Southeast RPS: A Challenge? Go

Posted on 5/5/2009 with 3 comments

“You can observe a lot by watching.”

Yogi Berra

With much discussion raging on the proposed Waxman-Markey Climate Bill as to the feasibility, practicality, ultimate environmental benefits and costs to end customers, there has been a consistent (bipartisan) counter theme that the Climate Bill will unduly burden residents in the Southeast and Midwest (e.g. mostly coal burning states with lesser available “renewable” resources).  While the din has intensified, some environmental groups have looked to counter the opposition with targeted research papers.

Renewable Resources by Type (Near and Mid Term)

This past month, the World Resources Institute (WRI) in cooperation with Southface and cleanenergy.org, published a paper titled, Local Clean Power: Renewable Electricity Opportunities in the Southeast United States, where they evaluated the renewable energy potential among southeastern US states using data and previous research from such groups as DOE, EPA, EIA, Natural Gas Association, US national laboratories, Lazard, La Capra Associates, state governments, and several universities.  While the purpose of the paper is not specified, it would appear that it is to show that the southeastern states can meet a federally mandated Renewable Portfolio Standard (RPS) without incurring a disproportionate share of the Climate Bill’s cost.

Southeast Renewable Potential

WRI estimates that there are sufficient renewable energy resources in the Southeast (Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee and Virginia) to achieve 30% of the total region’s electric power needs within the next 15 years.  If energy efficiency opportunities were included, then the region could even exceed the 30% level as WRI believes that energy efficiency could  capture total projected  annual load growth (estimated at 1.7% per annum).  [Note that WRI defines renewable as hydroelectric conventional, municipal solid waste, landfill gas, other renewables and waste, wind, and wood and wood waste.  However, the Climate Bill excludes from its definition of renewables all hydroelectric power placed in service before 1 Jan 2001, all municipal solid waste, and is very restrictive on the types of biomass that would qualify.]

Potential Renewables by State

WRI proposes that the southeast region can achieve an aggregate 26% (of 2006 electricity sales) renewable penetration in the “near term” (6-10 years) through the development of most of the feasible onshore and coastline wind, low-impact hydroelectric and biomass energy resources and 15% of feasible solar resources.”  The midterm portfolio would extend beyond 10 years (and through 2025), and would include all feasible biomass, wind, low-impact hydroelectric and solar power resources.  However, in order to achieve 30%+,  “robust state and federal policies” would be required.  The biomass potential is so great in certain states such as Mississippi and Alabama, WRI estimates that well more than half of their total statewide generation could come from renewables.  Development of renewables would also alleviate some of the pressure on water resources as they estimate that approximately 2/3 of all freshwater withdrawals currently go to cool thermoelectric power plants.

WRI does identify a number of key challenges that would inhibit renewables potential in the Southeast and these include:

• Traditionally low electricity retails rates have been a barrier to renewable power development.  [Note that IPPs typically receive only the utilties' avoided cost rate which can be in the 4-5 cent per kwh range.]
• Given the remote locations of ideal renewable sources in the Southeast, significant transmission upgrades or additions will be required.
• “Insufficient rules (or no rules at all) to integrate renewable resources into the electricity grid.”

Within the paper, WRI sites North Carolina as one of the Southeast’s leading renewable energy examples and the first of the regional states to adopt a Renewable Energy and Energy Efficiency Portfolio Standard.  Among a number of requirements, investor-owned utilities must achieve 12.5% renewable energy and/or energy savings as a percentage of total electricity sales by 2021.  [Note that this is far short of the 17.5% level in the Climate Bill for 2021.]

Prior to the passage of the North Carolina Senate Bill 3 in 2007, the State Legislature commissioned a technical study to determine the potential costs and benefits of enacting a Renewable Portfolio Standard.  The key findings are summarized below:

• North Carolina has sufficient resources to meet a 5% RPS, but would have difficulty meeting a 10% RPS with only renewable resources located in North Carolina.
• A 10% RPS (focused on generation only) would only be achievable with large hydroelectric generation, on and off-shore wind and energy efficiency. [Note that the Climate Bill excludes all hydro generation built prior to 1/1/2001 and places tight restrictions on additions.  Also the WRI study excludes off shore wind development in its analysis.]
• North Carolina has upwards of 13,000 MW of renewable energy potential, but only 3,400 MW can be practically developed.
• Biomass (wood and agricultural waste) would provide the largest contribution to the RPS.  [Note that this is consistent with the WRI study, but may create conflicts with the Climate Bill's definitions of allowable biomass.]
• A 10% RPS would increase retail electricity rates by an average of 3.6% by the tenth year.  [Note that the WRI study does not predict a material increase in electricity costs, but they also imagine achieving levels 2-3 times what North Carolina determined was feasible.]

The most significant issues were determined to be:

• Avoided cost energy buyback rates are insufficient to support renewable generation development. [Note that this is completely consistent with the WRI report.]
• The existing Integrated Resource Planning Process does not appropriately account for externalities such as renewable and energy efficiency.  This means that some substantial changes to required generation resources.
• The Mountain Ridge Protection Act of 1983 could provide significant barriers to development of wind resources in western North Carolina.
• Significant upgrades in the transmission system would be required under the RPS scenarios modeled.  [Note that the study believes that the existing grid will have challenges with an RPS at the 10% level let alone at 20-30%.]

Conclusions…

A new study will not resolve the arguments and heated discussions now taking place.  There are simply too many assumptions that are open to widely varying use and interpretation.  The WRI study includes certain types of renewable generation that the current proposed federal legislation would not allow and so overstates the starting point.  This gets to what the definition of renewable is? This study also underestimates the potential challenges to biomass, wind and hydroelectric development from both environmental and NIMBY groups.  In addition, the study does not take into account the costs and further challenges to grid infrastructure development to reach RPS levels contemplated.

On the flip side, the southeastern states can likely do (much) more to achieve greater renewable energy penetration than what they lead on.  Traditionally, the Southeast has opposed increased competition and choice for customers when it comes to energy.  The lack of a sufficiently high renewable energy buyback rate and few examples of net metering and interconnection rules underscore this resistance.

So where does this leave us…

The Raleigh News & Observer published an article (20 March 2009) written by the Progress Energy CEO under the title of One Size Solar Doesn’t Fit Every State.  The conclusion is that every state (or region) is not the same when it comes to available renewable resources and therefore a single 20% (or 25%) shouldn’t be mandated broadbrush.  Otherwise greater economic burdens will be borne by less renewable-rich states.  If the ultimate goal is to reduce greenhouse gas emissions, then establishing a cap and letting the states determine how best to meet would allow for more flexible and most likely less cost to the end customer.

It would also help if we could get a standard definition for renewables and not seem to exclude generation sources that meet sustainability requirements and pass the common sense test.