TRANSITIONING THE U.S. TO MAJORITY RENEWABLE GENERATION

BY MADELINE LEFTON

I. INTRODUCTION

The U.S. energy market is currently in a state of transition. Though the means to develop

more renewably sourced energy is the topic of much national debate,1 in the long-term, there is a

strong desire in the U.S. to lower carbon emissions and develop a healthy renewable energy

industry.2 To facilitate this transition, many local, state and national renewable energy policies

have been enacted.3 Though the enthusiasm to supply more of the power entering the national

grid from renewable sources is evident from these policies, the obstacles are formidable. The

array of renewable policies further complicate already unclear legal and economic energy market

dynamics, and perpetuate disorganization and a piecemeal approach to a problem that would be

served well by a more comprehensive plan.

The U.S. reached the milestone of supplying thirteen percent of its electricity from

renewable sources in 2011.4 A hodge-podge of renewable development incentives made this

possible. Most notably, state enacted renewable portfolio standards (RPSs) and federal tax

incentives have been instrumental in attaining this achievement.5 These policies have allowed

renewable energy developers to enter the competitive energy market by creating a guaranteed

1 See generally Jeffrey Logan, et al., NATURAL GAS AND THE TRANSFORMATION OF THE U.S. ENERGY SECTOR: ELECTRICITY, JOINT INSTITUTE FOR STRATEGIC ENERGY ANALYSIS, (2012), available at http://www.nrel.gov/docs/fy13osti/55538.pdf (discussing how the natural gas market and the widespread use of hydraulic fracturing has substantially impacted the electricity market).2 See Blair Swezy, et al., A PRELIMINARY EXAMINATION OF THE SUPPLY AND DEMAND BALANCE FOR RENEWABLE ENERGY, NATIONAL RENEWABLE ENERGY LABORATORY (2007), available at http://www.nrel.gov/docs/fy08osti/42266.pdf. 3 See DATABASE OF STATE INCENTIVES FOR RENEWABLES AND EFFICIENCY, http://www.dsireusa.org, (last visited Mar. 20, 2013) [hereinafter DSIRE], and THE OBAMA ENERGY AGENDA (2012), available at http://www.whitehouse.gov/energy/gasprices. 4 U.S. Energy Information Administration, Annual Energy Outlook 2013, available at http://www.eia.gov/forecasts/aeo/er/early_elecgen.cfm. 5 U.S. Energy Information Administration, Today In Energy, February 3, 2012, available at http://www.eia.gov/todayinenergy/detail.cfm?id=4850.

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market for renewable power, and mitigating high up-front or long-term investment costs.6

However, despite their success, various logistical complications embedded within these

renewable policies stymie renewable energy growth. Furthermore, existing renewable energy

development policies are designed to incubate renewable energy development. They are not

designed to sustain a fully-formed majority renewable generation market.

To facilitate a longer term, more cohesive transition from carbon to non-carbon-based

energy sources, policymakers must map out a new strategy–one that facilitates full capitalization

of the renewable energy market. This article proposes that in light of jurisdictional

complications, generation logistics, and the current utility regulatory scheme, the onus of

securing more renewable power in an efficient, reliable, legal way, should be on utilities. This

article sets forth a utility regulatory scheme that allows for more uniformity in the procurement

of renewable energy. Obligating utilities to build or buy renewable energy, in conformity with

procurement requirements, will serve to overcome many of the unique challenges currently

impeding development of the renewable energy market. Ensuring more stability in the renewable

energy market will quell volatility that presently stunts market potential, ultimately yielding

more renewable power and a route to a majority renewably powered U.S. electrical system.

Because the energy market is so fiercely competitive, a critical step to developing

renewable power is simply allowing room in the market for renewables. RPSs have done just

that, by guaranteeing demand.

The U.S. has a rather fragmented approach to energy regulation as a result of the federal

and state jurisdictional overlay, profoundly impacting market operations. Generally, states have

the police power to regulate their own electricity systems, including generation, transmission and

distribution, as well as retail sales of power, so long as the electricity in question does not impact

6 Id.

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interstate commerce.7 The federal government then affirmatively polices all electricity market

functions that cross state lines, thus wholesale sales of power and projects that impact the greater

national energy market are regulated federally.8 However, the federal government also can police

state energy policies if they “unjustifiably . . . discriminate against or burden the interstate flow

of articles of commerce.”9 The summation of these jurisdictional divisions adds up to the

impossibility of a national renewable energy plan, as well as a fierce political debate, forever

percolating, highlighting the tension between state and federal division of power. As a result, a

piecemeal approach in state plans has evolved, in an attempt to move forward on renewable

energy development, despite the regulatory prohibitions.10 Unfortunately, due to the unique

physical attributes of electricity, and the likelihood for a state energy market to have an impact

beyond its own borders, many renewable energy policies are unconstitutional.11

Up to now renewable energy portfolio standards, renewable energy credits, and

development tax credits have been effective drivers of renewable energy development, but as

they are currently designed and implemented, these incentives are not sustainable in the long

term.12 Section 45 of the Internal Revenue Code (IRC) provides an income tax credit for

electricity produced from qualified wind power, solar energy, small irrigation power, geothermal

energy, open-loop and closed-loop biomass production, municipal solid waste, hydropower

7 Federal Power Commission v. Florida Power & Light, 404 U.S. 453 (1972). 8 Id. 9 Oregon Waste Sys., Inc. v. Dep't of Envtl. Quality of State of Or., 511 U.S. 93, 98 (1994). 10 See DSIRE11 See Steven Ferrey, Sustainable Energy, Environmental Policy, and States' Rights: Discerning the Energy Future Through the Eye of the Dormant Commerce Clause, 12 N.Y.U. ENVTL. L.J. 507 (2004).

12 See Eric Lantz, and Elizabeth Doris, STATE CLEAN ENERGY PRACTICES: RENEWABLE ENERGY REBATES, NATIONAL RENEWABLE ENERGY LABORATORY (2009), available at http://www.nrel.gov/tech_deployment/state_local_activities/pdfs/45039.pdf, and RENEWABLE ENERGY INCENTIVES, TAX POLICY CENTER, URBAN INSTITUTE AND BROOKINGS INSTITUTION (MAR. 8, 2013), available at http://www.taxpolicycenter.org/taxtopics/conference_renewable_energy.cfm.

