No coal. 50 percent renewables. What does the Oregon's Legislature's big energy bill really mean?

Feb 5 - McClatchy-Tribune Content Agency, LLC - Ted Sickinger The Oregonian, Portland, Ore.

Lawmakers held their second, crowded public hearing Thursday to consider a complex bill that would restructure Oregon's electricity supply in pursuit of significant reductions in the state's greenhouse gas emissions.

A slew of advocacy groups testified for and against House Bill 4036, which aims to rid the state of electricity from coal fired plants by 2030 and require utilities to meet half their customers demand with renewable power by 2040.

The legislation is ambitious, and advocates argue, could be a historic step that signals the state is finally serious about taking on climate change. Yet the prospect of passing such a far-reaching policy in 35 days, with limited analysis and information, has opponents and state regulators alike pulling out their hair.

So what's all the fuss about? Here's a short primer.

Why is this bill running now?

Environmental groups' "Coal to Clean" bill died in the Legislature last year. In response, they started gathering signatures for a suite of anti-coal/pro-renewable-energy ballot measures proposed for November. Utilities negotiated a compromise plan with the groups in the fall that they say contains many of the same provisions, but offers flexibility, too. The groups have agreed to drop the ballot measures if the bill passes.

Why should I pay attention?

You'll likely be picking up the tab if this legislation passes. It could be a significant bill. And it will go on for years. If you think Oregon ought to be doing something about climate change, and polls show that most Oregonians fall into that category, this is the main show in the Legislature this year.

How much renewable energy are we talking about?

A lot. The mandate is 50 percent of retail demand by 2040 for the state's two biggest electric utilities, which serve 70 percent of the state. The bill permits utilities to fudge things for a while, using credits they've already accumulated to offset the new requirements. Regardless, the utilities will eventually need to build or buy enough renewable power to meet the actual targets.

For PGE, that means another 1,100 megawatts of renewable resources. PacifiCorp would eventually need another 1,300 megawatts, regulators say.

That's the equivalent output of a couple of large coal-fired power plants for each utility. But renewables don't work the same way. Because the output of wind and solar farms is variable, utilities need to overbuild by a factor of 2.5 to three times to get the output they need. If the utilities met the standard by using exclusively wind, together they'd need to build about 6,000 to 8,000 megawatts of new capacity. The entire wind fleet in Oregon today amounts to only about 3,000 megawatts.

Sounds expensive?

It could be. If they built all those windfarms today, it might cost between $9 billion and $13 billion. That doesn't count transmission upgrades, back-up resources or any energy-storage facilities. Independent studies suggest that those costs are substantial for "high renewable" systems.

At the same time, the price of wind and solar energy has declined rapidly in recent years, a trend utilities expect to continue. Prices years from now are anyone's guess.

The federal government just extended the production tax credit for renewable projects that begin construction in the next five years. So utilities are telling lawmakers it makes sense to start building now and lock in the 30 percent discount the federal subsidies provide (as well as bankable renewable credits they can use for compliance in future years).

So what's the estimated impact on my monthly electricity bill?

The utilities contend it will be nominal. PGE forecasts average annual rate increases of 1.5 percent for the next 25 years due to the bill's passage, while PacifiCorp says it will be less than 1 percent annually between 2017 and 2030.

Renewables advocates think there could actually be a net benefit to customers relative to current policy as gas prices and carbon costs rise. The Citizen's Utility Board, an advocacy group representing residential ratepayers, told lawmakers Thursday the bill was good public policy.

Others are less sanguine. The utilities' cost estimates are executive summaries of very complex legislation, thin on details. State regulators say they don't have enough data to evaluate the costs, despite requests for information.

Tyler Pepple, a lawyer and analysts for Industrial Customers of Northwest Utilities told lawmakers Thursday that the important thing to know about the numbers the utilities did provide "is that every one of them is so speculative and contingent that they are essentially meaningless. There is no way to know what the costs of these provisions are going to be."

Won't this provide a lot of jobs and property taxes in Oregon?

Utilities and renewables advocates are promoting the local economic development angle. PacifiCorp says it will start off by purchasing 450 megawatts of wind in Oregon and Washington, and another 150 megawatts of solar. Those are big projects.

Yet there is a practical limit to the buildout in Oregon. The wind here doesn't match Montana and Wyoming, and the windiest sites with nearby transmission on the Columbia Plateau are already taken. To maintain reliability, utilities will also avoid clustering all their wind turbines in one area.

Solar is a different, smaller story. But all that means a lot of ratepayer dollars will likely flow out of state. It makes sense to build where the wind is steadier, though that involves transmission upgrades between here and there.

Is this going to affect electric reliability?

Potentially. While utilities insist this it's technically feasible to reliably meet half their customers demand with variable resources, it wouldn't work today. Jason Eisdorfer, a program manager at the Oregon Public Utility commissioners, told lawmakers Thursday that "There's a lot of futurism in the bill."

A 2014 study by the E3 consulting firm looked at California's effort to implement a 50 percent renewable standard. It concluded that there would be potentially significant periods when California utilities were generating more power than they could use or export. The cost of solving that problem, either by shutting off solar and wind farms, building energy storage, or using tools to limit demand, could significantly escalate costs.

E3 also looked at the Northwest. With renewables penetration of just 30 percent, it found similar problems, with periods of over-generation in the spring and at night, when demand is low and wind generation is high. A 50 percent standard would only make those issues more pronounced.

The Bonneville Power Administration, which sells the output of the region's federal hydro system, says it is running out of reserve power to balance the intermittent output of wind farms in the Columbia Gorge. And the region has been slow to embrace solutions to its balkanized transmission system that could help utilities more economically share resources rather than building redundant plants.

HB 4036 does allow state regulators to suspend the renewables mandates if reliability is threatened, which utilities agree is an important safety valve in the bill.

How much would this bill reduce Oregon's greenhouse gas emissions?

Debatable. Oregon can't legislate the closure of coal plants in other states, even if ratepayers are no longer paying for them. Some of those plants would continue to run, selling their power elsewhere.

Utilities and renewables advocates maintain that the state's rules, coupled with similar mandates in Washington and California and federal emissions rules, would ultimately lead to the closure of those plants. In the meantime, they say Oregon's rules would force them to change the way they operate existing plants, reducing their output and their emissions.

Bottom line, utilities say the bill would put them on track to meet the state's greenhouse gas reduction target of 75 percent below 1990 levels by 2050.

What else is in this bill?

A bunch of stuff:

- A community solar program in the bill would allow utility customers to buy into and enjoy the benefits of cooperative solar projects.

- Provisions that make it more difficult and costly for voters to form new public utilities by annexing the service territory or customers of investor owned utilities.

- A provision that gives utilities the chance to install electric vehicle charging stations and build those costs into rates.

- Changes to rules around the banking of renewable energy credits that incentivize utilities to build renewable generation before they need it to comply with the renewable standard.

- Complex language around accounting for federal tax credits and decommissioning costs for coal plants that some believe will increase ratepayers' costs.

- Ted Sickinger

503-221-8505; @tedsickinger

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