From trash to treasure: converting America's contaminated land into renewable energy havens.

• Author: Scholtes, Jeremy S.
• Position: III. Mitigating Challenges C. Renewable Portfolio Standards through V. Pulling It All Together - The Aerojet Success Story and the Way Ahead, with footnotes, p. 27-52

3. Renewable Portfolio Standards

   One of the challenges mentioned earlier in this Part was a lack of state and federal legislation requiring renewable energy as a part of consumer-electricity supply. While no such federal legislation yet exists, over half of the states have enacted state policies, which now mandate incorporation of renewable energy into the electricity-supply portfolio--or in other words RPSs, which are also referred to as Renewable Electricity Standards (RESs). RPSs initially gained traction in the late 1990s when many states started to deregulate or restructure their electric-utility industry in an effort to increase competition. (148) Almost all states with a RPS define eligible renewable energy to include various wind, solar, geothermal, and biomass sources and technologies. (149) Some states also include certain types of hydroelectric power, landfill gas, municipal solid waste, and marine energy. (150)

   Under an RPS, utility companies and other types of retail suppliers are required to meet a specified percentage or express number of MW hours of power from the eligible renewable energy sources each year. (151) Generally, states allocate one credit per some designated number of kilowatt hours (kWh) produced by qualified renewable energy facilities. (152) In order to meet that threshold, the utility has the option to purchase the renewable energy along with the allocated credits from a supplier or buy credits through a credit-trading market. (153) Additionally, the utility may build or purchase its own renewable energy facility to generate some, or all, of its state-mandated quota of renewable energy. (154) Utilities can often bank credits if they purchase or produce an excess of the credits they need for a given year, and in some states utilities can defer a shortage of their mandated percentage until a following year. (155)

   As discussed earlier in Part II, renewable energy development requires time and monetary investment for planning, building infrastructure, and establishing a base of skilled professionals and laborers to design, build, and maintain the new infrastructure. A recent study designed to guide states through this important assessment process, discussed below, lists many of the costs and benefits of establishing and maintaining a state RPS. (156) After weighing and balancing these considerations, twenty-nine states, the District of Columbia, and two U.S. territories have settled on some version of a RPS while eight additional states and two U.S. territories established some version of renewable portfolio goals. (157)

   The Clean Energy States Alliance's recent study, Evaluating the Benefits and Costs of a Renewable Portfolio Standard, identified a number of potential economic and noneconomic benefits a RPS can yield. (158) Some of those benefits include:

   * Development of clean and renewable energy;

   * Reduction of air pollution, water pollution, water use, thermal pollution of waterways, and greenhouse gas emissions;

   * Reduction of near-term electricity prices from price suppression effects;

   * Increased long-term rate stability;

   * Growth of jobs directly connected to constructing, operating, and maintaining facilities;

   * Growth of supply, financial, legal, research, and consulting jobs in the clean-energy industry;

   * Related spending increases from the multiplier effect of new jobs and expanding tax base; and

   * Reduced transmission and distribution costs for development on parcels close to existing transmission infrastructure. (159)

   A recent Lawrence Berkeley National Laboratory study indicated that "[i]n states with RES policies in place, at least 33,000 megawatts (MW) of new renewable capacity--equivalent to about 50 average-sized coal plants--were added between 1998 and 2011." (160) Further, the "Union of Concerned Scientists projects that RES policies will support more than 103,000 MW of renewable energy capacity by 2025," of which "[a]t least 87,000 MW of this total is expected to come from new renewable energy." (161) With those numbers it is certainly hard to argue that states should refrain from continuing to seek energy independence, improving our environmental health, and strengthening our economy.

   Ensuring a balanced cost-benefit assessment, the Clean Energy States Alliance study goes on to account for potential costs of establishing a RPS. Some costs of establishing a RPS might include:

   * Short-term increase in the retail cost of electricity;

   * Job losses related to reduced operations or closure for in-state conventional energy generation;

   * Negative economic impact resulting from job losses and increased rate paying;

   * Transmission-expansion costs if renewable energy generation sites are distant from existing infrastructure and/or upgrade costs for aged or incompatible grid systems;

   * Integration costs for independent-system operators and utilities; and

   * Planning and operating reserve costs related to variable power generation at peak demand times. (162)

   Of note, none of the listed benefits or costs are specific to renewable energy development on contaminated property. However, all of the considerations are certainly applicable to such sites.

