Race to the Top: The Expanding Role of U.S. State Renewable Portfolio Standards
Like Texas, Massachusetts developed its RPS in the late 1990s in conjunction with a large piece of legislation that authorized electricity restructuring in the state. The state also had some prior history with promoting renewable energy and retained significant concerns about electricity cost and supply reliability. But whereas Texas did not emphasize GHG benefits from its RPS and has not developed a series of related programs, Massachusetts has become consistently explicit and emphatic about the role of its RPS as part of a broad strategy to address climate change. It has continued to perceive a shift toward renewables as part of a long-term economic development strategy but places much more emphasis on anticipated environmental benefits, including greenhouse gas reduction.
The Massachusetts RPS focuses exclusively on new sources of renewable energy or expansion in generating capacity at existing renewable energy facilities, with the initial one percent level to represent sources brought on line between December 31, 1997 and January 1, 2003. Thereafter, renewables must be increased at a rate of 0.5 percent per year, reaching four percent by 2009. At this point, the legislation takes the unusual step of creating an open-ended increase of one percent per year, until such time as the Massachusetts Division of Energy Resources decides otherwise (Chapter 164 of the Acts of 1997). The 1997 authorizing legislation establishes a series of "alternative compliance payments" (ACPs) that began at $50 per MWh in 2003 and are adjusted thereafter for inflation. These ACPs involve direct payments to the state "to maximize the commercial development of new renewable generation capacity" in cases where direct purchase of renewables is not a viable option (Massachusetts Office of Consumer Affairs and Business Regulation 2006, 4).
These payments are one of many sources of revenue that the Commonwealth has established to support the goals of the RPS and renewable energy development more generally. Like fourteen other states, Massachusetts has enacted a mandatory "public benefits" charge on all electricity bills to support renewable energy. By 2005, this reached $0.0005 per kilowatt hour and generates approximately $40 million per year for use on a range of renewable energy and energy efficiency projects that are funded by the Massachusetts Renewable Energy Trust. The Trust is a quasi-public entity and one component in a large infrastructure of state efforts to promote renewable energy. Collectively, these efforts provide a financial base of support for renewables that is not offered in Texas and some other states. Massachusetts continues to accentuate both the economic and environmental benefits from such action. As Robert Pratt, Director of the Trust, has noted: "Massachusetts has traditionally been a leader in technology because of its universities. As a result, we feel we should be the leader in [renewables]" (Fialka 2005).
At the same time, the RPS and related energy initiatives are only components of Massachusetts' broader effort to link greenhouse gas reduction with economic development. Massachusetts has been intensively involved in negotiations to establish a regional "cap-and-trade" program for carbon dioxide emissions from fossil fuel burning power plants. Although it has not formally joined the regional initiative thus far, Massachusetts is building on its pioneering efforts in 2001 to cap its own releases from these sources (DePalma 2005). It has also formally embraced California's standards to reduce greenhouse gas releases from motor vehicles and is an active participant in a compact linking the states of New England and provinces of Eastern Canada to achieve common reduction of greenhouse gas emissions. Each of these steps systematically link climate protection with economic development. As Governor Mitt Romney noted in introducing the 2004 Massachusetts Climate Protection Plan: "The same policies that protect the climate also promote energy efficiency, smart business practices, and improve the environment in which our citizens live and work" (Massachusetts Office of Commonwealth Development 2004, 3).
Initial implementation of the Massachusetts RPS has not triggered the exponential growth of renewable energy as in Texas, but has successfully met its initial requirements. A pair of comprehensive reports from the Massachusetts Division of Energy Resources have examined the first years of RPS compliance in 2003-04. They concluded that all parties covered by the RPS achieved compliance with sufficient RECs available in the market (Massachusetts Office of Consumer Affairs and Business Regulation 2005, 2006). Moreover, the reports noted that new renewable capacity was provided from landfill methane, biomass, anaerobic digester systems, wind, and photovoltaic sources. The Commonwealth initially relied on out-of-state renewable electricity to satisfy more than half of its total requirements during the first two years of RPS operation. Former Secretary Doug Foy of the Office of Commonwealth Development estimates that "the first year of the program avoided emissions of 320,000 tons of carbon" (Massachusetts Office of Consumer Affairs and Business Regulation 2005a). All of this energy came from Northeastern sources, with the largest shares imported from Maine, New York, New Hampshire, Connecticut, and Rhode Island. Massachusetts officials recognize that there may be increasing regional demand for renewable energy, particularly given the fact that a number of other states in the region have their own RPSs and are beginning to compete for available renewable resources.
Consequently, Massachusetts has placed increasing emphasis on in-state renewable energy development. This is particularly attractive for economic development reasons but has already begun to pose serious challenges to successful implementation. Much of the initial projection for growth of renewables in Massachusetts presumed that it could follow the path of Texas and take expanded advantage of its wind supplies. However, its first major wind siting initiative is in serious jeopardy due to local political opposition. In 2004, Boston-based Cape Wind Associates proposed a $770 million project to develop a 420 MW wind farm on an off-shore installation in Nantucket Sound, drawn to the site by its outstanding wind resource. If implemented, this would involve the placement of approximately 130 wind turbines on a shoal and meet a significant portion of Massachusetts' RPS requirement in coming years. Local response has been largely negative, out of concern about the appearance of the turbines and their possible impact on tourism, recreational boating, and the property values of some of the most expensive real estate in the Northeast. Opponents include U.S. Senators from both political parties whose families hold property in the area and have attempted to amend various federal laws to thwart the proposed project (Badkhen 2004, 18).
Massachusetts officials acknowledge that the Cape Wind development is highly doubtful and has had a negative impact on other wind siting initiatives in the state. "There is currently no reason to believe that people who do not want wind on top of our mountains or in the Cape are going to change their minds," noted one senior state official. "We're not Texas and it will be interesting to see what kind of a laboratory we turn out to be." In response to the Cape Wind controversy, wind proponents have attempted substantial public outreach in exploring the possibility of developing a set of smaller wind sources. In turn, other renewable technologies are receiving greater attention from proponents and various state programs, reflected in a particularly strong emphasis by potential private developers and state officials in 2005 on possible expansion of biomass capacity in Massachusetts and neighboring states. Biomass, however, does not begin to match the scale of renewable energy that had been anticipated from Cape Wind, and has triggered its own set of controversies, such as contentious state hearings during 2005 on classification of energy produced by "retooled, older biomass plants." State officials are moving toward finalization of regulations for biomass eligibility but these will not resolve the considerable uncertainty regarding Massachusetts' ability to achieve its ascending RPS targets in the coming years.
All references are cited in the report, which can be downloaded here.
