Renewable Portfolio Standard

On September 29, 2017, the Illinois Power Agency (IPA) released its Long-Term Renewable Resources Procurement Plan (Plan) to implement renewable energy goals set forth in Illinois’s Future Energy Jobs Act, which went into effect on June 1. Together, the new legislation and the Plan, among other things, make significant modifications to Illinois’s renewable portfolio standard (RPS) goal of 25 percent of retail electricity sales sourced from renewable energy by 2025. The Plan sets forth procurement programs designed to meet the state’s annual RPS targets until 2030 and will be updated at least every two years. These changes significantly expand renewable energy development opportunities in Illinois—by some estimates, leading to the addition of approximately 1,300 megawatts (MW) of new wind and nearly 3,000 MW of new solar capacity by 2030.

Expanding the Illinois RPS

While maintaining the same 25 percent renewable energy sourcing goal, the Future Energy Jobs Act functionally increases the state’s RPS target because Illinois’s RPS standard previously applied only to customers buying power through a utility’s default service, not customers taking supply through alternative retail suppliers or through hourly pricing. According to the IPA, in recent years, only 30-50 percent of potentially eligible retail customer load actually received default supply services, while competitive class customers (including larger commercial and industrial customers, which represent approximately half of total load) had no default supply option. Given this transition, meeting Illinois’s RPS goal of 13 percent of retail electric sales in the state sourced from renewable energy for the 2017–2018 delivery year will require the IPA to procure on behalf of the state’s electric utilities an additional 7.5 million renewable energy credits (RECs), which will gradually increase to a forecasted procurement of 31.5 million RECs for the 2030–2031 delivery year. One REC represents 1 megawatt hour (MWh) of generation produced by an “eligible renewable resource.” Eligible resources include wind, solar, thermal energy, biodiesel, anaerobic digestion, biomass, tree waste, landfill gas and some hydropower. Many other states, including California and Massachusetts, utilize RECs to demonstrate compliance with the state’s RPS program. Continue Reading Illinois Renewable Resources Procurement Plan Aims to Boost Renewable Energy Development

by William Friedman

The Massachusetts Department of Energy Resources (DOER) announced that it re-filed its Solar Carve-Out Emergency Regulation without any changes, thereby finalizing the temporary regulations that had been in effect for the past three months and bringing stability to the existing Solar Carve-Out program.  The Solar Carve-Out program enables participating solar units to produce valuable Solar Renewable Energy Credits (SRECs), which can be sold on the open market or at auction.  Earlier this year, DOER announced that applications exceeded the Solar Carve-Out program’s 400 MW cap.  In late June, DOER released the Emergency Regulation to deal with the program’s oversubscription and to offer a path forward for projects that were uncertain as to whether they would still qualify for incentives under the Solar Carve-Out. 

Under Massachusetts law, however, the Emergency Regulation could only remain in effect for three months if not finalized into law.  Finalizing the regulations gives all projects relying on the terms of the Emergency Regulation certainty that the previously announced requirements and construction timeline will remain in force.

Along with its announcement of the re-filed regulations, DOER released a draft guideline for qualified Solar Carve-Out units seeking an extension of the December 31, 2013 construction deadline.  Under the regulations, in order to qualify for the Solar Carve-Out, a solar project must be completely installed and receive authorization to interconnect from the local distribution company by December 31, 2013.  If a project does not meet the December 31 deadline, it may receive an extension until June 30, 2014, if it can demonstrate that it expended at least 50 percent of its total construction costs by December 31, 2013. 

The draft guideline explains that DOER will only consider costs associated with building the generating units as construction costs, and will not take into account legal fees, permitting, or financing costs.  The guideline provides two alternative methods for calculating the total construction costs of a generation unit.  First, the owner or operator can multiply the solar unit’s direct current capacity by the corresponding dollar per watt cost, as set out in the table below.  Second, the owner or operator of the generation unit can provide DOER with actual demonstrated costs.  All eligible costs must be incurred no later than December 31, 2013.

No later than January 6, 2014, all generation units seeking an extension must submit their applications for extension to DOER. DOER will notify applicants of its decision within 30 days.

Finally, if a project can demonstrate that it is ready to begin operations and is only waiting for a distribution company to issue its authority to interconnect, the interconnection deadline is extended indefinitely.

by William Friedman

As previewed at a recent solar stakeholder meeting, the Massachusetts Department of Energy Resources (DOER) released its emergency regulation on June 28, 2013 to address the excess of applications for Massachusetts’ Solar Carve-Out program and to guide the program’s future.  Qualification for the program enables a solar project to sell valuable Solar Renewable Energy Certificates (SRECs) to distribution companies, which are required to fill a minimum percentage of their electricity sales with generation qualified under the Solar Carve-Out.  Last month DOER reported that an unexpectedly high volume of applications for the Solar Carve-Out blew through the program’s 400 megawatt (MW) cap, creating uncertainty as to which projects would qualify under the program. 

