State Regulatory and Legislative Updates
January 14, 2013
During the 2012 legislative session, the region's state legislatures took on issues important to wind power spanning siting reform, renewable energy procurement, net metering, and reform of existing program targets. The summer closed with state administrations and regulators also undertaking efforts at wind siting reform, and with the New England Governors announcing a plan to launch a coordinated regional procurement effort for a significant amount of renewable energy by the end of 2013.
In August, Governor Patrick signed into law a major energy bill, SB 2395, which included several provisions of importance to wind power. The bill extends a renewable energy long-term contracting pilot program to require the state's investor-owned utilities to jointly and competitively procure an additional 4% of the total energy demand from all distribution customers under long-term contracts for renewable energy between 2013 and 2016. While 10% of the procurement total is set aside for distributed generation from sources other than wind and solar, the remainder creates a significant driver for the financing of the most cost-effective future regional wind projects. Important features of this contracting provision include allowing associated transmission costs to be included as part of the bid, and if so, requiring the Department of Public Utilities to authorize the contracting parties to seek recovery of such transmission costs through federal transmission rates, consistent with policies and tariffs of the Federal Energy Regulatory Commission if the department finds such recovery is in the public interest. It also extends the maximum contract duration from 15 to 20 years, allowing for installed costs to be amortized over a longer period (potentially reducing the cost to ratepayers). Prior to such solicitations, the statute requires the Department of Energy Resources to complete a study of long-term contracting requirements. The law also increases the total net metering cap from 3% to 6% of peak load, expanding a provision that has been a driver of community-scale wind activity in the state.
On the wind siting front, in January, the Joint Committee on Telecommunications, Utilities, and Energy sent the Wind Siting Reform Act, a bill designed to streamline the siting process for wind projects, to a study, ending the chance that the bill would be taken up by the full legislature in the current session. A new attempt to create wind siting standards appeared in late May in a new bill, HB 4112. However, it did not pass before the legislative session ended. The bill would have appointed the Energy Facilities Siting Board to develop wind siting standards with input from an appointed advisory group. These efforts have failed to progress primarily because of resistance from local municipalities. While the bill's authors incorporated provisions in the bill to ensure local control over siting decisions, communities continued to express concerns that the outcome of proposed streamlining provisions would force cities and towns to site wind projects using standards that override local preferences and conditions.
On September 13, the Connecticut Siting Council (CSC) released a revised draft of its wind regulations after a round of comments. The proposed regulations are designed to guide the council in determining whether proposed projects will have a negative environmental impact and outline the council's authority regarding wind turbine siting. In addition, the council released a Summary of Proceedings and Written Comments, outlining the input of each party during the comment period and why it was accepted or rejected in this revision. In general, the CSC held firm on the bulk of regulations contained in its February 2012 draft, dismissing stakeholder comments that measures were insufficient or too restrictive. Under the regulations, any project with a capacity greater than 65 megawatts (MW) must apply for a certificate, following the procedure in the regulations. Any project with a capacity less than or equal to 65 MW must submit a petition for a declaratory ruling, following the procedure in the regulations. All projects will be required to submit a report that includes information on visual, sound, and safety impacts. The September release included a notice that the council had decided to take action to adopt the proposed wind regulations. In late October, the council forwarded the regulations to the Legislative Regulatory Review Committee for approval.
The Renewable Energy Siting Partnership (RESP) released its Renewable Energy Siting Guidelines in June 2012. The guidelines are intended to assist municipalities in addressing renewable energy development. They include the identification and evaluation of the typical "siting impacts" that should be reviewed when siting a wind energy system, including safety from structural hazards, shadow flicker, icing, sound, residential property values, the natural environment, visual, and signal interference. RESP accepted comments on the guidelines through August 2012.
A bill designed to shift authority for grid-scale wind site development applications from the Land Use Regulatory Commission (LURC) to the Department of Environmental Protection (DEP) passed just after the formal close of the legislative session. LURC's former responsibilities for wind projects that are not grid-scale will be assumed by a nine-member Land Use Planning Commission (LUPC) that is placed within the Department of Agriculture, Conservation, and Forestry. LUPC will have jurisdiction over wind projects that are larger than 100 kilowatts and located in the expedited permitting area within the unincorporated territories or are community-based offshore wind projects. In May 2012, new wind turbine sound regulations were approved by the Board of Environmental Protection. The primary focus is to reduce night-time sound limits from the current regulation of 45 decibels to 42 decibels.
