Legislation Aims to Spike State’s Use of Renewable Electricity to Fast-Track Fight Against Carbon
June 2, 2022
PROVIDENCE — A bill before the General Assembly would, if passed, require Rhode Island to procure 100 percent of its electricity from renewable sources — mostly wind and solar — by 2033, a huge step that would lead, down the line, to also cutting fossil fuel use and pollution emitted from buildings and vehicles. It is one of several bills aimed at reducing the impact of carbon use and pollution.
The bill passed the Senate on May 31; action by the House is pending.
The mechanism for forcing the use of renewable electricity is the Renewable Energy Standard (RES), which officially sets the percentage of electricity a state must procure and use from green energy developers. Starting in the 1990s, many states began passing and using self-imposed standards to force electric utilities to buy more of their power from renewable electricity sources, with significant success.
If the 100% renewable energy standard becomes law, don’t expect to see wind turbines popping up on Starbucks’ roofs or solar panels covering Dunkin’ parking lots right away. The standard’s boost to 100% of renewables by 2033 — from the current year’s requirement of 16% — would happen, initially, by buying electricity from existing renewable generators, such as wind facilities and solar arrays, in New England and New York.
Passage of any of these carbon-reducing efforts would not eliminate fossil fuel-generated power. It would still remain well into the future, to cover peak usage or times that wind is not blowing and the sun is not bright.
And, according to experts at the Green Energy Consumers Alliance, “Cleaning the [electric] grid is a more straightforward, reliable way to reduce emissions in the short term … because the Renewable Energy Standard is simply a mandate on just a small number of electricity suppliers.”
Another bill before the Legislature aims to push the creation of new offshore wind facilities. The bill would require the state by the middle of August to put out bids to buy up to 600 megawatts (MW) of offshore wind power. The bill aims to drive wind power developers to enter contracts for new offshore wind projects.
Buying renewable energy certificates from existing energy resources could meet the 100% standard, but in the current market, that is unlikely to drive entrepreneurs to build and add new wind or solar projects to the renewable generating “fleet,” in order to further drive down regional emissions, said Todd Bianco, chief economic and policy analyst for the Rhode Island Public Utilities Commission (PUC).
“In that case, renewable energy developers and investors would have to take market risks, and currently in our region, they don’t have an appetite for those risks,” said Bianco. “They prefer a fixed contract rate for their output. Whoever buys that contracted output, like an electric utility and its customers, would then take the risk of whether the contract value is above or below the market price.”
Also before the Legislature is a bill to require that, as of 2035, all new cars sold in Rhode Island must be electric vehicles (EVs).
More EVs, more use of heat pumps for home heating, and other factors will explode the need for electricity in the future. This is the purview of another bill that would require the state PUC to begin evaluating electrical energy storage resources, such as batteries, with an eye to increasing storage capacity in the future.
Many of the current bills related to green energy and environmental protection are follow-ups to the passage in 2021 of the Act on Climate law. The legislation requires the state to reduce its climate emissions by 45% by 2035, from the baseline of 1990. Unlike its predecessor, the 2014 Resilient Rhode Island Act, the Act on Climate has teeth: if the state fails to meet its goals, anyone could bring a lawsuit to force compliance.
To hit these goals and mandates — far more ambitious than the renewable energy standards of neighboring states — Rhode Island also would need to curtail its historic habit of moving the goal posts, for goals the state imposes on itself, when it looks like raising the use of renewable electricity will be hard to achieve.
Rhode Island first adopted a renewable energy standard in 2004. Starting in 2007, 3% of electricity sold in that year was required to be renewable. That standard imposed a timeline that would increase the percentage in stages up to 38.5% in 2035. The standard for this year is 16% renewables.
But annual increases were blocked by the General Assembly at least once since 2007, when higher percentages looked to be unfeasible. Even in the case of the current renewable energy standard bills (S2274A and H7277), the original language of the bills called for 100% by 2030, but the Senate Commerce Committee voted last week to ease the deadline up to 2033.
The 100% renewal standard, if passed, would raise the required portion of renewable electricity purchased by utilities and served to customers in graduated steps over the years. The steps would begin in compliance year 2022 and they are much steeper than the annual increases in the current standard.
Larry Chretien, director of Green Energy Consumers Alliance, said the fossil fuel industry does not pay for the damage its products cause — air pollution, climate change, oil spills, lung disease, and so on. One solution to this is to put a price on carbon. An example of this is cap and trade, in which industries may release a certain amount of pollution, an allotment that goes down over time. If an industry releases less than its allotment of pollution, it may sell its unused share. This gives incentives for industries to burn cleaner fuel, because they won’t get fined for exceeding the cap and they can also make money by selling allotments.
Chretien said putting costs on carbon has not developed much in New England, so the region’s states have turned to the flip side of the equation: subsidizing renewable energy.
“Surveys have shown that people don’t want higher costs for fossil fuels, but they totally support renewable energy solutions,” Chretien said.
Supporting renewable electricity, however, means customers must pay more for the renewably sourced electricity that utilities are required by the state to buy. And renewable electricity is more costly than fossil fuel electricity. The extra that customers pay for higher-cost renewable energy appears on electric bills as “renewable energy distribution charge.”
Tracking mechanism: renewable energy certificates
Renewable energy created and bought in Rhode Island is governed by the New England Power Pool Generation Information System (NEPOOL GIS), which manages New England’s electricity market.
