Cactus ferruginous pygmy owl
• States as the new heroes?
States’ Role in Environmental Policy
• Implementation of federal laws
– Wisconsin's Green Tier program
– MN toxic pollution prevention act
– Minnesota and Idaho effluent-trading schemes
• Source of policy innovation and
experimentation
– Saratoga Springs- Complete Streets Program
– Solar farm on landfill
• It is time for public policy makers to unleash
America’s potential to solve its remaining and
emerging environmental problems.... With
Congressional direction, and adequate
infrastructure, the states can create a learning
system, with useful knowledge applied outward
to each other and upward to Washington, their
co-implementation partner.
• George Meyer, Secretary of the Wisconsin
Department of Natural Resources,
Big Questions
• Do states have the policy tools to “do” climate
policy?
• Do states have the political will to do climate
policy?
STATE CLIMATE POLICY
OPTIONS
Meeting of the Illinois Climate Change Advisory Group
Michael A. Bilandic Building, 160 N. LaSalle St., Room C500
Chicago, IL
February 14, 2007
Governor Rod R. Blagojevich Climate Change Advisory Group
Suggested priorities:
• Multi-Sector:
- Carbon offset requirements for existing and/or new large
stationary combustion sources
- Establish residential and commercial energy efficiency
construction codes beyond international standards
- Incentives for CHP and boiler construction and upgrades
- Incentives for water conservation appliances and equipment
- State-level cap-and-trade (including options to join RGGI or
other systems)
8
Suggested priorities:
• Electric Power:
- Carbon performance standards for electricity generation and/or
procurement
- De-couple electric and natural gas utility revenues from sales
- Distributed generation regulatory reform (real-time pricing, net
metering, interconnection, standby rates)
- Energy efficiency standards for appliances and equipment
- IGCC with carbon capture & storage portfolio standard
- Require utilities to factor CO2 into procurement and planning
9
Suggested priorities:
• Transport:
- Develop and finance "smart growth" initiatives and
expand/improve alternative modes of transport
- GHG emission standards for automobiles
- Incentives for fuel efficient vehicles
- Renewable fuels standard (RFS) and/or low-carbon fuels
standard
10
Suggested priorities:
• Agriculture:
- Incentives to reduce nitrogen application in crop fertilization
- Programs to encourage forest management, reforestation, treeand grass-planting
11
Suggested priorities:
• Commercial / Industrial:
- Encourage or require reductions in emissions of high GWP
gases (N2O, HFCs, PFCs, SF6)
- Energy efficiency standards for commercial and industrial
generators
• Fugitive / Waste:
- Encourage or require capture of methane from landfills,
wastewater treatment plants, and/or coal mines
12
Barriers to State Climate Action
1.
2.
3.
4.
Political will
Budget constraints
Upfront technology costs
For climate policy, impacts are
dispersed across economy
Major Co-Benefits
of Climate Policy
• Smart Growth = reduced fuel and infrastructure costs +
•
•
•
•
improved AQ + urban revitalization + open space protection
Energy Efficiency = reduced fuel costs + improved AQ +
economic benefits from new techs + energy security
Renewable Energy = jobs and other economic benefits +
energy security + improved AQ
Fuel Switching = Improved AQ + economic benefits
Tax Shifting = Clear market signals + economic and fiscal
benefits + improved AQ
The Adoption of RPS:1991-2005
RI
IA
1991
19921996
PA
VT
WI
NY
MT
NV
TX
MD
IL
MN
ME
NJ
NM
HI
DC
MA
CT
AZ
CA
CO
DE
2001
2002
2004
2005
1997
1998
1999
2000
2003
Approaches to Co-Benefits
1. Allocating State Money - Directing financial
outlays toward climate-friendly investment
2. Moving Markets - Using state financial
leverage to move new product markets
3. Regulations or Incentives - Choosing optimal
type of policy
Allocating State Money (1)
• States have limited financial resources
• Targeted allocation strategies and rules can
help achieve co-benefits
– E.g., requiring transportation funds to satisfy
smart growth criteria can provide economic, air
quality, and climate benefits
Allocating State Money (2)
• Maryland: Priority Funding Areas – limits
infrastructure spending to targeted development