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production, and marine and hydrokinetic renewable energy facilities that is sold by the producer

to an unrelated party. 13 Or, a producer may elect to utilize a 30 percent investment credit instead

of the production tax credit.14 Federal tax credits have provided an enticing opportunity to invest

in renewable energy production; however, the very nature of a tax credit leaves out a great many

potential investors if they lack tax liability.15 Additionally, though the U.S. has a long history of

subsidizing energy markets, there is the hope that renewables will become financially sound on

their own and not require the false security of tax credits to prosper.16

On the state level, many renewable energy portfolios have been adopted to develop a

local renewable energy market. However, their effectiveness is questionable. Many state RPS

policies are rife with jurisdictional issues that expose them to commerce clause and dormant

commerce clause challenges. Furthermore, “because RPS policies have not consistently required

accountability and states are not effectively complying with these self-imposed, mandatory

requirements, they appear to be more of a political tool used to provide a false sense of

accomplishment in the development and use of renewable energy.”17

Looking to utilities, and putting a greater onus on them to foster the renewable energy

market might be the best way to move into the next phase of bringing more renewable energy

into the grid. Utilities already have a quasi-public-private orientation.18 Utilities are accustomed

13 26 U.S.C.A. § 45 (2010). 14 26 U.S.C.A. § 48 (2010).15 See John Farrell, FEDERAL SOLAR TAX CREDITS RULE OUT HALF OF AMERICANS, INSTITUTE FOR LOCAL SELF RELIANCE (2011), available at http://www.ilsr.org/federal-solar-tax-credits-rule-out-half-americans/. 16 See eg., DIRECT FEDERAL FINANCIAL INTERVENTIONS AND SUBSIDIES IN ENERGY IN FISCAL YEAR 2010, US ENERGY INFORMATION ADMINISTRATION (2011), available at http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf, and, Jigar Shah, Are Subsidies Holding Back U.S. Solar Deployment?, CLEANTECHNICA (2012), http://cleantechnica.com/2012/10/04/are-subsidies-holding-back-u-s-solar-deployment-cleantechnica-exclusive-from-jigar-shah/. 17 Melanie Grant, Where Are They Now? A Look at the Effectiveness of Rps Policies, 2011 B.Y.U. L. REV. 849, 850 (2011)18 Arkansas Elec. Co-op. Corp. v. Arkansas Pub. Serv. Comm'n, 461 U.S. 375 (1983).

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to government-imposed demands.19 Also, utilities can plan comprehensively to set up a long-

term foundation for the renewable energy market to rely on. Utilities could revise their

operations by setting procurement standards, to bring more renewables online, in a

comprehensive, organized way.20

Section II of this article explains why existing renewable energy policies will not

substantially bring more renewable energy onto the grid, and may in fact inhibit more growth in

the renewable energy market. Section III explains why utilities, specifically in bundled or

regulated markets should play a bigger role in bringing renewable energy onto the grid. Section

VI details how utilities should fulfill the obligation to bring more renewable energy onto the grid.

Section V concludes by positing that the introduction of more renewable energy to the grid will

require a new regulatory scheme that mandates procurement of renewable energy, yet allows for

natural market conditions to determine pricing.

II. THE INADEQUACIES OF EXISTING RENEWABLE ENERGY POLICIES

Existing renewable energy development policies in the U.S. have laid a foundation for

the renewable energy market to gain traction but fall far short of stimulating the true potential of

the renewable energy market. For example, clean energy policies under the Obama

Administration aim to invest in developing new green technologies, rather than deploying

existing renewables to rapidly increase the amount of renewable electricity on the grid.21 On the

19 Fed. Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591 (1944).

20 See, e.g., 3799 PUR Util. Reg. News 1.

21 The principal green energy program under the Obama Administration is $34 .5 billion in loan guarantees under Section 1703 of Title XVII of the Energy Policy Act of 2005,which authorizes the U.S. Department of Energy to

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state level, renewable policies are still in their infancy. For example, California is heralded for its

relatively aggressive RPS, which targets a goal of supplying thirty-three percent of California’s

total electricity from renewables by 2020, and stops there.22 Encouragingly, California is on

target to meet its objective,23 but existing renewable energy policies must be updated in order for

the renewable energy market to significantly mature beyond currently outlined goals.

Renewable portfolio standards are a widely-deployed renewable energy development

policy in the U.S.24. RPSs play an instrumental in the growing supply of renewable power.25

However, despite their success, RPSs suffer from some design flaws. RPSs have not dismantled

the high energy market barriers to allow for smaller-scale renewable generation projects, as they

were expected to. A major flaw with RPSs is their inclination for federal and state jurisdictional

entanglements, frequently rendering portions of RPSs as unconstitutional. The other major

renewable development policy is a federal tax credit for investment in or production of

renewable energy. Like RPSs the federal tax credit incentives are structured to benefit larger

investment schemes, leaving out smaller investors. Additionally, political waffling substantially

undermines the potency of federal tax credits. Repeatedly, the federal tax credits have come

close to expiring or have actually expired. Despite being renewed, the political unreliability of

the policy has resulted in an incredibly disruptive boom and bust cycle, severely destabilizing

renewable energy market growth.

support “innovativeclean energy technologiesthat aretypically unableto obtain conventional private financing dueto high technology risks.” See 10C .F.R ..§609 .2 (defining an “eligible project” as a project “that employs aNew or Significantly Improved Technology that is not a Commercial Technology . . .”).22 Dsire, California, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=CA25R&re=1&ee=0. 23 California Public Utilities Commission, Renewables Portfolio Standard Quarterly Report, 1st and 2nd Quarter 1012 at 4, available at http://www.cpuc.ca.gov/NR/rdonlyres/2060A18B-CB42-4B4B-A426-E3BDC01BDCA2/0/2012_Q1Q2_RPSReport.pdf. 24 North Carolina Solar Center and Interstate Renewable Energy Council (2012) “Summary Maps.” Database of State Incentives for Renewables & Efficiency (DSIRE).25 Union of Concerned Scientists (2009) “Renewable Electricity Standards at Work in the States.”

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Finally, grid balancing is a practical problem that both policies fail to address and tend to

exacerbate. RPSs and federal tax credits both promote distributed generation, yet do not outline

how utilities are to account for the sudden introduction of inconsistent power onto the grid, even

though utilities are still accountable for preventing blackouts and maintaining grid reliability.

The following section details why these policies are problematic to the point of restricting

growth in the renewable energy market.

a. Existing Mandates Too Weak to Drive More Growth: If You Mandate It, It Will Be Built.

RPSs are a popular legislative policy, employed by individual states to outline renewable

energy goals, such as how much renewable energy capacity and from which sources a state

wishes to develop or promote.26 Generally, RPSs set a target percentage of renewable energy

capacity in a state energy market, to be comprised of a designated mix of renewable generation

sources, and achieved by a certain date, as well other compliance requirements. RPSs have

proven to be an effective way for states to develop a renewable energy market within their

borders.27 The strength of RPSs lies in their flexibility. RPSs allow states’ to tailor renewable

energy development to the specific goals of their electorate and to account for regional nuances.

