Repeal of Ohio RPS is Bad for the State in the Short and Long Run

Ohio State Senator Kris Jordan (R-Powell)  introduced Senate Bill 216 which would repeal Ohio's renewable portfolio standard ("RPS").  The RPS requires  that the state's electric utilities provide 25% of their retail energy supply from advanced and renewable energy sources such as clean coal, wind, and solar energy by 2025.  

Ohio enacted the RPS in 2009.  Each year the percentage of electricity to come from renewable or advanced energy sources gradually  increases until you reach the maximum of 25%. 

The bill is co-sponsored by Senators Tom Patton (R-Strongsville) and Bill Seitz (R-Cincinnati). The Senators argue that the RPS requirement is driving up electricity prices during a tough economy which is bad for economic development. 

The proposal comes as Governor Kasich is hosting a two-day energy summit to discuss Ohio's energy policy.

Short Term Job Gains

When Ohio enacted the RPS, the proponents argued that it would lead to job growth.  First, jobs would be added as projects were developed to meet the RPS requirements.  Second, manufacturers of renewable energy parts and equipment are more likely to locate in a state that shows support for its industry through passage of an RPS.

A recent study discussed in a prior post suggests those arguments have validity. 

  • Ohio ranks 6th in the country in total clean energy related jobs with a total of 105,306.
  • Ohio also ranked 12th in total clean energy jobs added between 2003-2010.

Long Term an Over-Reliance on Coal Hurts Ohio

Ohio still gets approximately 90% of its power generation from coal-fired power plants.  There is no argument that coal power has been subject to a flood of new and proposed regulations.  Those regulations include the following:

  • Mercury limits
  • Greenhouse gas regulations
  • NOx SIP Call- cap and trade for power plants
  • Cross-State Air Pollution Rule- greater reductions from power plant emissions enacted this year

This is just a partial list of the regulations facing coal power.  With all these regulations forcing more controls the cost of coal power is going to continue to rise.  It is not too difficult to see Ohio would be very wise to diversify its power portfolio or face future price shocks from these new regulations.

Not to overly simplify, but any good stock broker tells its customers to diversify their portfolio to reduce risk.  In particular, a broker will advise their client to reduce their investment in companies/stocks that are facing "head winds" or challenges in the future.

This is exactly the position the state is in when it relies almost exclusively on coal power.  The RPS serves as a tool to diversify its energy portfolio prior to experiencing these future price shocks.

 

Ohio Renewable Energy Policy at a Cross-Roads

"If you build it they will come..." is the old saying from the movie Field of Dreams.  It also could be used to sum up Ohio's energy policy toward growing green jobs. 

Policymakers believed using grant funds and passage of a renewable energy portfolio standard (RPS) would kick start demand for renewable energy in the State.  If demand for solar, biomass and wind projects significantly increased, then manufacturers would be more likely to locate in the State.  

Governor Strickland was a strong believer in generating demand through government programs.  Governor Kasich and the Republican controlled legislature are less convinced.  September 21st and 22nd, Governor Kasich is convening a energy summit to help formulate his Administration's energy policy. With Ohio's renewable energy policy at a cross-roads, what are the results from the "if you build it they will come" energy policy? 

Ohio's Advanced Energy Fund Comes to an End

Ohio's Advanced Energy Fund was created to provides loans and grants to help overcome the initial cost barriers to commercial and residential renewable energy projects.  The Fund was paid for using a 9  cent per month fee on all Oho electric utility customers.  Residential, commercial and industrial customers paid the same amount.  Total fees in a year whether you owned a factor or a house was $1.08.

According to a July 16th Plain Dealer Article discussing the end of Ohio Advanced Energy Fund, the Legislature's decision to discontinue the program will reduce demand for renewable energy products like solar arrays and wind turbines at at time Ohio's clean energy economy is seeing real growth.

The Advanced Energy Fund, managed by the Ohio Department of Development, has awarded about $44.6 million in grants since Dec. 31, 2005, to nearly 700 projects, more than 400 of them solar projects with a total generating capacity of more than 9.5 megawatts (9.5 million watts).

The awards went not only for solar power arrays, but also for solar heating systems, more than 150 wind turbine systems and more than 60 energy efficiency projects.

The grants, according to a Plain Dealer analysis of a current report obtained from the state, have gone to more than 300 residential projects, about 180 commercial businesses, nearly 70 industrial projects, about 10 farms and about 70 institutions such as schools, colleges, churches and foundations.

Without the grants, making the financing work on these renewable energy projects becomes much more difficult.  Project developers will largely resort to Power Purchase Agreements (PPAs) that typically involve fairly complex arrangements between the property owner, the developer and a corporation that can utilize federal tax incentives. 

The concern is the more complicated financing will mean less projects.  With less demand, the fear is Ohio will be less attractive to renewable energy manufacturers.  One reason the grant program was ended was because lawmakers believed it was no longer necessary now that Ohio enacted an RPS.

Ohio' Renewable and Advanced Energy Portfolio Standard

With the passage of Senate Bill 221 in 2008, Ohio became one of the 36 states to mandate a percentage of the State's energy generation come from renewable or advanced energy resources.  The law required utilities to secure a portion of their electricity supplies from these alternative resources.

By the year 2025, 25% of the electricity sold by each utility within Ohio must be generated from alternative energy sources. At least 12.5% must be generated from renewable energy resources, including wind, hydro, biomass and at least 0.5% solar. The remainder can be generated from advanced energy resources, including nuclear, clean coal and certain types of fuel cells. In addition, at least one half of the renewable energy used must be generated at facilities located in Ohio.

All utilities must meet annual renewable and solar energy benchmarks that increase as a percentage of electric supply each year.  Here are those benchmarks for the first five years of the standard.

Ohio's RPS
Year Renewable Solar
2009 .25% .004%
2010 .5% .01%
2011 1% .03%
2012 1.5% .06%
2013 2% .09%

Ohio's RPS was seen as the way to significantly pump up demand in the State for renewable energy projects.  We are only part way through year three of the RPS.  The RPS contains a modest glide path upward toward the 12.5% mandate.  At this early stage utilities are under only very modest requirements in terms of securing renewable energy generation.

Renewable Energy Projects Rise But What About "Green" Jobs?

So has Ohio's Advanced Energy Fund or the RPS grown Ohio's clean energy economy?

Last week it was announced that Ohio was second only to Oregon in manufacture of solar panels.  Ohio has enjoyed strong growth in solar equipment manufacturing.  This from the article appearing in the Toledo Blade:

The Solar Energy Industries Association of Washington says Ohio produced 66 megawatts of photovoltaic modules in the first quarter of 2011, up 50 percent from 44 megawatts of solar modules produced in the state during the first quarter of 2010.

Last week's announcement would certainly seem to suggest the Fund and/or RPS with the solar carve out was having its intended effect of driving up demand and bringing jobs to the State. But was last week's announcement a result of national demand or Ohio demand for solar panels? 

A more comprehensive analysis of Ohio's green energy job generation by the Brookings Institute paints a complicated picture of Ohio's clean energy economy.  According to figures compiled for Ohio, while the number of renewable energy projects in the State is way up, the State's performance in terms of clean energy job growth appears to be mixed.

On the positive side, Ohio ranks 6th in the country in total clean energy related jobs with a total of 105,306.

Ohio also ranked 12th in total clean energy jobs added between 2003-2010.

However, the graph shown to the left indicates Ohio's clean energy job growth has lagged the rate of growth in U.S.  The sector has only grown 2.5% annually which means Ohio ranks 38th.

It is important to note that Ohio's RPS standard only kicked in during 2009.  This is far too little time to determine what the impact of Ohio's RPS has been on growing Ohio's green energy economy. 

The question will be whether the Kasich Administration and Republican's are willing to keep the RPS standards in place despite mounting resistance from utilities.  Some Republican's believe that RPS mandates drive up electricity prices which hurts others sectors of Ohio's economy.  With Ohio's clean energy sector only making up 2% of the total jobs in the State will the sector and its allies have enough political muscle to keep the standards in place? 

Will Renewable Portfolio Standard Be Up for Debate at Governor's Energy Summit?

Governor John Kasich has not revealed his true feeling regarding the Renewable Energy Portfolio (called the Advanced Energy Portfolio Standard in Ohio) which mandates a certain percentage of electricity should be generated from renewable sources like solar, wind, biomass and others.  Ohio's RPS was instituted as part of Governor Strickland's major energy legislation- S.B. 221.

While the Governor has not affirmatively announced a position, there appears growing sentiment he may be cool to the idea of energy generation mandates.  He recently announced an energy summit with Battelle in Columbus. The Summit will be held on September 21st ad 22nd and will be called "Ohio Governor's 21st Century Energy & Economic Development Summit." Leaders from energy, business, education, government and economic development have all been asked to participate.

