill, H.B. 483, specifically targeted Ohio’s wind energy sector by requiring new setback requirements for commercial wind turbines, making it more difficult to site and configure turbines near property lines. “These requirements dramatically reduce the number of turbines that can be sited on new wind farms and, as our interviews with representatives from the wind industry show, threaten the viability of the industry in the state,” CAP said of the provision.

Backers of the reforms, including the Ohio Chamber of Commerce and several industry groups, maintain lawmakers needed the two-year “timeout” to review the renewable energy and efficiency standards and consider changes that would help the programs work better for utilities and consumers.

Charles Willoughby, director of energy and environmental programs at the Ohio chamber, said in an interview that the 2008 law, while well intentioned, relied on economic assumptions that do not match today’s realities. Suspending the renewable energy and efficiency programs for two years was necessary to allow lawmakers to reframe the programs’ goals and expectations.

“We’re not opposed to energy efficiency or renewables,” Willoughby said, “just not on the terms that the Legislature set in 2008.”

Losing jobs or saving electricity bills?

Matt Brakey, an energy consultant and former chairman of the business group Industrial Energy Users of Ohio, said in an email that homeowners and businesses will begin seeing rate relief under S.B. 310 in 12 to 24 months, after utilities’ balance sheets are cleared of a backlog of program compliance costs. He predicted that by 2018, “the electric bill savings will be substantial: to the tune of hundreds of millions — if not billions — of dollars for Ohioans.”

FirstEnergy Corp., one of four investor-owned electric utilities operating in Ohio, has already scaled back or canceled a number of efficiency programs, according to CAP, while American Electric Power Co., Dayton Power and Light Co., and Duke Energy Corp. have opted for a more cautious and gradual approach to changing their policies.

Even so, experts say Ohio is already losing jobs in its nascent efficiency sector. Gary Swanson, president of the consulting firm Energy Management Solutions, told CAP investigators that his company has shifted its growth strategy and investment priorities away from Ohio toward places like Illinois and Washington, D.C. “This has forced us to diversify, rather than expand [in Ohio], putting more eggs in other baskets,” Swanson said.

“The full implications of S.B. 310 and H.B. 483 will become clearer over the course of the coming year,” CAP said. “However, the initial evidence indicates that the legislation is saddling Ohioans with economic harms and will come to represent a missed opportunity for Ohio to lead the country in building a clean energy economy.”

Prior to the reforms, studies showed that Ohio’s energy standards resulted in approximately $660 million in public and private investment in 2012 alone, bolstering more than 400 companies selling goods and services in the advanced energy sector.

Wind industry loses investors

For example, Ohio currently has the largest number of wind energy supply chain facilities in the country, at 62 firms, and in 2011 notched the nation’s fastest growth in wind power installations, according to the American Wind Energy Association. The state’s solar power sector has thrived, as well, as investments in solar installations for businesses, homes and utilities in Ohio reached $72 million in 2013.

On measures of employment, independent studies from the Advanced Energy Economy Institute and ICF International showed that the advanced and alternative energy sectors had generated between 25,000 and 31,000 jobs in Ohio over the last several years, including an estimated 12,000 in energy efficiency alone, according to ICF.

But that growth is now at risk, according to CAP’s analysis. Ohio’s wind energy sector, in particular, has reported reduced investor interest and higher caution among developers that had previously been bullish on Ohio’s wind power prospects.

Eric Thumma, director of policy and regulatory affairs for Iberdrola Renewables, reported that the provision in S.B. 310 stripping the in-state requirement for renewable energy generation “will have a long-term, long-lasting impact” because it removed assurances for developers that the state’s utilities would buy locally produced clean energy.

At the same time, the new setback requirements for wind turbines — which require a buffer of 1,125 feet between any turbine blade and an adjacent property — had “essentially zoned out” new large-scale onshore wind farms. For example, a 75-turbine wind farm planned for a rural area near the town of Leipsic in northwestern Ohio was shelved after the new setback restrictions would have limited the developer to just two turbine sites.

“We’re trying to make our projects work,” Thumma told CAP. “We think our host communities want them, but it’s much more difficult now.”

Responding to charges that S.B. 310 has stymied economic growth by making wind and solar power less competitive, Brakey said the state-mandated renewables and energy efficiency standards actually did more harm to Ohio’s economy by diverting wealth “from economic sectors to uneconomic sectors,” thus destroying jobs.

“However, the wealth diversion and job destruction is not visible to the naked eye, so organizations like the Center for American Progress can make the plausible-sounding — albeit economically fallacious — argument that mandates like these actually benefit Ohio’s economy,” he said.