RPSs can empasize locally available resources, like sun in the Southwest or wind in the

Midwest.28 Because of their ability to reflect the unique renewable goals of a state, to date, thirty-

26 MOST STATES HAVE RENEWABLE PORTFOLIO STANDARDS, US ENERGY INFORMATION ADMINISTRATION (2012), available at http://www.eia.gov/todayinenergy/detail.cfm?id=4850. 27 Gireesh Shrimali, et. al., HAVE STATE RENEWABLE PORTFOLIO STANDARDS REALLY WORKED? SYNTHESIZING PAST POLICY ASSESSMENTS TO BUILD AN INTEGRATED ECONOMETRIC ANALYSIS OF RPS EFFECTIVENESS IN THE U.S. (2012) available at HTTP://WWW.USAEE.ORG/USAEE2012/SUBMISSIONS/ONLINEPROCEEDINGS/SHRIMALI%20ONLINE %20PROCEEDINGS%20PAPER.PDF .

28 See Melissa Powers, Small is (Still) Beautiful: Designing U.S. Polices to Increase Localized Renewable Energy Production, 30 WISC. INT’L L.J. 101, (2012) [hereinafter Powers] and see, DSIRE.

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seven states have enacted some form of RPS.29

The adoption of RPSs has played an important role in increasing renewable energy

capacity in the US. “Regional growth in renewable electricity generation is based largely on two

factors: availability of renewable energy resources and the existence of State RPS programs that

require the use of renewable generation.”30 Since the year 2000, renewable energy capacity has

increased in the U.S. from under five percent31 to over twelve percent in 2011. In states that have

RPSs, the market is estimated to exceed 115 gigawatts of renewable generation by 2025.32 This

number is significant, but, considering that the U.S. generates over four million gigawatts a

year,33 ample room for growth remains in the renewable energy market.34

As effective as state RPSs have been up to now in cultivating growth in renewable energy

markets, if they are not reassessed to implement new goals, their impact stands to greatly

diminish. Many formerly progressive RPS goals have already been, or are rapidly projected to be

met.35 Iowa was the first state to enact an RPS, in 1984, calling for 105 megawatts, or about two

percent of its energy capacity to be generated by renewable sources.36 Since it was enacted,

Iowa’s RPS benchmark has been surpassed many times over. Two other states, Maine and Texas

have achieved their RPS goals.37 Tellingly, twenty-four states are modifying their RPSs, many to

29 See, DSIRE, (follow “RPS Data Spreadsheet” under Dec. 2010) 30 ANNUAL ENERGY OUTLOOK, US ENERGY INFORMATION ADMINISTRATION (2012), available at http://www.eia.gov/forecasts/aeo/MT_renewable.cfm#renewable. 31 2009 RENEWABLE ENERGY DATA BOOK, US DEPT. OF ENERGY, available at http://www1.eere.energy.gov/maps_data/pdfs/eere_databook.pdf, and RENEWABLE ENERGY, INSTITUTE FOR ENERGY RESEARCH, available at http://www.instituteforenergyresearch.org/energy-overview/renewable-energy/#_edn2.32 Id. 33 ELECTRICITY IN THE UNITED STATES, US ENERGY INFORMATION ADMINISTRATION, available at http://www.eia.gov/energyexplained/index.cfm?page=electricity_in_the_united_states. 34 http://www.instituteforenergyresearch.org/energy-overview/renewable-energy/#_edn2. 35 Bill Opalka, The State of Renewable Standards, ENERGYBIZ, available at http://www.energybiz.com/magazine/article/243447/state-renewables-standards. 36 DSIRE at Iowa http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=IA01R37 DSIRE.

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increase overall capacity targets,38 indicating that the demands made in RPSs will be met. Thus,

where RPSs goals are meak, there is a profoundly missed opportunity to encourage renewable

energy development.

Other criticisms of RPSs are that they contribute to imbalance in the national market, and

their suspect correlation to the actual deployment of renewable energy. Because RPS designs

vary so widely between states, there is a fair degree of discord and incompatibility between the

various policies.39 “State RPS programs share the common goal of encouraging renewable

energy supply, but design variations among states are so stark that there is even some debate

over what exactly constitutes an RPS, and whether certain states qualify as having one.”40 The

resulting variation leads to substantially less than ideal market conditions. For example, “REC

prices have been highly variable across states.”41

As state RPSs grow stale, their incentives will fail to harness the full potential that the

renewable market can bear, and potentially stand to inhibit growth.42 Thus, states would do well

to streamline their RPSs and simply implement aggressive general capacity goals to eliminate

perceived market dischord, and continue spurring renewable market growth. Though RPSs are

only part of the current mix of renewable energy development incentives, considering the rapid

increase of RPS induced growth, neglecting to update RPS standards will likely result in

momentum loss, and stagnation in the renewable market.43

38 Id. 39 Ryan Wiser and Galen Barbose, Renewable Portfolio Standards in the United States, LAWRENCE BERKELEY NATIONAL LABORATORY (April 2008), available at http://escholarship.org/uc/item/1r6047xb#page-1. 40 Id. 41 Id.42 Id. 43 ANNUAL ENERGY OUTLOOK, US ENERGY INFORMATION ADMINISTRATION (2012), available at http://www.eia.gov/forecasts/aeo/MT_renewable.cfm#renewable.

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b. Market Participant Diversity Is A Distracting Goal: Problems with Net-metering,

Feed-in-Tariffs and Federal Tax Credits

A host of development incentive policies are often enacted to achieve state renewable

energy goals, in an effort to not only increase electrical capacity, but also diversity of market

participants.44 Most states have enacted multiple incentive policies to entice newcomers to

develop renewable projects,45 due to policymaker concern over market dominance and high

market entry barriers.46 Despite the various financial incentives that have been deployed, such as

feed-in-tariffs and net-metering, potential market participants still find themselves prohibited

from entering the renewable energy market by insufficient access to capital.47 Unhelpfully, many

renewable energy development incentives fail to address this aspect of the problem. Potential

suppliers of renewable energy are faced with high initial investment costs, but popular renewable

development incentives employ long-term amortization, and frequently cap investment

recovery.48 Thus, potential market participants are limited to those who have access to funding

upfront, and can stand to weather a delayed return on their investment.49 Pursuing the goal of

diverse market participants has resulted in policies running up against unconstitutionality, and a

harrowing outlook for the traditional utility in their responsibility to maintain grid balance.50

i. Net-metering

44 Carolyn Fischer and Louis Preonas, COMBINING POLICIES FOR RENEWABLE ENERGY: IS THE WHOLE LESS THAN THE SUM OF ITS PARTS? (2010), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1569634. 45 DSIRE. 46 See David Moskovitz, RENEWABLE ENERGY: BARRIERS AND OPPORTUNITIES, WALLS AND BRIDGES, WORLD RESOURCES INSTITUTE, July 1992,47 Thomas Lord, Are Renewables Elitist?, ENERGYPULSE, (March 30, 2013) http://www.energypulse.net/centers/article/article_display.cfm?a_id=146.48 Barriers to Renewable Energy Technologies, UNION OF CONCERNED SCIENTISTS, 1999, http://www.ucsusa.org/clean_energy/smart-energy-solutions/increase-renewables/barriers-to-renewable-energy.html#2. 49 Id. 50 Steven Ferrey, Nothing but Net: Renewable Energy and the Environment, Midamerican Legal Fictions, and Supremacy Doctrine, 14 DUKE ENVTL. L. & POL’Y F. 1 (2003). [hereinafter Nothing but Net].

