December 27, 2011

DSIRE’s Top 10 (+1) notable policy developments of 2011

Each year, we ask our friends from DSIRE to review the past year’s policy activities and come up with their Top 10 list.  This year, a bonus: there’s a +1.   Thanks to the DSIRE team for their consistently brilliant work, and a special thanks to Justin Barnes for the fitting introduction and for pulling these…

Each year, we ask our friends from DSIRE to review the past year’s policy activities and come up with their Top 10 list.  This year, a bonus: there’s a +1.   Thanks to the DSIRE team for their consistently brilliant work, and a special thanks to Justin Barnes for the fitting introduction and for pulling these all together for your reading pleasure.  jp

To quote Charles Dickens, “It was the best of times, it was the worst of times…” Okay, that might be a little melodramatic, but it is pretty clear that 2011 gave us plenty of the three-steps-forward-and-two-steps-back dance that characterizes U.S. renewable energy policy. (Were we expecting anything else?) So let’s all raise a glass to a couple of dearly departed friends – 1603 Treasury Grants and the Oregon BETC, and toast some new friends, like the California RAM, the Rhode Island FIT, and the Vermont Energy Act of 2011.

CALIFORNIA – RPS Receives Steroid Injection
In April 2011, California enacted legislation that cements California’s RPS at 33% by 2020. Utilities in California had already been working toward the standard, which was initially established via executive order in 2009. However, executive orders are generally weaker than statutes, and California’s new law provides much more solid legal footing for the state’s RPS policy. In addition to increasing the percentage of renewables required by the previous statutory requirement, the new law also extends the requirement to publicly-owned municipal utilities. The California Public Utilities Commission made substantial progress towards implementing the new standard throughout 2011, culminating in separate December 2011 decisions setting RPS procurement quantities for retail sellers and defining portfolio content categories for RPS-eligible electricity.

CALIFORNIA – Regulators RAM Through Renewables Auctions
California’s Renewable Auction Mechanism (RAM), authorized by the CPUC in December 2010, achieved another milestone in late August 2011 with the approval of Resolution E-4414. This resolution required California’s investor-owned utilities to complete their first auctions by November 15. The RAM involves two annual auctions held by each utility in which developers of eligible projects of up to 20 MW bid for standard contracts. (For folks who are dismayed to see multiple items from California, our apologies…what can we say? We don’t make the policies, and the RAM is BIG NEWS!)

Connecticut’s 2011 energy policy overhaul (SB 1243) included a provision that requires utilities to enter into long-term contracts (15 years) for RECs from zero-emission Class I renewables (on the customer side of the meter) up to 1 MW. Zero-emission Class I facilities include solar, wind and hydro generators. The new law also requires utilities to enter into long-term contracts (15 years) for RECs from low-emission Class I renewables (on the customer side of the meter) up to 2 MW. The law establishes the emission criteria required to achieve “low-emission facility” status, and could include facilities that generate electricity using fuel cells, biomass and landfill gas. While these long-term contracts do not directly amend the state’s RPS, the ZRECs and LRECs secured via these long-term contracts will be used for RPS compliance.

DISTRICT OF COLUMBIA – Solar Carve-Out Boosted
In August 2011, the District of Columbia enacted legislation that expanded its solar carve-out more than six-fold, from 0.4% to 2.50% by 2023, and placed new “in-District” geographic limitations and a 5-MW capacity limit on qualifying solar energy resources. The legislation also established a declining forward schedule of alternative compliance payment levels, as follows:  $0.50/kWh from 2011 – 2016, $0.35 in 2017, $0.30 in 2018, $0.20 in 2019 and 2020, $0.15 in 2021 and 2022, and $0.05 in 2023 and thereafter.

FLORIDA – Utilities Play Musical (Solar) Rebates; State Clears Old Rebate Baggage
The last year was nothing if not eventful for solar rebate programs in Florida. From April to October, sizable utility rebate programs for solar water heating and PV opened and closed repeatedly, often at single-day intervals.  Gulf Power and Progress Energy opened (and closed) the door on rebates on October 3 and October 4, respectively, while Tampa Electric and Florida Power and Light (FPL) cycled through several rounds of program funding, culminating with FPL’s $15.5 million single-day offering in late October. For its part, the state made partial amends for past mistakes (to the tune of roughly $0.55 on the dollar) by allocating funding to clear the queue of its woefully oversubscribed (and since terminated) rebate program.

