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Tuesday, July 10, 2007

News From My Backyard: Oregon Legislature Wraps Up Landmark Session for Clean Energy

The 2007 Oregon Legislature closed a landmark session advancing clean energy legislation and putting Oregon on the map as a clean energy leader.

The Oregon Legislature wrapped up it's 75th Legislative Assembly on June 28th, ending a session that can only be considered a landmark year for clean energy and the environment.

The 2006 Elections saw Democrats strengthen their majority in the Senate and squeak out a one vote majority in the House while Oregonians re-elected Governor Ted Kulongoski who made clean energy a top priority of his second term. The Governor and the Legislature certainly delivered this year, passing a slough of bills this session promoting renewable energy generation, renewable transportation fuels, increased energy efficiency and even took an initial step towards addressing climate change.

Here's a recap of the flurry of activity in Salem this session:

Renewable Energy Standard: Perhaps the most high profile, and arguably the most important, piece of clean energy legislation to pass this session was the 25% by 2025 Renewable Energy Standard legislation, the Oregon Renewable Energy Act (SB 838).

The standard enacted by the Act requires Oregon's three largest utilties - Portland General Electric, Pacific Power and Light (PacifiCorp) and the Eugene Water and Electric Board - to acquire at least 25% of their electricity from clean, homegrown renewable energy sources like wind, solar, geothermal and ocean energy by the year 2025. The utilities face interim targets of 5% by 2011, 15% by 2015, and 20% by 2020 as well.

Oregon's numerous smaller publicly-owned utilities are required to meet smaller standards of just 5% or 10% by 2025, depending on their size. However, if any of these utilities invest in new coal-fired power plants, they lose their exemption from the full standard and must meet the full 25% by 2025 requirement. Oregon's public utilities had argued that the 25% standard was unnecessary for them, since they relied largely on hydropower to meet most of their load. This provision provides a strong incentive to put their money where their mouths are and stay away from investments in dirty, coal-fired power plants.

The Oregon Renewable Energy Act will require Oregon utilities to generate approximately 1,500 average megawatts (aMW) of renewable energy generation by 2025, enough to meet the needs of 1.25 million average Oregon homes. Increasing Oregon's use of clean, homegrown renewable energy sources will also strengthen Oregon's economy, increase the state's energy independence, help hedge against volatile fossil fuel costs and make a major dent in greenhouse gas emissions from the electricity sector.

Given this win-win-win-win-win situation, it's no wonder the Oregon Renewable Energy Act was supported by a remarkably broad and diverse range of constituencies, received strong, bipartisan support in both the Senate and House and was hailed by Governor Kulongoski as "the most significant environmental legislation ... in more than 30 years.”

In addition to establishing the Renewable Energy Standards, the Act requires all Oregon utilities to offer their customers a voluntary green power product, extends the public purpose charge on PGE and Pacific Power customers' bills to 2025 and re-dedicates the renewable energy portion of those funds to support small, 'community-scale' renewable energy projects less than 20 megawatts.

If you're curious, there's plenty more on the Oregon Renewable Energy Act at the Powering Oregon's Future site.

[Full Disclosure: I maintain the Powering Oregon's Future site and am responsible for much of its content. I also worked directly to help pass the Oregon Renewable Energy Act in my position at the Renewable Northwest Project].

Biofuels: Succeeding where it failed last session, the Oregon Legislature also passed a bill promoting the use of renewable biofuels in the transportation sector. The biofuels bill, HB 2210, includes a package of tax incentives promoting the production of biofuels and feedstocks in Oregon.

The bill also includes a renewable fuels standard requiring the use of ethanol and biodiesel in gasoline and diesel fuels sold in the state, but only after biofuel production in the Oregon and the Northwest reaches a substantial level, to ensure that the standard will support a local, homegrown biofuels industry.

Fuel stations will be required to sell at least a 2% blend of biodiesel in their diesel fuel once biodiesel production in Oregon, Washington, Idaho and Montana reaches at least 5 million gallons per year and a 5% blend once production in the Northwest states reaches 15 million gallons per year. A 10% ethanol blending requirement will also kick in for gasoline sold in the state once ethanol production within Oregon reaches 90 million gallons per year.

The bill also directs the state government to use biofuels in fleet vehicles and stationary backup power generators and provides a $200/year tax incentive to individuals who use biodiesel (B99/B100) and ethanol (E85) for transportation and solid biomass from agricultural or forestry wastes for heating.

The biofuels bill received very strong support, passing the House 53-4 and the Senate 24-3.

Clean Energy Tax Incentives: The Legislature also expanded two popular and successful tax incentives supporting renewable energy and energy efficiency investments. Eventually rolled into an omnibus tax package, HB 3201 , expansions of Oregon's Business Energy Tax Credit and Residential Energy Tax Credit passed with unanimous support in the House early in the session and finally passed the Senate in the final days of the session.

The tax bill expands the Business Energy Tax Credit (BETC), which businesses and corporations can claim on investments in solar, wind and other renewable energy systems, energy efficiency investments as well as investments in manufacturing plants used to produce clean energy technologies or components. The credit is expanded from a credit worth 35% of eligible project costs, capped at $3.5 million, to a whopping 50% credit, capped at $10 million.

The BETC expansion also includes a new $9,000 tax credit available to homebuilders for solar electric and solar water heating systems installed on new construction single family dwellings.