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One policy commonly employed to entice smaller, distributed market participants is net-

metering.51 Net-metering is a popular development policy that allows utility customers to be

credited the amount of any electricity they put into the grid.52 Ideal net-metering participants are

homeowners who can afford the upfront cost of installing some sort of small renewable

generation device such as a wind turbine or solar panels.53 Net-metering program implementation

varies depending on the state.54 But, because the net-metering terms are preset, a customer-

generator cannot negotiate the terms of their investment, essentially limiting the program to those

who are not participating for financial gain. The dilettante customer-generator dynamic is even

more apparent since frequently net sales are capped or even barred entirely.55

ii. Feed-in-Tariffs

Feed-in-tariffs (FITs) are the most popular policy used to facilitate renewable energy

market participation, in the world.56 FITs are better suited than net-metering as a tool to finance

larger-scale projects, especially projects that are built with the intent to yield a commercial

profit.57 The key to the effectiveness of FITs in driving renewable energy development are their

relative stability and their infusion of some certainty to an investment scheme.58 The goal of FITs

is to increase the likelihood that a renewable project will ultimately become profitable.59 The

stability of FITs is a bonus that allows potential investors to more accurately calculate what costs

to expect before a project is underway. This enables investors to anticipate a time frame to

51 Nothing but Net.52 Nothing but Net.53 Nothing but Net.54 Id. 55 DSIRE, (CA, and NM programs), (California’s net metering program is considered generous in permitting up to a 5% recovery/profit from the utility for net-sales to the grid.)56 A POLICYMAKER’S GUIDE TO FEED-IN TARIFF DESIGN, NATIONAL RENEWABLE ENERGY LABORATORY (July 2010) available at http://www.nrel.gov/docs/fy10osti/44849.pdf. [hereinafter, NREL Guide]57 Id. 58 Id. 59 Id.

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expect a return on the investment.60

Despite the suitability of FITs to investor needs, there are some very limiting drawbacks

as well. Like net-metering, FITs increase the appeal of investing in renewable energy

developments only to a narrow, self-selecting group.61 “It is generally assumed that the

guaranteed terms offered by FIT policies will help developers and investors overcome the high

up-front costs by financing a larger portion of the project with debt financing. However, FIT

policies do little to address up-front costs directly.”62 Since potential investors are left to secure

up-front costs without aid, this limits participation to much larger investors with access to

capital.63 Thus, adjusting FITs to be more enticing will not capture more investors, but will only

sweeten the deal for current participants.64

Beyond the limited appeal of the investment scheme, a very destabilizing aspect of FITs

is that their constitutionality is highly suspect.65 By design, the rate of return set by a FIT is

supposed to guarantee competitive market rates for electricity produced by renewable sources.66

These guaranteed rates of return “should probably exceed wholesale electricity prices [for] the

FIT [to] successfully promote renewable electricity generation. Since FERC has exclusive

authority over wholesale prices, FITs would seem to directly interfere with federal authority and

thus violate the Supremacy Clause.”67 This jurisdictional uncertainty has tainted the viability of

FITs, resulting in FERC declaring that California’s FIT was preempted by PURPA and in light

60 Id. 61 Toby Couture and Karlynn Cory, STATE CLEAN ENERGY POLICIES ANALYSIS (SCEPA) PROJECT: AN ANALYSIS OF RENEWABLE ENERGY FEED-IN TARIFFS IN THE UNITED STATES, NATIONAL RENEWABLE ENERGY LABORATORY at 1 (2009), available at http://www.nrel.gov/tech_deployment/state_local_activities/pdfs/tap_webinar_20091028_45551.pdf.

62 Id. at 4.63 Id. 64 Id.65 NREL Guide. 66 Id. 67 Id.

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of federal supremacy over wholesale sales of electricity.68

iii. Federal Tax Credits

On the federal level, promoting renewable energy has been achieved through production

tax credits (PTC) and investment tax credits (ITC).69 Adopted in 1992, the PTC is a federal

attempt to incentivize investments in renewable energy. PTCs are awarded to qualifying

producers of renewable energy, but if the producer lacks tax liability, they can sell the PTC to a

third party.70 The PTC is designed to encourage investment in renewable projects by stabilizing

their probability of successful, long-term operation, buffering sales of renewable energy from

potentially ruinous market fluctuations.71

Conversely, the ITC, a newer federal program, is designed to ease the burden of initial

start-up costs for renewable development.72 ITCs ultimately allow for recovery of up to thirty

percent of the eligible costs of a renewable energy property placed into service.73 Unlike the

PTC, “the sale of electricity is not required to realize the ITC. Furthermore, the time commitment

to the project need only be five years to capture the full credit.”74 Investors who utilize the ITC

“are not exposed to the risks of decreased demand or production complications,” minimizing

potentially ruinous impediments for a young renewable development.75

The structure of the PTC and ITC sufficiently incentivize investing in renewable

development, however, the political climate surrounding the tax credits is toxic. The first 68 Id. and, In re: California Public Utilities Comm’n, Order on Petitions for Declaratory Order, No. EL10-64-00, 132 FERC ¶ 61,047 (July 15, 2010). 69 Erin Dewey, Sundown And You Better Take Care: Why Sunset Provisions Harm The Renewable Energy Industry And Violate Tax Principles, 52 B.C. L. REV. 1105 (2011) [hereinafter Dewey].70 Id. 71 Id. 72 Id. 73 Id. 74 Id. 75 Id.