ILLINOIS – RPS Receives DG Injection; Net Metering Takes it On the Chin
Overturning a gubernatorial veto, Illinois’s legislature enacted a bill that added a distributed generation requirement to the state’s RPS. SB 1652 requires 1% of the state’s RPS to be met with DG systems of 2 MW or less by June 1, 2015. This good news was balanced by other provisions of the bill which look to cast a cloud over net metering in the years to come. Although the bill raised the aggregate capacity limit to 5% and the individual system capacity limit to 2 MW, other provisions related to customer applicability, charges, net excess generation and meter requirements are expected to dilute or effectively expunge the benefits and/or availability of net metering.

OREGON – BETC Goes Down in Flames; New Incentives Rise from the Ashes
Throughout 2011, Oregon continued to tighten rules for its Business Energy Tax Credit (BETC) after several years of scrutiny and recent negative media attention. The BETC was initially authorized in 1979, and significant expansions to the tax credit were made in 1993 and during the past 10 years. Legislation (HB 3672) enacted by Oregon in June 2011 eliminated the BETC in its current form. Applications for the BETC that were submitted after April 15, 2011, will not be approved. This new law also created a new energy conservation tax credit, a tax credit auction program and a grant program that will be funded by revenue from the tax credit auctions. The renewable manufacturing tax credit will remain in place until its scheduled sunset in 2014.

RHODE ISLAND – Feed-In Tariff Established; National Grid Moves Quick
Rhode Island enacted legislation in June 2011 (H.B. 6104) establishing a feed-in tariff for new distributed renewable energy generators up to 5 MW in capacity. The new law requires electric distribution companies to enter into standard contracts for an aggregate capacity of at least 40 MW by the end of 2014. Standard contracts include a fixed payment rate, a 15-year term, and payment rates that generally vary by generator capacity and type. Each electric distribution company must conduct one enrollment period in 2011 and at least three enrollment periods in subsequent program years. In December 2011, National Grid began accepting applications for its first enrollment period of distributed generation standard offer contracts. Solar and wind systems of up to 5 MW are eligible to receive $0.1335 – $0.3335 per kWh, depending on system size and type.

TEXAS – 3rd-Party Ownership Authorized
Legislation enacted earlier this  year by Texas (S.B. 981) officially opens the door to third-party-owned systems that are designed to meet some or all of the customer’s annual electricity consumption — but not to exceed it. The law took effect September 1. Check out DSIRE’s summary map of 3rd-party solar power purchase agreements to find out which other states currently allow 3rd-party solar PPAs.

VERMONT – Net Metering, Solar Permitting Enhanced
Talk of permitting and “soft costs” was prevalent during 2011, and Vermont did not disappoint solar supporters. Under the Vermont Energy Act of 2011(H.B. 56), the process for securing a “Certificate of Public Good” (the state permitting process) for PV systems up to 5 kW will be expedited and streamlined beginning in January 2012. The legislation also increased the individual system capacity limit for net metering from 250 kW to 500 kW, increased the aggregate capacity limit from 2% to 4% of a utility’s peak demand and improved group net metering. It further required utilities to offer additional credits of $0.20/kWh minus the highest residential rate to solar net metering customers. This could result in an additional $0.01/kWh – $0.06/kWh for net-metered solar, depending on a utility’s residential rate.

And now for the (+1)…

FEDERAL – Industry Bids Farewell to 1603 Grants, 100% First-Year Bonus Depreciation
As it stands now, the wildly successful 30% Grant in Lieu of Tax Credit for renewable energy property (affectionately known as the 1603 or Treasury Grant Program) will not see the light of day in 2012, nor will 100% first-year bonus depreciation.  This is not so much a policy development as a lack of policy development, but all is not lost. The clean energy industry will still be able to benefit from the 30% business energy investment tax credit and the residential renewable energy tax credit through the end of 2016, as well as 50% first-year bonus depreciation through 2012.