Ohio Legislature Makes Fed Rule Harder

When Ohio suspended a law requiring utilities to meet renewable energy and efficiency standards earlier this month, it didn’t just loosen requirements for power companies. It also scaled back what the EPA considers the state’s biggest option for reducing carbon emissions.

The Ohio legislature earlier this month suspended a 2008 law that required utilities to get 12.5 percent of energy from renewable sources and reduce energy use 22 percent by 2025, arguing it made electricity too expensive for working families and set unrealistic goals.

In its landmark rule released at the beginning of the month, the EPA outlined how much states might choose to rely on four different options to meet individual reduction targets. And in Ohio, the federal agency leaned heavily on renewable energy and electric efficiency, making up about 65 percent of Ohio’s reductions from the power sector by 2030.

Stakeholders on both sides of the carbon regulation debate say Ohio’s recent law change will make it more difficult to meet the federal recommendations. And some believe the move highlights a gap in the federal policy: a lack of consideration for state capabilities and political environments.

The agency assumes under its estimates that Ohio could increase its percentage of renewable energy more than any other state by 2030, growing 1,000 percent from 1 percent of generation to 11 percent. The EPA also thinks Ohio could increase electric savings from 4.2 percent to 11.6 percent. But that will be difficult to achieve now that the requirement that incentivized growth in those sectors is on hold, experts say.

Samantha Williams, a Chicago-based attorney who focuses on Ohio clean energy for the Natural Resources Defense Council, says Ohio has great potential for using renewables to meet the federal standards but political realities could throw off those opportunities.

“Something is happening at the statehouse that is really unprecedented, and it doesn’t really comport with either what Ohioans say they want or what the (state) agencies are doing,” Williams said.

Experts who oppose the EPA carbon rule say the renewable goals set for Ohio are unrealistic because they were determined by the overall region, not the specific circumstances in the state. To set renewable portfolio suggestions for each state, the EPA grouped them together by location and determined the capabilities of the area. They then established an overall percentage for electricity generation from renewable energy and divided it among states. That’s how Ohio ended up with an 11 percent target, but critics say lumping states together that way is unfair.

Scott Segal is a lawyer with Bracewell & Giuliani, a firm that represents coal companies and plans to challenge the regulation.

“Where that falls flat is that states, even in the same region, are not all built alike,” Segal says. “They have different compositions of their baseload power, they have different types of their renewable resources that are available, and you can’t predict who might repeal their RPS.”

Segal says Ohio’s situation also raises the question of what states will do if they decided to change a core portion of their plan after they submit it to the EPA. Responses from the EPA so far have been unclear, but it is possible the agency would want to approve any major changes to the plan. Segal argues that violates state autonomy and could be a critical argument for fighting the rule in court.

POLITICAL REALITIES

Ohio is the first state to halt its renewable energy standard, and many advocates of the law were surprised when Republican Gov. John Kasich signed the measure because he has been vocally supportive of the renewable industry in the state.

Proponents of the standards say the change is an unprecedented show of power from business interests—mainly the utility First Energy, the Chamber of Commerce and the American Legislative Exchange Council—to influence energy policy.

Sen. Sherrod Brown, D-Ohio, claims the legislature is “full of a bunch of climate deniers and they were heavily lobbied by a small number of interest groups, including the Koch brothers.”

THE DEVIL IN THE DETAILS

While the EPA did solicit feedback from states, its draft proposal does not go into enough detail to take into account these political fights and whether states might weaken or repeal programs they are expected to rely on.

Ohio’s original state law set annual renewable energy goals with the aim of getting 12.5 percent of power from renewable energy sources like wind by 2025. It also set a 12.5 percent target for alternative energy, which was meant to increase the use of cleaner technologies for traditional fossil fuel sources.

The changes eliminate that second 12.5 percent outright. They put the renewable portion on hold for two years. They also repeal a requirement that half of the renewable power come from within the state, meaning Ohio could just import the energy, Williams says.
On energy efficiency, the bill puts a two-year freeze on the annual goals utilities are supposed to meet to increase energy savings to 22 percent by 2025.

And although the freeze is technically temporary, Williams says the bill includes “hostile legislative intent language” to enact future legislation to reduce or eliminate the standards.

Nevertheless, the hold puts businesses that have planned around the policy in limbo. That includes the kind of companies that produce solar panels or technologies that manage end-use electricity consumption, a total of 51 manufacturers and other businesses that opposed the changes to the law.

Brown says the revisions will likely lead to project closures too.

“This was done bipartisanly 5 years ago,” Brown said. “Business planned for it, business is fine with it, it’s predictable, they’re making the investments.”

And if those businesses do leave, Ohio won’t have them around in a few years when the state needs to start working to meet their carbon reduction target.

 

OhioRenewableMapSource: Ventyx Velocity Suite 

A STATE-BY-STATE APPROACH

Even before Ohio made changes to its renewable energy standards, the 1,000 percent increase struck critics as a bar too high for the state to reach.

Other states, like Iowa, have made increases much bigger than that in shorter time periods. But it has taken Ohio four decades to increase renewable power nearly that much, according to calculations by energy data collector Ventyx. In 1973, Ohio had 66 megawatts of renewable power, and at the end of 2013 it had 678 megawatts. That’s a 924 percent increase in 40 years.

Ventyx analyst Chris Tornow says there are a few cases where states see large renewable increases: when they have a renewable portfolio standard, when they have huge capabilities for wind or solar power, or when they have favorable tax policies or rebate programs. But the renewable standard is likely the biggest factor.

“If you looked at our new development (data) by state, you can see which states don’t have an RPS and it’s pretty obvious they aren’t doing much,” Tornow said.

Most states do have mandatory renewable standards, although a few have nonbinding goals.

But while Ohio might not have as much renewable generation if the standard is repealed, it is closer to meeting the EPA target than some other states, Tornow said.

As of March, more than 70 percent of the state’s power, or 8.8 million megawatts, came from coal plants. About 3,750 megawatts of that could retire by 2018, according to Ventyx predictions. And that would go a long way toward reducing emissions.

“That kind of takes the burden off the need for renewables to replace the coal, the coal is going to get replaced anyway,” he said.

Ohio is already about 30 percent of the way to meeting its target carbon emissions rate based on the 2005 starting point, according to Ventyx.

 

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LEGAL CHALLENGES AHEAD

Ohio’s law change also provides a useful example for states wondering how much control they will retain over amending the building blocks of their plans after they submit them.

That’s what Ohio Republican Bob Latta asked an EPA acting assistant administrator at a House Energy and Commerce hearing on the rule last week.

Latta wanted to know what would happen if legislators had decided to shelve the standard after including it in a proposal for the EPA, and EPA’s Janet McCabe’s response was mixed.

“There’s opportunities for states to adjust their plans along the way,” McCabe said. “If a state wants to replace one measure with another they would come to EPA and say this is what we’re doing.”

But McCabe also told Latta there likely would not be penalties for states if they didn’t consult with the EPA before doing something like passing a law to change a renewable portfolio standard.

“It will be up to the state of Ohio to design a plan that works for the state of Ohio,” McCabe said. “The way we’ve designed the plan is very respectful of the fact that states like Ohio…do rely heavily on coal.”

For now, state officials are left figuring out how to write Ohio’s carbon emissions plan, even though the state’s renewable energy requirements have been seriously slowed down. How they do that could signal whether this will be simply a skirmish or the start of a long war.

 

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