The emergency regulation sets the 400 MW cap aside and permits all projects that meet certain conditions and construction deadlines to qualify for the Solar Carve-Out.  The conditions in the emergency regulation were previously announced by DOER at its solar stakeholder meeting and described in an earlier article. The emergency regulation changes the date for extension of the construction schedule from March 31, 2014 to June 30, 2014.   In addition, the emergency regulation clarifies that all solar projects under 100 kilowatts will qualify for the Solar Carve-Out so long as they have submitted their Statement of Qualification Application and receive authorization to interconnect or permission to operate by the effective date of the next Solar Carve-Out program or June 30, 2014, whichever is earlier.

Along with new qualification requirements, the emergency regulation changes the formula used to calculate the compliance obligation of retail electricity suppliers, who must fill a minimum percentage of their electricity sales from generation qualified under the Solar Carve-Out program.  The updated compliance obligation formula is based on the new Program Capacity Cap, which will be announced by DOER on or before July 31, 2014, and will reflect actual supply beyond 400 MW.  However, DOER will provide exemptions to the additional compliance obligations for load that was under contract before the effective date of the emergency regulation.

Under Massachusetts law, the emergency regulation is only effective for three months unless DOER gives notice and holds a public hearing to formalize the rule.  According to the explanatory release accompanying the emergency regulation, DOER plans soon to schedule a public hearing and comment period in order to finalize the regulation.

 by William Friedman

At a recent solar stakeholder meeting, the Massachusetts Department of Energy Resources (DOER) outlined its emergency regulation that will address the recent influx of applications for the Massachusetts Solar Carve-Out.  The Solar Carve-Out program, which was established in 2009, is currently capped at 400 megawatts (MW) of installed capacity.  DOER announced this spring that the program cap had been exceeded months earlier than expected with applications totaling more than 550 MW.  While reaching the 400 MW cap four years before Governor Patrick’s target is a remarkable step for the Commonwealth of Massachusetts and its renewable energy goals, it left the solar industry in Massachusetts, particularly those developers with projects on the waiting list, with questions about solar’s present and future in the state.

In Massachusetts, participation in the Solar Carve-Out enables a solar system to produce Solar Renewable Energy Certificates (SRECs).  For each megawatt-hour generated by a qualified solar system, it receives one SREC, which can be sold on the open market or at auction.  Distribution companies purchase SRECs to meet their compliance obligations under Massachusetts’ Renewable Portfolio Standard, which requires distribution companies to fill a minimum percentage of their electricity sales with generation qualified under the Solar Carve-Out.

At the stakeholder meeting, DOER announced that it will scrap the 400 MW cap; all projects that applied to DOER and executed an Interconnection Service Agreement with a local distribution company by June 7, 2013 will qualify under and be able to participate in the existing Solar Carve-Out if they meet prescribed project construction deadlines. Specifically, a solar project must be completely installed and receive authorization to interconnect from a local distribution company by December 31, 2013.  If a project does not meet the December 31 deadline, it may receive an extension until March 31, 2014 if it can demonstrate that it expended at least 50 percent of its total construction costs by December 31, 2013.  Finally, if a project can demonstrate that it is ready to begin operations and is only waiting for a distribution company to issue its authority to interconnect, the qualification deadline is extended indefinitely.  DOER also intends to recalibrate the Solar Carve-Out compliance obligations of distribution companies to match the extended cap. The emergency regulation is expected to be published this month.

DOER’s emergency regulation comes as welcome news to developers and investors who faced the possibility that projects in which they have already placed substantial investments would lose access to the potentially significant revenue stream created by the Solar Carve-Out.  DOER’s extension of the Solar Carve-Out program demonstrates the agency’s preference for solar projects that are well invested and significantly developed and its awareness of the vital role that the Solar Carve-Out has played in the rapid growth of the solar industry in Massachusetts. 

DOER has also begun the rulemaking process for a new Solar Carve-Out to meet Governor Patrick’s recently announced goal of an aggregate of 1,600 MW of installed solar generation capacity by 2020.  While still in the early stages, “Phase II” of the Solar Carve-Out will consist of a new cap, a separate SREC market, and new compliance obligations for retail suppliers.  DOER is accepting public comments on its plans for the post-400 MW program through June 21.

 by Ari Peskoe

Buried in a court ruling that largely upholds challenged transmission-funding provisions of the Midwestern Independent System Operator (MISO) Open Access Transmission Tariff is a single sentence that could imperil state programs promoting renewable energy.   Writing for the three judge panel, Judge Richard Posner wrote that “Michigan cannot, without violating the commerce clause of Article I of the Constitution, discriminate against out-of-state renewable energy.”   While the sentence was dicta—not essential for the court’s holding—it marks the first time a federal appeals court has found that a state renewable portfolio standard (RPS) violates the Constitution’s commerce clause.