However, his comments in announcing the summit suggest he believes major reform is needed and perhaps SB 221 needs review.

"Right now, Ohio essentially has no energy policy, but at the same time energy costs are major factors in the success of every sector of our economy, especially manufacturing and agriculture," said Kasich, as reported in The (Cleveland) Plain Dealer.

Reasons to Support RPS

Those in favor of the RPS say its a job creator by supporting green energy and suppliers to green energy development companies.  They also point to Ohio's heavy reliance on coal power- nearly 90% of generation.  While cost of baseload coal may be cheaper than renewable sources, the difference is shrinking due to advances in green technology and more and more regulation on coal.

The regulatory trend line for coal does nothing but continue to point upward.  With each new regulation the cost of coal power continues to climb.  Here is examples of regulations recently issued by EPA affecting coal:

  • Rule on toxic emissions from power plants
  • Toxic standards from industrial boilers
  • Clean Air Transport Rule for coal fired power plants
  • Revisions to the NAAQS, including a potential tightening of the ozone standard in August
  • Potential regulation of coal ash (EPA seeking comments)
  • Soon to be proposed cooling water intake structures rule
  • New Source Review Enforcement Cases (Includes recent TVA settlement)
  • EPA existing ad future greenhouse gas regulations

A shift away from Ohio's heavy reliance on coal will takes years to accomplish.  Supporters of S.B. 221 argue the RPS puts Ohio on a steady path to diversify its portfolio.

Opponents of RPS

Those who oppose RPS mandates argue it drives up energy prices by forcing utilities to purchase more expensive renewable energy.  As energy prices escalate, they argue, companies face higher operating costs.

The Debate Has Already Commenced

Supporters of S.B. 221 and the RPS are already starting to make their voices heard.  Perhaps they are anticipating a potential assault on Ohio's fledgling RPS.  

"Since inception of the energy law, over 1,700 renewable energy projects have been approved, including over 1,000 MW of wind power - enough energy to power over 300,000 homes." Guest Column Larry Feist is Program Chair in Electro-Mechanical Engineering Technology and Power Systems Engineering Technology at Cincinnati State Technical and Community College.  (Click here to read Cincinnati Enquirer Article)

Other states have already made the decision to increase their green energy mandates. Governor Jerry Brown signed into law Special Senate Bill 2, raising California's Renewable Portfolio Standard (RPS) from 20% to 33% by 2020.

Governor Kasich's budget slashed funding for renewable energy projects by 38% causing some in the industry to question his support going forward.  This from a Business First article:

The president of SolarVision LLC in Westerville said alternative power sources, such as wind and solar, take a backseat to drilling for oil and natural gas when he hears the governor talk about energy in the state. Kasich often mentions the promising potential for oil and natural gas wells in eastern Ohio where new drilling methods have opened up the huge Marcellus and Utica shale formations for development.

The debate in Ohio appears to be just heating up.  One thing is certain, businesses don't like uncertainty.  As long as the possibility that S.B. 221 and the Ohio RPS may be repealed or revamped, it creates uncertainty which creates head winds for projects moving forward. 

As the debate over the budget ends in July, there is no doubt that energy policy will once again take center stage especially with rising commodity prices.

(Photo: Great Valley Center Image Bank- Everystockphoto.com)

Ohio Governor Candidates- A Study in Contrast on Energy Policy

With about ten days until election day races around the country are getting more heated.  Ohio's race for Governor is a study in contrasts on many issues.  Energy policy is certainly one of them.

Governor Strickland has pushed the development of advanced energy projects aggressively during his tenure.  Through passage of Senate Bill 221, he created the states renewable portfolio standard (RPS) mandating 12.5% of the State's energy come from renewable sources. 

He also created grant programs that sought to foster renewable energy projects in the State, such as the Advanced Energy Fund. According to the Ohio Department of Development's webpage the Advanced Energy Fund has made more than $41.9 million in investment in nearly 400 advanced energy projects.  The Fund is set to expire at the end of this year.

Congressman Kasich has built a solid lead in the polls.  One of his more creative proposals is to do away with the Ohio Department of Development as it is currently constructed.  He wants to transform the Agency into a non-profit organization with corporate board members. 

How will his proposal impact the development of advanced energy in the State?  It may depend upon the membership of the board.  The business community has some deep divisions when it comes to advanced energy.  Those same divisions appear between the candidates.

Kasich has expressed concern with renewable mandates and subsidies.  In a September Plain Dealer article this is how his spokesperson described his stance:

Strickland said the Republican would consider repealing an Ohio policy requiring that 12.5 percent of the power sold in Ohio come from renewable technologies by 2025.

The Kasich campaign said the governor's portrayal of Kasich's stance is inaccurate.

"John does not oppose the renewable energy standard and would not seek to repeal it," Kasich spokesman Rob Nichols said in an e-mail.

Kasich recently questioned the cost of the energy standard in an interview with the Dayton Daily News. He said he disagreed with the mandate if it increases consumers' utility bills.

Manufacturers who are deeply concerned about rising electricity prices in Ohio like Kasich's stance- go for the lowest cost alternative. Renewable energy manufacturers and companies that supply parts to those project may have a different perspective.

Ohio- Center of Debate Over Biomass

There is a very good article in the Akron Beacon Journal discussing the debate over the use of biomass as a replacement for coal.  Here is an excerpt from the beginning of the article (click here for full biomass article):

Burning Ohio trees at Burger sets fire to debate
Opponents are hot that FirstEnergy will get credits, question if state can produce enough fuel for power plant

By Bob Downing
Beacon Journal staff writer

Switching from dirty coal to clean wood at FirstEnergy Corp.'s R.E. Burger Power Plant will require millions of trees — year after year.  Where those trees will come from and new questions about whether the switch helps the environment have triggered objections from Ohio environmental and consumer-advocacy groups.

The dispute has brought Akron-based FirstEnergy's application for renewable energy credits — a financial incentive to make the conversion — to a standstill at the Public Utilities Commission of Ohio.

While the article does a great job discussing the different view points, it does not cover one important aspect- Ohio desperately needs to diversify if energy generation.  Right now it relies almost 90% on coal. 

Coal is facing more and more stringent regulation.  These include:

  • Tighter caps on Nox and SO2 emissions in U.S. EPA's proposed Transport Rule
  • Multi-pollutant legislative proposals in Congress
  • MACT standards for mercury reduction
  • Legislation and/or regulation of greenhouse gas emissions
  • Tighter waste disposal requirements

All of this new and potential regulation means the cost of energy production in Ohio will be escalating.  In addition, the prospects for significant added regulatory cost are great.  The challenge for Ohio is great given that it is a highly energy intensive State due to its population and manufacturing base. 

Similar to diversification in your stock portfolio, Ohio needs energy diversification.  The reality is there are not many sources of energy that can provide baseload power.  While wind farms and solar are clean and good investments, they do not produce significant power.  

Nuclear, biomass and natural gas are the current alternatives to coal for baseload power generation.  New nuclear capacity will take years to construct.  Natural gas has its own wild price fluctuations.  Which leaves biomass. 

Outside of greenhouse gas emissions, biomass is a cleaner fuel.  In addition, while  the need for large supplies of biomass fuel may leave wood as the only immediate option, that will change.  Once demand is created, the market will develop other alternatives. 

Energy policy means hard choices.  For those groups strongly opposing biomass, they must answer- if not coal, biomass or nuclear, then what is left as an option given the realities of current technology?

Ohio Offers Grant Funding for Biomass and Waste Conversion

Ohio is using federal stimulus money to establish a new grant opportunity in the renewable energy area.   The Ohio Department of Development has released an RFP soliciting proposals with a total of $10 million in available funding. 

Minimum award is $500,000 and maximum is $1 million.

The grant program is looking for projects that convert feedstocks such as municipal solid wastes, food and farm wastes, or other bio-mass or waste materials to electricity, heat, fuel and/or bio-products.

There is a cost share requirement of 25% of total cost of the project. Cost share can take the form of financial or in-kind contributions.

Grant funds can only be used to purchase and install eligible project equipment for conversion of wastes and biomass into energy , heat, fuel or products.  Due to limitations placed on federal stimulus funding, you may not use grant funds for any of the of the following:

  • Construction costs;
  • Purchase of buildings or land; and
  • Purchase of equipment for renewable energy techniques that are deemed not commercially available.

More information on the Transforming Waste to Value grant program offered by ODOD.

