Renewable Energy Making A Strong Impact On State Legislatures

Max Tyler has only been in the Colorado House of Representatives since last May, but the suburban Denver Democrat is already shepherding an energy bill that his governor considers a legislative priority. The bill would require major utility companies to produce 30 percent of their power from “green energy” by the year 2020.

On the other side of the country, Florida State Sen. Lee Constantine is plotting something similar. Constantine, a Republican, has introduced a bill calling for 20 percent green energy by 2020.

Tyler’s and Constantine’s initiatives are gambits in a fierce competition that has broken out among states hoping to attract green businesses such as wind farms, turbine manufacturers and solar panel builders.

With energy legislation bogged down in Congress, state governments are increasingly courting renewable energy companies with stringent new rules mandating that a share of their state’s electricity come from renewable sources.

The mandates, known as “renewable portfolio standards,” require that utilities either produce renewable energy themselves or buy it from green energy producers. Although the fine print varies from state to state, the standards share a similar goal: to force a market for clean electricity, and attract businesses that will come into the state to fill it.

“Wind energy manufacturers go where the markets are,” says Jeff Deyette, an energy analyst with the Union of Concerned Scientists. “It’s one of those things where the states aren’t waiting for the federal government to lead.”

At stake, the states believe, are not only bragging rights but economic development. Two recent studies found that almost 300,000 clean energy jobs could be created nationwide by 2025. That’s still a relatively modest number considering that the U.S. economy lost nearly 800,000 jobs in January 2009 alone.

But it’s enough to generate interest almost everywhere. New York’s standards require that 24 percent of the state’s energy come from renewable sources by 2013. Michigan aspires to 10 percent by 2015. Maine has mandated 40 percent by 2017.

Besides portfolio standards, states are offering tax incentives and other sweeteners to attract business. Almost every governor touted his or her state’s clean energy initiatives in speeches earlier this year.

Last year’s federal stimulus bill, which included $90 billion in spending and tax breaks for renewable energy projects, has only fueled the rush. Analysts say the federal aid has helped projects find financing that otherwise would be difficult to secure.

You might consider it the twenty-first century equivalent of the battle to attract foreign automakers a decade or two ago. “We’re not going to attract Ford Motor Company or Toyota to build an automobile plant,” says Colorado’s Tyler. “If you’re talking about a brand new economy, a brand new marketplace that can start anywhere, we really are a hot spot of renewable energy here.”

The most common sources of renewable energy that states have targeted are wind power and solar power. But many states also include energy from burning agricultural residue or solid waste, known as biomass, or drawing energy from the earth’s heat, known as geothermal.

Hawaii and Texas will count wave energy towards their standards. North Carolina includes energy generated from swine or poultry waste. Michigan and Pennsylvania go further, counting so-called “clean coal” technologies towards their standards.

In 1983, Iowa became the first state to impose renewable standards. Two decades later, 13 states had passed similar laws. Today, that number has grown to 29, plus the District of Columbia. Kansas was the latest to join last year, following Missouri, Ohio and Michigan. Besides Florida, Virginia and Indiana are also considering renewable portfolio standards this year.

At first, states set themselves easily achievable targets. Many – though not all – of those have now been met, spurring legislatures to toughen their requirements. Ten states did that in 2007, six in 2008 and eight in 2009. Pennsylvania, California, Maryland and Wisconsin are all discussing stricter standards this year.

In his 2010 budget address, Pennsylvania Governor Ed Rendell left no doubt why he was pushing for tougher rules. “We will not be able to stay at the front of the pack for long,” he said. “Since we passed our portfolio standards bill, other states have enacted higher standards that will make them more attractive for future investment and reduce Pennsylvania’s competitiveness.”

In Wisconsin, Governor Jim Doyle dangled the prospect of 15,000 new jobs in front of lawmakers and urged them to support a bill that would make that state’s standards twice as rigorous. “This isn’t just an environmental issue, this is a job creator,” stressed Adam Collins, Doyle’s spokesman.

The standards have forced utility companies to seek out renewable power sources while also trying to plan for increasing demand, says Dan Riedinger, spokesman for the Edison Electric Institute, a group of utility companies.
“In the best of all worlds, the utilities and the state regulators come to an agreement early on and design a program that is feasible, where there is a significant percentage of renewables that is brought online or being purchased and without unnecessarily hurting utility customers with sharp rate increases,” he says. “There are cases where the first phase of an RPS [Renewable Portfolio Standard] might be very feasible while the second phase virtually unreachable.”

Amid all this green fervor, two states are moving in a different direction. Oregon lawmakers recently rolled back tax credits for clean energy projects as a way to help balance the state’s budget.

The Wyoming Senate last week approved a House-passed plan to impose an excise tax on the state’s wind farms, a proposal that has strong backing from the state’s Democratic governor, Dave Freudenthal. Under the Wyoming bill, producers would pay $1 per megawatt hour. “It’s frustrating for the wind industry,” says Susan Williams Sloan, manager of state policy for the American Wind Energy Association, a trade group. “This kind of taxing regime is really in some ways sending a signal for the wind industry to go somewhere else.”

But Jonathan Green, a spokesman for Freudenthal, says he does not think the tax would drive business out of the state. “The wind ain’t going nowhere,” he says. “Quite frankly if these folks are operating on such razor-thin margins maybe they should be reviewing their business plans.”

Despite the efforts to this point, Americans still consume very limited amounts of clean electricity. According to the U.S. Department of Energy, about 3 percent of power came from renewable sources in 2008, excluding hydroelectric power from large dams. But wind energy has become the fastest growing source of electricity in the United States, increasing 51 percent between 2007 and 2008. Prices for customers have not increased by more than 1.5 percent so far, according to the Lawrence Berkeley Laboratory.

It’s not certain that states will be able to meet the ambitious benchmarks they have set for themselves. California regulators found that 13 percent of energy sales in 2008 came from renewable sources, “far below” the 20 percent mandated by 2010.

Gov. Schwarzenegger’s efforts to increase the mandate to 33 percent by 2020 will be difficult to achieve because of the lack of transmission lines and local concerns over where to place new plants.

New York has also struggled with its target. And Massachusetts fell short of its goals for four years before finally complying in 2007. But compliance came partly because some energy providers chose to pay a fee –something the law allows — rather than produce the required amount of renewable energy.

“Setting a standard for a state is a little like a New Year’s resolution,” says George Sterzinger, executive director of the Renewable Energy Policy Project, an advocacy group. “You can make it — and then you’ve got to do it.”