Legal History Repeats Itself on Climate Change: The Commerce Clause and Renewable Energy

• Author: Steven Ferrey
• Position: Professor of Law at Suffolk University Law School and served as Visiting Professor of Law at Harvard Law School
• Pages: 489-549

Legal History Repeats Itself on Climate Change:

The Commerce Clause and Renewable Energy

STEVEN FERREY*

TABLE OF CONTENTS

Introduction: Circuit Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490

I. The Renewable Portfolio Standard Legal Mechanism . . . . . . . . . . . . . . . 492

A. State Renewable Portfolio Standards for Solar Power . . . . . . . . . . . 492

B. Solar Srecs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496

1. States with SREC Programs . . . . . . . . . . . . . . . . . . . . . . . . . 496

2. Impact on U.S. Solar Capacity . . . . . . . . . . . . . . . . . . . . . . . 497

3. The SMART Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499

4. The States and RPS REC Prices . . . . . . . . . . . . . . . . . . . . . . 501

C. The Cost to Consumers of REC and SREC Program Subsidies . . . . 503

D. The Dormant Commerce Clause Restricts State Power Regulation . 505

II. The Legal Controversy Surrounding State Renewable Energy

Discrimination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507

A. The Legal Posture of the Twenty-Nine RPS States When the

Dormant Commerce Clause Was First Raised Regarding RPS State

Discrimination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509

B. The Federal Court Legal Pivot to the Present . . . . . . . . . . . . . . . . . 511

III. How States Responded Legally (Or Not) to Their Geographic

Discrimination Regarding Renewable Power . . . . . . . . . . . . . . . . . . . . . 512

A. The Evolving Geographically Discriminatory Commerce Clause

Structure of Certain RPS States . . . . . . . . . . . . . . . . . . . . . . . . . . 513

1. In-State REC Multipliers . . . . . . . . . . . . . . . . . . . . . . . . . . . 513

2. Preference or Indirect Requirements for In-State RPS REC

Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 518

* Steven Ferrey is Professor of Law at Suffolk University Law School and served as Visiting

Professor of Law at Harvard Law School. Since 1993, Professor Ferrey has been primary legal

consultant to the World Bank and the U.N. Development Program on their renewable and carbon

reduction policies in developing countries, where he has worked extensively in Asia, Africa, and Latin

America. He holds a B.A. in Economics from Pomona College, a Juris Doctorate degree and a Master’s

degree in Regional Energy & Environmental Planning both from U.C. Berkeley and was a postdoctoral

Fulbright Fellow at the University of London between his two graduate degrees. He is the author of

seven books on energy and environmental law and policy, the most recent of which are STEVEN FERREY,

UNLOCKING THE GLOBAL WARMING TOOLBOX (2010); STEVEN FERREY, ENVIRONMENTAL LAW:

EXAMPLES AND EXPLANATIONS (8th ed. 2019) (9th ed. forthcoming 2022).; and Law of Independent

Power (56th ed. 2021). He also is the author of more than 100 articles on these topics. Professor Ferrey

thanks the assistance of his research assistants, Alex Bloom, Briana Mansour, and Abe Wurster. © 2021,

Steven Ferrey.

489

3. California’s Unique Indirect In-State RPS Preference

Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520

4. In-Region REC Requirements . . . . . . . . . . . . . . . . . . . . . . . . 523

5. Defining Eligible Resources as In-State or In-Region REC

Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529

6. RPS REC Benefits for In-State Components and Labor . . . . . . 530

B. How States Structure Their RPS Geographic Preferences . . . . . . . . 532

1. States Which No Longer Maintain or Ceased Geographic RPS

REC Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532

2. States Which Continue to Include Geographic Preferences . . . 533

IV. Emerging Federal Circuit Court Conflict Regarding the Commerce Clause 538

A. Two Circuits Equivocate on ZEC Commerce Discrimination . . . . . 539

B. Inflection of the Commerce Clause . . . . . . . . . . . . . . . . . . . . . . . . 544

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 547

INTRODUCTION: CIRCUIT DISCRIMINATION

“History repeats itself,

that’s one of the things that’s wrong with history.”