Electrons operate by the rules of physics: they are created and moved and consumed fast; they cannot be stored, labeled with a green tag, and shuttled off to a specific buyer. They move continuously into and out of a shifting soup of electrical power that serves New England.
Purchase and use of renewable electricity are tracked by the neat accounting device of Renewable Energy Certificates. These certificates function both as a payment and incentive to renewable electricity generators, and as a tracking device for meeting states’ renewable energy standards.
When a megawatt-hour (MWh) of renewable electricity is created by an approved energy generator, a single certificate is created. A utility, such as National Grid, buys the certificate as a token of its use of renewable energy and compliance with the standard. The utility eventually passes the cost of the certificate on to ratepayers in their electric bills.
Through the NEPOOL, certificates are retired after purchase and use, so that there is no double-counting. Buying and retiring certificates is the only way to track the purchase and use of renewable energy.
Utilities also may satisfy the state’s requirement for purchase of renewable electricity by buying Alternative Compliance Payments (ACP) in lieu of certificates. In Rhode Island, the price of one ACP is currently about $71, well above the price of a certificate, at about $40.
If the state required all electricity to be sourced from renewable developers — as the bill does, by 2033 — all of those certificates could be provided by existing renewable energy generators, according to the PUC. No new green energy generators would be needed to meet the state’s standard, at least until other New England states began raising the percentages in their own renewable energy standards and competing for certificates, potentially driving the cost of certificates up.
At present, certificates cost about $40 each, according to Bianco of the PUC. In 2020, Rhode Island used 7.5 million MWh of electricity. So if the 100% renewable energy standard existed at this moment, utilities in Rhode Island would need to buy 7.5 million certificates this year for a total of about $300 million.
A typical electric customer in Rhode Island uses 500 kilowatt-hours (KWh) a month, or 6,000 KWh a year (1,000 kilowatts equals one megawatt). At present, this typical customer pays $40-$50 annually in renewable energy distribution charges. If 100% of Rhode Island’s electricity were bought with certificates, for $300 million, the typical customer’s share of the cost of renewable energy this year would rise to about $240, based on today’s certificate prices.
Experts say that moving into a 100% renewable energy future in Rhode Island will be costly for electricity customers. But no one will predict the future costs of renewable electricity, which will rely largely on the costs of certificates, competition for certificates from neighboring states, and development of more renewable energy, with the big player being offshore wind power.
National Grid, which was recently bought by PPL Corp., an energy company based in Pennsylvania, supplies 56.4% of electricity used in Rhode Island, with the remaining 43.6% supplied by more than two dozen smaller, competitive suppliers. Under the law, only National Grid — now PPL Corp. — must report its compliance data.
Bearing in mind that the National Grid figures are just over half of the whole picture, the Grid reported spending $24.29 million in 2020 to comply with the standard, according to the Rhode Island Renewable Energy Standards Annual Report for the 2020 compliance year published by the PUC. That was 49.8% higher than the previous year’s compliance cost. The report says the cost went up so much from 2019 to 2020 because of “the increase in the volume of [certificates] needed to comply with the increase in the [standard], as well as the increase in … usage compared to 2019.”
The PUC report said the increase from 2019 to 2020 “is comparable to the increase in 2019 and is significantly larger than the previous history of the [standard].”
Estimates for compliance costs in coming years are $26 million in 2021 and $30 million in 2022. If the 100% renewable bill passes, the first compliance year would be 2022, and in that case the compliance cost would be an estimated $34 million, the report says.
“The market price for [certificates] increased in 2020 and continues to remain relatively high compared to prices in 2018 and 2019, which indicates a tightening of the supply of [certificates] in Rhode Island and the region,” the report continued.
The PUC report said economic conditions have the potential to delay or decrease the number of new renewable energy-generating facilities that enter the market, particularly large offshore wind projects. “The timing of these facilities’ commercial operation could create volatility in [certificate] prices in the coming years. As a result, it is difficult to predict in which Compliance Years supply will balance with demand and in which years a gap between the two will exist,” the report said.
The PUC reports said the current renewable energy standard, “combined with important renewable financing programs, will continue to spur renewable energy development in the region.” It noted that it is “important” to sustain the growth of renewable resources — the objective of the current bill that would require the state to issue RFPs for 600 MW of offshore wind power.
A 2020 report by the Brattle Group and the Rhode Island Office of Energy Resources titled The Road to 100% Renewable Electricity by 2030 in Rhode Island agreed, in mild language, that “the goal of 100 percent renewable electricity of 2030 is achievable” but “will not be costless.” The report said “rate payers will need to support investments,” and agreed that “utility-scale offshore wind, land-based wind, and solar resources are likely to be the lowest cost of rate payers.”
The report strongly advised long-term and proactive planning for electricity system upgrades; competitive procurements; and the use of multi-state deals to reach the economies of scale offered by larger projects.
Senate President Dominick Ruggerio, D-North Providence, sponsor of the 100% renewable bill — the House sponsor is Rep. Deborah Ruggiero, D-Jamestown — noted the effects of the global climate crisis on Rhode Island.
“We are already feeling its effects here in Rhode Island and we must embrace bold solutions to mitigate our emission and build up our resiliency,” he said. “I want Rhode Island to think big and be a leader on this front.”