Renewable Energy Law Alert: Governor Gregoire Signs Bills Expanding Eligibility for Washington State's Renewable Portfolio Standard


3/8/2012

Washington's state legislature recently approved two bills intended to improve the state's Renewable Portfolio Standard (RPS). Governor Christine Gregoire signed one bill yesterday (ESSB 5575), and the second (SSB 6414) is awaiting her signature, which is anticipated. ESSB 5575 expands the types of biomass energy sources eligible under the state RPS. SSB 6414 would provide a process to obtain advisory opinions on project eligibility under I-937. These modifications enjoyed broad support from both existing Washington industries and developers planning projects in the state.

Background

In 2006, Washington approved the Energy Independence Act, or I-937, requiring electric utilities in Washington serving more than 25,000 customers ("qualifying utilities") to obtain the following percentages of their electricity from eligible renewable resources:

  • At least 3% by January 1, 2012
  • At least 9% by January 1, 2015
  • At least 15% by January 1, 2020

Due partly to the fact that I-937 passed by initiative, there was limited flexibility for its definition of "eligible renewable resources" to be expanded to reflect significant innovations in the biomass energy field. In addition, developers faced challenges due to the initiative's lack of process for pre-qualifying the eligibility of projects, which sometimes made it harder to obtain financing for biomass projects.

Changes Resulting from ESSB 5575

I-937 established the following "eligible renewable resources" for biomass energy: animal waste; solid organic fuel from wood (subject to certain exclusions), forest or field residues; and dedicated energy crops.

ESSB 5575 expands the definition to include the following biomass sources:

  • Organic by-products of pulping and the wood manufacturing process such as black liquor
  • Untreated wooden demolition or construction debris
  • Yard waste
  • Food waste and food processing residuals
  • Animal manure (replacing the term "animal waste")
  • Liquors derived from algae

The legislation also created a new category, "qualified biomass energy," which will enable some existing facilities that were excluded from generating qualified renewable energy under I-937 to generate qualifying renewable energy beginning January 1, 2016. This category requires that the biomass energy facility (1) commenced operation before March 31, 1999, (2) contributes to the qualifying utility's load and (3) is owned by (a) a qualifying utility or (b) an industrial facility directly interconnected with electricity facilities owned by a qualifying utility and capable of carrying electricity at transmission voltage.

Changes That Would Result from SSB 6414

With passage of this bill, project proponents and consumer-owned qualifying utilities would be able to seek advisory opinions from Commerce on whether proposed electric generation projects or conservation resources would qualify under I-937. The legislation provides that Commerce must consider various sources of information, including opinions issued by the I-937 Technical Working Groups and comments from interested parties, including staff of the requesting utility. Commerce must also give priority to any application that previously received an affirmative advisory opinion from the I-937 Technical Working Group.

An advisory opinion adopted by the governing body of a consumer-owned qualifying utility that will use the project or resource is binding on the auditors responsible for determining compliance with I-937, but only if (1) the advisory opinion affirmatively qualifies the project or resources, (2) the governing board of the consumer-owned utility that will use the project or resource adopts the advisory opinion after public notice and hearing and (3) the project or resource is built or acquired as proposed. An electric project reviewed and adopted under this process may produce renewable energy credits as defined in I-937.

Summary

While the changes wrought by the two bills are modest, they are favorable to both existing industries and developers of new projects. One additional provision that promoters of anaerobic digesters had sought was not included. This provision would have allowed developers to separately realize the value of methane capture for their projects and obtain a distinct income stream from this environmental benefit. Supporters of this provision were disappointed that it was not included in the final bill, but were typically pleased by the inclusion of organic waste as a qualifying feedstock.

Even with these changes, Washington's RPS's top requirement of 15% lags significantly behind California's RPS, which requires utilities to meet a 33% standard by 2020. This is driving more growth in California's renewable market by creating premium value for developers. Notably, California's program requirements largely exclude out-of-state renewable energy projects from qualification, which prevents the large majority of Washington projects from selling into the attractive market.


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