Benefits of Biomass Power Questioned- Implications for Ohio

Ohio's best hope for reducing its overwhelming dependence on coal for electricity generation is  biomass.  While wind and solar have significant benefits, it is unquestioned that current technology does not allow these renewable sources to be forms of base-load power generation. 

Biomass does have that potential in Ohio, as is evidenced by the recent announcements of the conversion of 312-megawatt First Energy's Burger coal-fired power plant to biomass generation.  Now that proposal is meeting opposition by environmental groups. As reported in Biomass Magazine:

The Ohio Environmental Council and Consumers’ Counsel have asked the Public Utilities Commission of Ohio to reject FirstEnergy’s request for classification of its project as a renewable energy facility on the grounds that it has not provided enough information to warrant the qualification...The two agencies are now requesting dismissal of the application altogether.  “The whole state could be deforested to produce energy for this one project.” (attorney OEC)

Opposition to the First Energy proposal will undoubtedly make movement toward biomass as a replacement for Ohio's coal dependence much more difficult. 

Studies have confirmed that biomass presents the best hope for Ohio re-aligning its generation portfolio. A 2004 study by The Ohio State University analyzed the potential of biomass as an source of electricity generation in Ohio:

Recent studies illustrate that Ohio as a relatively large biomass resource potential.  Among the 50 states, Ohio ranks 11th in terms of herbaceous and wood biomass and 4th in terms of food waste biomass.  As a result, using renewable biomass fuels in Ohio could lead to an estimated 27.6 billion in kWh of electricity, which is enough to fully support the annual needs of 2,758,000 average homes, or 64% of the residential electricity use in Ohio.

Now a new study calls into question a long held belief regarding the benefits of biomass power. It has always been assumed that biomass is better than fossil fuels in reducing greenhouse gas emissions. The assumption is based upon the "carbon cycle:"

Through photosynthesis, biomass removes carbon from the atmosphere, thus reducing the amount of atmospheric carbon dioxide, a major contributors to global warming.  When biomass is burned to produce energy, the stored carbon is released, but the next grown cycle absorbs carbon from the atmosphere once again.  (Public Utilities Commission of Ohio Webpage on Biomass Energy)

A new study now questions the "carbon cycle" benefits of biomass power.  It comes from a State that has historically been a very strong supporter of biomass energy- Massachusetts.   The Biomass Sustainability and Carbon Policy Study, released in June 2010, addresses the following issues:

  • Sustainable forest management and ecological implications of biomass harvesting
  • Carbon sequestration of forests with and without forest management
  • Net effect of biomass energy on atmospheric carbon balance
  • U.S. and international policies in regard to biomass and carbon neutrality

The study concludes that use of forest biomass actually has greater emissions of CO2 (a greenhouse gas) than commonly utilized fossil fuels.  The chart below from the study shows forest biomass (wood) generates 31% more CO2 than coal.

Does the conclusions of this study mean Ohio should no longer consider biomass as having the best renewable energy potential?

I don't think that is the case.  As discussed numerous times on this blog, the cost of coal is going to increase as a result of ever tightening environmental requirements (ozone & fine particle standards, MACT (mercury), revamped CAIR).  This doesn't even include eventual climate change regulations that target reductions from existing sources. Therefore, there is a very strong incentive for Ohio to continue to quickly re-balance its power generation portfolio. 

 Certainly the other benefits of biomass remain unquestioned.  These include:

  • Renewable resource- sustainability of the resource
  • Non-CO2 pollutant reductions
  • Only alternative energy source with immediate base-load power potential

While development of biomass continues to make sense, it is important to continue to question assumptions regarding any alternative resource.  The recent Massachusetts study is worthy of consideration when making strategic decisions regarding re-balancing Ohio's generation portfolio.

 

Ohio Utilities Commission Adopts Long Awaited Energy Efficiency and Alternative Energy Portfolio Standards

On April 15, 2009 the Public Utilities Commission of Ohio finally adopted the long awaited rules that will govern Ohio's energy efficiency requirements and its Alternative Energy Portfolio Standard (AEPS).  Ohio was one of the last states to have adopted a Renewable Portfolio Standard (RPS)- more broadly defined as a AEPS in Ohio.  However, as one of the largest energy intensive states in the Country the finalization of the rules will surely spur growth of "green energy" related business in Ohio.

As a former regulator, a frequent mantra in describing the decision making process was- "if both sides are unhappy then you know you did your job well."   Well the Commission appears to have followed that mantra in responding to the vast amount of comments that were filed on the rules.  It sided with the Utilities on many issues and it sided with consumer and green groups on many issues.  It rejected many suggestions and complaints by Utilities and it rejected many suggestions and complaints by consumer and green groups.

The rules cover three major aspects of S.B. 221 passed by the Ohio Legislature in the summer of 2008:

  1. Energy Efficiency and Demand Reduction Programs
  2. Alternative and Renewable Energy Portfolio Standards
  3. Greenhouse Gas Reporting and Carbon Dioxide Control Planning

Here is a brief recap of the changes made in response to comments.

Energy Efficiency and Demand Reduction Programs- The Commission completely restructured the rules governing energy efficiency and peak demand reductions.  The Commission revisions where designed to "reflect a focus on the program planning and review process."

  • Cost Effectiveness- added new definitions of "cost effective" and "total resource cost test" that are applied to energy efficiency programs.
  • Procedures for Review of Compliance Plans-  New hearing requirements were added on the planned portfolio of programs offered by an electric utility to meet energy efficiency benchmarks.  The hearing requirement was added in response to criticism that the benchmark review process be opened up and follow traditional Commission rate case procedures.
  • Independent Auditors- Commission requires use of independent program evaluators (hired by the Utility but work at the direction of Commission Staff) to review and verify claimed energy savings and peak-demand reductions
  • Calculating the Baseline for  Measuring Efficiency Improvements- the baseline will be measured by a "rolling average" of the last three years of kilowatt hours purchased instead of a fixed average of 2006 through 2008.  The Commission basically rejected claims by Utilities that using a rolling average keeps raising the bar because it incorporates the energy efficiency improvements each year.  As a result, the Utilities argued the energy saving requirement is closer to 39% than the 22.2% required in S.B. 221
  • Banking "Overcompliance"- Commission will allow Utilities to "bank" over compliance with the energy efficiency benchmark and apply the overcompliance to future years
  • Adjusting for Economic Growth- Baseline can be adjusted to account for either growth or reductions in economic growth.  The idea is to remove the influence of a changing economy on achieving energy efficiency improvements
  • Mandated Efficiency Improvements- Utilities cannot count energy savings that result from customer installed appliances or equipment that are mandated by law including the Energy Independence and Security Act of 2007

Alternative Energy Portfolio Standard- S.B. 221 splits the 25% of electricity energy by 2025 standard into two separate benchmarks- one for "alternative energy" sources and another for "renewable energy sources."  The rules put a lot more teeth into the renewable energy benchmark, including specific interim benchmarks. 

Overall, the Commission did not address significant concern with some of the loose aspects of the Alternative Energy benchmarks.  These include the definition of what constitutes "Clean Coal" as well as what can be counted toward meeting the Alternative Energy Benchmark.  However, as detailed below, the Commission did put teeth into the "cost cap" provisions associated with compliance with either benchmark.

  • RFP- Rejected a suggestion that renewable and alternative energy be procured through a Commission sponsored RFP process to ensure transparency
  • Biomass- with regard to wood resources, the Commission allows use of wood and paper manufacturing waste, urban wood and tree residues, forestry residues, forest management or other land clearing.  However, forest resources must be from "sustainable forest management operations."
  • Clean Coal- the Commission rejected criticism that the current rule would provide credit to technology that is "designed" to reduce CO2 irregardless of whether the reductions are actually achieved.
  • Co-firing- will qualify as a renewable energy resource as determined by the proportion of energy input from the renewable energy resource.
  • "Delivered into this State"- Commission will still require a power flow study and/or deliverability study to show power in the PJM or MISO transmission systems are deliverable into the state.
  • Distributed Generation- renewable energy credits (RECs) generated from distributed energy sources belong to the owner of the equipment
  • "Double Counting"- cannot use one project to meet both the energy efficiency benchmarks and the AEPS
  • "Unbundling"-  Cannot unbundle other positive environmental attributes associated with creation of a REC and sell those attributes separately.  The classic example is you cannot sell the climate change CO2 reductions as well as RECs from one project.  You will have to choose with credits are more valuable
  • Energy Storage- by itself cannot be considered a renewable energy resource
  • Cost Cap- rejected utilities argument that the advanced energy and renewable energy cost caps be aggregated as one 3% cap. Also, rejected claim that the 3% increase is measured by isolating cost of generating the renewable or alternative energy.  Rather, the cost cap is triggered only if overall cost of supplying all forms of electricity rises more than 3% in order to meet the alternative energy or renewable energy benchmarks.  This ruling makes it far more difficult for Utilities to trigger the cost cap provisions.
  • "Catch-up Provision- Commission effectively drops the requirement that future year benchmark compliance requirements be increased by the amount of undercompliance of the previous year due to the 3% cost cap

Greenhouse Gas Reporting Requirements

The Commission rejected concerns raised by Utilities regarding the mandate in the rules to become participating members in the Climate Registry.  The Commission noted that  S.B. 221 requires reporting and tracking of CO2 emissions must be performed.

