States and clean energy: 3 issues to watch

By David Iaconangelo, Heather Richards, Zach Bright | 06/15/2023 07:20 AM EDT

Rooftop solar, hydrogen fuel, offshore wind turbines.

Photos by AP, Getty Images

Statehouses across the country are enacting new energy laws this year, tackling issues that will directly affect President Joe Biden’s climate agenda even as Congress stands divided.

New laws signed in recent months and proposals still under consideration may affect the growth trajectory of low-carbon technologies including offshore wind and rooftop solar. In many cases, state plans may evolve over time along with national programs.

For emerging technologies like hydrogen, state lawmakers are trying to manage how the Biden administration’s ambitions will play out locally. Democrats have largely tried to implement Biden’s big-picture vision for promoting those technologies, while Republicans have sought to apply the brakes in some cases.

Advertisement

The state action is happening during an important period of implementation for last year’s Inflation Reduction Act and the 2021 bipartisan infrastructure law.

“We expected states to look into follow-on” laws that would respond to policies contained in the Inflation Reduction Act, said Frank Wolak, CEO of the Fuel Cell and Hydrogen Energy Association.

More laws of that kind are likely to emerge in additional state legislatures, he added. “I expect there’ll be others interested.”

The Treasury Department has recently rolled out guidance on how tax credits from the IRA could be claimed for rooftop solar projects and for U.S.-made offshore wind parts. And the Department of Energy is slated to award up to $7 billion of infrastructure funds for the first hubs of low-carbon hydrogen production, storage, transport and consumption this fall, for instance.

Both parties are angling to bring billions of dollars in infrastructure law funds to their states to support the first large demonstrations of low-carbon hydrogen. They include Republicans in Mississippi and North Dakota as well as Democrats in Hawaii and Washington.

Colorado, which Democrats control, has gone ahead with rules for clean hydrogen production that environmentalists and lawmakers in 35 states and Puerto Rico are touting as a national model.

In Maine, a Democratic lawmaker wants to pave the way for the construction of floating wind turbines off the coast — a technology seen as an important next-generation source of clean power by the Biden administration. Republicans allied with local fishing groups have introduced bills to block development.

Several states are also wrangling over how much homeowners should be compensated for their rooftop solar panels. New policies backed by utilities in New England and the South will slash benefits accruing to households when they feed their solar power back into the common grid.

The White House didn’t respond to a request for comment on recent state actions. The Treasury Department declined to comment.

Amanda Finney, deputy director of public affairs at DOE, said the department was focused on advancing clean energy at the state level by “deploying funding and technical assistance to state energy offices and community-serving organizations.”

“Progress in implementing clean energy will look different for different regions and communities, and we are working collaboratively to build their capacity to tackle the energy challenges today and in the future,” Finney said in an email. “And we are doing this work with a focus on disadvantaged and underserved communities, enabling them to be a part of the energy transition.”

Here are three low-carbon technologies central to Biden’s climate agenda where statehouses are taking action this year:

Hydrogen’s new standard?

Legislators in several states have written laws that promote the production of low-carbon hydrogen, including by offering new tax credits or pledging support for industry coalitions seeking to tap federal funds.

The 2021 bipartisan infrastructure law contained $8 billion for hydrogen hubs, which would be the nation’s first major demonstrations of low-carbon hydrogen production, transport, storage and consumption. All of those elements must be located in a single region for a potential hub. The first announcements from DOE this fall could see up to $7 billion awarded from the $8 billion total.

The competition for a share of the funding has piqued bipartisan interest from state legislators.

Democratic-controlled Hawaii and Republican-run Mississippi both passed resolutions pledging their state’s backing for coalitions that have filed applications to DOE for a share of the hydrogen hub funds, for instance.

Other state lawmakers tried to make it easier for hydrogen developers to store the fuel or receive permits for new production facilities — even if their state doesn’t win infrastructure law funds.

In North Dakota, Republicans appropriated $11.3 million for state-led research into the possibility of storing hydrogen and fossil fuels in two underground salt caverns.

Legislators in deep-blue Washington, meanwhile, enacted a law to streamline siting and permitting for clean energy projects, including production of “green” hydrogen made from renewable electricity and water.

Perhaps the most groundbreaking state law for hydrogen was enacted in Colorado.

Signed on May 22 by Gov. Jared Polis (D), H.B. 23-1281 creates a tax credit for companies that consume low-carbon hydrogen — specifically, industries considered hard to decarbonize, such as ammonia- and steel-making or long-distance trucking.

A $1 tax credit is available to companies that buy and use hydrogen that is made by releasing up to 0.45 kilogram of CO2 equivalent for every kilogram of hydrogen. That credit falls to 33 cents for hydrogen with a CO2 content of up to 1.5 kilograms.

