Federal, State and local energy
policy has a significant role to play in development renewable energy
resources. The unique legal framework in the US provides sufficient separation
of power between these three levels to achieve range of energy policy
scenarios.
Federal: Federal level energy policy is
overseen by the Department of Energy that deals with national energy policy
design, manages the nuclear infrastructure and various national laboratories.
Federal Energy Regulatory Commission (FERC) is also major player in federal
energy policy through its role to regulate the interstate transmission of
electricity, natural gas and oil. Energy Policy Act of 2005, PURPA (1978),
Energy Independence and Security Act (2007) and American Recovery and
Reinvestment Act (2009) are some of the major legislation that deal with
renewable energy development in the federal level. There are also numbers of
environmental regulations that have been indirectly helping the growth of
renewables. The Clean Air Act has been phenomenal limiting the growth of coal
fired plants and pushing the utilities towards renewable energy sources.
Incentives for
renewable energy development come in 3 types – as direct grants, tax breaks and
technical assistance. Two major federal programs that have been very successful
for renewable energy development are Renewable Electricity Production Tax
Credit (PTC) and Business Energy Investment Tax Credit (ITC). PTC provides a
tax credit for each KWh of electricity generated by a qualifying energy
resource. This program has been very popular with wind resource which obtained
2.3c/kWh for each KWh produced. This program however expired in 2013.[1]
ITC provides tax credit upto 30% of the expenditures for eligible projects.[2]
This program has been popular with solar projects for which the total maximum
credit is not capped. ITC is set to expire at 2016, at which it is the tax
break is set to decrease at 10%. As both of the programs have been designed as
tax credit rather than direct rebate, they are more attractive to investors
with large tax appetite. Some of the solar developers have come up with
innovative market schemes to transfer the tax subsidy to third party by
directly subsidizing the project cost for customers. ARRA act played a major
role in renewable energy development by providing more than $2 billion dollars
in funding to modernize the grid which has increased the feasibility of
integration of renewables into the grid.
The current federal energy goal of
“all of the above” is a serious impediment for renewable energy development. The
federal energy policy goal is targeted toward energy security, job creation and
environmental benefits. Conflict between
these diverse objectives which often contradict each other, the federal energy
policy can be best described as betting on all the horses. It provides generous
subsidies to nuclear and provides substantial amount of subsidies for fossil
fuel companies, which in turn decreases the cost competitiveness of renewable
energy. The federal level policy needs to strongly affirm the direction for
policy that focus on promoting renewable energy.
State: The state energy policies are varied
as the number of states itself. The 10th amendment to the US
constitution delegates police power to the State allowing them to creates laws
for safety, health, welfare of their communities. The states also have the
power to regulate the retail sale of electric rates and siting of facilities in
their states. These allow the States for sufficient rights to create their
energy policy. Each of the states has their own unique energy policy that has
been influenced by different factors. There is a wide spectrum of state energy
policy from California which has been a leader in renewable energy development
to states like Oklahoma[3]
whose energy policy seems to be designed to suppress renewable energy growth.
Renewable Portfolio Standards (RPS), Net Metering and Feed in Tarriff are the
three major policy programs popular in state level that has been targeted for
renewable energy development. RPS is a requirement that usually requires the
electric retail suppliers to meet certain amount of electricity load through
renewable energy. RPS does not provide direct subsidy to the renewable energy
but they benefit from selling Renewable Energy Credit (REC) in the market.
Around 30 states in the US have some form of RPS with different variation on
structure, enforcement, size and application.[4]
For instance CA has an RPS to derive 33% of their retail load by renewables by
2020 while Virginia has voluntary RPS goal to meet 15% of load by renewables by
2025.[5] Unlike
RPS, net meting and FIT provide direct credit to the renewable energy
generation. Various states have enacted policies that either allow customers to
offset their electric bill by producing their energy through net meting or
provide guaranteed pricing per kWh for a period of time form a qualifying
resource through FIT. An example of variation of FIT is used in Minnesota as
“Value of Solar Tariff” where customers get a specified amount of credit per
KWh. Similarly in Vermont has policy of feed in tariff of 20c/kWh for solar
projects. Some of the states however have instituted programs that counter
renewable energy development. For instance Oklahoma includes a law that charges resident extra amount to
produce their own energy through solar panels.[6]
Similarly Ohio has froze its RPS requirement creating a severe blow to
renewable energy development in the State.
It
is unfortunate that the issue of renewable energy in the US has been a partisan
issue. While the Democrats seem to be in favor or renewable energy, the
majority of the Republicans have undermined them. This uncertainty in the
policy in State and Federal level has been a severe impediment for renewable
energy development.
Local: Despite overarching Federal and State
energy policy, local communities have sufficient discretion to develop their
energy policy. Local governments and form electric cooperatives, set local
ordinances and make land use decision that can directly affect energy policy in
the grassroot level. There are more than 800 electric cooperatives in the US
that provide electricity to around 12% of the population. The cooperatives are
managed and owned by the local people and have direct voice and reflect the
values of the community. For instance,
the Washington Electric Coop in Vermont is committed to provide
electricity to its residents through clean and renewable sources where the
residents have agreed to pay higher rates for renewable energy.[7]
Community aggregation model are another example of how communities have been
able to affect energy policy in local level. Community aggregation allows the
communities to directly buy power at wholesale rates from their selected
renewable suppliers and pay the utilities for distribution service. Marin Clean
Energy in CA is an example of such community aggregation model which provides
its customers choice of consuming 50%-100% electricity from renewable sources.[8] Local
ordinances can also have significant impact for renewable energy development.
The ordinance enacted in Sebastopol, CA requires the new and improved buildings
to include solar PV. Inaddition to fostering renewable energy development,
locals can also play big role in inhibiting the growth of fossil fuels. The
residents of Oakland blocked the construction of new coal exporting terminal in
Oakland, CA.[9]
There have also been several local ordinances banning hydro-fracking in several
States.
The
legal framework structure in the US has especially designed in a way to
encourage wide variety of policies across the nation. The policies for growth
of renewable energy vary from each towns, cities and state. The policies range
strong programs in place for the growth of renewables others to policies placed
to act as barriers for the growth of renewables.
[1] http://dsireusa.org/incentives/incentive.cfm?Incentive_Code=US13F
[2] http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US02F
[3] http://thinkprogress.org/climate/2014/04/16/3427392/oklahoma-fee-solar-wind/
[5]
www.dsireusa.org
[6] http://thinkprogress.org/climate/2014/04/16/3427392/oklahoma-fee-solar-wind/
[7] http://www.washingtonelectric.coop/about-wec/bylaws/
[8] http://marincleanenergy.org/
[9] http://www.the-american-interest.com/blog/2014/05/14/new-green-motto-not-in-your-backyard/
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