Pitfalls and Considerations When Deploying Cleantech or Renewable Energy Projects

So you are about to deploy the first commercial version of your new technology.  Or you are about to select your site for a new renewable or advanced energy project. In ramping up your cleantech project, everything has looked great in small scale trial tests.  You have had great result and are excited to bring this to market as the "next big thing." 

Deployment of new technologies and choosing sites for your renewable energy project can always present major challenges.  What looks good during small scale tests or on paper may prove to be unworkable or too costly in the field. 

How can you better assess your situation and proceed to a smooth launch of your technology or successfully deploy your project?  Here are some suggestions I have developed either from my years as a regulator or in working with clients.  Hopefully, taking careful consideration of some these issues can better position your company and avoid some "unseen enemies." 

1.  Site Selection-  Study closely the practical aspects of various proposed locations for your new facility.  Often company's select a site based upon expected customer demands or other business considerations.  However, prior to moving forward with the significant investment in terms of lease or purchase agreements, permitting, and zoning/building approvals significant investigation should be performed to evaluate the viability of the proposed site.

  • What the local zoning and building requirements?
  • Transportation routes should be evaluated
  • Any significant history with regards to citizen or environmental groups in the area?- Cleantech companies can naively think they are immune to NIMBY concerns only to find themselves immersed in costly and protracted litigation
  • Will your project require significant amounts of water?  If so, is there a readily available source or any issues with tapping into that source?

2.  Environmental Permitting and Regulatory Requirements-  Will your source have air or water emissions?  Will you generate significant solid waste or hazardous waste?  You should have an assessment of how environmental permitting and regulatory requirements could impact either the location or configuration of the facility at the site.  You should also know whether environmental requirements are going to impact the ultimate engineering design of your facility.  I have seen companies forced to completely redesign their process because they did not fully incorporate environmental permitting issues into their designs.

  • Will you have air emissions at levels that will require pollution controls?
  • Are you co-located at a location with an existing air source where EPA requirements may force you to aggregate emissions with that existing source?
  • Will you have a wastewater discharge? If so, can you hook into the wastewater treatment system or need a direct discharge.  If hooking into a pre-existing wastewater treatment system what are the pre-treatment requirements. 
    • What if the local wastewater treatment plant is under investigation or a federal consent decree?  Will that result in stricter standards that could drive up your pre-treatment requirements on-site?

3.  Lease Agreement and Construction Documents-  While you may believe you are headed to a wildly successful deployment or expansion, if anything has been shown in the last six months its that the market place is unpredictable.  You should make sure you understand and negotiate termination provisions in your lease agreements, construction documents or other legal documents governing your relationships with customers or business partners.  While you may be very disappointed you have to cancel the project, you may really be frustrated if you find yourself in a costly legal battle with potential customers, contractors and/or property owners.

4. Feasibility Studies-  Make sure when hiring a consultant to perform a feasibility study that  they have the expertise and knowledge regarding the state and local requirements associated with the project.  Many may be familiar with federal requirements, but you need to take into account local site selection issues as well.

  • Local ordinances- many renewable energy projects will be highly impacted by local ordinances that contain siting requirements.  Make sure your consultant takes into account the hurdles involved in deploying your project.
  • Include assessment of possible environmental market trading mechanisms-  Will you generate CO2 offsets?  Are you deploying renewable energy that could qualify for renewable energy credits?  Is your consultant or project team considering the current market fluctuations in these markets when evaluating whether carbon credits or RECs add to the viability of your project?

5.  Incentives-  It seems every lawyer and consultant is promoting their knowledge regarding availability of federal stimulus funding.  However, don't forget there are many state and even local programs that can provide grants and tax incentives for green businesses and energy.  Make sure you have someone on your project team that has knowledge of these incentives and understands the process for obtaining funds. 

(Photo:jurvetson/everystockphoto.com)

PUCO Delay Creates Uncertainty in Ohio's Renewable Energy Market

On August 20, 2008, the Public Utility Commission of Ohio (PUCO) put forth proposed rules governing alternative and renewable energy sources.  The rules main purpose was to govern implementation of the State's new Advanced Energy Portfolio Standard (AEPS) established in Senate Bill 221.  The AEPS is broader version of a renewable portfolio standard (RPS) adopted by other states which mandates a certain percentage of power come from designated renewable energy sources.

The PUCO set a very aggressive public comment period in an attempt to finalize the rules quickly.    The comment period closed on September 26, 2008.  In the short month long comment period, the PUCO received hundreds of pages of divergent comments on the proposed rules. (See my prior post: Issues with proposed rules governing the AEPS)  Since closure of the comment period, the PUCO has failed to developed a second version of the rules. 

Today, a company filed a new letter on the docket which discusses the real world impacts of the delay in finalizing the rules governing the administration of the AEPS in Ohio.  Until the rules are finalized, no one knows what the renewable energy credit (REC) market will look like in Ohio.   A REC is the certificate issued to generators of renewable energy sources.  The certificate can be sold to the utilities to meet their compliance requirements with the AEPS.  REC are seen as a way to encourage renewable energy development.

The problem is that there are so many questions left regarding the construction of the rules, no one can set a reliable price for RECs. S.B. 221 contained a cap on REC prices of $45 per megawatt which certainly is the ceiling on REC prices in Ohio.  However, that leave a huge range in potential prices that is highly dependent on the construction of the rules.

The compliance period for the AEPS in Ohio begins in 2009.  Without an established market projects will get delayed.  This will make it far more difficult for Utilities to comply with the AEPS mandates.  In 2009, Utilities must develop or purchase .25 % of their total generation capacity from renewable energy sources.  While a quarter of a percent may seem tiny, in an energy market as big as Ohio's there will be a significant need for RECs.

In 2008 Ohio generated 13,000 megawatts of power.  A quarter percent means the REC compliance market in 2009 will be around 32,500 megawatts.  This is certainly enough to drive a significant amount of project develop in the State. 

Until the rules are established, the market for RECs will be uncertain.  Without this needed certainty many will delay moving forward with projects.  Of the states with an RPS, Ohio was one of the last states to establish an RPS.  This has meant Ohio has been late to the game in attracting investment and green jobs related to the renewable energy market.  The rules need to be finalized quickly so that Ohio doesn't lag further behind. 

 

Progress in Ohio on Renewable Energy Job Creation...But What Next?

Governor Ted Strickland made his State of the State speech today.  While almost the entire speech was focused on education there were a few interesting nuggets relative to Ohio's progress in developing green jobs. 

"Over the last three years, Ohio has led the nation with 350 new or expanded facility projects in the renewable energy sector.

 Take solar energy, for example. The Toledo area has become an international center for solar research and production, with more than 6,000 people working in the solar industry. First Solar and Xunlight (Zun-light) both launched major expansions just this past year.

 All across the state we’ve seen advanced energy creating opportunities."

Later in the speech Strickland discussed Ohio's efforts to incorporate energy efficiency requirements into new government buildings:

Together we took the school building program that Governor Taft and the legislature created, and we expanded it to fund hundreds of new and renovated school buildings. And our new schools are being built to efficiency standards that will reduce our energy costs for the life of the building. In fact, Ohio has the largest energy efficient school building program in the nation.

The Governor should be commended for creation of a Renewable Energy Portfolio Standard (Ohio calls it an "Advanced Energy Portfolio Standard").  His initial proposal was greatly improved upon in the Legislature.  However, the rules governing implementation of the RPS seem to be currently stuck at PUCO after the Commission was flooded with comments on how to improve them.  Without improvement we stand to lose the momentum gained through passage of the energy legislation.

The Governor also included Advanced Energy Grant Funding in the Job Stimulus package passed recently.  However, the size of the grants ($250,000 for non-coal projects) seem to be too small to attract major new development to the State.

Is Ohio losing the momentum on attracting green jobs and economic development? 

President Obama has made clear his priority is renewable energy, climate change and green jobs.  Given Ohio's importance in the election this seems like a perfect fit to start getting Ohio out of its economic crisis and create the jobs of the future. Unfortunately, the Governor included no new proposals or ideas for how to build on Ohio's recent momentum in his State of the State address. 

