State mandates encourage more green power than RPS in US market

WASHINGTON, DC, US,

2004-11-03

Refocus Weekly

State mandates account for the vast majority of new green power capacity in the United States, with 2,004 MW having been developed as a result, says the Energy Information Administration in ‘State Renewable Energy Requirements & Goals: Status Through 2003.’

That is 86% of all new green power capacity from state programs, with the Texas mandate alone accounting for 51% of total new capacity under all state programs. Of 17 state programs to encourage the development of green power in the United States last year, nine were renewable portfolio standards, four were mandates, and four were voluntary goals.

“Without doubt, some state initiatives have significantly propelled the development of renewable energy capacity,” especially in Texas with 1,186 MW, Minnesota with 501 MW and 260 MW in Iowa, and to a lesser extent in Wisconsin, Arizona, California and Massachusetts.

“State renewable portfolio standards, mandates, and renewable energy goals are all relatively new, with the majority just now entering their initial compliance years,” the report notes. Most of the new capacity is fuelled by wind at 2,183 MW, with smaller amounts of landfill gas, hydroelectricity, biomass and solar PV technologies.

“Because of alternative compliance options, opt-out provisions, and other limitations, it is difficult to project the future impact of the state RPS programs,” the report concludes. Some states such as Hawaii and New Jersey, may accelerate their programs in 2004, while other states such as Maryland, New York and Rhode Island, have either passed legislation or proposed new programs.

Recent history has shown that new capacity from state RPS requirements can be either “delayed or significantly less than the RPS requirements initially suggest” because utilities facing RPS requirements can choose alternatives to building new green power capacity and, as a result, “the amount of new generating capacity ultimately built under state programs may be less than the maximum potential initially anticipated from the statutes.”

The definition for qualifying renewables also varies from state to state, with landfill gas, solar thermal electric, solar PV and wind energy acceptable in all nine states with RPS programs, while biomass is also accepted in all nine states but its acceptability hinges on particular environmental requirements in each state. The treatment of hydroelectricity also varies, with most states accepting only facilities under 30 MW capacity, but Arizona and Massachusetts excluding hydro altogether and Wisconsin setting the limit at 60 MW and Maine at 100 MW.

Seven states accept fuel cells powered by renewables as an alternative to the construction of new renewables capacity, while Connecticut and Maine accept natural gas fuel cells as well. In Arizona and Nevada, solar thermal heating can be used to meet RPS requirements.

Some states offer more than one credit per kWh to favour select technologies, and the practice may stimulate those technologies while also reducing the effective size of the RPS if the technology is developed. For example, Arizona offers extra credits for in-state manufacture, in-state installation and early installation of solar technologies and for participation in solar incentive programs, which could reduce the amount of renewables needed to meet its RPS by as much as 50%. Nevada also provides 2.4 credits for off-grid PV and 2.55 for grid-connected PV, while New Mexico provides 2 credits for biomass, geothermal, landfill gas and fuel cells, and 3 credits for solar technologies.

“Most state RPS programs do not appear to have specific enforcement procedures, except for the option of revoking the operating licenses of covered utilities as a sanction,” it notes. “Collaboration and cooperation appear to be preferred enforcement tools,” although California’s RPS provides for a penalty of 5¢/kWh up to $25 million.

“It is difficult to determine whether specific renewable energy projects were caused by state RPS programs,” because projects are developed for a variety of reasons, some of which are unrelated to RPS requirements. Most RPS states did not expect their programs to stimulate new capacity by the end of 2003, with only Arizona and Nevada expecting their RPS programs to lead to new capacity by that time.

To date, most RPS requirements are met by output from existing renewable energy capacity within states or from nearby states, while some requirements are met by purchasing credits or by expecting deficiencies to be made up in future. In Maine and Wisconsin, green power currently exceeds the amount required and, as a result, they are earning credits that can be used in future years, and they do not expect to need additional renewable capacity until after 2010.


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