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

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?

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There was a lot of anticipation this summer about the scope of the energy bill coming out of the U.S. Senate.  Would the Senate try and tackle climate change?  Would it develop a national renewable portfolio standard? 

The bill was released yesterday and the answer was "no" on both accounts. 

The White House kept a glimmer of hope that climate change provisions- Cap & Trade- could be added back in at a later date.  This from Reuters:

But the White House indicated on Tuesday that climate provisions could be added back into a bill once negotiators from the Senate and the House of Representatives hammer out differences between their respective versions during "conference" talks.

The House bill, passed last year, includes climate provisions to cut greenhouse gas emissions.

White House spokesman Robert Gibbs, when asked whether the administration would seek to do a separate climate bill later after getting a narrow energy-focused bill first, said: "No, I think the process is you get an energy bill through the Senate then you can conference that legislation with the House."

Also absent from the bill was a proposed national renewable energy standard (RES) that would have mandated 15% of electric generation from renewable sources.   Some Democrats claimed there were 62 votes in favor of an RES.  They pointed to the urgency of restoring incentives for construction of renewable energy sources noting wind development dropped 72% in the first half of 2010 compared to last year.  This from the N.Y. Times:

Many see an RES as an achievable goal that could spark construction of manufacturing plants for wind turbines and drive the development of clean energy. Several senators, including Mark Udall (D-Colo.) and Byron Dorgan (D-N.D.), said yesterday that support for a modest RES that requires utilities to find 15 percent of their power by 2020 exists in the Senate.

"It seems to me that would be logical to include that [RES] in the energy bill that was going to be brought to the floor," said Dorgan, whose state stands to be a key generator of wind power. "I hope maybe there's a way to be found to do that."

Udall said there are about 62 senators who would support the 15 percent standard.

EPA and States Maintain Center Stage

The prospects for cap & trade and an RES diminish rapidly.  It seems hard to imagine the Democrats trying to cram such major provisions through reconciliation.  Though it appears that is being left open as an option.

What has become clear is that EPA's greenhouse gas regulations are center stage.  EPA's Tailoring Rule will kick in at the end of 2010 on new sources.  Mandatory monitoring and reporting already exists for other sources.  With legislation seemingly forever stalled in the Senate, pressure will mount on EPA to adopt more climate change regulations.

As to renewable energy standards, the states' have been on center stage for several years.  Thirty-seven states have adopted some form of a renewable or alternative energy standard.  Some are stronger than others, but there are strong incentives at the state level for development of alternative sources of power. 

However, there is inconsistency among the states in defining renewable sources, the % required, and marketability of production credits.  A federal bill could have addressed these inconsistencies.

However, the price of addressing those inconsistencies in mandating renewable energy generation in every state, including the Southwest which has resisted the standards.  Southern states don't feel there is a much opportunities for renewable energy development.

Like cap & trade, prospects have dimmed for a national RES.  Incentives for development will be left primarily to the states.

(For more information on each states specific programs, click on the map above)

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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.

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Here is a quick update on some of the important changes that were or were not included in the Ohio Budget (H.B. 1) that impact environmentally related issues and Ohio EPA's budget:

ERAC Deadlines-   As discussed in my previous post, the Ohio Budget included mandatory deadlines placed on ERAC for making determinations on appeals filed before the Commission.  Environmental groups wrote a strong letter to the Governor requesting a veto the ERAC deadlines.  The Governor did not veto the provision, however it appears likely the language will be tinkered with in the Budget Corrections Bill. 

Extension of Deadline for Construction after Issuance of Air PTI:  All air permits for construction and installation of new sources in the State of Ohio include a requirement that the permit expires after eighteen (18) months if construction of the source has not been completed.  An appeal of an air PTI can complicate financing efforts for projects.  Banks may not provide financing while an appeal is pending.  To address this and other issues associated with the construction deadline, the Budget Bill included new language that allows extension of that deadline for any of the following reasons (copy of amendment for exact language):

• Owner has undertaken a continuing program of installation or modification during the eighteen-month period
• Owner entered a binding contract for construction of the source within the eighteen month period
• Director of Ohio EPA issues an extension
• The air PTI is the subject of an appeal by a third party receives an automatic extension based upon the number of days the permit was under appeal
• Original permit is superseded by a subsequent air PTI

$1.25 increase in Solid Waste Tipping Fee to fund Ohio EPA:  The municipal solid waste tipping fee was increased by $1.25 a ton which raises the total fee from $3.50 a ton to $4.75 a ton. Of the increase, .25 goes to ODNR for the Soil and Water Conservation Districts. The remaining $1.00 will go to Ohio EPA to support its programs.  