Many states recognize the huge changes that are coming as a result of climate change and energy.  Unfortunately, Ohio lags these other states in developing and attracting the talent to truly lead in these areas.  As purely anecdotal evidence, when I attend national conferences that discuss these issues I will sometimes be the sole representative from Ohio. Meanwhile the New England States and West Coast dominate these conferences. 

Granted I don't attend every conference in these areas, but Ohio has certainly not lead on renewable energy.  It was the 26th state to pass an RPS.  Ohio has not lead at all on climate change. Its efforts have been focussed on resisting rather than improving climate change proposals

When the major policy changes on climate change and renewable energy are put forward, where do you think the jobs will go? 

 

Off-Shore Lake Erie Wind Farm Lease Proposal

Rep. Ross McGregor introduced H.B. 632 to require the Director of Natural Resources to establish a plan to make available for lease areas of the bed of Lake Erie for the purpose of wind energy development and to require Lake Erie wind farms to be certified by the Power Siting Board.

Legislation is necessary to create a mechanism to place wind turbines on Lake Erie.

For those who have not been following this proposal, here are some links of interest:

Great Lakes Energy Development Task Force-  This group, lead by Cuyahoga County Prosecutor Bill Mason, has been exploring the feasibility of developing off-shore wind in Lake Erie. The feasibility study will recommend whether or not to proceed with the development of the Great Lakes Wind Energy Center – and if so, how to fund and implement its development. The study will provide a conceptual design for the offshore turbines, including the technical function and scope of the site.  The feasibility study is expected to be completed by the second quarter of 2009. 

Volokh Conspiracy- Blog post regarding design issues faced by locating in the Great Lakes versus Salt Water.  Good array of comments that further flush out the issues...

Opposition View from Local Cleveland Blog-  Bill Callahan questions whether the Region's first investment "should be a handful of experimental wind plants that can’t go on line in less than five years; must be engineered from the ground up with unpredictable costs, unpredictable construction and operating problems, and unpredictable output economics; and for all these reasons can only be built with millions of dollars in scarce public subsidies that would otherwise support lots of smaller, less risky initiatives?"

Proponent View Green Energy Ohio-  On their wind activities page they discuss the progress being made on the project.

My View-  In yesterday's post I discussed the prospect of Ohio becoming a leader in developing Clean Tech to boost its economy.  In that post I discuss the need for Ohio to find ways to lead the nation in Clean Tech development.  Austin (Texas) and Research Triangle (N.C.) and Silicon Valley (Calif.)  where the first to identify and lead in promoting technology to develop their economies.  For Ohio, and hopefully Cleveland, to beat all the other areas competing for Clean Tech jobs it must be a visible leader.  It must do something bold and first.  For those reasons, being the first to develop fresh water wind makes sense.

(Photo: Flickr Phault)

Ohio Scorecard on Developing a Clean Tech Economy

The gloom and doom of today's economy, especially in Cleveland, is covered almost daily.  Job's have been disappearing from the area at a rapid clip.  The front page of the Cleveland Plain Dealer has almost been dedicated to breaking the bad news.  See, Plain Dealer Article "Northeast Ohio Job Loses Spread."

The Article includes the graphic to the left which shows areas of job growth and declines.  The question swirling around Norheast Ohio is how to get the overall economy growing again. 

The most important change is to adopt a Statewide strategy to pursue jobs of the future, rather than putting most of our efforts and money to try and protect struggling industries like the auto companies. We need to look to where the jobs of the future are going to develop and be aggressive about jumping into that space.

Northeast Ohio has done that well with its efforts on attracting medical innovation investment.  Growth in health care is here to stay. 

So what is another job growth area of the future?  It has been discussed with ever increasing regularity- Shifting towards attracting clean technologies jobs that will be associated with the monumental changes associated with energy and Climate Change. 

I am by no means the first to point out Northeast Ohio needs to be aggressively positioning itself to attract those jobs.  For example, locally we have had champions like the Cleveland Foundation pushing leaders to fully embrace a strategy to attract Clean Tech to Northeast Ohio (see, Rich Stuebi's recent op-ed piece in the Plain Dealer)  And leaders are paying attention.  You may not know this but the Greater Cleveland Partnership was the only chamber of commerce in Ohio that supported including renewable mandates in Ohio's Energy Bill that passed this summer.

Progress is being made, but we better double our efforts or will be beat out by other states and regions who have their eyes on the same jobs.  Like it or not, Northeast Ohio's chances at success are intertwined with State leadership efforts on developing a Clean Tech economy.

What is leadership?   Leadership means being out front, not coming late to the party.  For example, Iowa long ago embraced wind energy and has a large portion of generation from wind.  So which state is landing a multi-million dollar new manufacturing facility? Of course it is Iowa.  Meanwhile, Ohio was one of the last states to adopt a mandate on renewable energy.

Texas has also been taking notice and positioning itself to tie its economy to the forthcoming growth in Clean Tech.  An organization call Catalyst just completed a study of Clean Tech opportunities in Texas.  The study includes a series of recommendations for State leadership to adopt to ensure Texas is well positioned. 

Below I have taken out the recommendations that are included in the Texas study and provided my own analysis as to how Ohio is doing in these areas.  It is intended as a scorecard on Ohio's strategy to attract Clean Tech jobs.

Market Recommendations

  • Spur the creation of renewable energy markets by modernizing the state’s Renewable Portfolio Standard to promote non-wind generation, and update the state’s wind policy to promote the next generation of wind investment. (Ohio passed S.B. 221 that includes a broad RPS to encourage varies technologies.  The key issue with Ohio's RPS are the "out clauses" if costs to comply exceed 3%. Hopefully these clauses don't render the mandate useless)
  • Incent and reward residential and commercial energy customers who choose renewable electricity options, including aggressive rebates or tax credits for solar installation or other distributed generation. (Ohio does include some limited incentives for renewables. The Ohio Department of Development (ODOD) has information regrading solar for consumers.  But an analysis should be done to compare Ohio incentives to those provided by other states. Growth in residential demand helps attract companies to Ohio.)
  • Promote Texas companies by tying customer rebates and incentives to products designed, manufactured or marketed by Texas companies. (I am not aware that Ohio is doing anything in this area.  I know there is a "Buy Ohio" program, but I don't think it has much value in the Clean Tech arena)

Economic Development Recommendations

  • Conduct a comprehensive analysis of how Texas' new energy economic development incentives compare to those of other key states. (Ohio should perform such an analysis.  Ohio has new funding for alternative energy projects through the Ohio Air Quality Development Authority (OAQDA).  However, more information is needed as to whether this is enough of an incentive to put Ohio ahead of other states)
  • Consolidate existing and new incentives into a comprehensive and simple New Energy Incentive Package, and actively promote and market it by establishing a visible, coordinated state office to serve as a single point of entry for new energy economic development inquiries. (Ohio gets a mixed scorecard on this one.  Governor Strickland gets credit for creating an Energy Advisor position.  Also, he has increased available incentives.  However, authority and funding is split between OAQDA and ODOD.)
  • Commit specific and significant portions of the Emerging Technology Fund and Texas Enterprise Fund to companies and efforts in new energy industries. (Again, Ohio has created the Alternative Energy Fund as part of its Job Stimulus Package.  However, grants are limited to between $50,000 to $250,000 on renewables which seems hardly enough to attract series development. It may be a good program for helping bridge research to commercial deployment, but a larger effort is needed.)
  • Create a state-sanctioned venue through which university and community college officials, workforce development officials, regional and local chambers of commerce, and state leaders can develop a Green Jobs education and training strategy. (This has not been done at all in Ohio.  Efforts are scattered and not coordinated across the State.)

State Reputation Recommendations

  • Change the political rhetoric surrounding the new energy economy. The world has recognized this is no longer a partisan issue, but an economic opportunity. As long as Texas leaders position the future—and the new energy economy—as bad for Texas’ economy, businesses will go to other states where they’re welcome. This will require current leadership to demonstrate more enthusiasm for the future economy. (This same sentiment can apply equally to Ohio.  Due to its historical manufacturing base and reliance on coal, associations and leaders view major changes such as Climate Change as only bad for Ohio's economy.  To be a leader, the State must be willing to embrace the changes and work to take advantage of them.)
  • Convene a blue-ribbon commission on the new energy economy—consisting
    of traditional energy companies, renewable energy companies, universities,
    entrepreneurs, utilities and economic development entities—to design
    a long-term new energy economic development strategy for the state. This strategy should build upon the general suggestions of the Governor’s Competitiveness Council’s Report and State Energy Plan, and provide specific, executable strategies for promoting the new energy economy in Texas.
    (Another suggestion that would be wise for Ohio to adopt.  While there have been smaller efforts, development of a comprehensive plan is the only way to position the State for success.  A piece meal approach to incentives, RPS and training only means Ohio will be at best a middle tier state in attracting Clean Tech jobs)
  • Appoint a statewide, cabinet-level New Energy Economy Czar, responsible for identifying, articulating and executing a statewide strategy for maximizing Texas’ New Energy economic development opportunity. (Governor Strickland did create the position of Energy Advisor filled by Mark Shanahan. However, this position certainly does not have equal status to the recommendation in the Texas study.)
  • Launch a Manhattan Project-style initiative to design the model “future grid” that could serve as a national proving ground for emerging energy technology and a model for networks nationwide.  (While I don't have enough insight to determine if this is a worthwhile recommendation, the notion is correct that the State must take nationally visible efforts to distinguish itself from all the other States competing for these jobs.)

