Wednesday, February 25, 2015

Illinois & Maryland Consider RPS Expansion; Ohio Lags Behind

By Nick Lawton, Staff Attorney 

Legislators in Maryland and Illinois have proposed bills that would expand each state’s Renewable Portfolio Standard (RPS), substantially increasing the amount of renewable energy that utilities will have to build or buy in the next decades. These bills would both benefit the environment and grow the states’ economies by creating well-paid, green-collar jobs. In contrast, Ohio, which froze its RPS last year, has seen its jobs growth dwindle as a result. In short, state investments in renewable energy create jobs, and withdrawing support for renewable energy quashes jobs growth.

Maryland’s RPS-Doubling Bill

The Maryland Clean Energy Advancement Act of 2015 would double the state’s RPS on a quick timeline.  Currently, Maryland requires utilities to obtain 20% of their energy from renewables by 2022. Under the new bill, the utilities would need to obtain 40% renewable energy by 2025. Similarly, the bill would also double the RPS’s carve-out for solar power. Currently, solar power must contribute 2% of the state’s energy by 2022, while the new bill would require 4% by 2025.

The Maryland bill’s lead sponsor Sen. Brian J. Feldman (D-Montgomery) argues that the legislation is “a golden opportunity” for the state to develop “good paying jobs and a much needed boost to [the] economy.” Similarly, co-sponsor Delegate Bill Frick (D-Montgomery) notes that the state’s “solar industry is actually contributing more to our state than our iconic crabbing industry.” However, other legislators have expressed concern about possible compliance difficulties for utilities and increased costs for ratepayers. Delegate Frick has responded to those concerns by expressing willingness to amend the bill to more modestly require only 25% renewable energy by 2025.

The Maryland Department of Legislative Services has evaluated the bill’s fiscal impacts, which would fall primarily on ratepayers. Although it notes substantial uncertainties in its analysis, it projects annual compliance costs between $11 million and $ 44 million in 2018, rising to between $141 million and $566 million in 2025 and beyond. Translated onto utility bills, this would mean an increase of between $0.17 and $0.68 per month in 2018, and between $2.05 and $8.20 in 2025. The range in price increases has to do with Alternative Compliance Payments. If utilities fail to obtain sufficient renewable energy, they must instead pay into a state-managed fund. Alternative payments cost more than buying or building renewable energy. Thus, if utilities fail to comply through renewable energy development, their failure will cost the state’s ratepayers substantially. Moreover, the alternative payments do not necessarily create jobs in the way renewable energy development does. Thus, if this bill becomes law, Maryland’s utilities should make sure to invest in actual renewable energy development in order to limit rate increases and promote economic growth in the state.

Illinois’s RPS Expansion Bill

The Illinois Clean Jobs Bill has several goals. It would increase the state’s RPS, strengthen energy efficiency requirements, and call for the development of market-based strategies to reduce carbon emissions. The current RPS calls for utilities to obtain 25% renewable energy by 2025, while the new bill would require 35% renewable energy by 2030. Similarly, the bill would double the state’s energy efficiency requirements from 10% by 2025 to 20% by 2025. (The energy efficiency measure requires utilities to meet a portion of demand by reducing energy usage, for example through efficient appliances.) Finally, the bill requires the Illinois Environmental Protection Agency to develop a market-based means for compliance with the federal Clean Power Plan, seemingly focusing on a cap-and-trade system for CO2 emissions.

The bill’s main sponsor, Senator Don Harmon (D-Oak Park), argues that “[t]here is no time to waste” in passing this bill, which would promote “new jobs, better health, and a cleaner environment.” Sen. Harmon notes that “[a]s strong as the clean energy economy is today, with 100,000 clean energy jobs throughout the state, Illinois is at a tipping point.” Co-sponsor Representative Elaine Nekritz (D-Buffalo Grove) also noted that “too many states are beginning to outpace” Illinois in renewable energy development. For example, the Sierra Club notes that in 2014 Oklahoma saw the development of more than 600 MW of wind energy, while Illinois saw none.

Although the state does not appear to have evaluated the bill’s rate impacts yet, the Illinois Science and Technology Institute reports that the bill would create roughly 32,000 new jobs in the state. Moreover, the bill carries forward an existing 2% limit on rate increases associated with the RPS. Thus, the bill would not increase rates more than 2%—but would also stop operating once the utilities hit that cap.

Ohio’s Dwindling Jobs Growth

Meanwhile, Ohio froze its RPS last year. Essentially, that measure meant that utilities would not have to take any further action toward RPS compliance until 2017. Nominally, Ohio’s RPS freeze was a ‘free-market’ move to avoid ‘picking winners and losers.’ In reality, those arguments have always been false, and the RPS freeze is really an effort to coddle the fossil fuel industry. Now, Ohio is seeing the first negative impacts from its move away from renewable energy. Ohio has slid from 8th to 10th place in terms of jobs in the solar industry. Although the state is still seeing jobs growth in the industry, that growth rate is slowing, and other states are leaping ahead. Andrea Luecke, president and executive director of the Solar Foundation, notes that Ohio’s RPS freeze may continue to lead to further declines in solar jobs in the state.

The Upshot: Renewable Energy Investments Create Jobs and Drive Economic Growth

The lesson is clear. Ohio froze renewable energy requirements and is losing its potential for clean-energy job growth. Illinois is considering a renewable energy mandate expansion that would expand clean energy jobs in the state by roughly a third. Meanwhile, California, a clean energy leader, has seen clean energy jobs grow more than four times as quickly as other states. Investments in renewable energy create jobs and drive state economies. Maryland and Illinois should pass their RPS-expansion bills, and other states should follow suit.

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