Vol. 7: Issue 5 | August/September 2019
Ohio lawmakers passed a contentious energy bill that subsidizes nuclear and coal plants while changing the state’s renewable energy and energy efficiency programs. The measure has prompted an opposition group, who have said the bills weaken renewable and energy efficiency projects, to begin the process of putting the law to voters on the November ballot. The bill (H.B. 6) provides the owner of the state’s two nuclear plants, FirstEnergy Corp., around $150 million annually to help keep those plants operating through 2027. FirstEnergy is currently emerging from bankruptcy and has cited the poor performance of its nuclear plants in regional wholesale markets as a reason for its current position, and threatened to close the plants without state intervention. In addition to subsidizing the nuclear plants, the bill provides around $20 million annually to several utility scale solar projects that have already received state regulatory approval. The subsidies are expected to cost residential customers less than $1 per month, while large industrial customers will pay closer to $2,400 monthly. However, supporters pointed to overall customer savings after factoring in the effective elimination of energy efficiency and renewable energy mandates, which cost the average residential customer $4.74 each month. Another section of the bill offers an extension through 2030 of a $50 million annual subsidy to two coal-fired power plants. While the bill was quickly signed into law by Governor Mike DeWine, opponents have begun organizing a state referendum to overturn the law.
There’s been a reckoning in California over the state’s wildfire liability laws in recent years, as the state’s electric utilities face the prospect of being held liable for wildfire damages even when they follow state rules. The issue has grown with the bankruptcy of Pacific Gas & Electric, while the state’s other two investor-owned utilities have experienced instability due to their perceived risk exposure. In response, the California legislature passed a bill (A.B. 1054) crafted by Governor Gavin Newsom, which would establish a $21 billion fund to help utilities pay for future liabilities. The cost would be split evenly between utility shareholders and ratepayers—a decision which has led some consumers advocates to call the measure a bailout. However, the bill also requires utilities to receive yearly certificates of safety from the state if they want to be able to pass some wildfire costs along to ratepayers, while also establishing an advisory board to make recommendations to state regulators. While the bill promises some near-term financial stability to the state’s utilities, it does not change the law at the center of the issue: inverse condemnation, which holds a utility responsible for damages if their equipment sparks a fire, even if they were not negligent and followed all state safety protocols.
Governor Andrew Cuomo (D) signed the Climate Leadership and Community Protection Act into law, codifying the nation’s most ambitious climate targets. The bill mandates that New York reach 100% carbon-free electricity by 2040 and economy-wide, net-zero carbon emissions by 2050. Greenhouse gas emissions will be cut to 85% below 1990 levels with the remaining 15% offset by solutions such as underground carbon capture technologies and forest planting. The legislation also features a plan for transitioning toward new renewable energy technologies. 3,000 megawatts (MW) of energy storage capacity is slated to be installed by 2030, and 9,000 MW of offshore wind capacity should be online by 2035. Central to the bill is the creation of a 22-member Climate Action Council that will be tasked with devising a scoping plan over the next three years to recommend regulations and incentives to the legislature to meet these targets. The legislation also takes steps to spread the economic benefits of this large-scale energy investment by requiring state-financed energy projects to pay union wages. New York is the latest in a wave of states passing robust emissions-reduction laws and is now the sixth state to mandate 100% renewable energy in the next few decades, following California, Hawaii, Maine, New Mexico and Washington, along with Washington, D.C. and Puerto Rico.
FirstEnergy Solutions received a $12.5 million tax break from West Virginia lawmakers, saving the company’s coal-fired power station in Willow Island from almost-certain closure. Senate Bill 207, pushed for and signed into law by Governor Jim Justice (R), establishes an exemption from the state’s business and occupation tax for merchant power plants meeting specific criteria, such as not being subject to rate regulation by the state’s Public Service Commission and selling generated electricity only to the wholesale market. The law faced scant opposition during the special session. Only five legislators voted against the measure in the House, while the bill passed the Senate unanimously.
