As states try to individually address the issue of greenhouse gas emissions, creating renewable portfolio standards (RPS) has become a popular way to jump-start their efforts. During today's Event Coverage, the Pew Center on Global Climate Change introduces the new report, "Race to the Top: The Expanding Role of U.S. Renewable Portfolio Standards," written by the University of Michigan's Barry Rabe. Rabe focuses his report on several case studies of states that have implemented RPSs. He addresses some challenges facing renewable portfolio standards and outlines the political and economic benefits of RPSs.
Barry Rabe: The last time I set foot in this building was in late 2002. And it was indeed the moment at which the report, to which Eileen referred to a moment ago, was released, and interesting, for a moment, to think back to that time. What we tried to do in that report was not be encyclopedic, but present a bit of an overview of this new development.
A number of states are beginning to show signs of taking steps to reduce greenhouse gases through a number of policy tools. It's a kind of ad hoc collection of states and tools. And I think hovering over that discussion and hovering over the reaction to that report was, was this a fluke?
Did this involve a couple of states that always act before the federal government or other states? Is this a passing fad? A term that was used at the time. Or was it the beginning of something larger for which there would be momentum?
Well, this study does not intend to replicate the 2003 report and look at all of the tools and cutting across all of the possibilities. But I think if we were to try to replicate the 2002 report we'd certainly see three trends, all of which are relevant for the tool renewable portfolio standards that is the primary focus of our conversation today.
One is proliferation. I've lost count, I don't know about you, but the number of states, the number of policies, the number of ways in which different states, very different states, have begun to move on this issue. I would bet that before the close of business today some state somewhere will pass another bill or another governor will pass an executive order. The proliferation continues.
Diffusion, classic American federalism, where state A acts, states B and C follow, perhaps with a little bit of nuance and twist, and pretty soon you begin to have a spreading across the country, not unique to this area. Again, for which there is abundant precedent.
And then finally, regionalization, which we'll talk a bit more about. Literally, what begins to happen when you have neighboring states passing essentially similar or even identical kinds of policies and how they work together. So when as we often talk about the patchwork quilt, we're talking about large chunks of territory, regions of the United States, the Southwest, the Northeast, the Midwest, as opposed to a few states working individually.
And the primary focus of today of course is the RPS, the Renewable Portfolio Standard. Some of you were here in 2002, at that point, 12 states have an RPS, many with fairly modest goals, many were experimental, many the numbers were quite low, the levels of renewable energy that would be attempted.
Now, unless some state acted last night, 22 states plus the District of Columbia have an RPS. It's a very diverse set of states, physically, from Hawaii to Maine. A presidential candidate in 2008, in the Electoral College, only winning states that have an RPS, would win big time in the Electoral College.
A clear majority of members of the U.S. House of Representatives serve in districts that are in states that are covered by renewable portfolio standard. And this is an international tool. Australia, a federal system, not a participant in Kyoto, divided into six states. Two of the six states had an RPS, much like the ones we'll be talking about today.
At least three members of the European Union, as well as some sub-national units within European nation states have an RPS. One can even look to Canada, Prince Edward Island, where Anne of Green Gables is on the license plate. Well 15 percent of PEI's energy will be coming through an RPS over time.
And the point of regionalism begins to be illustrated by the fact that almost every region, really with the exception of the Southeast, is now a player in this in some manner or fashion. And you begin to see, we'll talk a little bit more about this, the clustering effect because of the movement of energy and electricity and commerce across state boundaries. But this is really, increasingly, a regional phenomenon, especially as the numbers of these begin to expand.
Let me say a few words, much of this is covered in the report, about common design features. Some of you may be RPS aficionados and junkies and very familiar with it, some of you this may be relatively new. But the basic design tool is the following. An RPS sets a level, a percentage or a megawattage or some level of renewable electricity that must be reached by designated providers over a certain period of time.
It's fairly straightforward. And that's the regulatory piece. There's a certain market mechanism or flexibility to this in that nearly all states involved some form of credit trading or so-called RECs, or renewable energy credits, which allow for flexibility for literally purchase and trading and exchanges of credits to satisfy those targets as they are imposed.
Each state with an RPS designates a lead agency, most commonly a public utility commission, a public service commission or a Department of Energy to play a lead role. And here I think it's important to note that while as recently 25 or 30 years ago public utility commissions were often exhibit A for discussions of the incompetence of states in issues of regulatory capture and the like.