   Despite the many variables involved in renewable energy development, states continue to routinely amend their RPSs to increase their target percentages. (163) Some states, particularly the wind-rich Western and Midwestern states and solar-rich Southwestern states, are experiencing an oversupply of energy. (164) The combination of that oversupply and the many realized economic and health benefits resulting from the RPSs drive the expansion and acceleration of their annual renewable energy requirements. There are some state legislatures experiencing pressure to repeal or rollback RPS policies, but none of these efforts have thus far been successful. (165)

   In sum, RPSs have proven to be very useful tools for developing renewable energy projects on both greenspaces and contaminated land. With state RPSs as templates and the resulting successes providing lessons learned, now is the time to redouble our efforts to develop a federal RPS. This recommendation will be discussed in detail in Part IV.A.

4. Financing Tools

   Much like the other discussions in this Part, the project-financing challenges were also mitigated in recent years. (166) Evolving incentives and financing vehicles continue to improve the landscape for renewable energy projects, including development on contaminated properties. (167) This section will discuss two categories in particular: state and federal incentives, and financing models.

   1. State and Federal Incentives

      First, and closely tied to the RPS discussion, the expansion of incentives and subsidies has helped to level the playing field for renewable energy with respect to more traditional energy sources. (168) While state and federal incentives and subsidies for cleanup and renewable energy redevelopment are not perfect, there are more positive trends today than ever before. Regarding state incentives in particular, the author encourages the reader to explore the nearly one-stop database previously cited--the Database of State Incentives for Renewables & Efficiency (DSIRE). (169) DSIRE is frequently updated and provides detail regarding the incentive packages.

      The incentives vary from state to state, but often include some combination of grants, loans, bonds, green-energy funds, renewable energy certificate (REC) incentives, tax abatements, tax deductions, and tax credits. (170) DSIRE tables also include numerous links to websites and contact information for relevant state agencies, business associations, and industry and community alliances which can provide the most up-to-date information on all of these incentives. For example, New Jersey and Massachusetts are well known as leaders in the development of robust master plans and regulatory schemes, which provide a combination of REC markets, grants, tax exemptions, rebates, standardized solar easements, standardized interconnection procedures, and net-metering policies. (171)

      Federal incentives, also referred to in both resources discussed above, play a critical role in facilitating renewable energy growth. One of the most notable tax incentives is the Federal Renewable Electricity Production Tax Credit (PTC). (172) Although the PTC for solar, biomass, open- and closed-loop geothermal, and other renewable resources was set to expire December 31, 2013, the PTC of 2.2 cents per kWh of produced electricity for wind was set to expire on December 31, 2012. (173)

      Fortunately, the American Taxpayer Relief Act of 2012 (ATRA) (174) made two significant changes to the Internal Revenue Code, which benefited all qualified renewable energy facilities. First, it extended the PTC for wind to expire on December 31, 2013. (175) Second, it modified I.R.C. [section] 45 from its original language, which defined a "qualified facility" as one that was placed in service before January 1, 2013 (for wind) or January 1, 2014 (for solar, biomass, etc.), to the renewable energy facility with "construction of which begins before January 1, 2014." (176) The ATRA also made other minor changes to the PTC, but none as significant as the amendments listed above.

      Another important federal incentive, especially for solar energy, is the business energy investment tax credit (ITC). (177) The American Recovery and Reinvestment Act created a mechanism for some PTC-qualified facilities to choose the ITC instead of the PTC. (178) More recently, the ATRA also amended this credit in a similar way as it amended the PTC. The ATRA modified I.R.C. [section] 48 from its original language defining a wind qualified investment credit facility as one that was placed in service between 2009 and 2012 and other renewable resource qualified investment credit facilities placed in service between 2009 and 2013, to read any qualified investment credit facility, "which is placed in service after 2008 and...