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political problem surrounding the tax credits is their impermanence. Despite the effectiveness of

the PTC and ITC programs, and how necessary they are to entice investors, they are temporary

programs, subject to sunsetting.76 Sunsetting provisions are expiration dates on laws, meaning a

law must be reevaluated and affirmatively renewed by Congress to persist.77 Some argue that

sunset provisions are a helpful tool to promote responsible legislation by reinforcing political

accountability.78 It is thought that sunset provisions force legislators to evaluate the actual cost of

enacting legislation, thus promoting circumspection.79 However, critics of the provisions argue

that they serve to reduce political accountability by allowing legislators to underestimate revenue

needs.80 Also, it is argued that the provisions reduce the reliability of revenue projections by

allowing legislators to look at the laws in a more piecemeal context.81 Lastly, it is argued that

sunset provisions encourage congressional misconduct by creating a new lobbying opportunity

each time a law is reviewed.82

The PTC and ITC are politically divisive and subject to sunsetting because they represent

the very core of what some consider violations of free-market principles and all that is

‘unAmerican.’83 “Opponents of [a federal renewable policy] have called it everything from “a

new energy tax” to “a huge wealth transfer.”84 Subsidizing renewable development strikes

opponents as something akin to socialism.85

76 Id. 77 Id.78 Id. 79 Id. 80 Id. 81 Id. 82 Id. 83 The Effects of Federal Renewable Portfolio Standard Legislation on the U.S. Economy, AMERICAN TRADITION INSITUTION (January 28, 2011), available at http://www.atinstitute.org/the-effects-of-federal-renewable-portfoliostandard-legislation-on-the-u-s-economy/, and Pelosi’s Big Bad Energy Idea, THE FOUNDRY (March 5, 2009), available at http://blog.heritage.org/2009/03/05/pelosi’s-big-bad-energy-idea/. 84 Lincoln L. Davies, Power Forward: The Argument for a National RPS, 42 CONN. L. REV. 1339 (2010).85 Jim Rossi, The Shaky Political Economy Foundation of A National Renewable Electricity Requirement, 2011 U.

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Manipulation of the PTC and ITC programs undermines the predictability of cost

calculations that investors rely on.86 However, this manipulation is only secondary to greater

problem that results from the sunset provisions. Each time approving an extension of the PTC

and ITC programs is up for a vote, the political climate is such that they are treated like political

footballs, with the likelihood of renewal remaining elusive up to the last hour.87 “Uncertainty

over [tax credit] continuation still exists because each renewal in Congress has introduced

political posturing and debate.”88 The fallout of the uncertainty over tax credits is that investors

lose the very reliability and sense of security that the credits are intended to provide. 89 When

extensions have been approved, the extensions have only been granted for relatively short

periods of time, often one to two years.90 The cause for concern that the tax credits may not be

renewed is real: in 2000, 2002, and 2004, Congress failed to extend the PTC, legitimizing the

uncertainty and severely undermining the reasonableness of investors relying on them.91 “Those

in the renewable energy industry agree that sunsetting of the PTC has impacted the industry and

that a permanent PTC would result in more long-term investment in renewable energy.”92

As a result of the mixed signals from Congress, the renewable industry has responded by

entering a boom-bust cycle, engaging in periods of frenzied development, followed by radio

silence. “Lapses in the PTC then cause a dramatic slow down in the implementation of planned

wind projects. When the PTC is restored, the wind power industry takes time to regain its

Ill. L. Rev. 361 (2011) (argues that a national renewable portfolio standard (RPS) for electric power is not likely to ADVANCE its purported goals, nor is it likely to be adopted by Congress in its present proposed form).86 Dewey. 87 Id. and Wind Credit with Bipartisan Backing Gets Lost in Election Year Fray, GREENWIRE (July 3, 2012), available at http://www.eenews.net/public/Greenwire/2012/07/03/1 [herinafter Election Year Fray]. 88 Id. 89 Dewey. 90 Dewey. 91 Phillip Brown, U.S. RENEWABLE ELECTRICITY:HOW DOES THE PRODUCTION TAX CREDIT (PTC) IMPACT WIND MARKETS? congressional research service (2012), available at http://www.fas.org/sgp/crs/misc/R42576.pdf.92 Id.

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footing, and then experiences strong growth until the tax credits expire. And so on.”93 Each time

the tax credits are up for renewal, investment in renewable projects comes to a screeching halt.94

“Staggered renewals have caused investors to rush to complete projects before the PTC

expiration, leading to a boom-and-bust investment cycle, particularly since 1999, whereby the

PTC was renewed only on a 1-3 year basis and was repeatedly allowed to expire.”95 These short-

term extensions tend to result in short-term development, as project developers and investors are

under more pressure to capture the value of tax credit incentives in a relatively limited window

of time.96

In sum, various development incentive policies ultimately are having a ruinous effect on

the fledgling renewable industry; the boom-and-bust cycle resulting from political volatility

undermines steady growth, and FITs have constitutional problems. And, these programs as well

as net-metering aim to diversify market participants, but ultimately fail to do so. Furthermore, all

of these policies are intended to encourage distributed generation which as the next section will

explore, has the potential to undermine grid stability and dismantle the utility system as we know

it.

4. Utilities Left Holding the Bag: the problem of grid balancing in a DG era

One of the many goals that promoting renewably sourced generation will accomplish is

the opportunity to transition from a predominantly centralized generation system to a

93 Union of Concerned Scientists, Renewable Energy Tax Credit Extended Again, but Risk of Boom-Bust Cycle in Wind Industry Continues (Feb. 14, 2007)94 Dewey. 95 Id. 96 Phillip Brown, U.S. RENEWABLE ELECTRICITY:HOW DOES THE PRODUCTION TAX CREDIT (PTC) IMPACT WIND MARKETS? CONGRESSIONAL RESEARCH SERVICE (2012), at 6, available at http://www.fas.org/sgp/crs/misc/R42576.pdf.

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decentralized or distributed generation system.97 As opposed to generation sources such as coal

plants or nuclear power plants, capable of providing energy to entire cities, distributed generation

is the principle of smaller, more discrete generation sources.98 Many generation sources can be

considered distributed generation, but a unifying principle is that it generally occurs outside of a

“centralized generation facility,” and is “built outside the distribution network on the

transmission grid.”99 Common distributed generation “technologies include combined heat and

power (CHP), small wind installations, small solar plants, fuel cells, and other forms of

decentralized power sources that either generate electricity or displace fossil fuel generation.”100

Distributed generation is alluring for a variety of reasons. Relying on a distributed

generation system might greatly improve the ability of the US electricity system to respond to

disruptions, big and small, decreasing power outages from natural disasters, or events like

terrorist attacks.101 Another benefit of distributed generation is the potential for reduced

environmental impacts.102 “By their very nature, distributed generation sources can operate in a

number of different landscapes and thus place less pressure on specific areas or ecosystems.”103

Minimal or relatively minimal environmental impacts of distributed renewable energy projects

are a key factor in boosting their appeal, compared to generation sources such as a coal plants.104

97 THE POTENTIAL BENEFITS OF DISTRIBUTED GENERATION AND RATE-RELATED ISSUES THAT MAY IMPEDE THEIR EXPANSION, US DEPT OF ENERGY (February 2007), available at http://www.ferc.gov/legal/fed-sta/exp-study.pdf.