Connecticut and Maryland have recently taken additional steps toward establishing themselves as leaders in the offshore wind development race. In accordance with legislation passed earlier this year, the Connecticut Department of Energy and Environmental Protection (DEEP) issued a draft request for proposals to procure up to 2 GW of offshore wind capacity by the end of 2026. The draft request requires bids to include a 400 MW proposal but also encourages developers to include multiple sizing options both above and below the required capacity. Bids must be submitted at the end of September, with winning bids announced in November. In Maryland, offshore wind developer, Ørsted is partnering with Tradepoint Atlantic to create a 50-acre staging center for offshore wind manufacturing that will be capable of servicing projects up and down the east coast. The staging area will be built adjacent to Tradepoint’s existing deep-water inner berth and will allow for on-land assembly, storage and loading out of offshore wind project components into deep waters. Ørsted has committed to invest $13.2 million with Tradepoint Atlantic and approximately $200 million in the state of Maryland. Ørsted is currently developing a 120-MW offshore wind project, Skipjack Wind, that will be installed off the coast of the Maryland-Delaware boarder and is expected to be online in 2022.
Recent renewable energy solicitations and proposed projects have broken previous records for cost and size. Hawaiian Electric Co. (HECO) submitted a renewable energy solicitation to the Hawaii Public Utilities Commission that details the utility’s plan for acquiring carbon-free energy resources and replacing coal- and oil-fired power plants. HECO’s series of requests for proposals include approximately 900 MW of new renewable energy generation, representing the largest single procurement effort undertaken by a U.S. utility.
Renewable energy developer, NextEra Energy Resources signed a contract with Oklahoma-based Western Farmers Electric Cooperative to develop the largest hybrid renewable energy project in the U.S. The 700-MW Skeleton Creek project will be located in Oklahoma and will include 250 MW of wind, 250 MW of solar and a 200-MW/800-megawatt-hour (MWh) battery storage project. The project will come online in two phases, beginning with the 250 MW wind energy installation, which will begin operations by the end of 2019, while the solar and storage projects are expected in begin operations in 2023.
The Los Angeles Department of Water and Power (LADWP) presented a solar and battery project that could shatter U.S. records, both in terms of storage capacity and price. The proposed Eland Phase 1 and 2 projects each include 200 MW of solar energy and at least 100 MW of battery storage, for a total of 400 MW of solar and up to 300 MW of energy storage. The project would sell the solar energy produced to the LADWP under a 25-year power-purchase agreement at $19.97 per megawatt-hour. This price beats the previous U.S. record low price set by a $23.76 per MWh solar project proposed by NV Energy in 2018.
New York and Minnesota are considering the potential for battery storage to replace peaker plants—electricity generation facilities, such as natural gas-fired plants, that are cable of quickly ramping up a generation to meet spikes in energy demand. The New York study found that replacing select peaker plants will significantly reduce emissions and help comply with clean air requirements. New York also announced it is offering $55 million in incentives for Long Island energy storage projects. A recent study by the National Renewable Energy Laboratory (NREL) found that peaking capacity storage opportunities exist today in many regions that have not traditionally been thought to have much potential for utility-scale energy storage.
After a fire at one of Arizona’s energy storage facilities, one state regulator is exploring risks of lithium-ion and the potential for safer storage technologies. Arizona Public Service, the utility that experienced the storage fire, plans to deploy large amounts of energy storage in the near future.
American Electric Power (AEP) has agreed to shutter the 2,600 megawatt (MW) Rockport coal-fired power station. The agreement allows AEP to avoid spending nearly $1 billion on pollution control equipment. It also commits the utility to support $3.5 million in projects that promote efficiency, distributed generation and pollution reduction. Last October, the utility decided to close down its 1,590 MW Conesville, Ohio coal generation facility two years ahead of schedule. FirstEnergy Solutions Corp. (FES) also announced plans to deactivate four coal generating plants, totaling 4 GW of capacity, in 2021 and 2022. The company, which filed for bankruptcy last year, stated the plants are no longer economic.
