) None of the existing state RPS mandates are alike.
Wisconsin, for example, has set its RPS target at 2.2 percent by 2011, while Rhode Islandis shooting for 16 percent by 2020. In Maine, fuel cells and high efficiency cogeneration count as “renewable”, while the standard in Pennsylvaniaincludes coal gasification and non-renewable distributed generation. Iowa, Minnesota, and Texas set purchase requirements based on installed capacity,while many other states make it a function of electricity sales. Minnesota and Iowa have voluntary standards, while Massachusetts, Connecticut, RhodeIsland, and Pennsylvania all levy different noncompliance fees.25
States vary in their targets, definitions of eligible resources, purchaserequirements, renewable energy credit (REC) trading schemes, and compliance mechanisms, among other things.
Conflicts over Statutes
Amid this complex morass of regulations, stakeholders and investors must not only grapple with inconsistencies, they areforced to decipher vague and often contradictory state statutes.
26 In Connecticut, for example, the state’s Department of Public UtilityControl originally exempted two of the state’s largest utilities from RPS obligations because the description of “electric suppliers” in the statute wasunclear. These exemptions created uncertainty over whether the statute would be enforced against any utilities at all.27 Hawaii’s standard contained somuch “wiggle room” that it was unclear even to its own advocates whether it applied to most of the state’s utilities.28 Such ambiguity has lead to “widedisagreements among parties in regulatory proceedings” about how to enforce some state RPS mandates. 29In testimony before the U.S. Senate Committee on Energy and Natural Resources, Don Furman, a senior VP at PacifiCorp, lamented how
“for multi-state utilities, a series of inconsistent requirements and regulatory frameworks will make planning, building and acquiringgenerating capacity on a multi-state basis confusing and contradictory .”30
Limits on Distributed Generation (DG)
The current state-by-state approach to RPS is also inhibiting the expansion of distributed generation technologies by forcing unusually prohibitiveoperational procedures. Inconsistent tariff structures and interconnection requirements, for example, add complexity (and therefore cost) to distributedgeneration projects. In fact, the Clean Energy Group, a coalition of electric generating and electric distribution companies committed to responsibleenvironmental stewardship, forecasts that fuel cells and community-scale wind energy projects are unlikely to play a meaningful role in state RPSmarkets until policymakers adopt a more comprehensive and uniform approach.31
Uncertain Policy Duration
The complexity of state-based RPS statutes is compounded by uncertainty over the duration of many state RPS programs.Stakeholders trying to plan investments in state renewable energy markets are tormented with unknowns.
32 New Jersey, NewYork, and Rhode Island, for example, will review and potentially modify their RPS schemes in 2008, 2009, and 2010, respectively.Hawaii’s standard expressly allows for its requirements to be waived if they prove to be “too costly” for retail electric providers and consumers.33Arizona, New Mexico, and Maine may terminate their RPS programs entirely. 34The market disruptions created by complex and often conflicting state RPS mandates are not merely “academic” concerns voiced only by staunchrenewable energy advocates. In comments to the New York State Public Service Commission, Executives from Constellation Energy – a utility serving1.2 million customers in Baltimore and more than 10,000 commercial and industrial customers in 34 states – complained that
many state RPS programs “unnecessarily burden interstate commerce, raise the cost of compliance, invite retaliatory discrimination, potentially violate the Commerce Clause, reduce the availability of imports, and are ‘impractical’ given the inability totrack electrons.”35
Risks Increase Costs
When renewable energy policy is predictable and stable, long-term project financing follows.
Potential investors are less likely to assume persistent risks where legislative or regulatory commitments are weak or constantly changing. Regulatory uncertainty creates substantial direct and opportunity costs for the nation’s renewableenergy market. Ten years ago, researchers at Lawrence Berkeley National Laboratory estimated that the uncertaintiesgenerated by inconsistent and unpredictable energy policies may increase the costs of renewable energy projects up to 50 percent compared to the probable costs under stable regulatory environments.36 It is not an exaggeration, therefore, tosuggest that the instability inherent in a state-based approach to RPS is dramatically distorting private investments inrenewable energy generation nationally and prohibiting the expansion of a robust renewable energy sector in the U nitedStates.A federal mandate is critical to correcting these market distortions and signaling a national commitment to renewableenergy generation. A federal policy would promote a national renewable energy technology sector that contributes to theU.S. economy, weans the nation from foreign and polluting sources of energy and decreases the real and social costs of electricity for American consumers .