Renewable Portfolio Standards
Renewable portfolio standards (RPS) require utilities to meet a percentage or a specified amount of their customer’s electricity needs with renewable sources. Twenty-nine states, Washington, D.C., and three territories have established an RPS, while eight states and one territory have set voluntary renewable energy goals. RPS programs require utilities to acquire renewable energy certificates or credits (RECs), which are earned by renewable energy producers for electricity generated from renewable energy sources. These certificates allow states to check compliance with state renewable portfolio standards, either for distributed generation carve-outs or broader utility requirements. In 2018, states introduced more than 100 RPS-related bills, including those to increase or decrease states’ RPS requirements, refine resource eligibility rules for hydroelectric and biomass facilities, and require long-term renewable energy procurement contracts for utilities. At least six states and Washington, D.C. enacted legislation related to RPS and RECs in 2018, including: California (Senate Bill 100 and Senate Bill 1110), Connecticut, Maryland, Massachusetts, New Hampshire (House Bill 225 and Senate Bill 1550) and New Jersey.
- California enacted Senate Bill 100, increasing the state’s RPS to 60 percent by 2030 and establishing a 100 percent clean energy mandate that requires utilities to procure all their electricity from clean sources by 2045.
- Legislation enacted in Connecticut (Senate Bill 9) increased the state’s RPS requirement to 40% by 2030, among other provisions. Previously, Connecticut’s RPS required 24% renewable energy by 2020. Senate Bill 9 also expanded eligible Class I renewable energy resources to include run-of-the-river hydropower facilities that receive a new license after Jan. 1, 2018.
- Massachusetts enacted legislation (House Bill 4857) increasing the state’s RPS requirement by an additional 2% annually from 2020 through 2029, after which the requirement will increase by an additional 1% annually. The bill also established the country’s first clean peak standard, which requires utilities to procure a certain amount of electricity during peak demand hours from clean energy resources, including renewable energy, energy storage and demand response. The measure directs the Massachusetts Department of Energy Resources to set the initial standard, which will increase by 0.25 percent annually.
- New Hampshire enacted House Bill 1550 that requires electricity customers’ monthly bills to include the cost of compliance with the state’s RPS requirements of 25.5% by 2025. The bill also requires the New Hampshire Public Utilities Commission to post the estimated costs of RPS compliance on the PUC’s website.
- New Jersey enacted Assembly Bill 3723 increasing and extending the state’s RPS to 50% by 2030. The bill also amends certain carve-outs in the state’s RPS—which require a certain percentage of overall renewable energy to be met with specific technology—by phasing out the solar carve-out and increasing the carve-out for offshore wind to 3.5 gigawatts, as well as creates new RPS compliance cost caps.
- Washington, D.C. enacted legislation (Bill 904) establishing a 100% RPS by 2032, making it the second state, after Hawaii (2015) to establish a 100% RPS.
Net Metering and Shared Renewable Energy
Net Metering policies allow distributed generation customers to sell excess electricity to a utility at a retail rate and receive credit on their utility bill. As distributed generation grows, states are exploring how to most effectively balance the demand for distributed energy technologies and their impact on the electric grid. As distributed energy generation evolves, some states have adopted alternative compensation models.
Legislation related to net metering and rate design was enacted in at least five states in 2018, including: Colorado, Connecticut, New Hampshire (House Bill 1202, Senate Bill 321 and Senate Bill 367), Utah and Virginia.
- Senate Bill 9, enacted in Colorado, allows solar-plus-storage systems to net meter. The bill also requires the adoption of rules to govern the installation, interconnection and use of customer-sited energy storage.
- Connecticut enacted Senate Bill 9 ending net metering for new customers when the Residential Solar Investment Program concludes or when state regulators establish the new compensation program—whichever occurs first. Existing customers will be grandfathered in until December 2039, while new customers will have two options: a buy-all, sell-all structure or a tariff structure. Rates for both structures will be determined by state regulators.
- New Hampshire enacted three bills related to group net metering, the state’s shared renewable energy program. House Bill 1202 allows municipalities to establish revolving loan funds to facilitate transactions for group net metering projects. Senate Bill 321 removes the requirements that group net metering customers be default service customers of the same utility, and instead requires that the net metering customers of a certain group be located within the service territory of the same electric utility as the group’s host. Senate Bill 367 deletes the requirement that the Public Utilities Commission review group net metering host agreements.
