Monday, May 06, 2013

Local Sourcing of Renewables – Desirable? Legal? Inconsistent?

Colorado’s Senate Bill 13-252, which passed through the General Assembly strictly on a partly line vote and which will presumably be signed into law by Governor Hickenlooper, accomplishes three principal objectives:
  1. It expands the renewable energy obligation of the state’s rural electric cooperatives and their wholesale provider, Tri-State G&T; 
  2. Adds electrical generation fueled by captured coal mine methane and syngas from the pyrolysis of municipal solid waste to the eligible energy resources for compliance with the RES; and
  3. Removes the in-state multiplier for compliance with the RES. 
In a column a few weeks ago (click here), I spoke about this bill when it was first introduced and how it was being shepherded through the legislature. One of my principal concerns was that it perpetuates the nonsensical, opaque, retail rate impact calculation in the Colorado RES that has been circumvented at every opportunity by Colorado’s two investor owned utilities with the complicity of legislators and regulators. Though this retail rate mythology persists, I am less concerned about the co-ops abusing it at the expense of their ratepayers than has been done by the IOUs. 

Today I would like to focus on the in-state multipliers which grant a preference to Colorado-based projects over those from out of state. The rationale for eliminating the in-state preference was an acknowledgment that it would likely be found to be an unconstitutional violation of the dormant commerce clause of the U.S. Constitution (Article I which expressly grants to Congress the power to regulate commerce among the states). OK, fair enough, though there are probably ways around that prohibition such as requiring that the project actually deliver energy into Colorado’s grid in order to be eligible for the RES. 

But today, out of Ontario, Canada comes word that the World Trade Organization has ruled against the province’s local content requirements for receipt of incentives paid to producers of renewable energy (click here). While not strictly the same as the in-state preference under Colorado’s RES, the parallels are obvious. Moreover, recall that there has been criticism of wind production tax credits that have been claimed by developers (domestic and foreign) because of the high foreign content of wind turbine generators (especially the generators and gear boxes). Hence, at a national level we find local preferences to be illegal and at an international level we now find local sourcing requirements to be equally problematic. So much for the argument about the economic development benefits of state renewable standards – they may exist but only if the lower transportation costs of local sourcing outweigh the lower costs of foreign produced goods. 

On the other hand, out in Nevada, the legislature is considering a bill to close certain loopholes in Nevada’s renewable standard – coincidentally, also Senate Bill 252 (see the report in the Las Vegas Sun). This bill would ratchet down the amount of energy efficiency credits that can be used toward RPS compliance. According to Nevada’s Governor, the law should not allow the utility “…to meet the portfolio standard by handing out energy-efficient light bulbs at Home Depot.” Seems reasonable. Ironically, Colorado’s Senate Bill 13-272, which would have required that 30 percent of gas-utility DSM funds be dedicated toward more substantive technologies such as solar thermal and ground source heat pumps was killed in committee (see my post on this topic here). Hence, our DSM programs remain focused on energy-efficient light bulbs handed out at Home Depot… and perhaps Lowes.