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Lower demand for electricity caused by the recession is hindering the expansion of renewable energy. And the shortfall could have a big impact among states that are lagging behind in meeting renewable portfolio standards (RPS).

According to Boulder, Colo.-based SNL Energy, which tracks compliance among the 29 states (plus the District of Columbia) that are required to have a specified amount of electricity derived from renewable resources, 70% of RPS states experienced lower electricity demand in 2012 than 2011.

Although SNL Energy says it is in the process of finalizing last year’s data, research shows that 2012 electric sales fell by 1.5% from 2011 in RPS states.

Steve Piper, associate director of energy fundamentals at SNL Energy, says low electricity demand is both a blessing and a curse for states.

“On the one hand, a lack of demand growth makes it easier to hit RPS compliance targets with even a little new generation,” he says. “However, utilities will slow down their procurement of renewable generation if low demand growth persists.”

Mindful that a gap in RPS compliance may widen over time – and, therefore, eventually become unattainable – some states are taking action to ensure that RPS compliance gets back on track.

New York has achieved 46% compliance toward meeting its 30% by 2015 RPS mandate, according to the New York State Energy and Research Development Authority (NYSERDA), which administers the program for the Public Service Commission (PSC). New York’s renewable portfolio includes more than 1.5 GW of wind power alone. In fact, utility-scale wind projects comprise the bulk of the state’s RPS-eligible production.

According to a NYSERDA spokesperson, the PSC will be reviewing the state’s RPS program this year and will focus on renewable technology installations, the impact of market and policy issues on near-term program goals and possible investment support post-2015.

Exclusive of hydropower, NYSERDA says the state has developed more renewable energy than any other state in the Northeast. Including hydropower, New York’s renewable energy capacity is comparable to the entire renewable energy capacity of the other eight states in the Northeast.

“The program continues to remain sensitive to market uncertainties regarding the future of the federal production tax credit for wind installations, as well as the impact of the low price of natural gas and other issues that could affect program development,” the NYSERDA spokesperson says.

Maryland, which has a 20% by 2022 RPS mandate, is also tracking behind its 2015 and 2030 target dates.

According to data compiled for NAW by SNL Energy, Maryland has fewer than 2% of its generation that qualifies for the RPS. And with only 659 MW of renewable energy announced or under development, the state does not figure to meet its 13% RPS target by 2015.

However, the Maryland Energy Information Administration disputes SNL’s research.


“Maryland’s electricity suppliers are in full compliance with our RPS,” explains spokesperson Devan Willemsen, adding that Maryland’s RPS policy does not require generation assets to operate within the borders of the state in order to be eligible. “So, it’s not really correct to say we are lagging in our goals, since our goals have always included some level of [renewable energy credit] purchase from out-of-state generators.

“We do look for every opportunity to encourage the deployment of renewable energy projects in Maryland and have made great strides on that count,” she says. “We have incentivized the construction of over 250 MW of installed renewable capacity and are expecting additional projects in the near future.”

Because the amount of renewable energy needed to hit their target dates is relatively small, some other states can meet RPS mandates simply by bringing online a few more projects.

Pennsylvania, which has an 18% by 2021 RPS, finds itself tracking slightly better than halfway toward its 15% by 2015 target. However, a closer look into the numbers suggests that the Keystone State is actually in decent shape.

SNL Energy’s Piper says that with 990 MW under construction or planned – 65% of which is wind – Pennsylvania’s construction pipeline should contribute enough megawatt-hours to close the gap.

According to the Database of State Incentives for Renewable Energy, non-renewable alternative resources count toward state totals, further easing the mandate.

Rhode Island, which has a 16% by 2020 RPS, also has enough planned projects in the pipeline to boost current generation figures to meet near-term targets. With 1,747 MW being planned or under development – 94% from wind – Rhode Island figures to easily meet its 2015 target of 9.2%.

Interestingly, Piper notes, the aforementioned states are located in the Northeast and share a commonality beyond geography.

Part of the reason why these states may be having difficulty may also relate to the market structures by regional transmission organizations (RTOs) that provide capacity payments to conventional generation and demand response.

“Renewables are outcompeted in some states because RTO market structures provide capacity payments that make returns to conventional generation better,” explains Piper.

Additionally, he says, most of these states originally set their targets expecting the proliferation of offshore wind – a sector that has yet to develop as quickly as the states may have hoped. “That may also be driving the lag.”

However, overall investment in wind power is slowing, and the funds may be moving to other sectors. There are several reasons for this, including a maturing cost profile, lower electricity demand and competition from conventional natural gas generation. As long as RPS mandates are kept in place and expanded, the market for renewable energy can grow. But the rate of growth for renewables, in general, and wind power, in particular, will depend heavily on those factors, as well as ongoing subsidies available for renewable generation.

The good news is that the targets themselves can be viewed as political markers, subject to change based on the governing agenda. “For example, states that show lags to targets but remain committed to renewable investment may extend the compliance deadlines and boost the final target,” Piper says. w

Industry At Large: RPS Fulfillment

How Low Electricity Demand May Impact RPS Fulfillment

By Mark Del Franco

Although most states are meeting their renewable portfolio standards, low demand for electricity is beginning to negatively impact the ability of some states to reach near- and long-term targets.






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