Oregon: Renewable energy standard and Business Energy Tax Credit under fire

HB 3674 — Protecting the Renewable Energy Standard: Last session, the legislature passed HB 2940 that allowed the energy output from vintage biomass facilities built before 1995 to count toward meeting the state’s Renewable Energy Standard (RES). The RES works to have 25% of the state’s energy usage met by new renewable resources by 2025. CUB strongly opposed that bill, because we thought that the combined effect of the actual energy from these facilities (built between the mid-1930s and the mid-1980s) plus the renewable energy certificates (RECs) that they would generate each year would dilute the RES too much and remove the need to invest in new renewables to meet future load growth.

The Governor vetoed HB 2940 and undertook negotiations to find some middle ground. Those negotiations were successful and led to the introduction of HB 3674. Essentially, the output from the vintage biomass facilities would be allowed to count immediately toward the standard (a very minor impact) but the renewable energy certificates, while they can be issued and purchased by utilities starting in 2011, cannot be used for RES compliance until after 2025. This means that the original standard must be met primarily with new resources, but the vintage biomass RECs can be used for ongoing compliance (since utilities have to maintain the 25 percent standard forever once it’s been met in 2025). This was a fair deal, and CUB supported the bill.

In addition to the biomass issue, the Senate President wanted the output from a municipal solid waste (MSW) facility in Marion County to count toward the RES as well. This was a difficult issue since MSW is not recognized at all as a renewable resource under the standard. CUB agreed to allow the plant to count, despite our concerns about MSW being considered a renewable resource, but could not agree to counting any MSW as renewable. Fortunately, only the Marion County facility was included in the bill.

This sets up a key issue for the 2011 session: the municipal solid waste industry will likely push hard for MSW to be considered renewable. CUB expects to oppose that change in the law. Stay tuned for developments around the RES as a whole.

HB 3680 — Creating a Balanced BETC: The Business Energy Tax Credit (BETC) has taken some hard hits lately. There has been widespread media coverage of questionable practices in awarding tax credits for some projects over the past few years. However, those problems have been the exception, not the rule, and since its creation in the late 1970s, BETC has made a significant contribution to supporting energy efficiency and renewable energy development in the state. It has been a key tool in putting Oregon at the forefront of the clean energy movement nationally and has allowed Oregon to be an innovator.

However, as the state budget has tightened, BETC expenditures have come under intense scrutiny. In 2009, the legislature passed HB 2472, which sought to put some restrictions on the BETC program and introduce some accountability and transparency measures. CUB thought that the bill went a bit too far and could drastically reduce the effectiveness of the program.

Long negotiations and conversations ongoing through early February eventually led to HB 3680. This bill was much more balanced in its approach and, while it certainly restricts resources toward some energy projects (such as large scale wind projects), it ensures that BETC remains a viable program. It imposes a $300 million cap on renewable programs (current projections put the cost at around $800 million for BETC expenditures without that cap), makes no changes to energy efficiency components of the program and also extends a program sunset (the year 2009) by six months. Finally, the bill includes many of the accountability measures (which no one opposed) that were included in HB 2472 from 2009, and have been adopted in emergency rules by the Oregon Department of Energy.

The discussions around BETC will continue in 2011. There will be a report on the program being issued in October 2010 that will provide some useful information. We will work to make sure that the positive impact the BETC does have can be protected while recognizing the ability of the state to meet all its needs at the same time.