Additionally, the tax bill expands the Residential Energy Tax Credit, available to homeowners who invest in renewable energy systems, efficient appliances, weatherization and other home efficiency retrofits. Homeowners can now claim the credit on more than one investment in a given year, allowing them to claim a credit on both a solar electric system and a solar water heating system installed in the same year, for example. The bill also raises the maximum credit for fuel cells and small wind power systems to $6,000 (up from $1,500), the same maximum credit available for solar photovoltaic systems.

The Legislature also passed two other tax bills aimed at clearing up important problems in the tax code. One bill, SB 819, fixed a problem in the interaction between the Business Energy Tax Credit and Oregon's corporate income tax 'kicker' refund which hampered businesses ability to take full advantage of the credit.

The other bill, known as the Solar Teamwork Bill (HB 3488), amended the exemption given on property taxes leveled against the increased property value due to renewable energy investments, like the installation of solar arrays. The exemption now applies to systems installed by a third party on a property-owner's property, as long as that system is a net metering system or otherwise designed to primarily offset on-site electricity use. This provision will help encourage distributed generation for renewable energy by not discouraging building owners from allowing alternative energy systems to be installed on their buildings because of increased property taxes.

HB 3488 also directs the Oregon Public Utility Commission to authorize the state's two large investor-owned utilities to provide low interest loans for customers who install solar arrays.

Finally, an uncontroversial tax credit bill, SB 875, added ocean wave energy to the list of BETC-qualifying renewable energy resources.

Solar on Public Buildings: Rounding out a series of measures that ought secure Oregon's position as a leading pro-solar state, HB 2620 also passed this session and provides that public improvement contracts for construction or major renovations of public buildings appropriate at least 1.5 percent of the total contract price to pay for the installation of solar energy technology, including solar electric, solar water heating and solar space heating systems.

It's solar on every public building in Oregon from now on!

Energy Efficiency: A bill establishing minimum efficiency standards for a number of additional home and commercial appliances not previously covered by efficiency standards passed the Legislature this session as well. While not including as many appliances as originally hoped, SB 375 will help Oregonians save energy, reducing our energy costs and environmental impacts.

Unfortunately, a bill requiring all major facility projects to be planned, designed, constructed and renovated to meet sustainable building standards died in the Senate Ways and Means committee and a bill requiring the state government to reduce energy use 20% by 2015 passed the House 44-14 but died in a Senate committee. [Well we had to leave something left to do next session, right?]

Global Warming: Last but definitely not least, the 2007 Legislature passed it's first piece of legislation specifically addressing global warming in Oregon!

Originally seen as a long shot, three global warming bills were introduced early this session in the hopes that the large clean energy agenda might move quickly, allowing the Legislature to move on to specifically tackle global warming. In reality, the measures were introduced largely to lay the groundwork for upcoming sessions, and while public hearings were held on the bills, it wasn't expected that they would pass until future sessions.

Well, while two bills were indeed dropped after two hearings, as the session neared it's end, it looked like one, the Global Warming Integration Act, just might have some legs and the Act, HB 3543 managed to squeak passed the finish line right before the end of the session.

The Global Warming Integration Act codifies greenhouse gas emissions reduction goals (10% below 1990 levels by 2020 and 75% below 1990 levels by 2020) and creates the Oregon Global Warming Commission which will coordinate local and state efforts to halt growth of greenhouse gas emissions. It will also fund a new Oregon Climate Change Research Institute within the Oregon University System.

The bill not only passed, it passed with a bipartisan 40-16 vote in the House with moneys fully appropriated to not only fund the commission's activities, but also fully fund the research center. Not at bad ending to a busy session for clean energy advocates and a hopeful sign for the chances of future global warming legislation!

Next Steps: In the face of such a landmark session for clean energy legislation - clearly the most significant session for energy legislation since Oregon's electricity restructuring law passed in 1999 - you might be wondering what's left to do to complete Oregon's transition to a clean energy state?

First, while the clean energy provisions passed this year will certainly make a major dent in the state's greenhouse gas emissions and help promote a sustainable energy future, work has just begun to specifically tackle climate change. The Global Warming Integration Act is a nice step forward, but far from the end of the road, and the Legislature is likely to consider a cap and trade program and an emissions performance standard, both designed to limit global warming pollution from the electricity sector, when next they meet (perhaps as early as a short special session in early 2008 - the Oregon Legislature normally meet biennially).

Additionally, Oregon would probably be smart to follow in the footsteps of other states pushing renewable energy development, including Colorado and Texas, by working to establish renewable energy resource zones and expedite investments in electricity transmission to tap the resources in those zones and bring them to population centers.

I hope the Legislature also revisits the two energy efficiency and green building bills that died this session and takes a hard look at how Oregonians can push energy efficiency to the max. Stronger building codes that include advancements in sustainable and energy efficient design would make sense, and there are always updates to appliance and lighting codes that can help us squeeze more out of the same amount of energy.

A Session to be Remembered: While there's always more work to be done, the 2007 Oregon Legislature should go down in history as the year Oregon took a giant step towards a sustainable energy future. 2007 was clearly the 'Year of Clean Energy' in Salem. Let's hope 2009 (or even 2008) is the 'Year of Global Warming Solutions'...

[A very appreciative tip of the hat to the folks at the Oregon League of Conservation Voters' SalemWatch newsletter whose diligent reporting kept me up to date all session on the wide range of clean energy bills moving through the legislature.]

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