A portion of the Texas Eastern Transmission regional gas pipeline ruptured in central Kentucky, resulting in an explosion shooting 300-foot flames over a residential area, destroying railroad tracks and several homes, and killing one woman. The pipeline is owned and operated by Enbridge, Inc. and serves an extensive area from the Texas-Mexico border to New York City. The cause of the rupture is still unknown. The Pipeline and Hazardous Materials Safety Administration (PHMSA) is assisting the National Transportation Safety Board (NTSB) with the investigation to determine whether Enbridge complied with federal guidelines, though a final report might not be available for another 18 months. The explosion comes nearly a year after a similar deadly pipeline rupture in Massachusetts that claimed the life of one man. NiSource, the parent company of Columbia Gas of Massachusetts, recently reached a $143 million settlement related to the 2018 explosion. A Safety Recommendation Report issued by the NTSB in November 2018 found that the engineering plans for work on the Columbia Gas pipeline system led to the accidental over-pressurization that caused the rupture. The incidents are spurring the PHMSA and NTSB to issue new oversight recommendations to prevent additional accidents in the future.
The California Public Utilities Commission (CPUC) revised a three-prong energy efficiency test, which effectively provides for the state’s energy efficiency budget to fund building electrification initiatives. The test, established in 1992 and designed to avoid encouraging substituting electricity for natural gas, was reexamined as California looks to fuel substitution to help meet its greenhouse gas reduction targets. The CPUC’s decision establishes a new baseline for comparing energy savings and emissions reductions and identifies greenhouse gas emissions as the measure for determining whether a program has an adverse environmental impact. It also removes the requirement that the fuel substitution measure passes a cost-effectiveness test at the measure level. Instead, the cost-effectiveness of an individual measure will be evaluated as part of the overall cost-effectiveness of the energy efficiency portfolio.
The company developing what may be the first small modular nuclear reactor (SMR) in the United States announced additional milestones in the certification of its design by federal regulators. The U.S. Nuclear Regulatory Commission’s (NRC) design certification application is an intensive and costly multi-year process for new reactors, and NuScale Power announced that the NRC has completed the first three phases of the review. NuScale has designed its reactors to be small—producing 60 MW, where most of the reactors currently in operation in the U.S. generate closer to 1,000 MW or more. The company’s plant design calls for 12 of these smaller reactors, for a total output of around 720 MW, to allow more flexible power generation and off-site modular assembly. So far, the NRC’s design review has gone according to schedule, which means the company’s plans to build its first plant near the Idaho National Laboratory by the mid-2020s remain on track. NuScale entered into an agreement to build its first plant with the Utah Associated Municipal Power Systems, a joint action agency which provides energy services to municipal utilities across six Western states.
The U.S. EPA has released two draft rules, aimed at relaxing regulations and streamlining processes for constructing and permitting energy infrastructure projects. One of the proposed regulations would allow EPA to issue Clean Water Act permits over state objections about a proposed project’s impacts on climate change or air quality. Section 401 of the Clean Water Act (CWA) allows states to certify that projects requiring permits comply with federal law and state water quality standards. Any new energy infrastructure projects that are permitted by EPA, the Army Corps of Engineers, or FERC must also be approved by state regulators. The proposed regulations would prevent states from considering issues other than water quality in their certifications and would allow federal regulators to decide whether a state’s denial of a permit or conditions placed on the permit meet the new regulatory definition for a condition. Previously, states have used Section 401 to deny permits for pipelines and coal terminals due to water quality concerns, as well as concerns about the projects’ potential contributions to air pollution and climate change. EPA’s proposal would also amend the amount of time states have to consider permit applications, limiting state consideration to one year after the states have received a certification request. There are speculations whether EPA’s new regulations would hold up in court—previously, courts have largely found that with Section 401 reviews, states have the right to issue conditions and denials if they choose.