Basically the perception being the public utility commissions were in the hip pocket of large utilities. That's not the case any longer. And in many states, small and large, PUCs and their equivalents are really quite large analytical shops. They understand renewable energy. They're quite, quite sophisticated in this policy design and have been able to put much of the architecture in place, as well as oversee implementation.
In total we estimate that of the RPSs in place, if they are successful in implementing what has been mandated, that we would add an estimated 64,000 megawatts of renewable energy by 2020. That translates, with a fairly conservative estimate, to a level of about 6 percent renewable electricity across the US, including RPS and non-RPS states, by 2020.
The assumptions there are continued demand for electricity, so that piece would continue and so affecting levels and percentages, that the implementation targets would indeed be hit. But it also is conservative, because it presumes that no more states would enact RPSs or no states that have existing RPSs in place would set a higher standard. So we think that's a fairly conservative target or a fairly conservative figure.
The political drivers behind this. One question that invariably emerges is why our states doing this, especially given the difficulty in some jurisdictions, most notably Washington, D.C., in moving forward on this issue? There's a lot of discussion about this in the report, but quickly this is an area, and this is fairly consistent with what I said in 2002, where you see a certain amount of cross partisan collaboration or even bipartisanship.
It doesn't mean Republicans and Democrats, governors and legislators lock arms and skip out the door passing renewable energy legislation. There are issues. But there's a remarkable amount of collaboration on this; 16 of the 22 RPSs, at least the first cut, were signed into law by Republican governors.
The legislative mix is really quite significant and a large number of these were enacted or have been revised in states with some form of divided government. There's a chart in the report that goes into this. And there really are a series of overlapping and, in some cases, interwoven rationales for why are states doing this.
One is economic development. I have yet to find a state that has not pursued this in large part because of a perception, widely held, that it is in the economic self interest of a state government to pursue this. Why? A perception that as opposed to importing increasingly expensive sources of fuel, whether its natural gas or coal or even still in some states oil or uranium, can you develop local homegrown sources of energy?
A perception that there may be a job multiplier locally in terms of constructing facilities and sustaining implementation. So the economic development argument is ubiquitous, but that's interwoven with state concerns about electricity reliability and diversification. Think of different regions of the country that have experienced shortages or blackouts or concerns about long-term projections and reliability of electricity.
And this invariably becomes interwoven with environmental concerns. Quite often opportunities or perceived opportunities to improve air emissions or conventional air emissions and increasingly weaving in the greenhouse gas provision in different ways in different states.
But I would argue now as opposed to 2002 we're seeing more states that are going the direction of an RPS, thinking about, talking about and looking at some combination of these factors, including the greenhouse gas piece, but linking that with perceived local opportunities for economic development.
In terms of design trends; quickly, clearly the bar keeps going up. If you look at the deliberations in many states, especially those states that may have enacted a first-generation RPS, in say 1999 or 2000. And in the last year or two have revisited, much of the debate is not over whether we continue, but literally how high we raise the bar.
Almost like in pole vaulting or high jumping, you see a set of initiatives, the ones in Arizona and Wisconsin, those were older RPSs that have just been raised to that level within the last six months. California, New York, probably more familiar.
We're also beginning to see RPS integration with other state renewable energy and energy efficiency programs. And it's a little too early to know how all of these interrelate, but this is not, in many cases, the only thing states are doing in terms of renewable energy.
There are new funds and incentives and a range of programs that are underway. And in some ways we're beginning to see the integrative effects of that. We're also seeing definitional diversity. This is federalism. These are different states.
My guess is if I asked all of you to pull out your legal pads and write on a list what is renewable energy? There's some things on which we would have unanimity, others where we might come to blows. There is variation by state.
There is a trend in a number of states to kind of divide the renewable pie into tiers or classes or categories; certain renewables in one pot, certain renewals in another and a responsibility then for generators to meet both areas of activity.
There is increasingly the question as the markets develop and certain technologies move ahead and demonstrate greater cost-effectiveness and others don't, what you do about those that are having a hard time keeping pace? And a point of some contention in some cases is frankly the solar issue.
Should solar energy be treated as a carve out or a special category? So you have a special subset within the tier or the category to provide special protection or opportunity for those technologies that right now have not been able to close the gap, as say have wind and some others.
We're also interestingly, and this is a development in the last year or two, beginning to see some formal fusion between renewable energy and energy efficiency in a lot of ways, but particularly a few states are beginning to put energy efficiency as one of the categories within the classification system or within the tiers that allow for satisfaction of the RPS.