- Utah Senate Bill 141 establishes a repeal date of Jan. 1, 2036, for the state’s net metering policy and modifies solar tax credit provisions.
- Virginia House Bill 1451 requires the State Corporation Commission to establish a six-year net metering pilot program for schools. The program is limited to wind and solar projects and has an aggregate capacity limit of 10 MW.
Financing programs can remove some of the barriers to clean energy adoption by reducing the amount of upfront capital required for investment in energy efficiency and renewable energy technologies. They can also provide certain demographics—such as small businesses and lower-income homeowners—with access to capital. Many states are exploring financing strategies such as loans, credit enhancements, on-bill financing and repayment, and Property Assessed Clean Energy (PACE) financing.
In 2018, at least nine states and Washington, D.C., enacted legislation related to financing for renewable energy systems or technologies, including: Alaska, California (Assembly Bill 2063, Senate Bill 1087 and Senate Bill 465), Delaware, Illinois (Senate Bill 43, Senate Bill 2773 and Senate Bill 2905), Minnesota, New Hampshire, Pennsylvania, Utah (House Bill 168 and Senate Bill 157) and Washington.
Examples of enacted legislation include:
- Alaska enacted House Bill 374, which authorized on-bill financing. This allows customers to enter into a financing agreement with a utility to purchase and install renewable energy systems, as well as energy efficiency and energy storage devices and repay the utility through charges on their utility bill.
- California enacted Senate Bill 465, adding wildfire safety improvements as eligible projects for PACE financing in localities designated as “Very High Fire Hazard Severity Zones.” California also passed two bills (Assembly Bill 2063 and Senate Bill 1087) that provide additional consumer protection measures for PACE financing customers. These bills are discussed in more detail in the “Other Notable Legislation” section.
- Delaware enacted Senate Bill 113 authorizing commercial PACE financing. The bill established the Delaware Voluntary Property Assessed Clean Energy program to provide financing for qualifying energy improvements including renewable energy systems, energy-efficient technologies and qualifying waste heat recovery technologies. Senate Bill 113 includes several consumer protection provisions, such as allowing the property owner to rescind any PACE financing agreement within three business days after entering into the agreement.
- Minnesota enacted Senate File 3245 expanding PACE financing to include homeowners by authorizing PACE implementing entities to establish residential PACE (R-PACE) programs. The bill also included R-PACE consumer protection provisions.
- Pennsylvania legislation (Senate Bill 234) authorized commercial PACE financing. The bill allows municipalities or counties to establish a commercial PACE program by adopting an ordinance or resolution and allows them to define the district or to provide other operational standards and guidelines. Established PACE programs are allowed to provide financing for renewable energy projects, as well as energy efficiency and water conservation improvements.
- Washington state Senate Bill 6090 created a revolving loan fund to support increased deployment of renewable energy and energy efficiency technologies, as well as transportation electrification technologies and electric vehicle charging infrastructure.
- Washington, D.C. enacted legislation (Bill 257) that established the Green Finance Authority to increase private investment in clean energy and other green infrastructure projects in the District. The Green Finance Authority will offer loans, loan guarantees, credit enhancements, bonds and other financing mechanisms for qualified projects.
Siting, Permitting and Interconnection for Renewable Energy
State siting, permitting and interconnection policies are essential components of state renewable energy policy and can alter the barriers to the expansion of new renewable energy projects. Siting and permitting policies can determine setback requirements and affect the interconnection process. Interconnection policies govern the process of connecting renewable energy systems to the electric grid. A streamlined interconnection process can reduce project delays and additional costs while expediting a project’s return-on-investment.
Legislation related to siting and permitting was enacted in at least 11 states and Washington, D.C., including: Colorado, California, Illinois (Senate Bill 2591 and Senate Bill 3214), Massachusetts (House Bill 3692 and Senate Bill 2189), New Hampshire, New Jersey, Oklahoma (House Bill 3561 and Senate Bill 1576), Tennessee, Virginia (House Bill 508, House Bill 509, Senate Bill 179 and Senate Bill 429), Vermont (House Bill 620 and House Bill 676) and Washington.
Notable enacted legislation includes:
- New Hampshire enacted House Bill 337 prohibiting municipalities from setting a noise level limit for small wind energy systems lower than the limit specified by the state’s site evaluation committee rules, as measured at the site property line.
