Ohio Environmental Law Blog : Ohio Environmental Lawyer & Attorney : Joseph Koncelik : Frantz Ward Law Firm : Environmental Regulation, Land Use, Compliance : Cleveland, Ohio

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.

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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.

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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?"

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