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Tuesday, November 14, 2006

Election 2006: Election Buoys Oregon Governor's Green Energy Agenda Plan

Gov. Kulongoski hopes to present a bill backing renewables with mandates and tax breaks

[I somehow missed this article in Saturday's Oregonian (I was out of the country, so I have some excuse!). Continueing the post-election coverage here at Watthead, here's "Vote buoys green energy plan" from the Oregonian, 11/11/06:]

When a grinning Gov. Ted Kulongoski delivered his victory speech on election night, he stood before a banner that read "Energy Independence."

Although education, jobs and health care had dominated his campaign, he had insisted on preserving a spot for his energy agenda, which promoted home-turf renewables such as wind, solar and biofuel.

Some considered his green intentions a bit ephemeral. But, with this week's election, the climate changed. Not only did Kulongoski win a second term, but he also gained a Legislature dominated by fellow Democrats.

"It's a new day," said David Van't Hof, the governor's renewable-energy policy adviser. "We're excited about our prospects."

Kulongoski has said he wants to make Oregon a leader in the development of alternative energy. He considers his green agenda key to strengthening the state's economy, especially in struggling rural areas.

Clearly, he is emboldened by the election results, which sustained a Democratic majority in the Senate and, for the first time in 16 years, handed the party an advantage in the House. Despite the power shift, Kulongoski is determined to gather broad bipartisan support, his advisers stress.

Whatever the partisan interplay, substantial opposition could come from utilities and business groups leery of greater regulation and fearful of higher power costs.

Kulongoski has developed a three-pronged energy plan, which includes combinations of mandates and tax breaks. Already bill writers are drafting proposals for early introduction to the Legislature, which convenes in January.

Here are the nuts and berries of his agenda:

  • Renewable energy sources, such as solar, wind, wave and biomass.

    A bill, known as a renewable energy standard, would require utilities, including Portland General Electric Co. and PacifiCorp, to obtain specified amounts of their power supplies from new renewables in the years ahead, with 5 percent by 2011 and 25 percent by 2025. At this point, Oregon consumers get about 4 percent of their power from renewables.

    At least 19 states have renewable energy standards [the count is actually 21 states now plus the District of Columbia - two more states have non-binding renewable energy goals as well]. Neighboring California has one. In unofficial election returns, Washington voters passed one Tuesday [see previous post].

  • Biofuel.

    The proposal would establish fuel blending standards for biodiesel and ethanol. It would require raw materials used in the fuels to be grown or produced in the Northwest.

    The package would include property tax breaks for the plants that make the biofuel blends, and it would offer income tax credits for producers and collectors of biofuel raw materials and for consumers who use biofuel.

  • Energy tax credits.

    One piece of the proposed package of incentives would increase the business energy tax credit for companies that install renewable energy systems such as wind turbines and solar photovoltaic arrays. The credit percentage would rise to 50 percent from the current 35 percent. Limits on a project's cost would increase to $20 million from $10 million.

    Another piece would increase residential tax credits for wind generation and fuel cells to $6,000 from $1,500, matching the maximum available for solar electric systems. The proposal also would allow the residential credit to be used for more than one qualifying system -- a solar water heater and a solar electric system, for example.

  • "If these pass, Oregon can stand up to any state in the country" in terms of its efforts to develop renewable energy and address global warming, Van't Hof said.

    Renewable portfolio standards in California and Washington increase pressures to move quickly, Van't Hof said.

    "The point for us is, do we want to be on the tail end and have other states capture the benefits, or do we want to be on the front end?"

    Last session, Kulongoski nudged along pieces of his energy agenda. A biofuel bill passed both chambers, only to die in conference committee, the victim of end-of-session maneuvering.

    Kulongoski found many rural lawmakers, regardless of party, eager to consider incentives that might aid jobs and businesses in their districts, but he knew he'd get nowhere with a renewable portfolio standard, given Republicans' aversion to mandates.

    More predictability

    In the House, the post-election reality of a slight 31 to 29 Democratic majority hardly creates a majority party juggernaut, the election winners note. But it does give Kulongoski and his crew assurances that key energy bills will hit committee agendas, receive hearings and, more likely than not, proceed to the floor for votes.

    "Before we had no idea what the House leadership would do," said Jeremiah Baumann, environmental advocate for the Oregon State Public Interest Research Group, or OSPIRG. "They could sit on wildly popular bills if they wanted to."

    The renewable portfolio standard promises to draw the most political intrigue. It is expected to be a complex bill, which means that special interests will have room to maneuver for provisions more to their liking.

    Utilities want details

    PGE and PacifiCorp, the state's largest utilities, say they need more details before they take a position on a renewable requirement. But, PacifiCorp opposed the Washington state initiative, and its parent company, Berkshire Hathaway's MidAmerican Energy Holding Co., said it prefers market incentives to mandates.

    Neither has Associated Oregon Industries, Oregon's largest business lobby, weighed in on any portfolio requirement, but it would fiercely fight anything thought to increase energy costs, often a critical operating expense.

    "My members will watch closely anything that might have an effect on energy rates," said Julie Brandis, an AOI lobbyist.

    OSPIRG's Baumann said he's eager to debate business interests. He said he's thrilled by his organization's sudden political clout, but careful to curb any tendency toward reckless enthusiasm.

    "We're not expecting the whole political world to reverse itself," he said. "Things are looking better for the environment, for global warming and energy. But we still have a lot of work to do."

    The Renewable Northwest Project and our allies continue to champion Kulongoski's renewable energy agenda in Oregon, particularly the renewable portfolio standard. We are currently participating in the Governor's Renewable Energy Working Group, which has been meeting for a year now and has been working to reach a consensus of stakeholders (or as close to a consensus as possible) on a package of renewable energy legislation to be proposed in the 2007 legislative session beginning in January.

    We are committed to the passage of a strong renewable portfolio standard in Oregon (25% by 2025) that will drive the development of clean, homegrown renewable energy in the state and the region and will accrue the many public benefits - public health, energy indepenence and economic development benefits - to the citizens of Oregon and the Northwest. And, like Governor Kulongoski, and our friends at OSPIRG, we are also quite optimistic after the outcome of last week's election.


    Anonymous said...

    An increase of 1% by 2011 doesn't feel that ambitious. Overall good news though

    Jesse Jenkins said...

    The idea with the 5% by 2011 target is to allow utilities that are lagging behind time to catch up. We fully expect (and encourage) utilities that are already close to the 2011 target - including PacifiCorp and PGE which together make up about 2/3rds of state load - to overbuild/overcomply with the early targets.

    The 2011 target was also set to coincide with the termination of the public and municipal utilities' current contracts with the Bonneville Power Administration and the renegotiation of new long-term contracts. Most of Oregon's municipal and public utilities rely on BPA to supply their power, so they will also likely rely on BPA to supply a renewable energy product to meet their RPS requirements, rather than acquiring their own generating resources.

    Remember that these targets are a floor, not a ceiling, and utilities are free to do whatever is most cost effective for them to meet these targets, including overbuilding the first target or two in order to secure cheaper projects in prime locations.

    The final 25%x2025 target is pretty ambitious and will be one of the higher targets of any state with an RPS - although to be fair, many other states have final target years that are earlier (2015 or 2020 are common).

    Enacting an RPS will: ensure that our growing energy needs are met by the clean, renewable energy resources that are abundant throughout the Northwest; help build a clean and diverse energy portfolio; and ensure that more of our money and jobs stay right here in Oregon’s communities. Enacting an RPS will be a smart investment in Oregon’s future.