Tuesday, April 21, 2015

RPS Repeal Efforts Are Deeply Misguided

By Nick Lawton, Staff Attorney

Texas and North Carolina have joined the fray over Renewable Portfolio Standards, the popular and effective state requirements for renewable energy. Bills in both states would rescind local RPS requirements. Although Texas would suffer less from an RPS repeal than North Carolina, enacting either bill would be a costly mistake. This post offers some details on the proposals in these two states and then offers some broader context to explain why RPS repeal efforts are bad public policy.

Is Texas Declaring Victory or Snatching Defeat from its Jaws?

Texas enacted its RPS in 1999 and expanded the policy in 2005. The Texan RPS required the state’s utilities to purchase 5,880 MW of renewable energy by 2015 and set an aspirational goal of 10,000 MW by 2025. Since then, Texas has become the nation’s leader for wind energy development, with more than 14,000 MW already installed (more than twice the amount as in California, the next runner up). Texas also has roughly 330 MW of solar power installed. In short, Texas has wildly exceeded the most ambitious goal in its RPS.

In some sense, the remarkable renewable energy development in Texas lends credibility to the argument from the bill’s sponsor, state Senator Troy Fraser (R-Horseshoe Bay), and other backers that the RPS is no longer necessary. However, the RPS also gave the state’s Public Utility Commission (PUC) greater authority to approve new transmission lines in “Competitive Renewable Energy Zones.” The new transmission lines connect the rich renewable resources in west Texas to the metropolitan energy consumers in the eastern parts of the state, and they have been extremely successful in spurring the state’s wind energy development. If the state rescinds this authority, the PUC will lose the ability to easily approve new transmission lines, thus setting up a new obstacle for further renewable energy development. Similarly, repealing the RPS sends a message to renewable energy developers that the state lacks interest in their business, even at a time when renewable energy is poised to help the state comply with new federal pollution regulations at low cost. In the words of Tom Smith, director of Public Citizen, the legislature "snatched defeat from the jaws of victory." In other words, even though the state has already met the goals of its RPS, the repeal would still stymie renewable energy development.

But more fundamentally, Texas’s situation raises the question of what states should do once they meet, or surpass, their initial renewable energy goals. The Texas Senate seems to think the appropriate solution is to dust off their hands, declare victory, and end support for a successful industry. But a better reaction to achieving one goal is to set another, greater goal. Only by building off prior victories can states continue to make progress. Wind power in Texas has already saved the state more than $950 million annually and created more than 8,000 jobs. The state can realize even greater savings and even greater benefits, but not by retracting successful policies. The Texas House of Representatives should reject this RPS repeal effort and instead launch new renewable energy goals for the state.

North Carolina Proposes Backing Down from a Promising Policy

In contrast to Texas, North Carolina has not attained its RPS targets and thus stands to suffer worse economic impacts from the repeal recently proposed in the state House of Representatives. North Carolina became the first state in the Southeast to enact an RPS in 2007, requiring the state’s utilities to obtain 12.5% of their energy from renewable sources by 2021. But a new bill in the House of Representatives would slash the target in half and end the policy altogether in 2018. In effect, the new bill would end North Carolina’s driving renewable energy policy.

One of the bill’s sponsors, Senator Chris Millis (R-Pender), promotes the bill by arguing that the RPS transfers wealth from ratepayers to the renewable energy industry. However, the RPS has already driven more than $2.6 billion in investment in the state since 2008, and more than three-quarters of that investment has gone to rural counties, which likely have the greatest need for it. 

Repealing North Carolina’s RPS would disrupt existing investment and deter future investment by sending a signal that the state will refuse to support the renewable energy industry. The state is already on track to meet its targets, but slashing those targets would present a significant obstacle to making further progress.

States that Meet RPS Goals Thrive, but States that Abandon RPS Goals Suffer

Texas, North Carolina, and all the other states considering RPS repeals should pay close attention to the demonstrable economic benefits from achieving RPS targets and to the economic damage that repealing RPS targets can wreak. The benefits are clear. California, which has a robust RPS and is strongly considering an expansion, is seeing strong economic returns, including sales of renewable energy to other states worth $4 million just in the first two months of 2015.  Meanwhile, in Virginia, compliance with that state’s RPS has proven cheaper than the state’s utilities expected, leading Appalachian Power to begin the process for offering its customers rebates, which would be worth nearly $1 off each resident’s monthly energy bill, for a total rebate of roughly $8 million.

In contrast, Ohio offers a good example of the economic damage that RPS repeal efforts can wreak. In 2014, Ohio became the first state to freeze its RPS, meaning that utilities no longer needed to invest in renewables in order to comply with the law. Consequently, the value of renewable energy credits, which utilities buy to demonstrate RPS compliance, plummeted. The fallout has been harsh for the solar energy sector in Ohio. According to one developer, Ohio’s solar companies “are either going out of state or going out of business.” Those companies are seeing rapid declines in profits and are shedding jobs. In short, Ohio backed down from its RPS target, and its local businesses suffered.

In 2015, the states will have to be leaders in renewable energy policy. Although Congress has focused heavily on energy and the environment in the first 100 days, it has so far focused on encouraging fossil fuel development and has failed to pass any significant reforms. Meanwhile, the United States Environmental Protection Agency is very likely to issue a final version of the Clean Power Plan this summer. Under that rule, states will take leading roles in figuring out how to slash carbon emissions from the energy sector. The states that have successful RPS programs will have more experience driving renewable energy development and thus will be better prepared to meet federal emissions targets. In contrast, the states that are abandoning successful, efficient RPS policies are likely to have a harder time.

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