EPA also released a draft rule to rework the two-step process for New Source Review permitting for power plants, refineries and other major industrial polluters. The two-step process is used for deciding whether a plant expansion or major upgrade would result in a significant emissions increase requiring a New Source Review pre-construction permit, and potentially additional pollution control requirements. Currently, the first step in this process involves determining whether the project would lead to a significant pollution increase. If that is the case, the second step examines whether there would be an overall emissions increase once all other increases or decreases at the plant over recent years are considered. The proposed revisions would allow companies to consider both projected emissions increases and projected decreases attributable to the project during the first step in the process. The proposed rules would codify this shift, first advanced by former EPA Administrator Scott Pruitt in 2018.
Congress is considering several pieces of legislation that would extend tax credits for renewable energy technologies, as well as bills to promote renewable energy development on public lands. Companion bills (H.R. 3961 and S.R. 2289) have been introduced that would extend the solar Investment Tax Credit (ITC) for five years at its full 30% value. Under the current schedule, the ITC for commercial solar facilities drops from the full 30% credit to 10% in 2022, while the credits for residential solar would disappear. The bills would also extend the ITC for other qualifying clean energy sources, such as fuel cells, small wind facilities, microturbines, combined heat and power, and geothermal heat pumps. Additionally, two bills have also been introduced that would extend a 30% federal tax credit for offshore wind projects. One bill would extend the incentives for six years, while the other bill would provide an eight-year extension.
Finally, Congress is considering a bill (H.R. 3794) to expedite permitting for renewable energy projects on federal lands and set up a revenue-sharing arrangement for state and local communities where proceeds from the renewable energy project are generated. The bill incentivizes renewable energy development in lower-conflict priority areas while ensuring that impacts to wildlife, habitat and cultural resources are avoided and minimized. Additionally, the bill would ensure a fair return of revenue from the renewable energy project to certain stakeholders, allocating 25% of the revenues to the state where development occurs and 25% to the counties of origin. An additional 25% would be deposited into a new renewable energy resource conservation fund, while the remaining revenue would be split between the federal government to streamline renewable permitting (15%) and the general treasury (10%).
The $2.8 billion Massachusetts offshore wind project, Vineyard Wind, was unexpectedly delayed by federal regulators on Aug. 9. The Bureau of Ocean Energy Management ordered an additional supplementary review of the project, stating that they need to learn more about the cumulative impact of offshore wind developments before proceeding with the final environmental impact statement. The move stands in contrast to the administration’s latest actions easing regulations related to domestic oil and gas development and the goal of reducing regulatory burdens in the energy sector. The 800-MW project would provide enough energy to power a million homes with clean, carbon-free energy.
NCSL has presentations and resources available from its well-attended Energy Supply Task Force meeting and Energy Policy Summit, which took place Aug. 4-5. The meetings explored technologies and policies that are rapidly transforming the energy sector and examined efforts to address the risks and vulnerabilities associated with this transformation. Explore this NCSL blog to learn more about the sessions and outcomes at the Energy Supply Task Force Meeting. NCSL also held two thought-provoking sessions at its Legislative Summit on August 7: Juicing Up for Electric Vehicles and State Action on Carbon Emissions.
A growing number of states are finding that non-wires solutions—approaches that use efficiency, demand response or distributed energy resources to avoid costly infrastructure upgrades—can meet customers’ energy needs for a lower cost than traditional capital-intensive solutions. Presenters for this Sept. 18, 2019, webinar will discuss a range of non-wires solutions case-studies and explore the role that state legislators can play in overcoming barriers to the non-wires approach. Click here to register for this webinar.
Energy efficiency delivers numerous benefits, including reduced emissions, customers savings, improved comfort, grid resiliency, and lower utility operating costs. The traditional regulatory approach, however, links utility income to energy sales and capital investments, creating a disincentive for utilities to invest in energy efficiency since it may reduce energy consumption and utility sales. To address the misalignment of incentives and desired outcomes, states are exploring policies and strategies that reward, rather than penalize, utilities for efficiency investments. On Aug. 28, NCSL hosted a webinar exploring a variety of state policy solutions, including energy efficiency resource standards, revenue decoupling mechanisms and performance incentives. Click here to access a recording of the webinar and speaker presentations.