The tipping fee increase was included, in part, to address a reduction in the amount of solid waste going into Ohio's landfills.  As the fee continues to increase, businesses will have a greater incentive to look for alternative ways to dispose of industrial waste other than sending it to a solid waste landfill.  One such option is beneficial use of the material.  Ohio EPA has yet to to release its second draft of the beneficial use rules, however, as costs of disposal increase interest in this option will rise.

Spending Authority Caps:  While the Legislature agreed to restore the $1.25 increase in tipping fees, it failed to remove the spending caps that were placed on Ohio EPA fee accounts in the Senate.  The practical ramification is that even though the accounts have fee revenue, Ohio EPA will be prevented from spending the revenue to support its staff and programs.  Ohio EPA intends to seek removal of the spending authority caps through the Controlling Board.  If Ohio EPA gets support from business groups it appears likely the caps will be removed and possibility of dramatic staff reductions appears unlikely.

Rejection of the Expansion of Renewable Energy Projects-  Ohio has one of the broadest definitions for what qualifies as "renewable energy source" for purposes of meeting the State's Renewable Portfolio Standard (RPS).  Efforts were rejected to expand the definition to include burning of solid waste.

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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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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)

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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. 

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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.)

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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)

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Have you ever heard of the irresistible force paradox?  What would happen if an irresistible force met an in-movable object?  I think this paradox may describe what will happen when the Obama Administration's environmental agenda meets the reality of the economy. 

Remember a few months back when oil peaked around $140 a barrel.  Of course you do...But do you also remember the momentum that the green movement due to the reality of limited resources and escalating energy prices.  Everything looks possible- a shift to renewable energy, energy conversation, higher gas mileage vehicles, and climate change legislation.

Now, only a few months later and oil is around $60-70 a barrel (I just filled up my gas tank for $1.90 per gallon)  We saw an economic meltdown the likes that has not been seen since the Great Depression.  How did this effect the momentum (the irresistible force) behind the Green Movement.  Let's take a sampling of recent headlines....

• Many Solar Energy Firms Likely to Fold During Economic Crisis- Analysts say nearly three-fourths of all solar energy companies could go out of business due to extremely tight credit, intense competition to produce solar panels, and falling prices.
• Local Government's Reconsider Costs of Green Building Mandates- The poor economy means tight budgets for most local governments.  This has forced local governments to begin questioning the costs associated with mandating LEED certification on new construction.
• T. Boone Pickens Places Wind Farm On Hold-  The dramatic drop in the cost of natural gas and the global credit crunch makes wind less competitive, according to Pickens.  As a result, he is putting on hold or scrapping plans for his massive 4,000 megawatt wind farm in Texas. (comment:  I guess Mr. Pickens is still a business man and not just motivated by getting us off of foreign oil)
• Renewable Energy Blues-  As reported in the Wall Street Journal, "when fossil fuel prices were soaring, things like offshore wind farms suddenly looked appealing, and guaranteed electricity prices from wind farms looked like a bargain. But with fossil fuel prices headed south and capital getting more expensive, renewables are losing some of their glow." (see also "Clean Energy Meltdown, Now GE is Bailing")
• Will EU Member States Use Economic Meltdown to Avoid Climate Targets-  When the economic crisis spread to Europe, the EU's ambitious goals on Climate Change were second guessed.  The current EU target of a 20% reduction in emissions by 2020 is set to automatically increase to 30%. Recently, Poland, Greece, Hungary, Slovakia, Romania and Bulgaria have opposed an increase in reduction targets.   Other EU countries are also second guessing their commitments. As reported in the Wall Street Journal, Germany’s foreign minister said recently: “This crisis changes priorities.” 

Exit polling from yesterday's election indicated that around 60% of the people who cast their vote made their decision based on issues associated with the economy.  After a quick search I could not even find where the environment ranked as a motivating issue.  I'm willing to bet it was a non-issue for the majority of the voters.

When the Obama Administration takes office and develops their environmental agenda it is likely to include: strong climate change legislation, renewable energy mandates, and policies that will not favor fossil fuels.  However, that Agenda will meet an immovable object that will likely cloud Obama's entire first term...the economy.  What emerges from the collision is anyone's guess.

(Photo: Flickr Transplanted Mountineer)

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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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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-

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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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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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