Are states curbing their enthusiasm for renewable portfolio standards?

By Gregory K. Lawrence and Melissa Dorn, McDermott Will & Emery, LLP

Connecticut and California are considering changes to their renewable portfolio standards (RPS) that could be viewed as “scaling back” the targets. This could be a near-term effort to address high utility rates during an economic downturn and an election season, or the start of an unwelcome trend for renewable power developers.

In Connecticut regulators are considering scaling back on the state’s RPS, which currently requires 27 percent renewable energy by 2020, including 20 percent from Class-I renewable resources such as wind and solar.

Connecticut already has some of the highest utility rates in the country, and its state Department of Public Utility Control (DPUC), in a draft decision recently released regarding the utilities’ integrated resource plans, warned that the price of renewable energy certificates (and thus the cost of RPS compliance) may be higher than the utilities’ are anticipating after 2013, which could drive rates even higher.

There is little renewable energy development occurring in Connecticut, and the state must compete with the surrounding New England states for renewable generation as each of their RPS targets annually increases. It is estimated that in total, New England states need a four-fold increase in renewable energy resources to meet the region’s future RPS requirements.

Alternatively, the region could import more renewable generation, but the cost of necessary transmission construction is prohibitive.

A final DPUC decision on the state’s integrated resources plan is expected to be issued sometime this month, and will likely call for an investigation into alternative approaches to the RPS, including a decrease in the targets for Class-I renewable energy and a possible solicitation for long-term contracts for in-state renewable energy development.

In California the current RPS statute only includes renewable energy targets through the end of 2010. State senate bill 722, which called for an extension of the RPS to 33 percent by 2020, failed to pass before the end of the legislative session in early September 2010.

A similar bill was passed by the legislature in 2009, but was vetoed by Gov. Arnold Schwarzenegger. The governor then issued an executive order requiring the California Air Resources Board (CARB) to implement a 33 percent by 2020 renewable electricity standard.

However, with Schwarzenegger’s retirement approaching quickly, the status of the executive order is uncertain. CARB has not yet passed the required regulations, though they may be considered at its hearing this month. CARB is not the RPS’s only hope though, as the bill could be revived if the governor decides to include it in a special session he may call to address outstanding budget issues.

Authors:

Gregory K. Lawrence is a partner in the law firm of McDermott Will & Emery and is based in the Firm’s Boston office. He is co-head of the Firm’s Renewables practice and head of the Global Renewable Energy, Emissions and New (GREEN) Products affinity group. Mr. Lawrence can be reached at +1 617 535 4030 or glawrence@mwe.com.

Melissa Dorn is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C. office. She focuses her practice on a combination of regulatory, legislative, compliance and transactional issues related to energy and commodities markets, with a particular focus on renewable energy sales, projects and trading, and the developing emissions markets. Ms. Dorn can be reached at +1 202 756 8288 or mdorn@mwe.com.

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Are states curbing their enthusiasm for renewable portfolio standards?

By Gregory K. Lawrence and Melissa Dorn, McDermott Will & Emery, LLP

Connecticut and California are considering changes to their renewable portfolio standards (RPS) that could be viewed as “scaling back” the targets. This could be a near-term effort to address high utility rates during an economic downturn and an election season, or the start of an unwelcome trend for renewable power developers.

In Connecticut regulators are considering scaling back on the state’s RPS, which currently requires 27 percent renewable energy by 2020, including 20 percent from Class-I renewable resources such as wind and solar.

Connecticut already has some of the highest utility rates in the country, and its state Department of Public Utility Control (DPUC), in a draft decision recently released regarding the utilities’ integrated resource plans, warned that the price of renewable energy certificates (and thus the cost of RPS compliance) may be higher than the utilities’ are anticipating after 2013, which could drive rates even higher.

There is little renewable energy development occurring in Connecticut, and the state must compete with the surrounding New England states for renewable generation as each of their RPS targets annually increases. It is estimated that in total, New England states need a four-fold increase in renewable energy resources to meet the region’s future RPS requirements.

Alternatively, the region could import more renewable generation, but the cost of necessary transmission construction is prohibitive.

A final DPUC decision on the state’s integrated resources plan is expected to be issued sometime this month, and will likely call for an investigation into alternative approaches to the RPS, including a decrease in the targets for Class-I renewable energy and a possible solicitation for long-term contracts for in-state renewable energy development.

In California the current RPS statute only includes renewable energy targets through the end of 2010. State senate bill 722, which called for an extension of the RPS to 33 percent by 2020, failed to pass before the end of the legislative session in early September 2010.

A similar bill was passed by the legislature in 2009, but was vetoed by Gov. Arnold Schwarzenegger. The governor then issued an executive order requiring the California Air Resources Board (CARB) to implement a 33 percent by 2020 renewable electricity standard.

However, with Schwarzenegger’s retirement approaching quickly, the status of the executive order is uncertain. CARB has not yet passed the required regulations, though they may be considered at its hearing this month. CARB is not the RPS’s only hope though, as the bill could be revived if the governor decides to include it in a special session he may call to address outstanding budget issues.

Authors:

Gregory K. Lawrence is a partner in the law firm of McDermott Will & Emery and is based in the Firm’s Boston office. He is co-head of the Firm’s Renewables practice and head of the Global Renewable Energy, Emissions and New (GREEN) Products affinity group. Mr. Lawrence can be reached at +1 617 535 4030 or glawrence@mwe.com.

Melissa Dorn is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C. office. She focuses her practice on a combination of regulatory, legislative, compliance and transactional issues related to energy and commodities markets, with a particular focus on renewable energy sales, projects and trading, and the developing emissions markets. Ms. Dorn can be reached at +1 202 756 8288 or mdorn@mwe.com.