- Legislation enacted in New Jersey (Senate Bill 1217) requires the Board of Public Utilities (BPU) to allow the submission of an amended application for a 20 to 25 MW offshore wind project, which the BPU had previously rejected due to cost concerns. The review of the application is limited to addressing modifications made to resolve the financial viability concerns.
- Oklahoma companion bills—House Bill 3561 and Senate Bill 1576—established requirements that the construction or operation of proposed wind energy facilities or expansion projects must not encroach on or have a significant adverse impact on any military installation.
- Tennessee enacted legislation (House Bill 1731) that implements the recommendations of a study committee on wind siting. The bill establishes siting and impact assessment requirements, setbacks, noise limits and financial security requirements to decommission the wind facilities.
- Vermont enacted legislation (House Bill 676) that exempts solar PV facilities installed on parking lot canopies from setback requirements but allows the Public Utilities Commission to establish new setback requirements for such facilities. The bill also waives application fees for roof-mounted solar PV systems of up to 500 kW in capacity and establishes a beneficial habitat and pollinator-friendly standard for solar energy sites. Additionally, Vermont enacted House Bill 620 that requires the Vermont Agency of Transportation to evaluate the feasibility of siting renewable energy plants at state-owned airports.
- Legislation enacted in Washington (Senate Bill 5470) streamlines the geothermal resource permitting and extraction processes by promoting orderly exploration, safe drilling, production and proper abandonment of geothermal resources in the state.
- Washington, D.C. Bill 229 establishes a solar rights law for the district that prohibits homeowners, condominium owners and other housing associations from restricting a resident from installing solar energy devices on their property or residential unit.
Renewable energy generation has nearly doubled in the last 10 years. In 2018 alone, 6.6 gigawatts (GW) of wind generation capacity and 4.9 GW of solar capacity came online. Of more than 31 GW of generating capacity added in the U.S. in 2018, wind made up 21%, solar accounted for 16% and hydroelectric and battery storage capacity comprised 2%. Due to several consecutive years of explosive growth, solar resources became the third-most prevalent renewable electricity source in 2018, reaching 77 million MW and surpassing biomass resources for the first time.
During the 2018 legislative session, at least 14 states and Puerto Rico enacted legislation focused on specific renewable energy and distributed energy resource technologies, including onshore and offshore wind, solar and microgrids. States include California, Illinois (Senate Bill 2591 and Senate Bill 3214), Maryland, Massachusetts (House Bill 3692 and Senate Bill 2189), Minnesota, New Hampshire, New Jersey, New York, Oklahoma (House Bill 3561 and Senate Bill 1576), Rhode Island (House Resolution 7457 and Senate Resolution 3011), South Carolina, Tennessee, Utah, Virginia (House Bill 508, House Bill 509, Senate Bill 179 and Senate Bill 429) and Puerto Rico.
Notable enacted legislation includes:
- California enacted Senate Bill 1339 that promotes microgrid and distributed generation development and streamlines standards for grid interconnection. The bill requires publicly owned electric utilities to create separate electric rates for microgrids installed by customers.
- Illinois enacted two bills related to solar energy. S
- Senate Bill 2591 added solar energy provisions to the state’s agricultural impact mitigation policies. The bill requires commercial solar energy facilities that are located on private property to enter into an agricultural impact mitigation agreement with the Department of Agriculture that outlines construction and deconstruction standards and policies designed to preserve the integrity of any agricultural land that may be impacted by the solar project. The commercial solar energy facility owner is required to submit a deconstruction plan for the project prior to construction and must provide appropriate financial assurance to guarantee the project’s deconstruction in the event of abandonment.
- Senate Bill 3214 allows owners of certain solar projects that implement site management practices specified in the bill—such as providing native perennial vegetation and foraging habitat beneficial to birds and pollinators, and reducing stormwater runoff and erosion—to claim that the project site is pollinator-friendly.
- Minnesota House File 3232 amended the state’s solar energy incentive program, increasing the capacity limit of eligible systems from 20 to 40 kW, and specifying that the systems must be operated by a utility
- Legislation enacted in New York (Assembly Bill 8083), requires the Department of Environmental Conservation to develop minimum requirements for pollinator-friendly solar projects. The guidelines must include information on short- and long-term property management practices, including the use of perennial vegetation, use of pesticides, and width and composition of buffer areas adjacent to the property, among others.