zones in established communities
• New York: State Energy Plan - redirects State
funding toward energy-efficient transportation
alternatives
• New Jersey: Executive Order 4 - requires that
state funding be consistent with smart growth
principles
Moving Markets (1)
• State spending can spur markets through targeted
procurement
• New technologies hampered by higher incremental
costs
• Purchases of climate-friendly products can help
realize economies-of-scale
– E.g., state purchases of renewable electricity and
alternative fuel or hybrid vehicles
Moving Markets (2)
• New York: Executive Order 111 – new vehicles
purchased by state agencies must use alternative fuels,
and 20% of state energy must be from “green power”,
by 2010
• Maryland: Energy Efficient Product Procurement –
state-purchased energy-using products products must
be Energy Star or in top 25% of energy efficiency for
product type
• Massachusetts: High-efficiency Vehicle Procurement –
replacement of non-essential state fleet SUVs with
efficient vehicles, and prevention of future SUV
purchases
Regulation or Incentives (1)
• Regulation examples – technology standards,
emission caps, portfolio standards
• Incentive examples – tax credits, production
credits, emissions trading
• Tradeoff between policy based regulation or
market incentive
– Regulation = less politically popular, less impact on
state budget, broader participation, more enforcement
– Incentives = more politically popular, more impact on
state budget, voluntary participation, less enforcement
Regulation vs. Incentives (2)
• Regulation:
– California: Renewable Portfolio Standard (RPS) - 20% by 2017 equates to between 3,000 and 8,000 MW of additional RE
– Massachusetts: System Benefit Charge - over $150 million per
year to finance RE
• Incentive:
– Michigan: NextEnergy Program – 20-year state and local tax
exemption for alternative energy producers and system
designers
– Minnesota: Renewable Energy Production Incentive generation incentive payments of $0.015 per kilowatt-hour
(kWh) for qualifying renewable energy technologies
Conclusions about policy tools
• Range of cost-effective opportunities for
climate policy
• Many have range of economic and
environmental co-benefits
• State policymakers have several policy options
available
• Policies often overlap
– Emphasis on complementary approaches
“Laboratories of Democracy”
• Many environmental laws enacted by states have
charted the way for later passage of major national
legislation
• State early action, in 1980’s, to address acid rain had
major impact on passage of national legislation
– Acid rain laws initially introduced in a number of states
• California’s air quality laws laid groundwork for
national air quality law passed in early 1970
Good News: States are on the move…
25
Regional GHG Initiatives
Vehicle Emissions Standards
Renewable Portfolio Standards
Variations Among States in Emissions
Growth, 1990-2003
50.00%
40.00%
Del
Ca
Wa
Vt
Ms
Nv
30.00%
20.00%
10.00%
0.00%
-10.00%
Source: Barry Rabe, States on Steroids
30
First mover dilemmas
• Tensions between rewarding first movers and gaining
participation of late adopters
• Design decisions have consequences for first movers
and late adopters
–
–
–
–
Preemption
Stringency of caps
Baseline
Allowance allocations
• Tools to address tensions
– Grants
– Partial preemption
The Adoption of RPS
As of 2005, 22 states and DC have adopted RPS.
*WA: 15% by 2020
MN: 10% by 2015 Goal +
Xcel mandate of
1,125 MW wind by 2010
MT: 15% by 2015
VT: RE meets load
growth by 2012
WI: requirement varies by
utility; 10% by 2015 Goal
ME: 30% by 2000;
10% by 2017 goal - new RE
MA: 4% by 2009 +
1% annual increase
RI: 15% by 2020
CT: 10% by 2010
☼ NY: 24% by 2013
IA: 105 MW
☼ NV: 20% by 2015
☼ CO: 10% by 2015
IL: 8% by 2013
☼ NJ: 22.5% by 2021
☼ PA: 18%¹ by 2020
*MD: 7.5% by 2019
☼ AZ: 15% by 2025
*NM: 10% by 2011
*DE: 10% by 2019
☼ DC: 11% by 2022
TX: 5,880 MW by 2015
State RPS
State Goal
HI: 20% by 2020
☼ Minimum solar or customer-sited requirement
* Increased credit for solar or customer-sited
¹PA: 8% Tier I, 10% Tier II (includes non-renewable sources)
Note: Renewable portfolio goal is voluntary,
as opposed to a renewable portfolio
standard, which is generally enforced by an
appropriate state regulatory agency.