In June, Governor Lynch signed a renewable portfolio standards (RPS) bill that decreased the Class I target (for which wind power is eligible) from 16% to 15% by 2025. The new law also creates a Useful Thermal Energy (including wood pellet boilers, solar water heating panels, and geothermal heating and cooling systems) target of 0.2% of total electric load in 2013, increasing each year by that amount to 2.6% by 2025 when the RPS sunsets. This amount is carved out of the Class I target, effectively reducing the total New Hampshire RPS demand open to wind power by 22.5%.
In the 2012 session, the legislature appeared on track to pass a bill to establish an RPS (Vermont is the only New England state without such a policy). However, in the final hours of the session, Senators instead chose to preserve and expand the SPEED (Sustainably Priced Energy Development) standard offer program. The SPEED program provides for Vermont's utilities to procure a target amount of renewable energy supply from in-state generators smaller than 2.2 MW by setting cost-based standard offer prices for long-term contracts (similar to a feed-in tariff). Unlike an RPS, utilities are allowed to sell the renewable energy credits from these generators to load-serving entities with RPS obligations in other states so that the policy, while supporting the financing of new renewables, does not increase the total targets for renewable energy in the region. Separate SPEED prices are available for wind installations larger than 100 kilowatts (kW) and for 100 kW and less. The bill, signed by Governor Shumlin as the Vermont Energy Act of 2012, expands the standard offer program from 50 MW (currently approved) to a total 127.5 MW (with the incremental 77.5 MW phased in over 10 years).
Coordinated Regional Procurement
At the July 2012 New England Governors' Conference, the New England governors unanimously passed a Resolution on Coordinated Competitive Renewable Power Procurement to develop and release a regional request for proposal in 2013 for a "significant amount" of renewable energy. While the quantity of energy to be sought under such a procurement is still unknown, a request for information issued by the New England States Committee on Electricity (NESCOE) in 2011 resulted in more than 4 gigawatts of generation and transmission proposals, dominated by onshore and offshore wind. The resolution was spurred by recommendations from the 2009 New England Governors' Renewable Energy Blueprint, which included technical analysis conducted by ISO-NE and identified significant renewable energy resources in and around the region, consisting primarily of wind power. It also included policy analysis that identified the potential for New England states to coordinate competitive renewable power procurement.
The goal of the proposed procurement is to take advantage of economies of scale and market power to help reduce costs of renewables across the region. While the individual states may be too small to warrant the generation and transmission investments necessary for greater renewable energy infrastructure, the New England region as a whole is more suited for the task. Such a procurement could serve as a critical pathway to facilitating regional onshore and offshore projects as well as associated transmission facilities necessary to get the output to market.
The resolution dictates that NESCOE will develop and implement a work plan on behalf of the New England Governors that will result in the final RFP. NESCOE is expected to produce the work plan and coordinated competitive regional procurement solicitation by the end of December 2013. Toward that end, NESCOE posted a Notice of Comment Opportunity and DRAFT Work Plan, seeking comments from interested stakeholders. Comments from a range of stakeholders can be found on NESCOE's website. A final work plan is expected to be released in the fourth quarter of 2012. The final plan will not commit any New England state to procure any renewable resources; rather, each state will make an independent decision.
The draft plan states that competitive markets have met renewable resource demand to date but that it may be necessary to use power purchase agreements and other mechanisms or policies to bring "lower-cost New England renewable resources to fruition." Factors driving this need are identified as including drops in natural gas prices reducing expected energy revenues; challenging financing conditions; diminishing transfer capacity on the transmission system in regions with high renewables potential; changing market rules that may limit access to capacity market revenues; and the clogged interconnection queue. The plan articulates the potential benefits of coordinated procurement as:
- Aggregating demand for renewables, enhancing buying power, stimulating the market, and creating larger revenue streams than otherwise possible
- Facilitating development of cost-effective, low-carbon generation in and around the region
- Meeting a preference for using competitive processes
- Stimulating necessary transmission development and facilitating efficient transmission development consistent with state policy goals.
NESCOE estimated the timeframe from a regional RFP announcement through contract approval following a 180-day regulatory proceeding to be approximately 24 months. However, one or more states may require additional time, extending the process.