—Clarence Darrow (1857–1938), American lawyer

Discrimination and power: Federal courts have found that some state renew-

able power laws violate the U.S. Constitution’s Commerce Clause by discrimi-

nating against out-of-state renewable energy. At stake is climate change and the

near-term future of the planet. After being warned almost a decade ago about

their constitutional violations, which states conformed their laws as the Earth has

warmed? This Article analyzes which of twenty-two U.S. states flagged as having

potentially unconstitutional, discriminatory renewable energy laws a decade ago

have conformed their discriminatory renewable energy laws and which have

allowed legal history to repeat itself.

The Supreme Court has consistently held that the Constitution’s Dormant

Commerce Clause bars states from enacting laws or regulations that discriminate

by favoring their own commerce or burdening external commerce.

1

The Supreme

Court declared that nothing is more in interstate commerce in the U.S. than elec-

tric power as every continental U.S. state imports interstate power from adjacent

states to meet its needs.

2

Electricity is widely regarded as the second-most impor-

tant invention since the wheel.

3

Electric power has delivered a value in the

1. See infra section I.D.

2. FERC v. Mississippi, 456 U.S. 742, 757 (1982).

3. James Fallows, The 50 Greatest Breakthroughs Since the Wheel, THE ATLANTIC (Nov. 2013),

https://perma.cc/X77Y-WC68. (Electricity finished behind only the movable type printing press;

electricity is essential to operate seven other ‘top 50’ inventions of all time: The Internet, computers, air-

conditioning, radio, television, the telephone, and semiconductors). Electronic books and messaging,

displayed only through electricity, are now significantly replacing use of the movable-type press, which

490 THE GEORGETOWN ENV’T LAW REVIEW [Vol. 33:489

United States of approximately $390 billion annually,

4

exceeding the total

amount of corporate income taxes collected in the U.S, even before the corporate

tax rate was dramatically reduced in 2018.

5

The Second and Seventh Circuit Courts of Appeals in the last decade struck

down state energy regulations that discriminate geographically against interstate

commerce in renewable and zero-carbon-emitting electricity.

6

However, different

panels of these same Second and Seventh Circuits recently issued identical deci-

sions contrary to their own circuit precedent and Supreme Court precedent in

order to allow state geographic discrimination to support in-state nuclear power.

7

This intra-circuit legal stand-off between different panels in the same circuit

courts clouds the Constitution’s Commerce Clause which has become the legal

fulcrum to leverage the determination of the U.S. technical and policy response

on climate.

This Article determines whether legal history is repeating itself: How many of

the twenty-two states that could have been discriminating geographically a dec-

ade ago against out-of-state renewable energy, after admonitions from circuit

courts, have ceased such discrimination and which others have not. Part I

describes the legal mechanism of state Renewable Portfolio Standard (RPS)

Renewable Energy Credits (RECs) programs now operating in twenty-nine states.

It examines the first beginnings and evolution of RPS programs in the states, their

costs, and impacts. Twenty-two of these twenty-nine states were determined to

have discriminatory renewable energy statutes regarding interstate commerce a

decade ago. Part I also analyzes the nuances of key Supreme Court Dormant

Commerce Clause decisions that prohibit geographic discrimination.

Part II examines the handful of different means by which state RPS programs

originally a decade ago may have discriminated against out-of-state renewable

energy projects, and groups the states by their different mechanisms. Certain

courts reacted: Part II analyzes key Seventh Circuit and Second Circuit Courts of

Appeals’ decisions, as well as Federal Energy Regulatory Commission (FERC)

orders, that found several state energy laws violated the Commerce Clause.

8

Part III tracks this changing U.S. renewable energy law over time, examining

each of the involved twenty-nine state’s energy laws then

9

and how each state has

was invented in China in 1041. See Robert Leche

ˆne, Printing, ENCYCLOPEDIAS BRITANNICA (last visited

Aug. 30, 2021), https://perma.cc/SF6J-LYNT. After this transition, movable print presses were invented

in Korea and by Gutenberg in Europe in approximately 1450.

4. Bruna Alves, Revenue of the Electric Power Industry in the United States from 1970–2017,

STATISTA (July 5, 2021), https://perma.cc/98LF-2TXQ.

5. Amount of Revenue by Source, TAX POL’Y CTR. (June 7, 2021), https://perma.cc/K6YJ-AQ6J.

6. See infra section I.D.

7. See infra at section IV.A.

8. See infra at section II.B.

9. See infra at section II.A.

2021] LEGAL HISTORY REPEATS ITSELF ON CLIMATE CHANGE 491