Number of States (Annual)
10
25
Significant Revision to Existing RPS (left scale)
9
Annual RPS Adoption (left scale)
8
20
Cumulative RPS Adoption (right scale)
7
6
15
5
4
10
restructuring bust
3
2
5
1
2006 (partial)
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0
1990
0
Recently Adopted RPS: CO, HI, MD, NY, RI (2004); DC, DE, MT (2005)
Recently
Revised RPS: CA, NJ, NM, PA (2004); CT, NV, TX (2005); WI, NJ (2006)
Environmental Energy
Technologies Division •
Energy Analysis
Number of States with RPS (Cumulative)
State RPS Activity Gathering Steam
State RPS Program Context
• Load Covered: Roughly 40% of U.S. load covered by a state
RPS or a renewables purchase obligation
• RPS Development: Most policies emanated from state
legislation, but some from regulatory action (e.g., NY, AZ)
and one from a state ballot initiative (CO)
• Operating Experience: Experience with policy is growing,
but few states have >5 years experience
Cumulative Renewables -- Nameplate Capacity, MW
RPS Policies Are Relatively New, But RE Capacity
Built in RPS States is Growing
25,000
20,000
Capacity Built in RPS States
15,000
10,000
5,000
Capacity Built in Non-RPS States
0
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Environmental
Source: Black Energy
& Veatch 2006
Technologies Division •
Energy Analysis
Note that RE
capacity built in
RPS states may not
all be “caused” by
the RPS, and that
RE capacity built in
non-RPS states
may supply nearby
state RPS policies.
Looking Ahead, Existing RPS Policies Could be a Major
Driver of New Capacity
7,000
UCS estimates ~32,000 MW of new renewable
energy capacity by 2017, if all goes well
5,000
4,000
3,000
2,000
ME
MD
HI
DE
AZ
CT
DC
RI
IA
NM
MT
CO
NV
MA
PA
NJ
NY
TX
CA
0
WI
1,000
MN
2017 New RE Capacity (MW)
6,000
Source: UCS
EIA estimates ~9,000 MW of new RE capacity, assuming that all does not go well
Environmental Energy
Technologies Division • Energy
Analysis Department
14%
12%
10%
8%
6%
4%
ME
MD
AZ
IA
CT
TX
DE
HI
CO
NM
PA
DC
WI
MT
NY
MN
CA
NV
RI
0%
MA
2%
NJ
2017 New RE Generation as % of Statewide
Sales
The Most Aggressive State RPS Policies
Require an Annual Growth of ~1%
Source: UCS
Environmental Energy
Technologies Division •
Energy Analysis
Development in RPS States Predominantly, But
Not Entirely, Wind So Far
Total Renewable Energy Additions in RPS States
Percentage of Additions in RPS States
4,450 MW (nameplate); 1,320 MW (average)
100%
90%
80%
70%
MSW
60%
Solar
50%
Geothermal
40%
Biomass
Wind
30%
20%
10%
0%
Nameplate Capacity MW
Environmental
Source: Energy
Black & Veatch 2006
Technologies Division •
Energy Analysis
Average Capacity, MWa
Annual US Wind Development (MW)
Nearly Half of All Wind Project Development
From 2001-2005 Was RPS-Related
7000
6000
5000
Other (economical, green power, IRP, etc.)
RPS-related
42% Other
Renewable Energy Fund-related
4000
3000
47% RPS
2000
1000
11% SBC
0
2001
2002
2003
2004
2005
20012005
The EIA loosely attributes 1,998 MW out of 3,275 MW (61%) of installed wind in
2004-05 to states with RPS policies
Environmental Energy
Technologies Division • Energy
Analysis Department
Recent Examples of the Impact of RPS Policies on
Wind Power Development
Texas
700 MW installed in 2005
California
60 MW installed in 2005; new wind under contract:
727-988 MW (IOUs), 530 MW (POUs)
New York
Four contracts for 317 MW in NY, MD, PA, NJ
Colorado
775 MW in negotiations; 60 MW under contract
Wisconsin
200 MW to be built in 2006 (due to We Energies
goal)
Minnesota
145 MW installed in 2005
New Mexico
140 MW installed in 2005
New England Development activity in New England and PJM in
and PJM
part as result of state RPS policies
Environmental
Energy Technologies
Division • Energy
Other Technologies Will Also Be
Supported Over Time
EIA estimates that 93% of RPS-driven RE capacity will be wind on a going-forward
basis. RPS cost studies predict – in aggregate – that ~60% of RE deliveries are
likely to be wind, while Global Energy (a consulting firm) predicts ~75%.
