Positive Steps to Reform Renewable Power Requirements

The legislature’s Energy and Technology Committee this week approved a proposal (SB 1138) that takes several significant steps to reduce the negative impacts of Connecticut’s very aggressive Renewable Portfolio Standards (RPS) on electricity ratepayers.

The RPS establishes percentage thresholds for how much power sold in Connecticut must come from renewable sources (such as solar electric, wind, fuel cells, methane gas from landfills, certain biomass facilities, ocean thermal power, wave or tidal power, and certain small-scale hydropower facilities).

However, these “Class I” renewables are expensive compared with traditional energy sources, so increasing their use drives up energy costs in the state. 

If electricity distributors can’t meet the RPS thresholds, they must pay a penalty–the cost of which is likely to be passed on to ratepayers, thus pushing energy costs even higher.

Falling short

One of the main reasons for creating the RPS was the hope that it would spur development of renewable power sources in Connecticut by allowing those sources to sell renewable energy credits (RECs) to power providers trying to meet the RPS requirements.

Unfortunately, the RPS program is failing in significant ways. For example:

·        Only a very small percentage of the energy used to meet Connecticut’s Class I RPS requirements is coming from in-state sources (just 4% in 2011).

·        The vast majority of Connecticut ratepayers’ investments in Class I resources is currently going to support wood-burning plants in Maine and New Hampshire.

The current RPS is not just failing expectations; it’s also presenting an increasing challenge to Connecticut’s vital effort to become more competitive on energy costs.

Falling short of current RPS targets, Connecticut is now paying a 5.5 cent per kilowatt-hour noncompliance penalty.  The amount of that penalty will increase substantially in the coming years if the current RPS is not addressed.

Losing Ground

According to the Department of Energy and Environmental Protection (DEEP), “Connecticut ratepayers are in immediate danger of shouldering a growing economic burden while receiving little of the environmental or economic benefits envisioned when the original RPS was adopted.” 

Meanwhile, Connecticut continues to have the highest electric rates in the country and has also lost ground against the other New England states. Prices in Connecticut, on average, remain over 10% higher than the average prices in the rest of New England and are 22% higher than the prices paid by neighbors just across the state line in Rhode Island. With prices nearly 60% higher than the national average, Connecticut has also lost ground in the U.S.   

The RPS noncompliance penalty, along with the Connecticut-only tax on electric generation, the RGGI greenhouse gas tax, and others, are all combining to make Connecticut a less competitive place to do business with respect to energy costs.

Large-Scale Hydropower

That’s why DEEP and the legislature are taking steps in SB 1138 to diversify the portfolio of clean power from nearby sources and provide critical flexibility to meet RPS requirements. The bill allows the state to take advantage of the immense opportunity to use large-scale hydropower from Canada and large-scale regional wind power. 

Under SB 1138, power from these sources counts toward meeting RPS requirements but is not part of the REC program, which will continue to function as an incentive for developing renewable power right here in Connecticut.

SB 1138 is a work in progress with many details and nuances to be further vetted with affected members of the power industry.  But DEEP and the Energy and Technology Committee are on the right track: provide greater flexibility to the RPS, make large-scale Canadian hydropower and wind part of the solution, and continue to support the development of a thriving instate renewable industry in Connecticut.

For more information, contact CBIA’s Eric Brown at 860.244.1926 or eric.brown@cbia.com.