The commerce clause empowers Congress “to regulate commerce . . .  among the several states.”  Under a long line of Supreme Court cases, the clause prohibits states from enacting laws or regulations that benefit in-state economic interests by burdening out-of-state competitors without justification.  For example, as authority for its statement that Michigan’s RPS, which mandates that utilities purchase energy from in-state renewables, violates the Commerce Clause, the court cited two Supreme Court cases.  In Oregon Waste Systems, the Court held that a surcharge by the state of Oregon on out-of-state waste that was three times higher than the surcharge on in-state waste was discriminatory and failed to advance a legitimate local purpose.  In Wyoming v. Oklahoma, the Court struck down an Oklahoma law that required at least 10% of coal burned in the state’s power plants to come from Oklahoma. 

In this case, petitioners challenged portions of the MISO Tariff, which allocated costs among members for regional Multi-Value Projects, or MVPs.  Amendments to the MISO Tariff, approved by FERC in 2010, allocate costs to member utilities in proportion to each utility’s share of the region’s total wholesale consumption, a departure from the prevailing methodology that allocates costs of new transmission to the nearest utilities, regardless of electricity consumption.   

Among several challenges to the MISO Tariff, Michigan utilities and the state’s Public Service Commission claimed that the state would not receive benefits commensurate with their increased cost allocation because it draws little power from outside of Michigan and because the state’s RPS does not allow out-of-state power to count towards meeting the renewable energy mandate.  The Court quickly dismissed both arguments.  With regard to the first, it noted that one of the MVP projects is specifically designed to bring more power into Michigan.  The court wrote that the second challenge “trips over an insurmountable constitutional objection” and determined that Michigan’s RPS violates the commerce clause.

Numerous state RPS statutes have in-state requirements.  Only Texas has an in-state requirement as severe as Michigan’s.  Other states, including Ohio, require that a certain percentage be from in-state generation, and some states require that energy be capable of being delivered in-state.   Other states, including Montana and Wisconsin, require that the energy actually be delivered in-state.  Several states, such as New Mexico and Oregon, require that a relatively small percentage come from in-state distributed resources, and other states have several classes of renewable resources, which can include in-state requirements.

A state’s economic development alone is unlikely to provide a sufficiently compelling state interest to win commerce clause approval.  But there are a number of other state interests not addressed in the Seventh Circuit’s perfunctory dicta that could make out a compelling state interest.  These include grid reliability, transmission congestion, environmental protection, and fuel diversity.  These justifications are likely to be raised in future Commerce clause challenges to RPS statutes, which the Seventh Circuit’s decision will likely precipitate.  In 2010, a Canadian energy company challenged solar carve-out and in-state long-term contracting regulations in Massachusetts.  The parties settled and the state rewrote its regulations before the case went to trial.  In 2011, a self-described think tank challenged Colorado’s RPS.  That litigation is still pending in federal district court.  Also in 2011, North Dakota sued Minnesota over its requirement that any new coal-fired plants selling to the state offset its greenhouse gas emissions.  That suit is also pending in federal district court. 

by Benjamin B. McReynolds

Promoting development of Maryland’s considerable offshore wind energy resources tops Governor Martin O’Malley’s recently announced 2012 legislative agenda. The Maryland Offshore Wind Energy Act of 2012, S.B. 237, if enacted, will tweak the state’s existing renewable portfolio standard (RPS) to require that a small percentage (no more than 2.5 percent) of generation be sourced from qualifying offshore wind projects. The current draft of the bill requires utilities to meet the new offshore wind RPS beginning in 2017 and specifies that qualifying projects must interconnect to the PJM Interconnection at a point located on the Delmarva peninsula. Maryland’s utilities will be able to satisfy the offshore wind RPS by obtaining (through development or purchase) a new category of renewable energy credit (REC) — the offshore wind renewable energy credit (OREC).

The Maryland bill borrows from New Jersey’s Offshore Wind Economic Development Act of 2010. Other States in the Mid- to Upper-Atlantic region have successfully lured emerging renewable technologies to their region using similar modifications to RPS legislation. Delaware amended its RPS in an attempt to attract fuel cell technology, which resulted in the Delaware PUC’s recent approval of a tariff that allows the utility to rate-base portions of the cost of developing a utility-scale fuel cell project in Delaware. As mentioned above, New Jersey’s addition of an OREC in 2010 has garnered significant attention from developers, one of whom hopes to receive Public Utilities Commission-approval and start offshore construction later this year.

This is Governor O’Malley’s second attempt to encourage development of Maryland’s considerable offshore wind resources. The Governor’s first attempt, last year’s S.B. 1054, would have required the State’s utilities to enter into long-term (25+ years) power purchase arrangements with offshore wind projects. The Maryland Legislature rejected that approach, based largely on concerns over the ultimate costs to the average Maryland ratepayer, which were estimated to be between $24 and $108 annually.