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By Tricia Caliguire
Some say you can't go back, but last week, I did go back -- to Austin, Texas, where I went to law school. Things changed -- the east side has been gentrified, the traffic is horrendous, and Molly Ivins is gone – and are much the same – including that having the legislature in session makes for some interesting headlines.
The news in 2015 is the proposed repeal of the renewable portfolio standard (RPS). Back in 1999, when they deregulated the electric market, Texas adopted an aggressive RPS of 10,000 MW by 2025 (including 500 MW of non-wind resources). The programs adopted by the Public Utility Commission of Texas (PUCT) to support renewable energy development, including renewable energy certificate (REC) trading and competitive transmission, were incredibly successful; Texas passed the 2025 target in 2009. So, State Senator Troy Fraser, one of the sponsors of the original RPS legislation, introduced a bill to end it, as it is no longer needed. This is not just a repeal, explained a former UT Law classmate who practices energy law, but "a wipe it from the books as if it never appeared."
This is different, at least from the way we do things in New Jersey. In 2011 a rapid increase in new solar projects meant more solar RECs (SRECs) were produced than needed to satisfy the RPS. As a result, the price of SRECs came down dramatically, from a high of over $600 to under $100. But the New Jersey legislature didn’t declare victory and take down the goalposts; instead, New Jersey raised the RPS. Rather than risk losing a successful homegrown industry, the government took action to stabilize the market for SRECs and the result is continued growth at a more moderate pace and SREC prices sufficient for projects to secure financing.
One thing that is the same everywhere is developers’ need for regulatory certainty. If long term contracts for the power and/or the financing of Texas projects depend on a robust market for RECs and Senator Fraser’s bill passes, future development may go the same way as the RPS which created the demand.
Why not? With the Clean Power Plan looming, it would seem that increasing the supply of homegrown renewable power would be one of the most cost-effective ways for a state like Texas, home to a tremendous on-shore wind resource and more sunny days than we find in New Jersey, to reduce its emissions of CO2 by the required 44% (in the draft rule). Consider that the state requirements were based, in part, on the ability of the state to reduce CO2 emissions and the requirement assumed compliance with their RPS.
To calculate renewable energy growth expectations for each state under Building Block Three of the Clean Power Plan, EPA assigned states to a region (Texas is in the South Central) and averaged the RPSs of all the states in each region. That average RPS became the regional renewable generation target. The EPA then determined the rate the region would need to grow its renewable capacity in order to meet that target (20% for South Central), and then applied that growth rate uniformly to each state within the region. Where this becomes an issue of fairness is that the states within each region have different baseline renewable generation resources. States like Texas, with a high baseline, will need to increase their renewable generation capacity more in absolute numbers than states which start with less. While you can’t legislate away existing resources, if the bill passes and the RPS is wiped off the books before the Clean Power Plan is final, Texas may have padded the argument that the regional target should be recalculated and reduced. Hook’em.
J. Wylie Donald, a partner at McCarter & English, LLP, counsels and litigates for clients on insurance coverage, environmental and products liability matters. Mr. Donald co-chairs the firm's Climate Change and Renewable Energy Practice. He draws on his substantial environmental experience, his prior non-legal technical work, and his deep involvement in risk management to assist clients in understanding and controlling the coming regulatory and non-regulatory impacts of climate change. He has tried cases and argued appeals in the state courts in New Jersey and Maryland, conducted private arbitrations and mediations, and argued motions in federal courts across the nation.
Read more at Climate Lawyers Blog by McCarter & English, LLP.
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