New RPS Proposals under Consideration by Congress
Enactment of a renewable portfolio standard ("RPS") has been under consideration in Congress and elsewhere for several years. In a nutshell, an RPS would require that a certain percentage of electricity sold to retail consumers must be obtained from renewable sources, such as wind, biomass, solar, and geothermal. Several states have enacted their own RPS, but to date no action has been taken at the federal level.
February 10, 2009
Last week, two significant developments occurred in Washington. First, the majority staff of the U.S. Senate Committee on Energy and Natural Resources, chaired by Senator Jeff Bingaman (D-NM), released the outline of a proposal for a federal RPS. If enacted, this proposal would require that 20% of all energy sold to retail consumers by 2020 be obtained by the seller from renewable sources. The staff also announced that a hearing on the proposal was scheduled for Tuesday, February 10, at 10 a.m. (EST). The following witnesses are scheduled to testify:
Dr. Ralph Izzo, Public Service Enterprise Group
Mr. Don Furman, Senior Vice President, Iberdrola Renewables, Inc.
The Honorable David Wright, Commissioner, representing SEARUC
Mr. Scott Jones, Executive Vice President, Forest Landowners Association
Dr. Lester Lave, Professor, Carnegie Mellon University
In addition to this announcement, Representative Ed Markey (D-MA), chair of the House Select Committee on Energy Independence and Global Warming, together with Representative Todd Platts (R-PA), has introduced his own proposal for a federal RPS. That bill (HR 890) would go further than the Senate Energy Committee staff proposal, and would impose a 25% RPS requirement by the year 2025.
Although it is impossible to predict what Congress may or may not do, the conditions look favorable for enactment of some form of nationwide RPS. As part of his campaign, President Obama called for a 10% RPS by the year 2012. It is expected that the President will soon propose a comprehensive energy strategy to Congress, which could include an RPS.
A continuing issue in Congress’s consideration of the bills will be the relationship between the federal and state standards. As initially presented, the federal legislation would provide for the higher standard to apply. The House bill would also recognize credits granted by a state RPS. It is not clear, however, whether federal credits would be recognized when based on technologies that do not qualify for credits under the federal RPS (such as "clean coal"). The House bill also calls for reliance on state credit tracking systems. Most such systems utilize megawatt hours as a unit. The House bill, however, curiously specifies granting credits per kilowatt hour. We also note the "steps" to the maximum standard of 25% are back-end loaded, inviting controversy in the later years of the program. Doubtless, these and other issues will be debated as the legislation moves through committees.
Enactment of a federal RPS would significantly alter the demand for renewable energy on a nationwide basis. Nevertheless, it is expected that opposition to an RPS will be strong and that enactment of an RPS is not a certainty.