 

Local Zoning Can Tie Up Small Solar and Wind Projects in Red Tape

When a former Secretary of State (George Shultz) and a Vice President (Al Gore) can't seem to navigate local ordinances to install solar systems on their own homes, what are the chances for everyone else? 

These are two high profile examples cited in a recent report that discusses streamlining the local approval process for solar and small wind projects-  Taking the Red Tape Out of Green Power.  

After interviewing experts from around the Country regarding various local impediments, the study includes seven principle recommendations:

  1. Remove barriers to photovoltaics (PV) systems from building and zoning codes.
  2. Simplify PV permit application forms and review processes.
  3. Adopt flat permit fees or fee waivers for PV and small wind systems.
  4. Incorporate information about wind energy opportunities into municipal comprehensive planning.
  5. Establish small wind turbines as permitted uses, with appropriate design guidelines, performance standards, and review processes.
  6. Ease permitting processes by establishing statewide interconnection standards and educating building and electrical inspectors about proper installation procedures for distributed renewable energy systems.
  7. Adopt legislation at the state level mandating consistent and appropriate permitting requirements for distributed renewable energy systems.

A review of recent articles from around the Ohio shows zoning ordinances pertaining to solar and wind projects have become a hot topic.  Local governments would be wise to examine the study to determine ways to draft ordinances and administer local permit processes to encourage development of renewable energy projects. (See Dispatch:  "To avoid fights, set rules for windmills now")

Granville- debate over allowing solar panels in a historic district.

Morrow CountyEstablished zoning ordinances governing utility scale wind projects, but local governments ignore standards for small scale wind project. 

Hamilton County Planning and Zoning Officials- Consider an array of zoning regulations including restrictions on height, noise and placement for energy-generating windmills, solar panels and outdoor furnaces. Example regulations:

  • Windmills may not exceed 100 feet in height, cannot be in front or side yards, and their noise may not exceed 62 decibels between 10 p.m. and 7 a.m. (roughly the volume of a conversation).
  • Solar panels on roofs may not be taller than the highest point of the roof. Detached solar panels may not exceed 14.5 feet.

Clermont County- Windmills and outdoor furnaces are lumped into the "accessories" category of the zoning code which means there is a 14-foot height limit without a permit.

City of Columbus-  According to an article appearing in Ohio Planner's News (November/December 2006 Issue) discussed some Ohio zoning code application to solar and small wind turbine projects.

The City of Columbus staff recommends that the request for a solar installation be preceded by “preliminary zoning clearance review,” which is an official way of saying, “bring in your request and a map of the property.” According to the plans examiner, a solar installation would probably be handled under local code enforcement by your contractor (under the engineered systems section) and comply with the National Electric Code regulations per Article 690 Solar Photovoltaic Systems and Chapter 14 of the Ohio Mechanical Code.
 

The City of Columbus also states that, “A wind tower as a principal use on residentially zoned property does require a use variance (Council variance) because said use is not permitted in many districts. However, a wind tower as an accessory use to a principal dwelling may be permitted but most certainly is subject to specific development standards…” Notice the distinction between “principal use” (the only use for the property) and “accessory use” (a use that fulfills a need for the house) and the ability to avoid a variance. The distinction is critical for easy success in the hearing process.

For additional Resources:

Wind:  The American Wind Energy Association (AWEA) has a web site that goes state by state discussing various aspects of small wind projects.  The AWEA also has put together various resources to assist in permitting small wind projects as well as local policies to encourage their development.

Solar:  GE has a list of frequently asked questions about residential solar projects.  However, there is also plenty of information provided at the state level regarding residential solar project.  For example, the Ohio Department of Development also has made available resources for Ohioans interested in installing solar panels on their home, including the Ohio Consumer Guide to Buying a Solar Electric System.

See http://www.green-energy-efficient-homes.com/green-electricity.html for more information on green energy options for your home.

 

 

(Photo:  Great Valley Center Image Bank/everystockphoto.com)

 

 

Ohio Job Stimulus Package- Advanced Energy Grants and Loans Available

On Friday, November 7th, the Ohio Air Quality Development Authority (OAQDA) held a bidders conference to launch the Advanced Energy/Job Stimulus Program.  The Job Stimulus package set aside $150 million (over three years) to increase the development, production and use of advanced energy technologies in the state.

Those interested can begin filing applications for either grants or loans through the web portal on OAQDA's web page.  Unlike other competitive programs decisions will be made on a rolling basis, there is no deadline for filing applications.  However, $150 million is not a lot of funding for the types of projects involved, therefore it is likely available funds will dissipate quickly. 

The program has two separate pots of money:

  • $66 million for clean coal technology projects administered through OAQDA’s Ohio Coal Development Office (OCDO).  Grants can be for up to $5 million for each project  The funding set aside for these projects is similar to other funding opportunities that have been provided by the OCDO.  Proposals will be reviewed by staff, outside reviewers and the Technical Advisory Committee and approved by OAQDA;
  • $84 million for renewable energy and energy efficiency projects. Grants will be awarded in amounts from $50,000 to $250,000.  Loans will be $1 million to $2 million.  Funding will be in three $28 million annual appropriations administered by OAQDA. Projects will be reviewed by staff and outside reviewers, the Development Finance Advisory Council, approved by OAQDA.  Before funding can be awarded Legislative approval is necessary through the Controlling Board.
     

Some of the tips provided to bidders during the conference include:

  1. "Tipping Point"-  Explain why a grant award or loan would be the tipping point in the project.  Would it help get the project through a difficult time?  Would funding allow some type of breakthrough? Would it lead to a possible major expansion in Ohio?
  2. Jobs, Jobs, Jobs-  The main point of the funding is to stimulate job growth in the Ohio.  Therefore, you must be prepared to demonstrate that the project will generate jobs immediately.  New jobs will be favored over retained jobs.  Better if the are considered "foundational jobs"- meaning the project will lead to more jobs in the future.  Also, want to see better paying jobs.  
  3. Leverage- The State wants to see that a grant award will other funding in the project.  Private funding is favored over other public financing.  The higher the leverage the better the application will be viewed. 

Applications can be made through the web portal.  To start the process applicants must only fill out a "letter of intent" which requires only minimal information.  OAQDA said at the bidders conference it is there goal to weed out unfundable projects early in the process. 

One other note, if you are going to pursue a coal grant, be advised that similiar with other funding through the OCDO, you will be required to sign a royalty/payment agreement.  OCDO is required by statute to seek a recovery for investing in research and development projects.  While I understand it is in the statute,  this requirement discourages businesses looking for funding that will accelerate commercial deployment of a proven technology. 

 (Photo: Great Valley Center Image Bank/everystockphoto.com)

With the Energy Crisis Temporarily Over, So is the Green Job Push

I have discussed  the ability of green jobs to help stimulate our economy.  However, that was before our energy crisis ended....temporarily.  The Wall Street Journal discussed President Elect Obama's plan to add 5 million new jobs through spending on clean energy.  As shown below, the Article questions the economic theory behind that plan.  Stating the Obama proposal does not account for the jobs that would be lost in the gas and coal sectors of the economy when such a shift occurs. 

The green-jobs argument rests on the notion that big capital investments in new-energy technology today will be more than offset by savings in reduced fossil-fuel costs. Though oil prices have fallen, the International Energy Agency predicted Thursday that once the economy picks up again, they will resume climbing, potentially topping $200 a barrel by 2030. The IEA called the current energy system "patently unsustainable" and called for "radical action by governments."

Several studies estimate that $1 invested in renewable energy or energy efficiency would yield up to four times as many jobs as $1 invested in oil and gas, whose basic infrastructure of wells, refineries and pipelines has been around for years. Moreover, those studies say, clean-energy jobs are likely to be centered in the U.S., unlike jobs in the oil and gas industry, which increasingly are spread around the world.

