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.

 

"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? 

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)

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.

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 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.

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.

 

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.

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)

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.