Determining a State's Contribution to the GCVTC Regional
Renewable Energy Goals and to what Extent a State's Renewable
Energy Programs are Helping to Meet its Contribution
A WRAP AP2 Forum Discussion Document
I. Introduction
A central theme underlying efforts to improve visibility
in the West is that visibility degradation is a regional
problem requiring a regional solution. At the same time,
there is the recognition that the existing air quality regulatory
structure contains no regional organization with the authority
to implement solutions. Instead, this authority rests with
the states. Like other aspects of the GCVTC regional haze
recommendations, the challenge of meeting the renewable energy
goals is how to assign responsibility for solving a regional
problem to individual states and to how to coordinate their
activities to meet the goal in the most efficient way possible.
The issue of developing regional solutions while maintaining
individual state responsibility is present in the Pollution
Prevention section of the GCVTC component of EPA's regional
haze rule. Section 309(d)(8)(i) of the rule requires states
to include in there regional haze state implementation plans
their anticipated contribution to the regional renewable
energy goals that 10% of regional power needs be met by renewable
generation by 2005 and that 20% be met by 2015. In addition,
Section 309(d)(8)(vi) requires a state to provide descriptions
of the programs it is relying on to achieve its contribution
toward the 10/20 goals. The rule, however, does not provide
guidance on how to determine either a state's contribution
or the extent to which programs adopted by a state are helping
to meet its contribution. As the WRAP forum charged with
helping the states design policies to achieve the renewable
energy goals, the AP2 Forum is an appropriate place to make
recommendations on these issues. As a starting point for
discussion, this paper presents some preliminary ideas on
how these issues might be addressed.
II. Determining a State's Contribution to the Regional
Renewable Energy Goals
One potential way to determine a state's contribution to
the overall regional renewable energy goal is to multiply
the end-use electricity consumption in the state by the regional
renewable energy percentage targets. This method bases a
state's contribution on its share of overall regional electricity
demand. Under this approach, states with greater electricity
use (presumably due to a larger population or greater economic
activity) would make a larger contribution to the regional
goals in terms of the MWh of renewable energy their renewable
energy programs induce. However, when measured as a percentage
of electricity use, all states would be contributing equally.
This approach is based on the following public policy rationale.
The GCVTC renewable energy goals were recommended to help
solve the problem of regional visibility degradation which
is caused, in part, by conventional power production. If
one agrees that electricity production is driven by the demand
for electricity, then ultimately it is electricity consumption
that causes the problem the renewable energy goals are seeking
to address. If one also agrees that a fair way to assign
a state's responsibility for the solution of a regional problem
is based on a state's contribution to the problem, then determining
a state's contribution to the renewable energy goals based
on its share of regional electricity demand is a fair way
to apportion the renewable energy goals across the states.
III. Determining the Extent to which a State's Renewable
Energy Programs are Helping to Meet its Contribution to
the Regional Renewable Energy Goals
Once a state's contribution to the regional goal is determined
the next step is to ascertain the extent to which the state's
renewable energy programs are helping to meet its contribution.
It is suggested here that, for the purposes of counting a
programs contribution toward a state's share of the regional
goal, the location of the production or consumption of the
renewable energy is not important. Instead, a policy should
count toward a state's contribution so long as it induces
increased renewable energy production or consumption anywhere
within the region. Several examples will help illustrate
the concept.
Example 1: Suppose the cost of producing renewable
electricity is 2¢/kWh more than the cost of producing conventional
electricity. To eliminate this cost differential and spur
renewable energy development, State A adopts a 2¢/kWh renewable
energy production tax credit. As a result of the tax credit,
a power supplier invests in a renewable production facility
in State A, the power from which is sold and consumed in
State B. In this case, the renewable energy production would
count toward State A's share of the regional renewable energy
goal.
Example 2: Again, suppose that the cost of producing
renewable electricity is 2¢/kWh more than the cost of producing
conventional electricity. A power supplier in State B commits
to deliver a renewable energy product to customers willing
to pay a 2¢/kWh premium. To supply the power for the product,
the power supplier invests in a renewable energy production
facility in State A. In this case, the renewable production
would count toward State B's share of the regional renewable
energy goal.
In each of the above examples a single policy adopted by
single state was responsible for inducing the renewable energy
production. The situation is more complicated when multiple
polices across multiple states are responsible for the increase
in renewable energy production. Consider the following example.
Example 3: Again, suppose the cost of producing
renewable electricity is 2¢/kWh more than the cost of producing
conventional electricity. Suppose that state A offers a 1¢/kWh
production tax credit that narrows, but does not eliminate,
the cost differential. Because of the tax credit, power suppliers
in State B are able to offer their customers renewable energy
from a State A production facility at a premium of 1¢/kWh
rather than 2¢/kWh. In this case, both the State A production
tax credit and the willingness of State B consumers to purchase
renewable energy at a premium have combined to increase renewable
energy production in the region. Because 50% of the renewable/conventional
cost differential is made up by State A and 50% is made up
by State B, 50% of the renewable energy production is counted
toward State A's contribution to the regional renewable energy
goals and 50% is counted toward State B's.
III. Conclusions
The ideas presented in this paper are preliminary and intended
as a starting point for discussion. Alternative approaches
for determining a state's contribution to the regional renewable
energy goals exist that are not discussed in this paper.
For example, rather than using the "bottom up" approach of
determining a state's contribution based on its share of
overall regional power demand, as is suggested here, some
within the Forum have suggested that a "top down" approach
may be more appropriate. The idea behind the "top down" approach
would be to survey the renewable energy potential in the
region, identify where the renewable energy production necessary
to meet the regional goals could come from, and then, using
available policy tools, design a least-cost regional strategy
for meeting the goals. A state's progress toward achieving
the goals would be measured by the extent to which the state
was adopting its part of the overall strategy. This type
of "top down" approach should also be developed and discussed
within the Forum.
In addition, in this paper, the method for determining
the extent to which a state's renewable energy programs are
helping to meet its contribution to the regional renewable
energy goals is illustrated with some very simple examples.
In reality there are likely to be many factors that will
complicate this determination, especially in situations where
different policies across different states are acting together
to cause the renewable energy development. Moreover, for
policies such as disclosure, that provide consumer information
rather than a direct financial incentive, quantifying the
effects on renewable energy development may be difficult.
In short, much more work is needed on this topic. |
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