- Rhode Island House Resolution 7457 creates a five-member legislative commission to study the effect of wind turbines on all marine life. The commission is required to report its findings back to the legislature.
- South Carolina House Bill 4875 establishes voluntary best management practices for commercial solar energy generation sites. The bill requires the Department of Natural Resources to design a native vegetation habitat and pollinator management plan. Solar energy project owners that implement the management practices established in the plan are permitted to claim that the project site is a beneficial habitat.
Energy storage can help integrate renewable energy into the electric grid and can provide resiliency, reliability and cost savings. Deployment of energy storage technologies has been steadily increasing, and in 2018, installations totaled 311 MW. This growth is due, in part, to state legislative efforts to promote energy storage. At least five states—California, Massachusetts, New Jersey, New York and Oregon—have established energy storage targets, while the Nevada legislature has tasked the state Public Utilities Commission with establishing a target. In addition, states have passed bills to provide tax credits for energy storage projects, commissioned studies, funded demonstration projects and required utilities to consider storage in resource planning.
The number of energy storage measures under consideration has jumped more than six-fold over the past several years and in 2018, more than 80 bills on energy storage were considered, with at least nine states ultimately enacting more than a dozen bills—California (Senate Bill 700 and Senate Bill 1369) Colorado (House Bill 1270 and Senate Bill 9), Connecticut (Senate Bill 7 and Senate Bill 9), Hawaii, Massachusetts, Michigan (House Resolution 387 and Senate Resolution 170), New York (Assembly Bill 8921, Assembly Bill 10410 and Assembly Bill 11099), Virginia and Vermont.
Examples of enacted energy storage legislation includes:
- California legislation (Senate Bill 1369) requires the Public Utilities Commission, State Air Resources Board, and Energy Commission to consider green electrolytic hydrogen an eligible form of energy storage and to study other potential uses of green electrolytic hydrogen.
- Colorado enacted Senate Bill 9 that allows energy consumers the right to install, interconnect, and use personal energy storage systems on their property. The bill also directs the Public Utilities Commission and utilities to streamline the storage application and approval processes for consumers. House Bill 1270 established rules to encourage storage development by including storage in utility Integrated Resource Plans.
- Michigan adopted House Resolution 387 and Senate Resolution 170, which encourage the Michigan Agency for Energy to undertake a collaborative stakeholder process to study the integration of energy storage into Michigan's electric market. The resolutions further request that any findings or recommendations discussed to be presented to the Michigan Legislature and made available to the public.
- New York Assembly Bill 8921 requires the Public Service Commission (PSC) and the New York State Energy Research & Development Authority (NYSERDA) to establish rules and regulations for a 2030 energy storage goal for the state and directs the PSC and NYSERDA to design a deployment policy to support this goal. The deployment policy must consider cost-effectiveness and address the ability of energy storage to assist the integration of variable energy resources, reduce greenhouse gas emissions, decrease peak energy demand and improve the reliability of transmission and distribution systems.
Other Notable Legislation
Several states enacted legislation in 2018 that does not fall within the categories listed above. This section includes notable enacted legislation related to tax incentives for renewable energy, utility business model reform, and consumer protection for renewable energy customers.
States have encouraged renewable energy growth by providing tax incentives. These incentives may reduce the cost of installing systems by reducing tax liability, mitigating or eliminating post-installation increases in property value or providing exemptions from or refunds of sales taxes. During the 2018 legislative session, states including Hawaii, Illinois, Louisiana, New York, Utah, Virginia and Washington enacted legislation to amend their renewable energy tax incentives.
- Hawaii legislation (Senate Bill 3077) lowered the production threshold of the renewable fuels production tax credit eligibility from 15 million BTUs to 2.5 billion BTUs and expands the types of renewable fuel eligible for the credit to include wood chips, wood pellets, wood bark and logs.
- Legislation (Assembly Bill 10410) enacted in New York establishes a property tax abatement for energy storage equipment installed in 2019 through 2021. The tax incentive amount is the lesser of either 10% of the eligible energy storage equipment costs, the amount of taxes payable in the tax year, or $62,500.
- Virginia Senate Bill 902 established a system capacity limit for solar photovoltaic (PV) systems eligible for the solar property tax exemption. Solar PV systems for which an initial interconnection request form is filed on or after July 1, 2018 must have a capacity between 20 MW and 150 MW to be eligible for the property tax incentive.
