The Proposed Federal Renewable Energy Standard

One of the provisions in the Waxman-Markey climate change bill calls for a federal renewable energy standard (RES), often referred to as a renewable portfolio standard or RPS. Long favored by the renewable and environmental communities, a federal RPS has come up short several times in Congress in the past. And, former President Bush threatened to veto any legislation containing one.

Now, with the Dems in control of Congress and the White House, the prospects for passage are the best they’ve ever been. Colorado has a reasonably aggressive and generally successful RES that has successfully stimulated wind and solar electricity generation, at least in the investor owned utility (IOU) territories. And, while our experience has been largely positive, I have gone on record in the past, and continue to believe, that a federal RPS is NOT the way to go.

Presently, some 28 states have mandated RES requirements for at least their investor owned utilities. Some extend them to cooperative rural electric associations and municipal utilities and a few states have renewable targets or goals as opposed to mandates. Most of the resistance to renewable standards has come from the southeastern states although even some of the states with the best wind energy resources have no RPS (North and South Dakota have goals, Wyoming not even that).

In spite of the fact that I generally favor a transition toward more renewable energy, there are a number of reasons why I do not favor a federal RPS. First, most of the states with existing RPS already have more stringent targets than are contained in the Waxman-Markey bill. So, all the federal requirement would accomplish is force the recalcitrant states to make some progress toward producing clean electricity. What’s wrong with that you may ask? Nothing, per se. But it should be understood that each state with an existing RPS has tailored it to its own resources and needs. No two look alike. Each has different requirements for sourcing the generation, the vintage of facilities, the lifespan or bankability of renewable energy certificates (RECs), etc. Some even have different definitions of what constitutes a renewable resource (Pennsylvania, for instance, allows waste coal to count toward its RPS... we won't go there).

Now, along would come a federal RPS which would eliminate some of that discretion. It is generally acknowledged that a state may have a more stringent RPS (at least in terms of the target renewable percentages) but that in itself could create an administrative nightmare since we could have RECs that are retired with respect to one requirement and not the other. And, with both a state agency and the FERC to report to for RPS compliance, utility costs of compliance will only increase.

To avoid further confusion, states would (or should) harmonize their definitions of eligible resources and REC characteristics with the federal standard. And, while this could be a positive step (Colorado, for instance, presently has a ridiculous 6-year shelf life for RECs and accepts unbundled RECs for compliance from anywhere), the principal beneficiaries will be the REC marketeers who make a living in trading paper. This is no different from trading in problematic carbon offsets or financial derivatives. If you consider that renewable standards are sold to the public on the basis of clean energy, job creation, and other local benefits, shipping ratepayer money across the country for the purchase of unbundled RECs (that is, RECs without the associated green energy) helps those ratepayers exactly how?

So, what is the solution? Simple. Rather than have a federal RPS with utilities reporting to the FERC, mapped over the top of a cornucopia of different state standards, why not simply mandate that each state create its own state RPS and leave it to the individual states to administer. This is no different than was done years ago with the 55 mph speed limit and a number of other federally mandated, but state administered, programs. The feds could mandate a minimum set of requirements that each state program must meet and, once that state program is approved by the FERC, administration and compliance is left to the state. We get renewables across the country, each state gets to tailor its program to its own needs, the benefits accrue locally, and utilities report to only one task master. And given the weak RPS that is contained in Waxman-Markey, no one could argue that it would result in a weaker standard than we will see with the current proposal.