98 Dennis L. Arfmann, Tiffany Joye, Eric Lashner, The Regulatory Future of Clean, Reliable Energy: Increasing Distributed Generation, 40 COLO. LAW 10, at 31. [hereinafter Arfman]99 Id.100 Id. 101 Powers, and THE POTENTIAL BENEFITS OF DISTRIBUTED GENERATION AND RATE-RELATED ISSUES THAT MAY IMPEDE THEIR EXPANSION, US DEPT OF ENERGY AT 7-1 (February 2007), available at http://www.ferc.gov/legal/fed-sta/exp-study.pdf.

102 Powers. 103 Id. 104 Id.

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“Additionally, the smaller size and design of distributed generation and the potential to locate

distributed generation within urban areas typically result in less opposition from neighbors and

others concerned about aesthetic impacts.”105

Despite the many real benefits of decentralized generation, there remains a major

challenge in implementing such a system. Functionally, a predominantly distributed generation

system would require an entirely new regulatory approach to grid balancing, and a major

overhaul of existing grid infrastructure to incorporate ‘smart-grid’ technology.106 The problem

with those two prospects are that the technology that is required to implement such a transition is

not fully developed, such a transition would be incredibly costly, and political support is for such

a task is inconsistent, if not downright hostile.107 Though a smart-grid, and an accompanying

regulatory scheme are likely to happen in the future,108 pushing the system to change before the

renewable market is mature enough to warrant the transition is a troubling prospect that will

likely cause more problems than necessary.

Another problem with a decentralized generation system stems from the physics of

balancing the electrical grid. The electrical grid must consistently maintain certain flows of

electricity. Too much or too little electricity in the system will result in power outages.109

Because the technology to efficiently store electricity in large quantities does not yet exist,

balancing the grid requires minute by minute attention.110 Since investor-owned utilities are

105 Id. 106 See, Smart Grid, US DEPT OF ENERGY, available at http://energy.gov/oe/technology-development/smart-grid. [herinafter SmartGrid]107 Id, and Arfman, and ESTIMATING THE COSTS AND BENEFITS OF THE SMART GRID, ELECTRIC POWER RESEARCH INSTITUTE, at 1-4 (2011), available at http://ipu.msu.edu/programs/MIGrid2011/presentations/pdfs/Reference%20Material%20-%20Estimating%20the%20Costs%20and%20Benefits%20of%20the%20Smart%20Grid.pdf. 108 SmartGrid. 109 Electricty 101, US DEPT OF ENERGY, available at http://energy.gov/oe/information-center/educational-resources/electricity-101#sys3. 110 Id.

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responsible for almost eighty percent of transmission in the US, the task of balancing the grid

primarily falls to them.111 Grid balancing is already difficult, requiring constant care. If the US

transitions to a distributed generation system, even with smart grid technology, regulating the

flow of electricity would become incredibly unwieldy. Keeping track of each relatively tiny

source of energy, from say an individual house, has the potential to wreak havoc on transmission

management attempts, and utilities would be left scrambling to sort it out.

Adding insult to injury, in addition to regulating much of the grid, utilities also must buy

and distribute the power of their distributed generation competitors.

Section 210 of PURPA provided a legal framework for … [qualified facilities] to interconnect to the transmission system and sell electricity to a regulated utility. PURPA mandated that local utilities purchase excess power generated by the QFs at the utility's avoided cost rate. This reform created largely unregulated sources of electricity to compete with existing regulated utilities. Congress passed the Energy Policy Act of 2005 (EPAct) and tightened certain restrictions of PURPA. Under the EPAct, a public utility is no longer obligated to enter into a new contract with or purchase power from a QF that has nondiscriminatory access to certain types of developed markets112

Thus, not only must utilities care take for grid balancing, but they are also obligated to

buy electricity from independent power producers, who are essentially their competitors.

Up to now, independent power producers have supply about twenty-five percent of the

electricity on the grid,113 but if distributed generation becomes the norm, utilities face an

incredible burden to maintain grid balance.

All in all, if the US is going to transition to a predominantly renewably sourced energy

system, the current renewable energy incentives and grid balancing polices cannot facilitate that

111 Id. 112 Arfmann at 31, 34.113 Electricty 101, US DEPT OF ENERGY, available at http://energy.gov/oe/information-center/educational-resources/electricity-101#sys3.

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change. RPSs work. Across the US, RPSs are close to compliance, or are on track to be so in the

near future. But RPSs not aggressive enough to get more renewable energy on the grid. They

also need to be updated to minimize the discordance between various state RPSs, and eliminate

unconstitutional tendencies, both of which serve to undermine energy market stability. Federal

incentives are also not the key to getting more renewables on the grid as they are so volatile

politically that they too wreak havoc on market stability. In the end, the utilities have been left to

pick up the pieces. For a real renewable energy revolution, a new policy must address these

concerns.

III. WHY UTILITIES SHOULD BE A BIGGER PART OF THE PICTURE: NO NEED TO REINVENT THE WHEEL

The previous section detailed some of the major deficiencies in existing renewable energy

development policies, thus why they cannot be relied on to facilitate a major transition to

renewably sourced generation in the US. The following section explains why utilities need to

play a bigger role in the regulatory scheme to transition more renewable energy onto the grid.

Transitioning more renewable energy onto the grid will be significantly easier if existing

infrastructure is effectively utilized. Utilities already dominate the electricity-generation,

-transmission, and -distribution markets. Simply augmenting the physical and regulatory

frameworks that exist is the most efficient way to integrate more renewable energy onto the grid

in the fastest amount of time.

a. Mechanics – physical infrastructure is there – use the path of least resistance

The traditional, regulated utility is responsible for generation, transmission and distribution in the

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US.114 Investor owned utilities (IOUs) are the single largest caretaker for these services,

responsible for eighty percent of transmission and supplying fifty percent of US generation.115

The IOU system is so entrenched that it serves approximately seventy-five percent of the US’s

energy needs.116 The costs associated with transmission in the US, which predominantly fall to

IOUs, are enormous. The US electrical grid consists of over 200,000 miles of high voltage

transmission lines.117 The exact values of the transmission system are variable, relative to

location, above ground or underground lines, high voltage capacity, and so on, however, capital

expenditures in the transmission market were valued at $128.9 billion in 2011 alone.118 In terms

of per unit costs, “the median cost of transmission” from a sample of potential wind generation

projects was estimated at “$300/kW, roughly 15% of the cost of building a wind project.”119

Another capital-intensive component of utility infrastructure is distribution services.