Some RPS policies yielding diversity of resources, even without technology bands:
California, Nevada, New England
California’s RPS procurements
are governed by “Least Cost,
Best Fit” criteria
New RE Deliveries Under Contract to CA IOUs
Since 2002 (maximum GWh)
wind
2967 GWh
PV
0 GWh
...and...
Wind may not always provide
the “Best Fit” (even if “Least
Cost”)
Environmental Energy
Technologies Division •
Energy Analysis
biogas
207 GWh
biomass
1473 GWh
solar thermal
3665 GWh
small hydro
20 GWh
geothermal
2312 GWh
Race to the Top: RPS Rabe
• Case studies on five states: Texas, Massachusetts,
Nevada, Pennsylvania, and Colorado
• Driving Forces:
– Transcending Partisan Boundary: “Regardless of partisan
composition of state government, these policies (RPSs) have
consistently drawn a rather broad coalition of support.”
– Renewable Energy Developers: “Renewable energy developers are
far more visible and influential in RPS deliberations than
conventional environmental advocacy groups”
– Economic Benefits: “perhaps one of the biggest factors…has been a
commonly held perception that promotion of renewable energy
through an RPS is in the economic interest of an individual state.”
Especially, “…this labor benefit has fostered discussion in many state
capitals about an anticipated ‘job multiplier’ effect of renewable as
opposed to conventional sources.”
Which Alaska in 2050?
www.terrytamminen.com
(Scientific American, Sept. 2006)
$7 billion
RPS Design Varies Substantially
From One State to the Next
Structure, Size and Application
Basis (energy vs. capacity obligation)
Structure (e.g., single tier or multiple tiers)
Percentage purchase obligation targets
Start date
Duration of purchase obligation
Resource diversity requirements or incentives
Application to LSEs - Who must meet targets?
Product- or company-based application
Eligibility
Administration
Regulatory oversight body(ies)
Compliance verification (TRCs or contract-path)
Certification of eligible generators
Compliance filing requirements
Enforcement mechanisms
Cost caps
Flexibility mechanisms (banking, borrowing, etc.)
Implementing future changes to the RPS
Geographic eligibility
Resource type eligibility
Eligibility of existing renewable generation
Definition of new/incremental generation
Treatment of multi-fuel facilities
Treatment of off-grid and customer-sited facilities
Contracting standards for regulated LSEs
Cost recovery for regulated LSEs
Interactions with other renewable energy and
environmental policies
Environmental Energy
Technologies Division • Energy
Analysis Department
Common Design Pitfalls
Overly Broad Definitions of Eligible Resources
• Existing biomass in Maine, Connecticut
Lenient Geographic Boundaries
• Can enlarge the market for RECs, but may also moderate need for new renewables
and reduce local benefits (e.g., PA, MD, NJ, DE, DC, NY)
Overly Stringent Requirements
• Requirements that ramp up so fast as to not be achievable may not be politically
sustainable (MA, NV, CA)
Force Majeure Clauses and Cost Caps
• Compliance flexibility should be encouraged, but new RPS policies increasingly
including a lot of “wiggle room” to possibly allow escape from full compliance, or
establishing low cost caps (e.g., MT, HI, MN, PA, NV)
Inadequate Enforcement
• Enforcement motivates action; where full compliance is apparently not being
achievedEnergy
(NV, CA, AZ)...will penalties be used to enforce compliance?
Environmental
Technologies Division •
Energy Analysis
Common Design Pitfalls (cont.)
