- Amendments to Alternative Renewable Energy Standard Increase Opportunities to Generate Renewable Energy Credits
- August 22, 2012
- Law Firm: Taft Stettinius & Hollister LLP - Columbus Office
Recently enacted Senate Bill 315 established important changes to the Alternative Renewable Energy Portfolio Standard originally established by Senate Bill 221 in 2008, notably expanding the Alternative Renewable Energy Portfolio Standard (“Portfolio Standard”) to include waste energy recovery systems and combined heat and power systems. The incorporation of these systems into the Portfolio Standard will provide many industries with the opportunity to promote energy efficiency by capturing and reusing excess heat produced in their operations, thereby substantially decreasing energy costs, while concurrently generating valuable renewable energy credits, which can be sold on the open market and contribute to a business’ bottom line.
A waste energy recovery system is “a facility that generates electricity through the conversion of energy from either of the following: (i) exhaust heat from engines or manufacturing, industrial, commercial, or institutional sites, except for exhaust heat from a facility whose primary purpose is the generation of electricity; or (ii) reduction of pressure in gas pipelines before gas is distributed through the pipeline, provided that the conversion of energy to electricity is achieved without using additional fossil fuels.” O.R.C. § 4828.01(38). An example of this process would be the recovery of heat from a steel mill furnace that would otherwise escape into the atmosphere and reusing the captured heat to create electricity.
Owners of waste energy recovery systems may register the system as a renewable energy resource or an energy efficiency resource, but not both. Electric distribution utilities are required to generate 25% of their total generation from alternative energy resources by 2025, one half of which must be generated from renewable energy resources. In order for the waste energy recovery system to be eligible under the renewable portfolio standards, it must have a placed-in service date or retrofit date on or after the effective date of Senate Bill 315. The Bill allows a waste energy recovery system to be used to meet Senate Bill 221’s energy efficiency requirement of 22% energy savings for electric distribution utilities by 2025.
Senate Bill 315 defines "combined heat and power system" as “the coproduction of electricity and useful thermal energy from the same fuel source designed to achieve thermal-efficiency levels of at least sixty per cent, with at least twenty per cent of the system's total useful energy in the form of thermal energy.” O.R.C. § 4929.01(A)(40). Combined heat and power systems capture the heat (in the form of steam or hot water) produced during energy generation and use the heat to increase energy efficiency in the facility. Senate Bill 315 permits combined heat and power systems with placed-in service or retrofit dates on or after the effective date of the bill to be used to meet the Senate Bill 221’s energy efficiency requirements.
The inclusion of waste energy recovery systems and combined heat and power systems in the Alternative Renewable Energy Portfolio Standard was strongly opposed by stakeholders of renewable energy generating facilities and environmental organizations. Entities representing wind power generation were especially vocal during the legislative process arguing that the waste energy recovery systems would be devastating to the substantial investments in wind power in Ohio because the RECs generated from industrial manufactures would water down the REC market in Ohio. Likewise, opponents to combined heat and power systems inclusion in energy efficiency standards argued that the new law promoted the continued use of generation using non-renewable fossil fuels, which will discourage investment in renewable energy.
The bill also expands the scope of advanced energy resources. Senate Bill 221 requires each electric distribution company to have an energy portfolio of 25% alternative energy resources by 2025. Of the 25%, one-half may be generated by advanced energy resources; for example, clean coal technology and nuclear generation. The bill now includes in the definition of advanced energy resources: “[a]ny new, retrofitted, refueled, or repowered generating facility located in Ohio, including a simple or combined-cycle natural gas generating facility or a generating facility that uses biomass, coal, modular nuclear, or any other fuel as its input”; and “[a]ny uprated capacity of an existing electric generating facility if the uprated capacity results from the deployment of advanced technology.” O.R.C. § 4928.01(A)(34)(h)(i).
Other provisions concerning alternative energy and energy efficiency include:
- Biologically derived methane gas is a renewable energy resource. O.R.C. § 4928.01(37)(viii).
- The expansion of the state energy policy encouraging the advancement of smart-grid technology throughout the state, which can be incorporated into electric distribution utilities’ energy efficiency requirements. O.R.C. §§ 4928.01(A)(39); 4928.02(D); 4928.66.
- The Public Utilities Commission of Ohio (“PUCO”) may review any green pricing program in the state. O.R.C. § 4928.70.
- The PUCO must study whether increased energy efficiency programs encourage customer choice in Ohio. O.R.C. § 4928.71.
- The PUCO may commence a multi-state study concerning the development of compressed natural gas infrastructures for transportation. O.R.C. § 4928.72.
- Major utility facilities serving 15,000 customers or more must provide a more detailed long term forecast report that forecasts energy demand, peak load, reserves, and a general description of the resource planning projections. O.R.C. § 4935.04.
With respect to the Alternative Renewable Energy Portfolio Standard, the key takeaway from Senate Bill 315 is that it provides a major opportunity for industry to capitalize on the benefits of waste energy recovery systems and combined heat and power systems. Industries willing to make an investment in these systems will increase efficiencies and save money in their operations, and potentially generate substantial quantities of RECs, which will continue to have value on the open market.