Distribution services are the meters, power lines, substations, and pole mounted transformers that

deliver electricity to consumers. “Distribution costs range significantly between utilities and

between locations within utilities.”120 Comparing four utilities, “average marginal distribution

capacity costs (MDCC) range from $74 to $556 per kW, and individual planning area marginal

114 THE ELECTRIC ENERGY MARKET COMPETITION TASK FORCE, REPORT TO CONGRESS ON COMPETITION IN WHOLESALE AND RETAIL MARKETS FOR ELECTRICITY 10 (2006), available at http://www.ferc.gov/legal/fed-sta/ene-pol-act/epact-final-rpt.pdf. 115 Electricty 101, US DEPT OF ENERGY, available at http://energy.gov/oe/information-center/educational-resources/electricity-101#sys3. 116 REGULATORY ASSISTANCE PROJECT, ELECTRICITY REGULATION IN THE US A GUIDE 9 (2011), available at www.rapon line .org/document/download/id/645 . 117 Edison Electric Institute, Electricity Transmission, http://www.eei.org/OURISSUES/ELECTRICITYTRANSMISSION/Pages/default.aspx. 118 Andrew Mills, Ryan Wiser, and Kevin Porter, THE ELECTRIC POWER TRANSMISSION AND DISTRIBUTION (T&D) EQUIPMENT MARKET 2011-2021 (February 2009), available at http://www.visiongain.com/Report/626/The-Electric-Power-Transmission-and-Distribution-(T-D)-Equipment-Market-2011-2021. 119 The Cost of Transmission for Wind Energy: A Review of Transmission Planning Studies, ERNEST ORLANDO LAERENCE BERKELEY NATIONAL LABORATORY, available at http://eetd.lbl.gov/ea/emp/reports/lbnl-1471e.pdf.

120 COSTING METHODOLOGY FOR ELECTRIC DISTRIBUTION SYSTEM PLANNING, THE ENERGY FOUNDATION at 1 (2000), available at http://sites.energetics.com/MADRI/pdfs/CostMethodFinal.pdf.

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costs from a low of $0 to a high of $1,795 per kW.”121

Considering the monumental value of the existing US electricity system, the renewable

energy market would do well to capitalize off of that preexisting infrastructure. Transitioning to

a fully renewable energy system is an incredibly expensive endeavor, and will “require an

enormous commitment of valuable materials, such as steel and rare metals, to one sector of our

economy.”122 Renewable energy market viability will be realized much sooner if it is unburdened

by such daunting infrastructure costs.

b. Private/regulatory infrastructure

In addition to a large physical presence, power lines being never too far from view in any

one spot in the US, utilities also represent an expansive regulatory structure designed with public

benefit as a central aim. “Like other network industries…the regulation of electricity was based

on the central political economic idea that the industry had natural monopoly characteristics and

that electricity served the public interest.”123 Regulated utilities in the US are the domain of

private industry, however, they receive a significant amount of public oversight and government

regulation.

The utility business represents a compact of sorts; a monopoly on service in a particular geographical area (coupled with state-conferred rights of eminent domain or condemnation) is granted to the utility in exchange for a regime of intensive regulation, including price regulation, quite alien to the free market . . . . Each party to the compact gets something in the bargain. As a general rule, utility investors are provided a level of stability in earnings and value less likely to be attained in the unregulated or moderately

121 Id. (the four utilities compared were Texas’s CP&L, Missouri’s KCP&L, Californias PG&E, and Indiana’s PSI).122 Hannah Wiseman, Lindsay Grisamer, E. Nichole Saunders, Formulating A Law of Sustainable Energy: The Renewables Component, 28 PACE ENVTL. L. REV. 827, 839 (2011). 123 Joseph P. Tomain, The Past and Future of Electricity Regulation, 32 ENVTL. L. 435 (2002).

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regulated sector; in turn, ratepayers are afforded universal, non-discriminatory service and protection from monopolistic profits through political control over an economic enterprise.124

The regulators tasked with monitoring utility behavior are the Federal Energy Regulatory

Commission (FERC), and State Public Utility Commissions (PUCs), any one utility being

regulated by one or both. Some of the major regulatory structures imposed on utilities are

outlined in the Federal Power Act (FPA), the Public Utility Regulatory Policies Act (PURPA),

and various FERC issued orders. The reasoning behind such exacting regulation lies the fact that

“most utility consumers cannot “shop around” between multiple providers as a result of the

natural utility monopoly, [thus] regulation serves the function of ensuring that service is

adequate, that companies are responsive to consumer needs, and that things like new service

orders and billing questions are handled responsively.”

For the purposes of this article, the focal point on electricity regulation is limited to

procurement mandates and electricity pricing.

i. Procurement and least cost standards

Regulated utilities are under an obligation to supply reliable, inexpensive power to the

public. Utilities are under an obligation to buy electricity or build generation capacity to fulfill

that obligation of to ensure reliable, inexpensive electricity for customers. Mandating that

regulated utilities buy power in circumscribed regulatory plans has consistently been a way to

align political and customer interests with utility behavior. In a series of FERC orders and cases,

the courts have resoundingly affirmed procurement mandates, or electricity purchasing

mandates, in their constitutionality.125

124 Jersey Central Power & Light Co. v. FERC, 810 F.2d 1168, 1189 (1987).125 See, FERC P 61191 (F.E.R.C.), 2012 WL 4039274, and American Forest and Paper Association v. FERC, 550 F.3d 1179 (2008), and 135 FERC P 61234 (F.E.R.C.), 2011 WL 2418554 (terminating a utility’s mandatory purchase obligation only where market dynamics granted qualifying facilities alternative access to the grid).

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Furthermore, utilities are under an obligation to supply the least expensive electricity to their

customers. Regulated utilities have a right to earn profits, but they are not guaranteed a profit. “A

regulated utility has no constitutional right to a profit, and a company that is unable to survive

without charging exploitative rates has no entitlement to such rates.”126 The ability to recover a

profit from services rendered can be affected by imprudence on the part of the utility. “If the

inclusion of property not currently used and useful in the rate base automatically constituted

exploitation of consumers, …then the Commission would be justified in excluding such property

summarily even in cases where the utility pleads acute financial distress.”127 Utilities must

convince a PUC that a proposed investment, whether it be for generation, or for some other

service function, is prudent before they are allowed to commence with the project. In order to be

granted permission by the PUC, the utility must demonstrate that the investment will ultimately

lead to a public benefit. This can mean that an approved investment can later prove imprudent

and the utility cannot recover its expenditures. In the case of investments in nuclear power plants

in the 1970’s, “many investments which were prudent, indeed considered essential, when made,

have now by necessity been cancelled. Forked River was one, and in 1980 Jersey Central

abandoned it, having concluded “that it must devote whatever resources it had available to ... less

capital intensive and more politically acceptable alternatives.””128

Utilities have existed under a structure that has been fleshed out over the past century.