Quickly, a few case studies. We talked, as Eileen mentioned, about five of them. These are not intended to be best practices or award winners. We were looking for a fairly representative sample. But I think by providing quick snapshots of these five, each of which are treated in greater length in the report, you begin to sense some of the range as well as the opportunities.
I think Texas is probably very familiar as an RPS. Initially this was legislation signed into law by former Governor Bush in 1999. It was seen as quite successful, was probably less publicized. It was his last summer. Texas had a heck of a political problem on its hands, namely how to handle school finance. A tough issue in any state, especially Texas.
Governor Bush's successor, Mr. Perry, called a special session of the Legislature into Austin, which he has the powers to do constitutionally. He agreed to amend that agenda to allow renewable energy to go forward. Interestingly, the state of Texas could not come to any agreement on its school finance formula, but overwhelmingly supported an expansion of its RPS. It was the issue that emerged out of that session.
Texas, which were it to secede from the union, and we are not proposing that as a federalism strategy, though it's been explored before, would rank somewhere in the top 10. By my latest projection, seventh in the world as the greenhouse gas source, is now on track with its new RPS to get somewhere in the vicinity, they use a megawattage rather than a percentage. So it's a little difficult to calculate. About 7 or 8 percent renewables by 2015 and have a goal for decade after.
We're talking about real numbers, big numbers here. And really the main point of contention throughout those deliberations in Austin was not whether we go forward, but literally how high to set the bar, 15, 18, 20. Very, very interesting discussions.
The goal here is obvious, tapping into the incredible source of wind energy in West Texas, in a state that is concerned about its long-term electricity reliability, is deeply concerned about its air emissions and is also increasingly beginning to see greenhouse gas ramifications.
And if there is a challenge in that state, it is the question of course of transmission capacity. How do you get all of that great wind energy in the west part of the state, which doesn't have a lot of people, to the central and eastern parts of the state, which are very heavily populated?
That's one case. Another is Massachusetts. The Massachusetts RPS calls for a 4 percent level of the renewables by 2009 with steady increases thereafter. In fact, there's no endpoint currently on the Massachusetts RPS. In this case the RPS is one tool of a large number of strategies that Governor Romney and the Legislature have developed under their climate protection plan. You can find it embedded within that, one of a series of efforts that that state is pursuing and thinking about with regard to greenhouse gas reduction.
Because Massachusetts got into this fairly early, there are a couple of very good early implementation analyses that the state has issued. They're cited in the report, that if you're interested in really the technical mechanics of how an RPS works and compliance processes and credit trading and all of that works, it's talked about in the report, but is made available by the Commonwealth of Massachusetts.
I mentioned a challenge in Texas' transmission. There's a challenge in Massachusetts. It's another kind of an implementation issue. Can they develop their homegrown sources of electricity? Everyone knows the story of Cape Wind, but maybe less well known is that there's also been opposition to some of the renewable proposals including biomass.
And questions about how dependent Massachusetts ultimately will be on other jurisdictions for importing and trading and developing reciprocal relations, particularly in other states that have RPSs. Hence an early look at the regionalism issue.
Nevada is also an interesting case. Since the late 1990s four of the last five legislative sessions in Nevada have passed RPS legislation. Starting with a very, very modest bill in 1997, the most recent one approved last summer, has now a commitment of getting to 20 percent by 2015.
The thinking in Nevada is that there are all sorts of renewable sources. It really is a potpourri of renewable possibilities, not one particular source. They looked very closely at Texas, classic diffusion and there's much of the language in Nevada is very similar to what Texas has put together.
They're one of the first states to really think about the energy efficiency, renewable energy nexus and allow for energy efficiency credits to be used towards satisfying those RPS targets. And invariably one does not have a conversation about energy or much else in Nevada without talking about nuclear power.
And invariably in that state, when you see a discussion of the rationale behind RPS, one of many reasons or rationales is an argument against Yucca Mountain, to show the world, to show the nation that there are other options and other alternatives. Governor Guinn gave quite an impassioned state of the Union address a year ago on that, which went into this in some detail. So you really have a confluence of variables or factors that are in play there.
Two final case studies quickly; Pennsylvania, big coal state, big energy state. In 2004 passed an alternative Energy Portfolio Standards Act. It's one of these two-tiered systems; column A, column B. Tier 1 other renewable sources that I think most of us would sort of think of as conventional renewables; wind, solar and the like. Tier 2 gets a little more complicated and was part of the political negotiations in trade. It's a very long list, which is all laid out in the report.