Critics say analyzing only new green jobs misses half the story. "It's not looking at the other side of the coin: You are spending more money for your energy," says Anne Smith, a vice president at CRA International. The consulting firm wrote a report for the coal-mining industry in April that concluded that, under a bill to cap global-warming emissions, gains in green jobs would be "more than offset" by job losses elsewhere in the economy. That bill failed, but Mr. Obama has said he supports capping emissions.
 

While the journal focuses on the loss in jobs in oil and gas, I think the main issue is the fall in commodity prices like oil and coal.  When those prices were soaring everyone wanted to shift into alternative energy, however the energy crisis is temporarily over.  I highlighted the statement in the article that "once fossil fuel prices climb again" the shift to clean energy will make sense.  The key is..."once the prices climb again."

Once the world economy grows again we will be in the same place we were in this summer.  It is a fact that there is just only so much oil to go around.  However, as discussed in my last post, the failing economy will also temporarily take away the momentum behind the green jobs push.  With oil down below $60 a barrel, the strong motivating factor that made everyone interested in alternative sources of energy is temporarily gone.  Right now we will be going into survival mode.  The question will remain for business- "What is the cheapest form of energy right now?" 

When commodity prices climb again (and they will), businesses will again consider clean energy has a hedge against ever escalating commodity prices.

(Photo: Flickr Crashworks)

Ohio Adopts Rules Governing Siting and Operation of Wind Farms

On June 24, 2008, Governor Strickland signed Amended Substitute House Bill No. 562 (HB 562).  The legislation directed the Ohio Power Siting Board to adopt rules for the construction, operation and maintenance of electric generation wind facilities.  After receiving numerous comments from individuals, renewable energy associations, and other interests, the Power Siting Board has finalized the rule for wind facilities.  The rules outline requirements for issues including aesthetics, setback, noise levels, ice throw, blade shear and shadow flicker.  Here are some of the major issued under debated were resolved:

Siting of Wind Farms Treated Like Other Major Utilities

The American Wind Energy Association (AWEA) argued that the siting of wind farms should not be treated like other major utility facilities.  As a result AWEA argued some of the standards and application requirements would not apply to siting of wind farms.  The organization cautioned that doing so may discourage development of wind farms in Ohio.  But the Board rejected this approach after the sponsor of the bill, Senator Seitz, indicated it was the legislature intention to treat wind farms equally. 

Noise Standards

One significant issue of debate among commenters was whether the rules should include noise standards.  The Staff responded to those comments by rejecting the proposal to adopt a specific noise standard and evaluate each project on a case by case basis:

The Board and Board Staff shall evaluate the noise levels in
association with each application on a case-by-case basis in
light of the composition of the area surrounding the proposed
facility and will impose conditions on the noise emissions
during construction and operation of the wind-energy facility
as the Board determines to be appropriate. Such conditions are
enforceable pursuant to Section 4906.98, Revised Code.
Accordingly, we find it unnecessary to impose noise standards
as proposed by E-Coustic or to adopt operational noise
standards and measurement protocols as proposed by UNU.

Under the rules, each applicant will have to use computer modeling software developed for wind turbine noise measurement or a similar wind turbine noise methodology, including consideration of broadband, tonal, and low frequency noise levels to evaluate operation noise levels.

Setback Requirements

Another issue of significant debate was requisite setback requirements from wind turbines.  Many individual commented that strong setback requirements were needed to protect their property values and for public safety.  Similar to the issue with noise levels, the staff of the PUCO has decided to evaluate setbacks on a case by case basis. 

 (Photo: Kevin Dooley/everystockphoto.com)

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U.S. EPA Identifies Possible Renewable Energy Sites Including In Ohio

U.S. EPA is encouraging the development of renewable energy by identifying currently and formerly contaminated lands and mining sites that present opportunities for renewable energy development. The federal agency has prepared state by state maps and incentives fact sheets to provide easy access to information about development opportunities.

The attached map is a clip from google earth on U.S. EPA's website.  The map developed by U.S. EPA identifies numerous contaminated sites around the country that could be used for renewable energy development. The EPA used data from DOE’s National Renewable Energy Laboratory, the Comprehensive Environment Response, Compensation & Liability Act (CERCLA) and the Resource Conservation & Recovery Act (RCRA) to establish the list.

U.S. EPA's main technique in developing the maps and list of incentives is to marry state/federal brownfield redevelopment incentives with state/federal renewable energy incentives.  The overall message being that there are may be more government funds available to fund your renewable energy project by building on contaminated land. (attached is the incentive sheet for Ohio)

Because there are few areas Ohio that have sufficient wind resources, the majority of site are identified for either biomass energy or biofuel production.  (Here is a link to the biofuel map for Ohio).

U.S. EPA's web site has information and resources for developers, industry, and anyone interested in renewable energy development on formerly contaminated land and mining sites.  Why develop renewable energy on formerly contaminated land?  U.S. EPA's web site provides the following list of reasons:

  • Many EPA tracked lands, such as large Superfund and RCRA sites, and mining sites offer thousands of acres of land, and may be situated in areas where the presence of wind and solar structures are less likely to be met with aesthetic opposition.
  • These EPA tracked lands have existing electric transmission lines and capacity and other critical infrastructure, such as roads, and are adequately zoned for such development. The avoided new infrastructure capital and zoning costs is often significant.
  • Redevelopment of brownfields for "green" energy production can help reduce the stress on greenfields for construction of new energy facilities, and can provide clean, emission-free energy.
  • Many EPA tracked lands are in areas where traditional redevelopment may not be an option because the site may be remote, or may simply be saddled with environmental conditions that are not well suited for traditional redevelopment such as residential or commercial.
  • There are approximately 480,000 sites and almost 15 million acres of potentially contaminated properties across the United States that are tracked by EPA. Cleanup goals have been achieved and controls put in place to ensure long-term protection for more than 850,000 acres. This leaves open many potential opportunities to develop renewable energy facilities on these sites.

Ohio Trying to Sieze Green Jobs to Jump Start its Economy

A report released today by the U.S. Conference of Mayors estimates that job growth associated with green industries could be the fastest growing job market over the next few decades.  As reported in Time Magazine:

A major shift to renewable energy and efficiency is expected to produce 4.2 million new environmentally friendly "green" jobs over the next three decades, according to a study commissioned by the nation's mayors.

By 2038, another 4.2 million green jobs are expected to be added, accounting for 10 percent of new job growth over the next 30 years, according to the report by Global Insight, Inc.

"It could be the fastest growing segment of the United States economy over the next several decades and dramatically increase its share of total employment," said the report, obtained Wednesday by The Associated Press.

Ohio, with its long history of manufacturing and its heavy reliance on fossil fuels, has been slower to embrace green ideas as means of turning its economic fortunes around.   However, the drumbeat of bad economic news has more Ohio leaders looking for new opportunities to jump start Ohio's economy.  From 2000 to 2007, Ohio lost 209,000 jobs.  During that same period Cleveland lost 63,000 jobs based upon a report compiled using Department of Labor statistics

The single largest development was passage of legislation (S.B. 221) this summer that created a renewable portfolio standard, advanced energy portfolio standard and energy efficiency requirements. However, a review of recent local news stories and events shows the Buckeye State is beginning to focus on developing a green economy:

  • Cincinnati Wants to Lead Green Roof Movement in U.S.- The City Council on Wednesday became the first in Ohio with a plan to channel grants and loans to residents and businesses to replace tar and shingles with vegetation.
  • Columbus Summit on Sustainability and the Environment-  MORPC, the Columbus metropolitan planning organization, held a successful multi-day summit at the Columbus Convention Center.  Over 500 individuals attended that event that had a wide range of presentations relating to sustainability. 
  • Eight Major Green Projects in Northeast Ohio- They include attracting fish to the Cuyahoga River shipping channel through installation of plants along the bulkhead, deconstruction of abandoned homes to recycle the materials, local food from urban community gardens, etc.
  • Wind Turbines on Lake Erie- Cuyahoga County officials this week rolled out the first three reports from their $1 million study of a grand vision -- erecting two to 10 wind turbines in the lake off Cleveland's shore.  Constructing off-shore wind power in fresh water is seen as a possible economic driver in Northeast Ohio.
  • Ohio State University Participates in Solar Decathlon- 20 university teams will participate in the 2009 Solar Decathlon. The teams, chosen from the United States, Canada, and Europe, will each receive $100,000 from DOE to design, build, and operate energy efficient, solar-powered homes.  The Solar Decathlon is an international, biennial competition that challenges university teams to design and build energy efficient solar-powered homes.
  • Ohio Has 28 Solar Sites as Part of National Solar Tour-  Green Energy Ohio organized the tours in Ohio as part of the American Solar Energy Society.  The tours are from October 3-5.
  • Ohio Gov. Recognizes U. of Toledo Solar Power Leadership-

 

Major Issues Revealed With Ohio's Alternative and Renewable Energy Rules

The initial comment period is now closed on the Public Utilities Commission of Ohio's (PUCO) draft rules for implementation of the Alternative and Renewable Energy Requirements. The PUCO received hundreds of pages of comments from a wide variety of perspectives: Utilities, Renewable Energy Developers, Industrial Customers, Environmental Groups, Clean Coal Technology Providers, and Consumer Groups.