- Utah enacted Senate Bill 141 that gradually decreases the solar PV tax credit amount until it is entirely phased out in 2024.
Increasing adoption of renewable energy technologies, specifically customer-sited generation such as roof-top solar, has introduced challenges to the traditional utility business model. The traditional cost of service utility business model was designed at a time when a utility was responsible for providing affordable, reliable electricity. The growth of renewable energy is challenging this old model, creating a misalignment between ratepayer desires and utility needs. Many states are investigating ways to reshape the traditional regulatory framework in a way that better aligns customer and utility goals. In 2018, Hawaii and Pennsylvania enacted notable legislation related to utility business model reforms.
- By enacting Senate Bill 2939, Hawaii became the first state to create a legislative mandate to separate utility revenues from capital expenditures. The bill directs the Hawaii Public Utilities Commission (PUC) to implement performance-based regulation by 2020 and create a new utility business model. The bill breaks the link between allowed revenues and capital investment levels and requires the PUC to evaluate existing ratemaking structures and design incentives and penalties around several outcomes, including customer affordability, electric reliability, and rapid interconnection or renewable energy and distributed resources.
- Pennsylvania enacted legislation (House Bill 1782) to reform its utility business model. The bill allows utilities to propose and the PUC to approve alternative ratemaking mechanisms based on decoupling mechanisms, performance-based rates, formula rates, and/or multiyear rate plans.
Consumer protection is an increasing area of attention in distributed energy policy, specifically distributed solar, and renewable energy financing policies, especially PACE financing. These policies ensure that individual homeowners and small business owners make fully informed decisions about whether to enter into contracts for solar energy or PACE financing and that they understand what the implications may be. In 2018, several states enacted legislation related to consumer protections including, California, Rhode Island and Utah.
- California enacted two bills related to consumer protection measures for PACE financing customers.
- Among other provisions, Assembly Bill 2063 prohibits a PACE program administrator from executing an assessment contract and prohibits any work from commencing under a home improvement contract financed by the assessment contract unless the program administrator has ensured that the property owner has not been party to any bankruptcy proceeding within the last four years, is current on all mortgage debt on the property and has had no more than one late payment during the six months immediately preceding the application date. Program administrators must also make a reasonable, good-faith determination that the property owner has a reasonable ability to pay the PACE assessment before the contract is executed and work commences. The bill also requires program administrators to provide the property owner a written disclosure of the methodology that was used to determine if there was a difference between the property owner’s ability to pay the annual PACE obligation and the actual amount financed. The bill also requires the program administrator to include in the oral confirmation that the property owner is responsible for contacting the property owner’s home insurance provider to determine whether the improvement to be financed by the assessment is covered by the property owner’s insurance plan.
- Along with other provisions, Senate Bill 1087 requires program administrators to ensure that property owners are current on all mortgage debt on the property as of the application date and authorizes program administrators to rely upon an appraisal obtained from the property owner if certain requirements are met. The bill also establishes that program administrators are subject to all provisions included in the California Financial Information Privacy Act that are applicable to financial institutions and establishes procedures to be executed if a program administration violates the California Financing Law. Finally, this bill requires the Department of Business Oversight to maintain the identities of enrolled PACE solicitors and PACE solicitor agents on its website by 2020.
- Rhode Island adopted Senate Resolution 3011 requesting several state agencies, including the Office of Energy Resources and the Public Utilities Commission, to create a solar consumer rights guide. The guide is required to include: an index of consumers’ rights and the contracting terms used in solar purchase agreements, leases or loans; information on the potential effects from future changes to electricity rates; information on state and federal solar programs and incentives available for consumers; an explanation of financial options available to customers including ownership, lease, power purchase agreements and solar loans; a listing of the licensing requirements for solar companies; advice concerning the need to obtain multiple quotes as well as the rights and obligations required when a home is old with leased solar panels; and contact information for the state departments and agencies responsible for information, oversight and investigation of questions or complaints.
- Utah enacted Senate Bill 157, establishing written disclosure statement requirements for solar energy system purchase and lease agreements, and power purchase agreements. The bill outlines the information that all disclosure statements must contain for any solar agreement, solar energy system purchase agreement, solar energy system lease agreement and power purchase agreement.