Narrow Applicability
• RPS applied unequally will limit impact of policy, create “unfair” competition (CT
and PA original RPS policies)
Lack of Long-Term Contracts
• Major problem in Northeast, where retail competition exists and where
renewable energy sources are more expensive
Policy Instability
• Uncertainty in RPS duration, target, or eligible technologies can impede
development (e.g., CT, MA, AZ etc.)
Transmission Bottlenecks
• TX, MN and CA trying to be more proactive with transmission planning and
construction, but transmission remains a key barrier in many states
Design Complexity
• Is the complexity
inherent in
Environmental
Energy
Technologies Division •
Energy Analysis
the California RPS worth it?
What Makes a Strong RPS?
Policy Design Requirements
• Broad applicability (limited exemptions ok)
• Carefully balanced supply-demand (ensures new supply, but not overly aggressive)
• Sufficient duration and stability of targets (provides market confidence)
• Well-defined/stable resource eligibility rules (ambiguity erodes confidence)
• Well-defined/stable out-of-state resource eligibility (ambiguity erodes confidence)
• Credible & effective enforcement (to ensure compliance)
• Flexible verification (simplifies oversight, contracting; may lower compliance costs)
• Adequate compliance flexibility (to ensure that targets can be achieved at low cost)
• Contracting standards/cost recovery for regulated utilities and providers of last
resort (to ensure reasonable compliance effort, and long-term contracts)
• Product-based (not company-based) compliance (supports voluntary sales)
Environmental Energy
Technologies Division •
Energy Analysis
State RPS Structure and
Vintage Eligibility
STRUCTURE
One Tier with
Only New Eligible
One Tier with New
and Existing Eligible
Arizona (proposed)
Iowa
Massachusetts
Montana (out-of-state)
Earlier Xcel (MN)
California (partial)
Colorado
Hawaii
Maine
Minnesota
Montana (in-state)
New Mexico
New York (partial)
Nevada
Pennsylvania (for RE)
Texas (partial)
Wisconsin
Two Tiered
by Vintage
Delaware (partial)
Rhode Island
Two Tiered
by Technology
Technology Bands/
Set Asides
Connecticut
Maryland
New Jersey
Texas (partial)
Washington, DC
Arizona
Colorado
Minnesota
Montana
Nevada
New Jersey
New York
Pennsylvania
Washington, D.C.
Environmental Energy
Technologies Division • Energy
Analysis Department
Different Approaches Are Used for Geographic
Eligibility/Deliverability
• In-state requirement: IA, MN (original Xcel mandate), HI
• In-state delivery requirements of varying stringency:
– In-state transmission interconnection requirement: NV, TX
– In-state delivery requirements: AZ, CA, WI, MN, NM, NY
• Delivery can be required on a real time, monthly, or yearly basis
• Broader regional delivery requirements of various types:
– Unbundled REC trade within larger region with delivery to region: CA (multijurisdictional utilities), CT (after 2010), CO(?), DE, MA, ME, NJ, PA, RI (WA
proposal a special case because delivery required to state)
– Unbundled REC trade within larger region with delivery to that region, and
possibility of REC trade from nearby states without delivery if certain
conditions are met: CT, DC, MD
• In-state encouragement: CO (multiplier), DE (multiplier), AZ (in-state solar
multiplier before 2005); NM (in-state preference)
• DG must often – not always – be located in-state (exceptions: CT, PA)
Environmental Energy
Technologies Division •
Energy Analysis
Assessing the Tradeoffs in Determining
Geographic Eligibility
•
Potential cost reduction from expanded geographic scope
– The wider the net, the lower the costs
•
Supply-demand balance that drives new investment
– Risk of absorbing existing/non-additional RE as geography expands
•
Relationship between benefits and location/delivery of RE
– Economic development: in-state
– Fuel diversity: delivered to state
– Environmental
•
•
•
Local: delivered to state
Regional: delivered to region
•
Global climate change: anywhere where fossil is displaced
Interstate commerce clause
– In-state requirements very problematic
– In-state multipliers worrisome
– Stringent in-state delivery, and anything more lenient, should be ok
Environmental Energy
Technologies Division •
Energy Analysis
Caveats
• Connecticut Mulls Rollback on Clean Energy?
• Midwest Turn Its Back?
• NJ- Christie
• Larger lesssons
– political fluctuations
– cobenefits