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States set goals to increase renewable energy use

Like a pied piper, the mandated renewable energy requirement has been crisscrossing the country, gathering a state legislature here and a public utilities commission there, until 18 states now have targets and timetables for using electricity generated from renewable resources.

The policies may look very different from state to state but all have the goal of maintaining or increasing the amount of renewable energy in the electricity mix. As a result, said Senior Energy Analyst Lori Bird at the National Renewable Energy Laboratory, “RPSs stimulate the development of new sources.”

Western states adopt RPS

Western’s territory holds the states with the earliest renewable energy mandates in the country. The Iowa Alternate Energy Production law passed in 1983, although enforcement provisions did not follow until 1996. The Minnesota legislature mandated renewable acquisition in 1994. Mandates require the construction of set amounts of new renewable capacity using specified technologies.

The newer RPS programs generally require that a specified share of electricity generation or sales come from qualifying renewable technologies. Arizona, California, Nevada and New Mexico have RPSs. Colorado joined that club on Nov. 2, 2004, when it became the first state in the country where voters decided the issue, rather than a legislature or regulatory agency.

Ballot Initiative 37 requires Colorado's investor-owned utilities to obtain three percent of their electricity from renewable energy resources by 2007 and 10 percent by 2015. The measure also called for a standard net metering system for small, grid-tied photovoltaic systems, and for four percent of the mandated renewable energy to come from solar resources.

Goals, deadlines differ

State requirements vary widely in the amount of renewable energy and target dates for reaching the goals. In California, renewable energy must make up 20 percent of the state’s generation by no later than 2017. The Arizona Corporate Commission adopted an RPS requiring its regulated utilities to generate a minimum of 0.2 percent of total retail energy sales from renewables in 2001, increasing to 1.1 percent by 2007.

Nevada’s aggressive law phases in renewable energy use by increasing requirements two percent every two years, reaching 15 percent in 2013. Investor-owned utilities in New Mexico must provide five percent renewable energy in their mix by 2006, and increase one percent annually to 10 percent by 2011.

Iowa energy regulators set Feb. 9, 1997, as the deadline for utilities to sign contracts with renewable energy developers to purchase 105 megawatts of electricity. The state’s renewable resources now generate 200 MW per year.

In exchange for granting Xcel Energy increased nuclear waste storage, the Minnesota legislature mandated that the utility build or contract for wind and biomass power. The mandate was expanded in 2002 to require 1,125 MW of wind generation by 2010.

Programs show results

Passing an RPS is only the beginning, however. The Colorado Public Utilities Commission begins its 12-month rulemaking process this month. Power wholesaler TriState Generation and Transmission plans to be involved in the rulemaking, even though it has only one member co-op affected by the new RPS.

“There are still a lot of unanswered questions,” observed Communications Manager James VanSomeren. “For example, we don’t know if utilities can count existing renewable generation like the wind power we purchase from Platte River Power Authority.”

“Some RPSs allow existing renewable generation because the states want to support those projects too,” said Bird.

RPSs may also target a technology for development. “Since one of the goals of a renewables requirement is to stimulate development, standards often have provisions for less cost-effective technologies,” explained Bird. “Otherwise, the utilities would just go for the least-cost option.”

The provisions have had the desired affect in some states. Solar energy projects, like Las Vegas Valley Water District’s distributed solar array projects, must comprise five percent of Nevada ’s RPS. Applications have poured into SolarGenerations – the rebate program for Sierra Pacific Power and Nevada Power customers – for almost a full MW of solar power.

As a result of Minnesota’s mandate specifying wind and biomass, the state will be home to at least 825 MW of wind energy and 125 MW of biomass power by 2006. Iowa’s policy has been met with 250 MW of wind installation, exceeding the original mandate of 105 MW.

Arizona’s modest RPS has supported seven MW of solar and more than 10 MW of landfill gas and biomass. State utilities have also contracted for 15 MW of wind generation and 20 MW of geothermal capacity.

Pitfalls, solutions arise

Development has posed different challenges in different states, noted Bird, and given rise to a number of solutions. A major obstacle for many standards is a lack of long-term power purchasers. Without contracts for the electricity a renewable project would produce, financing for construction is hard to obtain.

Two northeastern states are attempting solutions that other states may be able to adapt. New York is setting up a central procurement system to purchase renewable energy through competitive bidding solicitation. Connecticut is requiring utilities that provide standard offer service to sign 100 MW of renewables to long-term contracts.

Evaluating Experiences with Renewable Portfolio Standards, a paper published by Lawrence Berkeley National Laboratory, notes other pitfalls that can limit the effectiveness of an RPS policy. Narrowly applied standards that offer exemptions to providers that dominate the market will have little effect on renewable development. Without sufficient enforcement provisions, providers may comply slowly or not at all. Without clear policy duration or stable goals, renewable energy developers may have trouble obtaining long-term contracts.

The paper makes the point, however, that most RPS programs are too new to judge their effectiveness. Legislatures and regulatory agencies are still learning how to design balanced programs that advance renewable markets while protecting consumers.

Even so, RPSs continue to gain popularity and followers—evidence that consumers and the power industry have heard the piper’s call of a diversified energy mix. As more states adopt renewable portfolio standards or mandates, the best practices for getting that mix will emerge. In program design, as in dancing, practice makes perfect when you are learning to dance to a new tune.