With billions of dollars in physical and legal infrastructure in place, the renewable market will be

able to advance at a rate much faster if it utilizes existing frameworks. Based on these existing

126 Jersey Central Power & Light Company v. Federal Energy Regulatory Commission, 810 F.2d 1168 (D.C. Cir. 1987).

127 Id. 128 Id.

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frameworks, a new regime can be developed that utilizes procurement mandates and least cost

planning to incorporate renewables to synch up public sentiment and utility behavior. Ultimately,

there is no need to reinvent the (electricity delivery) wheel.

IV. HOW TO MAKE UTILITIES BUY OR BUILD RENEWABLE ENERGY

The call to transition more renewables moving towards a majority renewably generated

electricity system in the US has been made. Public sentiment supports investing in renewables

and the dangers of relying on fossil fuel based energy are clearer every day. However, the

renewable market has not yet found its footing. As detailed above, the existing renewable

investment policies have led to mixed results. Renewable generation projects are being built and

their market share is rapidly increasing, but the viability of the renewable market has been

sharply undercut by inconsistent support, and political waffling. The following is a proposal to

get more renewable energy on the grid in an efficient, and short-term way by using existing

infrastructure, but simply updating it to better suit the needs of the public and the fledgling

renewable market.

a. Procurement – RPSs – stronger, longer

For the foreseeable future, investments in renewables must remain reliant on a regulatory

scheme that supports renewable generation. Currently, the relationship between renewables and

fossil fuel based generation is like David and Goliath; fossil fuel generation is so entrenched and

has benefitted from political support for so long that it would be foolish to think that renewables

could overtake the market without a well-laid plan. Because public support for renewable energy

is so strong, mandates that guarantee renewables a spot in the energy marketplace should remain

in tact, but should be strengthened. As detailed above, RPSs in conjunction with various other

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incentive policies, have been very successful in securing renewables a foothold in the national

energy market. “The cost curve for renewables has steadily been coming down, however, with

both significant public investment (through tax benefits and other policies…) and scale-related

production cost declines accounting for the reductions. Wind power is the most striking

example.”129 However, a major complaint hurled against renewables is that they just don’t make

economic sense, and are too subsidy dependent; “coal is … relatively plentiful and inexpensive

(in strict financial terms) compared to natural gas resources (at historic prices), while renewable

resources remain plentiful but relatively expensive in strict financial terms.”130 Though the cost

of renewables has consistently come down, with the security of guaranteed demand via

aggressive RPSs, the renewable market will be allowed the room to start competing within more

natural market dynamics, against other fossil fuels and various renewables, alike.

If renewables have been able to garner twelve percent of the energy market under

existing RPSs,131 the potential to secure substantially all but guaranteed with more aggressive

mandates. With this in mind, state RPSs should be updated to mandate seventy, eighty, and up to

ninety132 percent renewable energy over the next few decades, but certainly well within this

century, to create a stable marketplace that will allow renewables to thrive.

b. IRPs – integrated resource plan – least cost planning

Mandating renewable benchmarks is a critical component to ensuring renewable market

129 Timothy P. Duane (FNd1), Greening the Grid: Implementing Climate Change Policy Through Energy Efficiency, Renewable Portfolio Standards, and Strategic Transmission System Investments, 34 VT. L. REV. 711, 780 (2010). 130 Id. at 714.131 RENEWABLE ENERGY, INSTITUTE FOR ENERGY RESEARCH, available at http://www.instituteforenergyresearch.org/energy-overview/renewable-energy/#_edn2.132 One hundred percent renewable energy should be the goal, but it is likely that some form of fossil fuel based generation will remain part of the energy market, such as natural gas, for reliability and dispatch-ability purposes for some time.

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stability, but after that, renewables should be allowed breathing room to eventually stand on their

own, and move away from subsidy dependence. In conjunction with aggressive RPS mandates, it

is critical that utilities be responsive to RPS demands by buying or procuring renewable energy.

Because utilities are so centralized and well-established, utilities should continue to follow least-

cost planning mandates, and buy power or build generation facilities to meet their mandated

needs. To ensure that regulated utilities are complying with least-cost standards, they need to

plan out their generation needs for consistency with an integrated resource plan (IRP). “Whereas

traditional utility regulation focused on adjusting the prices electric utilities charged, integrated

resource planning is aimed at ensuring efficient use of electricity and the resources used to

produce it.”133 The overarching goal of an IRP is the requirement that utilities meet demand

growth by increasing supply but also by simultaneously trying to decrease demand with internal

efficiency measures.134

With least cost planning and IRPs in mind, utilities should then attempt to meet mandated

renewable demand by either building renewable generation plants or buying it from independent

power producers on the open market. Since utilities are be responsible for generating electricity

to meet their customer demand, they should develop generation proposals and bring them to their

PUC for approval. The PUC should then evaluate that proposal against other independent power

producer proposals. If the utility has the least cost plan, they should be granted approval to build

their own generation, but if independent power producers can supply electricity at a better

overall rate, then the PUC should reject the utility proposal and recommend that the utility

purchase the independently produced power.

133 Scott F. Bertschi, Integrated Resource Planning and Demand-Side Management in Electric Utility Regulation: Public Utility Panacea or A Waste of Energy?, 43 EMORY L.J. 815 (1994).134 Id. at 830.

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The benefit of comparing utility proposals to the open market is that it will stabilize costs and

expand power resources available for serving customers. Many factors will account for whether a

utility proposal will stand up against independent suppliers, such as access to transmission lines,

siting viability, and access to various renewable resources. This will be a great equalizer.

Eventually, natural market dynamics will prevail.

V. CONCLUSION

Ultimately, the renewable market is prime for reevaluation and implementation of new goals.

The assortment of development incentives that have been utilized up to now have done a great

job of carving out a foothold in the national energy market. But the renewable market is strong

enough to be pushed harder, yet with appropriate oversight. The key to rapid development of

renewable energy is to require utilities to build or procure renewable power in increasingly large

quantity. This will cement that independent suppliers of electricity must be able to compete at

utility-scale, however, this is also the most efficient way to get the largest amount of renewable

energy on the grid in the shortest amount of time. The underlying concept that has been proven

under current conditions is that if the people demand it, renewable energy will be provided. If

more is demanded, it too will be supplied.

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