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

Posted on September 16, 2008 by Joe Koncelik

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)

Promoting Advanced Energy Technologies

  • Clean Coal Resources- Is it limited to technologies that only reduce CO2 or should include demonstrated reductions in other pollutants?
  • CO2 Reduction Technologies- Multiple comments were filed pointing out SB 221 mandates identification of standards for C02 reduction to qualify as advanced energy resources. The rules fail to include any such standards or a process to establish the standards.
  • Off-shore Wind- Proponents of off-shore wind want additional incentives to develop resources on Lake Erie. They advocate for award four times the amount of credit towards the RPS for these resources versus any other renewable energy resource.

Determining Which Generation Capacity Can Count Toward the AEPS

  • Modifications and Upgrades to Existing Facilities- A major loophole was identified by multiple parties commenting. If an existing 500 mw facility adopts a technology that reduces CO2 or other pollutants, what portion of generation should be credited toward compliance with the AEPS? The current rules could allow the entire 500 mw generation capacity which would certainly not drive development of advanced energy resources.
  • Out of State Delivery of Renewable Generation- Comments questioned the standard for which resources outside Ohio could be counted toward meeting the RPS benchmarks. Should it be just sources in neighboring states or any source that can show delivery is possible?

Waiving Compliance with the RPS Benchmarks

  • When can the Commission waive compliance with the AEPS? A wide divergence emerged as to how much discretion the Commission should have to waive compliance.
  • All or nothing-If the 3% cost cap is exceeded does the Commission waive compliance with the entire renewable energy benchmark or just an increment?
  • Reasonable or Impossible- Whether waiving compliance with a renewable benchmark should be based on the “reasonableness” of compliance or only if its deemed “impossible”?
  • What amounts to a 3% price increase? Based only on the cost of meeting the benchmark or by looking at price increase as compared to all generation?
  • Act of God- Some commented the Rules give too much discretion to invoke the Force Majeur exception to complying with the RPS.

Double Counting the Energy and Environmental Attributes of Advanced Energy Resources

  • Should a single project be able to count toward meeting both the AEPS and the Energy Efficiency Standards
  • Whether the CO2 attributes of Renewable Projects can be unbundled from the REC and used on voluntary compliance or future mandatory reduction requirements?
     
Tags: , , , , , ,

Ohio Proposes Rules Governing Renewable Energy and Clean Coal

Posted on August 28, 2008 by Joe Koncelik

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?"

 

Tags: , , , , , ,