Those limits are based on the strictest limits contained in the Inflation Reduction Act, which makes tax credits available for hydrogen production.

The Colorado law also lays out an unprecedented series of emissions accounting rules for “clean” hydrogen, jumping into the forefront of a national policy debate.

Across the United States, prospective producers of “green” hydrogen want to be able to use electricity from the grid to make their fuel, rather than drawing the power directly from new wind or solar facilities.

Emissions modelers and environmentalists say that could effectively erase the “green” credibility of that style of hydrogen, by spiking emissions from the grid.

If hydrogen producers are using grid power, those groups argue, the companies should have to help finance new renewable capacity located nearby on the same regional grid, then match their electricity consumption to the hourly levels of power generation from those wind or solar facilities.

Producers should have to incorporate that complex series of offsets when they count and report their greenhouse gas emissions, emissions modelers and environmentalists say.

Those requirements were instituted in Colorado’s law, making it the first state to do so.

The Treasury Department is also weighing similar requirements. The department is drawing up guidance for the Inflation Reduction Act’s federal tax credits for clean hydrogen.

One major environmental group, the Natural Resources Defense Council, urged the Treasury Department to follow Colorado’s lead.

Colorado’s requirements for clean hydrogen created a “nation-leading standard” that made the law “the first major example of clean hydrogen policy” in the United States, Pete Budden, a climate and clean energy advocate at the NRDC, wrote in a May 18 blog post.

“Hopefully, Treasury, the Department of Energy and the White House are also paying close attention,” he wrote.

Trade groups representing renewable developers and investor-owned utilities have opposed those tight emissions requirements, however, arguing that they will stifle the growth of a low-carbon hydrogen industry.

“Our view as an industry is that these limitations constrain the development of hydrogen,” said Wolak of the Fuel Cell and Hydrogen Energy Association.

Colorado’s emissions-accounting requirements for clean hydrogen will apply in 2028 for companies that consume the fuel — or after 200 megawatts of electrolyzers have been deployed in the state. Electrolyzers are the machinery used to extract hydrogen from water using electricity.

Investor-owned utilities will also have to abide by the requirements when they produce hydrogen, although other hydrogen producers located in Colorado could claim the federal tax credit for making the fuel.

“It is important that clean hydrogen production uses clean electricity, from renewables or other zero carbon generation, in order to contribute towards the pollution reduction goals of our state,” Polis, Colorado’s governor, said in a signing statement.

But Polis also cautioned against the idea that Colorado’s strict requirements should be immediately adopted by the Treasury Department as a standard for federal tax credits.

Colorado’s requirements “should not immediately be created nationwide for access to federal production tax credits, but should be phased in over time as the economics becomes more favorable,” he added in the statement.

In an interview, the executive director of the Colorado Energy Office, Will Toor, explained the governor’s statement as a recognition of the state’s strong wind and solar resources.

“The economics [in Colorado], I think, are much more favorable than they would be in many places around the country,” said Toor.

“But the situation is just very variable across the nation,” he added.

Legislators in dozens of other states and territories are taking notes from what Colorado did, however.

In a recent letter to several federal agencies, over 130 state lawmakers from 35 states and Puerto Rico urged the Treasury Department to adopt Colorado-style requirements on hydrogen’s emissions accounting.

State Sen. Lisa Cutter, a Democrat from Colorado, was a lead organizer of the letter and worked with the National Caucus of Environmental Legislators to gain additional signatories. All but three of the signatories were Democrats.

“We worked hard in Colorado to create a balance; incentivizing innovative energy options while creating a framework to provide the critical environmental protections necessary,” Cutter said in a statement this month. “I’m hopeful that the federal government proceeds in a similar fashion, and am thrilled to receive so much support from legislators across the country for this letter.”

Offshore wind and lobster

Dueling bills proposed in Maine demonstrate the state’s mixed feelings on floating offshore wind turbines in the deep waters of the Gulf of Maine as well as the importance of a crustacean central to the state’s economy: lobster.

A Democrat’s proposal would create Maine’s first offshore wind target of 3,000 MW by 2040 and create tax incentives to lure developers out of the Gulf of Maine’s prime lobster grounds. Meanwhile, a Republican representative is proposing to close the door to any wind energy infrastructure — even in federal waters — landing on the Maine coast, in hopes of protecting the state’s fisheries.

“The state of Maine will not survive the industrialization of the Gulf of Maine,” said state Rep. Tiffany Strout, the Republican lawmaker behind the bill to bar offshore wind.