By next year, well over half of U.S. households will have a smart meter installed on their property—totaling close to 90 million smart meters. These devices are considered vital to modernizing the electric grid, allowing operators a more real-time view of system operations and consumer behavior. However, not everyone wants these devices on their homes and states are having to consider whether to allow certain customers to opt out of having smart meters installed on their homes. At least nine states have taken created a statewide policy on the issue, while utility regulators in another 22 states have issued rulings on a case-by-case basis. NCSL has developed a new document, "Smart Meter Opt-Out Policies," that offers a comprehensive look at this emerging issue and how policymakers are managing the issue in a variety of states.
Interest in renewable energy has been increasing as it becomes more cost-effective and competitive with traditional generation sources. The 2018 legislative session was no exception: more than 650 renewable energy bills introduced across the nation, with nearly every state considering legislation on this topic. NCSL’s 2018 Renewable Energy Legislative Update provides an overview of the state renewable energy policy landscape for the 2018 legislative session and highlights notable enacted bills. Interest in renewable energy has been increasing as it becomes more cost-effective and competitive with traditional generation sources. The 2018 legislative session was no exception: more than 650 renewable energy bills introduced across the nation, with nearly every state considering legislation on this topic. NCSL’s 2018 Renewable Energy Legislative Update provides an overview of the state renewable energy policy landscape for the 2018 legislative session and highlights notable enacted bills.
The NC Clean Energy Technology Center (NC CETC) released new 50 states quarterly reports tracking major state actions on grid modernization and electric vehicles for Q2 of 2019. NC CETC’s grid modernization report found that 44 states, Washington, D.C. and Puerto Rico took actions related to grid modernization in the second quarter of 2019. Among the most common actions taken by states around grid modernization were policies, planning and market access, and deployment. The report also highlighted energy storage, data access and distribution system planning as the three most common types of grid modernization state actions during this quarter. In the 50 states of electric vehicles analysis, NC CETC reports that 43 states and Washington, D.C. took electric vehicle-related actions during the second quarter of 2019, the most common of which were regulations, financial incentives, and market development.
Researchers at the National Renewable Energy Lab released a report on battery storage potential for providing peaking capacity in the United States. The study focused on whether batteries with a four-hour duration could provide peak capacity and found that renewable generation increased the four-hour batteries’ storage potential. In particular, the study found that increased (greater than 10%) penetration of solar photovoltaics doubles the potential for 4-hour batteries to provide peak capacity. The report did not reach any definitive conclusions on the impact of wind generation and highlighted the need for additional research in this area.
The Lawrence Berkeley National Laboratory recently released the U.S. Department of Energy’s 2018 Wind Technologies Market Report, which provides an overview of trends in the U.S. wind power market. Highlights from this year’s report include: the continued, robust pace of wind power capacity additions; enhanced wind project performance, due to larger turbines; sustained declines in wind project costs; and historically low wind energy prices. Notably, researchers found that in 2018, $11 billion was invested in new wind power plants, and that last year, wind energy contributed 6.5% of the national electricity supply, with wind comprising more than 10% of total electricity generation in 14 states, and more than 30% in three of those states—Kansas, Iowa and Oklahoma.
Recent publications from Indiana University and Syracuse University explore policies and incentives related to the adoption of electric vehicles. The research focuses on how state and municipal policies can affect consumer interest in plug-in electric vehicles and lead to different purchase decisions. Additional research also examines different policies and incentives with results revealing that tax credits for individuals, grant programs for charging infrastructure, and incentives for state-owned electric vehicle fleets increase plug-in electric vehicle registrations. You can view abstracts of the research, or for full reports, please email Kristy.Hartman@ncsl.org.