In a potentially crushing strike against advocates for renewable energy mandates, a federal court ruling recently raised the issue of constitutionality of major provisions of many states’ renewable energy mandates.
On June 7, 2013, U.S. Circuit Court of Appeals upheld the Federal Energy Regulatory Commission’s (FERC) position against the state of Michigan (and other petitioners) in a disagreement over FERC’s proposal to distribute costs for new power lines to supply millions of megawatts of wind power in the Great Lakes area. Michigan believes that this plan would, in essence, require them to pay for expensive new power lines intended for transmitting renewable energy out of the state. Based on the law establishing Michigan’s 2008 Renewable Energy Standard, only renewable energy generated inside its state borders is qualified to fulfill Michigan’s obligation to utilize 10% of eligible renewable energy sources by 2015.
Speaking for the Court, Judge Richard Posner ruled:
“Michigan’s first argument—that its law prohibits it from crediting wind power from out of state in favor of the state’s obligated use of renewable energy by its utilities—trips over an unbreakable constitutional precedence. Michigan cannot, without violating Article I of the commerce clause of the Constitution, discriminate against out-of-state renewable energy (emphasis added).”
Thirty states, including the District of Columbia, have mandates on renewable energy that require electric companies to purchase a certain quota or percentage of renewable energy by a projected year. Just like Michigan which has a clear ban on wind produced in other states from being allowed into their mandate, other states also “discriminate” against out-of-state renewable power. When counting mandate compliance, several states count in-state power at a higher rate than out-of-state power, a practice popularly labelled as “multipliers”:
Delaware has a 300% credit multiplier for customer-sited, in-state photovoltaic (PV), a 350% multiplier for a specific offshore wind project, and a 150% multiplier for all other in-state wind projects;
Colorado applies a 1.25 multiplier for its in-state generation;
Michigan provides an extra 0.1 credit for projects that use state-available components and its local workforce;
Missouri grants a 1.25 multiplier for all in-state generation.
Kansas uses a 1.1 multiplier for all in-state resources;
Moreover, some state renewable policies have a list of renewable energy grades, where certain power sources can only be utilized to fulfill a part of the mandate. Others have grade levels dedicated particularly to in-state power generation that may now be doubtful in view of the recent decision by the federal court:
New Mexico’s Tier V applies to customer-sited resources;
Massachusetts’ Tier IV exclusively applies to in-state PV projects;
New York’s Tier II covers customer-sited resources.
The new ruling is significant since one of the main points raised by mandate proponents is the creation of jobs in the concerned state. Certainly, these claims merely consider the overall “green” jobs provided, while totally neglecting the loss of net jobs resulting from increased electricity rates arising from these mandates. The federal court ruling might just end up nullifying the argument for in-state green-job employment since renewable power can be imported out-of-state to comply with the mandate.
Lawmakers in these states with power mandates may now question the value of raising electricity rates on their state power consumers for the purpose of subsidizing “green” job creation in another state nearby. In the end, what this ruling has done is to unravel the problems and complexities with a market for renewables that has been created through government policies.