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Renewable Energy: Toward A Portfolio Standard?

Fortnightly Magazine - August 1998

State Legislatures. "It's not the top item."

At the federal level, however, the Clinton Administration's draft legislation for deregulation includes a 5.5-percent RPS by 2010. That's slightly more aggressive than the 4-percent share called for in Rep. Dan Schaefer's (R-Colo.) well-publicized restructuring bill (H.R. 655). Several other congressional bills also contain an RPS, including S. 687, introduced by Vermont Sen. James Jeffords (R-Vt.). S. 687 calls for a 10 percent RPS in 2010. That's combined with emissions caps on carbon dioxide, sulfur dioxide and nitrogen oxide. Only one bill, S. 237, introduced by Arkansas Sen. Dale Bumpers (D-Ark.), grants RPS eligibility to large hydropower generators.

Politicians know they have support from a substantial portion of the public on green energy. Why? In a Sustainable Energy Coalition survey last April, 60 percent of more than 1,000 registered voters cited renewables and efficiency as worthy of the highest priority in energy research funding. The National Renewable Energy Laboratory concluded in a review of about 20 years of opinion polls that 56 to 80 percent of Americans are willing to pay more for renewable energy. And a recent study by the Edison Electric Institute concluded that 60 percent of households are willing to pay $6 or more per month for green power. About 40 percent would pay more than $11.

But the Energy Information Administration doesn't foresee widespread renewables development without additional incentive programs like an RPS and "green pricing." According to the EIA's 1998 Annual Energy Outlook, under current conditions, the total renewable share of U.S. generation, including hydropower, will likely drop from 12.5 percent in 1996 to 9.2 percent in 2020. Excluding hydropower, the EIA expects electricity generation from renewable resources to supply just 2.5 percent of the country's grid-connected energy supply in 2020.

In devising a way to boost demand for renewables in a competitive market, AWEA looked to the SO2 allowance trading program for guidance. The program's trading aspect, which allows trading or banking of emissions allowances in order to achieve the lowest cost of compliance, has produced higher cost savings than expected. According to a U.S. Environmental Protection Agency report, since 1990, the projected cost of compliance has declined from $4 billion per year to less than $2 billion per year.

Under the RPS, explains Swisher, "energy companies that aren't interested in or aren't in a good position to build their own renewable generation" could instead purchase credits to meet requirements. In addition to lowering compliance costs, the credits would provide revenue for new renewable facilities.

How Much Will It Cost?

Several studies have tried to calculate the costs associated with a nationwide RPS, as well as the impact on overall energy mix. However, the cost calculations come with caveats.

Researchers at the Tellus Institute of Boston, a nonprofit organization that promotes sustainable resources, studied Rep. Schaefer's proposal and concluded it would raise electricity prices by just 0.03 cents per kWh by 2010 (compared with a system with no RPS). For the average residential customer, that's an additional 15 cents a month.

Researchers also concluded that carbon emissions in 2010