The two bills underscore an inflection point for Maine’s offshore wind prospects, driven by the state’s decarbonization goals and the maturing technology that will float turbines in waters too deep to fix turbines to the seafloor, like the waters of the Gulf of Maine.

The White House aims to hold a first-ever offshore wind lease sale in the Gulf of Maine as soon as next year — part of its larger ambition to place enough wind capacity offshore to power 10 million homes.

“BOEM is continuing progress towards achieving the Administration’s goal of 30 gigawatts of offshore wind energy by 2030 and 15 gigawatts of floating wind capacity by 2035,” a spokesperson for the Bureau of Ocean Energy Management said in a statement. “In the Gulf of Maine, there are significant opportunities for offshore wind development with the development of floating wind technology.”

Maine Gov. Janet Mills (D) signed a law in 2021 to ban offshore wind in state waters — the state has primary regulatory control in the ocean up to 3 miles from the coast — to appease lobstermen. But the administration remains all-in on offshore wind for the long term, advancing a research floating wind array with up to 12 turbines in federal waters off the coast of Monhegan Island.

Additionally, the governor’s office released an offshore wind road map that aims to establish a state procurement target for offshore wind power within the next two years.

Democrat state Sen. Mark Lawrence’s bill, Legislative Document 1895, would do just that.

The bill would set a target for the state to reach 3,000 MW of installed offshore wind power by 2040, a process to be managed through the state’s electric regulatory body. The lead time is intended to give the floating offshore wind industry time to mature.

Floating turbines in deep water will be necessary to tap most of the potential offshore wind power globally, but the technology is only just being deployed at pilot scale. Foundation and turbine designs need to win market buy-in and be manufactured at scale, a process that will take years. To make that happen faster, the Department of Energy earlier this year set a goal to drive down costs 70 percent by 2035.

That burgeoning floating wind market is in Maine’s favor, said Jack Shapiro, the climate and clean energy director for the Natural Resources Council of Maine. Shapiro, whose organization is part of the coalition of environmental and labor groups that worked with Lawrence on the wind procurement bill, said Maine could be able to capture part of a rapidly growing wind industry globally.

“The big picture here is that we have in Maine a huge opportunity on offshore wind. That’s pretty widely recognized,” he said.

Shapiro said Maine will also need offshore wind power as it chases electrification and climate targets.

In 2021, more than 70 percent of the state’s electricity came from renewables. Clean power for Maine today flows from dams and regional rivers. The state deploys biomass, solar and onshore wind. But it also partly depends on natural gas like much of New England.

Conservative critics have come out in opposition to the procurement bill, criticizing the state’s push for offshore wind as overly ambitious when there are cheaper alternatives.

“As much as it might make us feel good, this is not a long-term strategy to keep prices down,” said Nick Murray, director of policy at the Maine Policy Institute, which is affiliated with the conservative State Policy Network.

But lobster fishermen, who provide some of the most influential voices on ocean policies in the state, are torn on the bill.

Virginia Olsen, a fifth-generation commercial lobster fisherman and political director of the Maine Lobstering Union Local 207, said she supports the state bill that would set an offshore wind target because it also offers tax benefits to developers that site their wind farms outside of the Lobster Management Area One, a federal fishing zone that hosts a significant share of the state’s lobster landings.

Most fishermen remain opposed to offshore wind, but the bill offers a chance to at least shape the industry in the Gulf of Maine, she said.

“It is about trying to preserve our fishing grounds and trying to figure out how to move offshore wind forward and the fishery forward in a way that there’s the least amount of conflict,” she said.

The state’s lobster industry has been one of the most consistent critics of potential turbines in the water. It has raised concern that wind farms could displace lobster grounds. And, following a lab study from scientists at the Heriot-Watt University in Scotland, the industry argued that offshore wind transmission cables might increase the risk of lobsters being born deformed.

“Both the state and federal governments readily acknowledge that the impacts of large scale floating offshore wind development are largely unknown, yet they want to figure it out as they go,” the Maine Lobstermen’s Association wrote in a May letter to state lawmakers.

The association has come out in support of Strout’s bill — which would bar state agencies from issuing leases, rights of way or permits related to offshore wind turbines in state or federal waters. The group opposes Lawrence’s measure setting an offshore wind target.

The two Maine bills face a looming deadline in late June to advance or not.

The bill proposing to ban offshore wind failed to make it out of committee in late May, but it could make a reprise.

The procurement bill has been more successful, winning a majority vote last week from the joint Energy, Utilities and Technology Committee. If it passes out of that committee with amendments, it will head to the full Senate and need votes of approval from both the Senate and House before being sent to the governor to be signed into law. Supporters hope it gains enough traction to get passed now, rather than punted to another legislative session for further consideration.

