Pennsylvania

Race to the Top: The Expanding Role of U.S. State Renewable Portfolio Standards

Pennsylvania has also been drawn to renewable energy in large part for economic reasons but under somewhat different circumstances than states such as Texas and Nevada. The Commonwealth has suffered from a significant loss of jobs, particularly in the manufacturing sector, and recent governors and legislators have struggled mightily with the challenge of revitalizing the Pennsylvania economy. It has also suffered from a series of environmental problems that may have further impaired economic development, including an unusually large number of land tracts with extensive environmental contamination. At the same time, coal mining and its use in electricity have been Pennsylvania staples for generations, posing formidable challenges for any policies that might encroach on that resource.

In recent years, however, Pennsylvania has given new prominence to environmental protection and renewable energy. This has particularly been a hallmark of the administration of Democratic Governor Edward Rendell, who entered office in 2003 and has framed environmental and renewable concerns as essential for economic development and diversification. What has resulted is a flurry of new legislation and program initiatives, all designed to put Pennsylvania ahead of the curve in developing renewable energy sources and technologies, as well as environmental clean-up expertise, as part of a larger strategy to revitalize the Commonwealth's economy. This effort has included a series of tax incentives and renewable energy development programs, with the centerpiece being the enactment in November 2004 of the Pennsylvania Alternative Energy Portfolio Standards Act (Pennsylvania Senate Bill 1030 2004). Introduced with bipartisan support in both chambers of the Pennsylvania legislature, this legislation took effect in March 2005, followed by extensive rule-making directed by the Pennsylvania Public Utility Commission.

Pennsylvania had some prior experience with renewables, including 129 MW of wind power and a variety of hydro sources. It retains, of course, its strong historic linkage with coal, which was evident in its unique definition of what constitutes a qualifying source. Like several other states such as Connecticut and New Jersey, Pennsylvania divided its Alternative Energy Portfolio Standard (AEPS) into two distinct categories, with Tier I sources required to climb to a level of eight percent by 2020 and Tier II sources required to reach a level of 10 percent by that same year (see Table 4). Under Tier I, the legislation includes such familiar renewable sources as wind, geothermal, solar photovoltaic, low-impact hydro power, biologically-derived methane gas, biomass, and fuel cells. However, it also includes coal mine methane. Under Tier II, Pennsylvania joins Nevada and Hawaii in including energy efficiency but also adds more environmentally controversial sources such as waste coal, integrated coal gasification combined cycle, and incineration of municipal trash and poultry farm wastes.

This expansive definition made the passage of the Pennsylvania legislation unusually controversial. A coalition of state-based environmental groups characterized the proposal as "the dirtiest RPS" in the nation and urged opposition, calling upon the legislature to narrow the definition of eligible energy sources. At the same time, supporters contended that the creation of Tier II essentially accepted energy sources that were already on line to be developed and that Tier I would foster considerable new renewable capacity in the state (Dujack 2005, 37). Overshadowed by the definitional controversies, the Pennsylvania AEPS does make specific commitments to solar energy and energy efficiency. It continues the trend in recent years toward boosting the prospects for solar through a designated percentage of Tier I energy that must be derived from solar sources (see Table 4). In turn, it preceded Nevada by several months in encouraging "the participation of demand side management and energy efficiency resources" as eligible for inclusion within an RPS, placing them alongside the more controversial items in Tier II (Pennsylvania Public Utility Commission 2005, 5). Many of the details of these provisions continue to be refined through rule-making procedures.

Initial rule-making indicates that defining the boundaries from which renewable energy can be counted toward the Pennsylvania standard will entail a major challenge. Much like other Eastern states, Pennsylvania has substantial cross-border exchange of energy. Most of the Commonwealth is located within one regional transmission organization (RTO), the PJM Interconnection that integrates Pennsylvania with electricity providers in Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Tennessee, Virginia, West Virginia, and the District of Columbia. However, portions of the state are located in other regional organizations, suggesting that a wide range of states could conceivably contribute renewable energy to Pennsylvania. The RPS legislation establishes that eligible energy must be "derived only" from within Pennsylvania or "within the service territory of any regional transmission organization that manages the transmission system in any part of this Commonwealth" (Pennsylvania Senate Bill 1030, Section 4 2004). Debate has continued in Harrisburg through public hearings over just how to interpret that clause, weighing the constitutional requirement not to constrain the interstate movement of commerce against Pennsylvania's desire to capture economic and environmental benefits of renewable energy internally.

All references are cited in the report, which can be downloaded here.