June 12, 2009
Renewable portfolio standards at the state level are likely to be a precursor of things to come on the national stage. Congress, in fact, is now considering mandating utilities to generate a fixed portion of their electricity from green energy.
Renewable energy tied to wind and solar would have difficulty penetrating markets unless government interceded and provided tax breaks or instructed utilities to provide some green offerings. The goal is to create demand, which in turn attracts providers to the field and ultimately leads to the development of newer and better products and services. The objective is to produce a cleaner environment while creating viable jobs.
"Based on the experience in many states, a well-designed national standard would also be an economic boon," says Tom Kenworthy, a senior fellow at the Center for American Progress, in a paper. "In just a short time, state renewable standards have proven to be a strong catalyst to development of a robust economic and jobs sector for wind, solar, and other forms of renewable energy. And the resulting growth in renewably generated electricity has come with only a nominal rise in electric rates for consumers."
Previous attempts by progressives in Congress to enact national renewable energy standards have failed. The chief reason is that some areas of the nation are more blessed with wind and solar resources than others and therefore such decisions should be left to the states. Now, though, the issue has taken on new prominence and a portfolio standard is included in the climate change bill now circulating on Capitol Hill.
At least 28 states now have those mandates on the books, all of which have set ambitious long-term goals. The idea is that the standards would create fuel diversity, ease overall energy prices and lead to better air quality. Some in Congress want to follow suit, with the most notable bill establishing a 15 percent threshold by 2020 -- a number that has been reduced from 20 percent because of utility concerns. The measure would compensate, though, by requiring greater implementation of efficiency programs.
While renewable mandates have languished in the past, they now enjoy the support of President Obama and appear poised to pass. The president hopes to revive the American economy through his nearly $1 trillion stimulus plan with $60 billion of that going into green energy development. It's about building the next generation of economic development, creating more energy independence and limiting harmful air emissions.
Some staunch conservatives in Congress want to defeat the legislation, arguing that it will cause energy prices to escalate and make the country less competitive. Others acknowledge the momentum and as such want to influence its outcome. Therein lay the potential for a more flexible renewable portfolio standard. States with limited sustainable resources, under pending proposals, could adopt renewable portfolio standards of 12 percent as long as they require eight-percent efficiency gains.
"As with renewable fuels, the only reason why renewable electricity needs to be mandated in the first place is that these alternatives are far too expensive to compete otherwise," says Ben Lieberman, senior policy analyst at the Heritage Foundation. "In effect, Washington is forcing costlier energy options on the public. This is particularly true for certain states."
Carries Risks
Investing in renewable energy carries risks. Utilities are therefore nervous about putting capital into emerging technologies that may not have an immediate payback and that may not adequately be recovered through the rate base.
But now climate change has become a national priority. Throughout the country, policymakers are enacting laws that require utilities to utilize renewable energy programs. While resistant at first, many companies are finding real benefits in that business strategy and the subsequent success has created even more forward momentum in the effort to broaden the nation's generation mix.
The Center for American Progress says that the transition has been "painless," prompting many states to strengthen their requirements. It points to Colorado: In 2004, despite stiff opposition by utilities, voters there approved a ballot measure to require large utilities to generate 10 percent of their power from green sources by 2015. Now the state has doubled the standard to 20 percent by 2020, and 10 percent for smaller utilities. Xcel Energy, which now supports the measure, expects to hit the goal five years early.
New Mexico has also raised the bar. In 2004 it adopted a 10-percent standard by 2011. But three years later it doubled that to 20 percent by 2020 for large utilities and 10 percent by 2010 for electric co-ops or private, independent electric utilities, the center says. That, in turn, has attracted major solar manufacturers that have invested millions and employed thousands in the process.
Texas, meanwhile, set a target in 2005 of producing 10,000 megawatts of wind power by 2025. Today, it is within a hair of reaching that goal. In 2007 alone, Illinois and Maine switched from a voluntary to a mandatory system while Delaware doubled its standard. Connecticut, Maryland, and Minnesota, furthermore, increased their percentages. The same year, North Carolina became the first southeastern state to have a renewable standard, all according to the Center for American Progress.
"If an oil state like Texas can do it, so can other southern states," says the center's Kenworthy. All told, he adds that more than 60 percent of all renewable energy additions have come as the result of state-wide standards.
The question now is whether that success can be replicated at the national level. While renewable portfolio standards are not universally supported, a modified version could pass Congress this year. If the programs are effective and cost-efficient, they too could later be strengthened.
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