New Rules Project - Democratic Energy - Renewable Portfolio Standards

Renewable Portfolio Standard - Texas

The 1999 Texas renewable energy mandate requires utilities to acquire 1280 megawatts (MW) of generating capacity from renewable technologies by January 2003; increasing to 1730 MW by January 2005, 2280 MW by January 2007, and 2880 MW by January 2009 (equal to 3% of total capacity). Out of the total amount, 2000 MW of generating capacity will come from new installations in Texas. Renewable energy technologies include solar, wind, geothermal, hydroelectric, wave or tidal energy, and biomass or biomass-based waste products including landfill gas.

UPDATE: In July 2005, the Texas Legislature boosted the renewable portfolio standard so that it will double the goal for the amount of wind power, solar power and other forms of renewable energy in the state's energy mix [Senate Bill 20]. The new goal calls for the state to obtain 5,880 MW, or about five percent of the state's electricity, from renewable energy by 2015. Of the total, 500 MW must come from renewable energy sources other than wind energy. The law sets a long-range target for the state to get 10 percent of its electricity from renewable energy by 2025. The legislation also streamlines the ability of the Public Utility Commission to order construction of new transmission lines to meet the state's renewable goal.

More:

Texas Utilities Code Annotated §39.904
Sec. 39.904. GOAL FOR RENEWABLE ENERGY - 1999 version

(a) It is the intent of the legislature that by January 1, 2009, an additional 2,000 megawatts of generating capacity from renewable energy technologies will have been installed in this state. The cumulative installed renewable capacity in this state shall total 1,280 megawatts by January 1, 2003, 1,730 megawatts by January 1, 2005, 2,280 megawatts by January 1, 2007, and 2,880 megawatts by January 1, 2009.

(b) The commission shall establish a renewable energy credits trading program. Any retail electric provider, municipally owned utility, or electric cooperative that does not satisfy the requirements of Subsection (a) by directly owning or purchasing capacity using renewable energy technologies shall purchase sufficient renewable energy credits to satisfy the requirements by holding renewable energy credits in lieu of capacity from renewable energy technologies.

(c) Not later than January 1, 2000, the commission shall adopt rules necessary to administer and enforce this section. At a minimum, the rules shall:

(1) establish the minimum annual renewable energy requirement for each retail electric provider, municipally owned utility, and electric cooperative operating in this state in a manner reasonably calculated by the commission to produce, on a statewide basis, compliance with the requirement prescribed by Subsection (a); and

(2) specify reasonable performance standards that all renewable capacity additions must meet to count against the requirement prescribed by Subsection (a) and that:

(A) are designed and operated so as to maximize the energy output from the capacity additions in accordance with then-current industry standards; and

(B) encourage the development, construction, and operation of new renewable energy projects at those sites in this state that have the greatest economic potential for capture and development of this state's environmentally beneficial renewable resource.

(d) In this section, "renewable energy technology" means any technology that exclusively relies on an energy source that is naturally regenerated over a short time and derived directly from the sun, indirectly from the sun, or from moving water or other natural movements and mechanisms of the environment. Renewable energy technologies include those that rely on energy derived directly from the sun, on wind, geothermal, hydroelectric, wave, or tidal energy, or on biomass or biomass-based waste products, including landfill gas. A renewable energy technology does not rely on energy resources derived from fossil fuels, waste products from fossil fuels, or waste products from inorganic sources.

(e) A municipally owned utility operating a gas distribution system may credit toward satisfaction of the requirements of this section any production or acquisition of landfill gas supplied to the gas distribution system, based on conversion to kilowatt hours of the thermal energy content in British thermal units of the renewable source and using for the conversion factor the annual heat rate of the most efficient gas-fired unit of the combined utility's electric system as measured in British thermal units per kilowatt hour and using the British thermal unit measurement based on the higher heating value measurement.

(f) A municipally owned utility operating a gas distribution system may credit toward satisfaction of the requirements of this section any production or acquisition of landfill gas supplied to the gas distribution system, based on conversion to kilowatt hours of the thermal energy content in British thermal units of the renewable source and using for the conversion factor the systemwide average heat rate of the gas-fired units of the combined utility's electric system as measured in British thermal units per kilowatt hour.

Additional Information:

Mike Sloan, policy co-chair of the Texas Renewable Energy Industries Association (TREIA), summarized the principal provisions of the 1999 rules in an e-mail message as follows:

2,000 MW of new renewable energy generating capacity must be built in Texas by 2009. Intermediate goals require additions of 400 MW by 2003, another 450 MW by 2005, another 550 MW by 2007 and another 600 MW by 2009.

Each retailer in Texas will be allocated a share of the RPS based on that retailer's pro rata share of statewide retail energy sales (for the competitive portion of the Texas market).

A Renewable Energy Credits (REC) Trading Program will start January 1, 2002, and continue through 2019. Renewable capacity additions have a minimum of 10 years of credits to recover over-market costs.

A Capacity Conversion Factor (CCF) will be used to convert megawatt goals (stated above) into megawatt-hour (MWh) requirements for each retailer in the competitive market. The CCF will be administratively set and equal to 35% for the first two compliance years. Thereafter, it will be based on the actual performance of the resources in the credits trading program.

Production from "existing facilities" (those installed prior to September, 1999) can generate "offsets" that reduce a retailer's allocated share of the RPS. Offsets may not be traded and can only be used by the retailer who currently owns or contracts the resource.

Retailers with insufficient credits are subject to a penalty of $50/MWh or 200% of the average cost of credits traded during the year.

To reduce Commerce Clause concerns, new renewables from anywhere can receive RECs if delivered to Texas in compliance w/ strict metering & verification requirements (such as via a dedicated transmission line). The quantity of credits obtained from out of state must be reallocated to retailers to ensure that 2,000 MW is ultimately built in Texas.