The rules were set in motion by passage of Ohio’s comprehensive Energy Legislation (SB 221) which includes provisions designed to promote alternative and renewable energy development.  The legislation includes both an Advanced Energy Portfolio Standard (AEPS) and a more traditional Renewable Energy Portfolio Standard (RPS). 

While the Legislation was very complex, major policy issues were left to be sort out through rule promulgated by the PUCO.  The comments received on the first draft of the rules for implementation of the AEPS and RPS reveal significant differences of opinion over critical issues.

Here is my critical issue list.  The rules must address squarely these issues to determine the direction of Ohio's energy policy.

  1. What are "advanced energy"  resources and projects and how best to promote it?  For example, right now the rules contain no standards for what qualifies as clean coal.  Comments I submitted pointed out that a simple reduction of a few pounds from a 500 mw source that emits a 1,000 tons of pollution could still be considered a "clean coal" source.  Worse yet, the entire generation could qualify toward meeting the AEPS.  Without modification the AEPS could be rendered effectively meaningless.
  2. Double counting environmental attributes- It appears from the comments that Ohio doesn't recognize this debate has been going on nationally for some time.  Many of the 26 or so states that have had RPS standards have been sorting this type of issue out.  The standard practice emerging nationally is not to allow CO2 emission reduction credits to be separated from a Renewable Energy Credit (REC).  Allowing otherwise distorts the voluntary CO2 and REC markets.
  3. How much teeth does the RPS have?  Many comments were submitted that the rules would grant the PUCO too much discretion to waive compliance with the RPS standard based upon a "act of god" (force majeure).  Also, SB 221 allowed compliance with RPS benchmarks to be waived if electric rates rise as a result of the RPS by more than 3%.  But how you measure the 3% increase is critical to determining whether there truly will be a RPS requirement in Ohio.  It seems the rules have to answer the question-are we serious about having an RPS standard in Ohio?

 (a summary of the major comments on the AEPS and RPS by clicking on "continue reading" below)

(photo: Kevin Dooley/everystockphoto.com)

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Ohio Proposes Rules Governing Renewable Energy and Clean Coal

On August 20th, the Public Utilities Commission of Ohio (PUCO) proposed administrative rules for the implementation of Ohio's Alternative Energy Portfolio Standard.  Approximately 26 states have enacted renewable portfolio standards (RPS) that mandate a certain percentage of electricity supplied in the state come from renewable sources.  Only one other State, Pennsylvania expanded the mandate to cover additional sources of energy beyond renewables. 

Ohio has now gone beyond Pennsylvania in promoting other "advanced energy sources."  Ohio is the first State in the Country to allow the following resources to be eligible toward meeting the advanced energy mandate:

  • Clean Coal Technology
  • Technology or improvements that reduce CO2 emissions
  • Enhancement of Nuclear Power

Under Senate Bill 221, and as set forth in the proposed rules, 12.5% of power supplied in Ohio must come from these and other advanced energy sources (fuel cells, distributed generation, fuel cells, solid waste to energy and energy efficiency projects) by 2025. 

The proposed rules are pretty standard on the renewable side.  The include provisions used by other states who have already had an RPS.  The rules provide for annual benchmarks, alternative compliance payments, use of renewable energy credits (RECs) and costs caps on meeting the RPS. 

It is significant that Ohio has developed a more complex and interesting portfolio standard for advanced energy sources.  However, where the SB 221 was very prescriptive as to meeting the renewable standard requirements, the legislation was vague on the advanced energy side of the standard.  Unfortunately, the draft rules fail to provide much needed detail.

Here are some issues that should be addressed to better promote advanced energy sources:

  1. Benchmarks-  SB 221 did not include them for meeting the advanced energy standard.  The rules should at least require meaningful evaluation as to progress toward meeting the mandate to supply 12.5% from advanced energy sources by 2025.
  2. Establish a Currency-  On the renewable side, Ohio is following the well established method of buying and selling renewable energy certificates (RECs).  One megawatt of renewable power equals one REC.  There is no such currency established for the advanced energy portion of the standard.
  3. Better define each advanced energy resource-  Most importantly, the definitions of what types of projects qualify are far too vague.
  • Example 1: The rules say "a significant improvement to an existing nuclear" facility qualifies.  There is no definition of "significant."  What type of enhancements are we trying to promote?  If one change is made, does the whole plant qualify as an advanced energy resource?
  • Example 2:  "Clean Coal Technology"- the rules don't provide anymore specification then SB221.  The bill just says qualifying technology is something that reduces pollutants like arsenic, chlorine, nitrous oxide, mercury, sulfur dioxide.  By how much?  Again, does a small reduction, like one particle of mercury, make the whole 500 megawatt plant an "advanced energy resource?"

 

Food vs. Fuel: Round 1 goes to Fuel

Governor Perry of Texas had filed a request to waive 50% of the national volume requirements for the renewable fuel standard (RFS).  The Governor's Waiver Request cited to the following factors to support issuance of a waiver:

  • Since ethanol mandates were instituted, more of the U.S. corn crop is being diverted to produce fuel
  • 25% of the corn crop was diverted in 2007 and its projected to rise to 30 to 35% in 2008
  • Corn prices have skyrocketed, going from $2.06/bushel to at least $4.00/bushel
  • Globally, corn prices are up 138% over the past three years
  • Global food prices have increase 83% over that same time period
  • Translates to a $1.17 billion dollar negative impact on the current Texas economy

The RFS mandate came about through the Energy Policy Act of 2005 and was expanded in the Energy and Independence Security Act of 2007.  The total volume of renewable fuels, such as ethanol and biodiesel, mandated by law to be blended into the fuel supply is 9 billion gallons in 2008 and 11.1 billion gallons in 2009.

EPA denied the request the RFS waiver request based upon its analysis of the evidence suggesting a waiver would have only a nominal impact on corn prices (on average $0.30 per bushel of corn).  The EPA concluded there was no evidence to support the claim the RFS mandate was causing "severe harm" to the economy of a State, region, or the United States.

I would guess this will not be the last waiver request submitted.  However, in denying the request, EPA also provided insight into its interpretation of the requirements for issuing a waiver.  The legal standard articulated with be very difficult to meet. Generally, EPA found it has only narrow waiver authority:

  • EPA would have to determine that the implementation of the mandate itself would severely harm the economy; it is not enough to determine that implementation of RFS would contribute to such harm;
  • EPA would also have to find that there is a generally high degree of confidence that the RFS is severely harming the economy; and
  • This requirement calls for a high threshold for the nature and degree of harm that would support the issuance of a waiver based on "severe harm" to the economy of a State, region, or the United States.

Renewable Energy World Leader....China

Surprised? I was after hearing the old reports of China building a new coal plant once a week.  China has long been the favorite scapegoat for those arguing the United States shouldn't address climate change without their participation.  But it appears China may be changing direction. 

As reported in the Guardian, the Climate Group released a study that concludes China is the world's leading producer of energy from renewable sources

 Here are some of the fun (and surprising) facts reported in the Study:

  1. China leads the world in installed renewable capacity at 152 gigawatts
  2. Approximately 820 solar PV were produced in China in 2007, second only to Japan
  3. It is the leading world exporter of wind turbines
  4. China investments in renewable energy as a percentage of GDP are almost equal to Germany's, the world leader
  5. China's energy efficiency standards for cars is 40% higher than in the United States
  6. China is the third largest producer of ethanol

Clearly, the goal of the Climate Group was to produce a study to combat the arguments raised in the United States that support inaction on climate change without India or China.  However, one statistic highlighted in the Study deserves some additional discussion. 

In 2007, China emitted 5.1 tons of CO2 per capita compared to 19.4 tons for the United States.  While the United States per capita number justifies action, so does the potential for China to grow its emissions. 

China has 1.2 billion people compared to the United States 300 million.  China has already overtaken the US in total emissions with 1/3 of the emissions per capita because it has four times more people.  Without mandatory caps, what will China's emissions be once 1/2 their population drives cars, purchases more of latest electronics, and have more income to travel?