It includes waste coal, which is in abundance in 56 of the 57 senatorial districts in the Commonwealth of Pennsylvania. It includes poultry farm waste, which is in abundance in Pennsylvania. It includes energy efficiency. It includes a really, really interesting mix.
Part of the challenge in that state is rule making amid very competing energy interests. And the fact that because it is such a physically large state and cuts across different generating or transmission regions, how you weave together a statewide or a Commonwealth wide policy and make all of that work.
The final case is Colorado. Three times Colorado came close, through the legislative process, to enacting an RPS. It was a little bit like Charlie Brown and the proverbial football, got close to the football, but didn't quite happen at the last minute. As is customary in American federalism, at least in those 30 plus states that have provisions for direct democracy, ballot provisions within their Constitutions, Colorado went to the ballot.
And in late 2004, by a fairly significant margin, the voters of Colorado established an RPS reaching 10 percent by 2015. An intriguing political coalition came together behind this. Folks you probably would not expect to join forces on just about any other issue, that degree of variability. A coalition headed by the Republican speaker, then the Republican speaker of the assembly and a member of Congress, a Democrat from Colorado.
And clearly this is not only another RPS, but raises the specter of another tool in the kit bag of policies that are available for states. We know the state of Washington, for example, is looking at the Colorado model. Other states are looking at ballot propositions for other tools, other ways to engage in this process.
And there is abundant literature on this, outside of environmental policy that suggests that when one state turns from conventional processes to the ballot process other action follows. And indeed that's quite, quite likely.
Looking ahead. I think it's safe to say that whereas three years ago or three-and-a-half years ago RPSs and the whole state climate policy area seemed a little uncertain, perhaps peripheral, perhaps fringe. RPSs now are increasingly significant forces in many states and in many regions. And that's probably going to only expand.
There are issues. Do you treat all renewable sources in identical fashion? Do you cut them into two categories? Three? Or how do you divide the pie? What about siting issues? And facility siting issues like Cape Wind, but not just Cape Wind. Transmission issues. Getting renewable energy to the place, point of generation to point of demand, and how that transmission is handled both politically and economically, as well as prospects for interstate cooperation and collaboration. That map again.
Think about the economic relationships between those states that appear in orange. And even from what we know of the last five to eight years of energy and electricity movement in the states in the last five to 10 years; blackouts, reliability issues, coordination issues. Sort of what happens in a federal system when you have a number of neighboring states, basically in the Southwest, a de facto RPS from California to Texas.
And a real possibility, if we all gather in another year or two, you're going to see more orange blotches on that map. Well, the bottom line here is that RPSs are indeed held as a state power or as a state responsibility in 22 states, but they operate in a regional marketplace.
And a real challenge, as well as an opportunity for states, is that for those states that are into this in large part because of economic development reasons. How do they maximize the economic development benefit? And at the same time allow the kind of competition and cross-border movement and regional source development that needs to occur to allow them, not only to hit their targets, fully develop renewable energy sources?
Can states develop somewhat common metrics? Renewable energy credits? Greenhouse gas reductions? There's actually an appendix in the report that sort of talks about different methods and metrics for translating all of these new policies in renewable growth into greenhouse gas reduction issues or measures.
And finally, what ultimately is the relationship between the state and federal government? Eileen mentioned, and there have been a number of stabs at this at the federal level, a federal RPS. And one of the things that surprised me over the last year as I talked to folks at the state level who work on this issue on a day-to-day basis, is the relative lack of communication and conversation that takes place between folks who work on this issue and know it at the state level and those who work at the federal level.
On one hand there are many folks at the state level who would welcome active and constructive state engagement. There are concerns that will they get credit for early actions? Will their experience and expertise, they've been doing this, be taken into account in the design of ultimate federal legislation?
And is it possible for the federal government to play a facilitative, coordinating, enhancing kind of role that allows interstate collaboration and coordination and regional coordination to emerge as opposed to other less salutary outcomes that we might envision?
Finally, there's a web site. But finally finally, I wanted just to show this slide on REC tracking systems. These are a number of efforts. Obviously Texas is in a world unto itself in terms of electricity. But you can begin to see different patterns here. Probably most notably the Regis case involving California and all of the Western states that is about some kind of a mechanism for allowing for interstate crediting, interstate discussion, common metrics, trading and the like.
But I'll thank you for your attention and close there and turn things back over to Eileen. Thank you all.
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