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United States

Federal renewables law still a long shot -- Senate bill includes 10% target and PTC extension

The odds are slim that a US national renewables portfolio standard (RPS) will be in place this year, despite a decision by the Senate to include a 10% target in its comprehensive energy legislation. "I think right now I'd have to say it's still a long shot that this will be approved and in place this year," says Randy Swisher, executive director of the American Wind Energy Association (AWEA). "But we're encouraged by the fact that it has gotten this far in a Congress that has been very difficult."

The bill, passed in late April by the Democrat controlled Senate, now faces difficult negotiations with the Republican dominated House, which last summer approved a version that did not include an RPS. The differences between the House and Senate versions must be ironed out in conference. "It will be subject to contentious debate and negotiation," admits Swisher. As well as the RPS, the Senate bill extends wind's production tax credit by five years and includes a new investment tax credit for small wind systems, an effective 30% subsidy of the capital costs.

Of the three provisions, the RPS was easily the most contentious and took days of debate to resolve. As originally drafted, the bill required electricity retailers to acquire 10% of their power from renewable energy sources by 2020. But in late March, Republican Senator Jon Kyl of Arizona introduced an amendment to remove the RPS and instead required utilities to offer renewables power only "to the extent available." The amendment was defeated in a 58-40 vote, with nine Republicans, 48 Democrats and one independent voting against the Kyl plan.

That vote is being regarded as a significant victory by environmentalists. "This is a major step forward, that the Senate has gone on record favouring a renewables portfolio standard," says Alan Nogee of the Union of Concerned Scientists. AWEA's Jaime Steve, agrees, calling the Kyl amendment a "do-nothing, status-quo" approach. "The vote opposing the amendment demonstrated bipartisan support for slowly but surely increasing the role that renewable energy will play in meeting America's electricity needs," adds Steve.

Defeat and victory

In proposing his amendment, Kyl said the RPS would benefit only a few companies at the expense of ratepayers. He tabled statements from utility and industry opposing what one described as "a one-size-fits-all national mandate for an arbitrary quota" that would raise utility bills and create inequities among energy sources and among states not blessed with renewable resources.

Senate supporters of the RPS, led by Senate Energy and Natural Resources Committee chair Jeff Bingaman, argued the RPS would help the US diversify its electricity supply. "We need to be less dependent on some certain specific sources and more dependent on new technology. That is possible. It is happening. It is not happening as quickly as it should."

Two other Republican amendments aimed at limiting the scope of the RPS were also defeated. One would have allowed states to opt out of the mandate, while the other would have exempted retailers in states with their own portfolio standards.

Weakened

In the waning days of the energy bill debate, however, the Republicans did succeed in weakening the provision. The Senate passed an amendment from Oklahoma Senator Don Nickles lowering the bill's price cap on renewable energy credits (RECs) from $0.03/kWh to $0.015/kWh. RPS supporters say the lower cost could reduce the likelihood that utilities will achieve the standard by actually generating renewable energy, but opt instead to buy RECs from the US Department of Energy.

To get an RPS adopted at all, however, Bingaman had to propose his own compromise amendment, one he says is modelled on the successful Texas RPS. The bill originally required retailers to supply 2.5% of electricity from renewables in 2005, increasing by 0.5% a year until 2020. The version adopted is for a more gradual transition, starting at 1% and increasing yearly by 0.6%. It exempts municipal utilities and rural electric co-ops, and allows retailers to subtract all renewables generation resources, including hydro, from their sales bases in order to determine their obligations.

The result, says AWEA, will be a requirement for about 8.5% of new renewables by 2020, a target that Swisher calls "modest and achievable." He takes issue with claims that the standard will cost utility customers billions more on their utility bills. "According to analysis by the US Energy Information Administration, the RPS would have minimal impact on electricity rates while substantially increasing the use of renewable energy," he points out.

The plan will also give the US wind industry a much needed stable market, says Andris Cukurs of NEG Micon North America. "If that gets put in place, this RPS, you'll see the growth really take off and you'll see European companies investing very heavily in the US."

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