“Our goal is to get it done,” said Colin Durrant, spokesperson for the Natural Resources Council of Maine.

Rooftop solar under fire

Policies seeking to change compensation rates for rooftop solar owners swept through a number of states this spring. In state after state, expanded benefits lost to reductions.

New Hampshire lawmakers passed a measure aimed at boosting net metering, a billing system designed to pay customers that send excess electricity back to the grid. In most states, including New Hampshire, net metering awards credits to residential customers equal to the retail rate that they pay for electricity.

Republican Gov. Chris Sununu vetoed the bill May 31 over what he called “several problematic provisions.”

The measure, S.B. 79, would have expanded benefits to industrial and commercial businesses with rooftop solar of up to 5 MW annually, a fivefold increase from the current 1-MW cap.

“Although this may have been unintended by legislators, this change would completely upend the state’s net metering structure,” Sununu said in his veto message.

The bill’s primary sponsor, Republican state Sen. Tim Lang, said he plans to reintroduce the bill in the state’s next session.

Sununu added that expanding net metering would mean higher electricity bills for those who don’t own rooftop solar, with the largest costs passed on to low-income and senior residents. Opponents of expanded net metering benefits often make the argument that costs will be passed onto residents without rooftop solar.

A similar assertion was used by Duke Energy Corp., which notched changes that will cut net metering benefits from North Carolinians.

But more than half a dozen advocates for clean energy, including frequent critics of utilities like the Environmental Working Group and NC WARN, a clean energy and climate nonprofit, filed an appeal in May that aims to block the change and seeks to delay implementation until at least Oct. 1.

Jim Warren, NC WARN’s executive director, called the rule “outrageous and totally reckless” and said it would make the state’s transition toward clean and renewable energy more difficult by removing rooftop solar incentives.

Under the new rule, customers with new installations will have to pay new minimum monthly bills and get paid back under a “time-of-use” system that will replace existing flat repayment rates.

Duke, the state’s largest electric utility company, received approval in March from the North Carolina Utilities Commission to change its net metering policy with a study based on internal numbers.

But opponents of the change say that under a state solar law passed in 2017, the state’s utility regulator must perform its own cost-benefit analysis of net metering with its own numbers.

The author of the 2017 solar law — then-state Rep. John Szoka (R) — and North Carolina elected officials like Attorney General Josh Stein (D) have said a cost-benefit study should not rest on Duke’s data alone.

Duke spokesperson Randy Wheeless commended the state’s “subtle” change, which he added would likely mean lower benefits for most rooftop solar customers. He said negotiations with the state’s solar installer community left most happy.

The Solar Energy Industries Association’s Southeast regional director, Will Giese, called the change “a step forward for North Carolina’s rooftop solar market that preserves the ability of residents to choose the power that works for them.”

“Compared to other states, I think North Carolina’s got something to be proud of to settle that issue,” Wheeless said in an interview, drawing a comparison with a net metering measure passed in Arkansas’ legislative session.

Sarah Huckabee Sanders, Arkansas’ Republican governor, signed a law in March that clean energy advocates argue will dismantle the state’s net metering system passed in 2019.

The law’s lead sponsor, state Sen. Jonathan Dismang (R) told lawmakers ahead of a March vote that the act “does not make us an outlier” and that it still allows space “for people that want to do rooftop solar.”

The new law “basically eliminates any incentive or competition that the utility monopolies had when it comes to energy production,” said Lauren Waldrip, the executive director of the Arkansas Advanced Energy Association.

Waldrip said she fears that utilities will overbuild their own systems because the most significant incentives for rooftop solar generation will disappear for installations that come after a Sep. 30, 2024, deadline.

The state’s largest electric utility — and a member of the Arkansas Advanced Energy Association — Entergy Arkansas, supported the law’s passage. Entergy spokesperson Neal Kirby said in an email that the act brings the state’s net metering policy “from the extreme toward the mainstream” and addresses an “unfair cost shift.”

“Lost revenue is not a cost shift,” Waldrip said.

“Solar users certainly want to pay their fair share for infrastructure, for fixed costs, and we could do that through a reasonable grid charge,” Waldrip said. “That’s not what this act does.”

Alongside state changes, a report released this year by the National Academies of Sciences, Engineering and Medicine said net metering compensation systems are at an “inflection point,” and compensation systems in certain cases need to be rebalanced to support the growth of other resources, such as battery storage.

Those conclusions bolster the argument for less benefits in states that lead the country in rooftop solar.

California, which fits the profile, adopted rules that took effect in April that reduced rooftop solar benefits for new customers. Three environmental groups have sued the state’s Public Utilities Commission over that decision, which it made last December.