2021 Legislative Round-Up: A Productive Six Months for Solar, Storage, and Electric Vehicle Legislation

By: DSIRE Insight Team

With 32 state legislatures having adjourned their 2021 sessions, the dust is starting to settle on a very active year for state lawmakers. The 18 remaining states are still actively engaged in considering energy legislation, and governors in 12 of the 32 adjourned states still have time to sign or veto pending legislation, so DSIRE Insight staff will remain busy for the foreseeable future. A total of approximately 859 bills related to distributed solar, grid modernization, and electric vehicles were introduced during 2021 with 103 becoming law in 33 states.

Solar, Grid Modernization, & Electric Vehicle Bills Enacted in 2021

Distributed Solar

As of mid-June 2021, state lawmakers have introduced 155 bills related to net metering, community solar, and third-party ownership, 19 of which have been enacted. An additional 6 bills have passed at least one chamber. While some of the approved bills made relatively small amendments to state law, other bills made significant changes to open new market opportunities for distributed solar.

A suite of bills enacted in Maryland increase the aggregate capacity limit for net metering in the state, authorize meter aggregation in net metering for local governments, and allow community solar participants to retain their subscription when they change their address. Lawmakers in New Mexico established a community solar program in the state, while the Washington legislature authorized the Utilities and Transportation Commission to approve discounts for low-income customers participating in community solar. West Virginia, meanwhile, legalized the use of third-party power purchase agreements in the state.

Grid Modernization

As of mid-June 2021, state lawmakers have introduced 339 bills related to grid modernization, energy storage, and regulatory reform, 38 of which have been enacted. An additional 32 bills have passed at least one chamber. Virginia had the busiest legislative session by far, enacting a whopping 12 bills related energy storage and grid modernization. Among the new laws are sales tax and property tax incentives for energy storage, a directive for 100% carbon-free electricity by 2040, and the establishment of the Virginia Solar Energy Development and Energy Storage Authority to further development of these resources.

Another hot topic among state legislatures this year has been utility business model reform, and wholesale markets specifically. Nevada legislators passed a bill requiring the state to join a regional transmission organization (RTO) by 2030, while the Oregon Legislative Assembly enacted a bill initiating a study of the benefits, opportunities, and challenges posed by the development or expansion of an RTO in the state. Connecticut lawmakers also passed notable legislation establishing a 1,000 MW energy storage target, to be achieved by December 31, 2030.

Electric Vehicles 

As of mid-June 2021, state lawmakers have introduced 462 bills related to the electrification of transportation, 59 of which have been enacted. An additional 54 bills have passed at least one chamber. As with the other technology categories, Maryland and Virginia had productive legislative sessions for electric vehicles, each enacting 6 bills. Among Virginia’s enacted legislation are bills creating rebate and grant programs for electric vehicles.

Other states also adopted meaningful legislation though, including Arkansas, which reduced its annual registration fee for hybrid vehicles, exempted vehicles registered to military service members from the annual registration fee, and established an EV Infrastructure Grant Program for Level 2 and DC fast charging facilities. Kansas, North Dakota, and South Carolina, meanwhile, clarified that electric vehicle charging stations are not public utilities and not subject to regulation by their respective state regulatory commissions. South Carolina’s legislation also establishes a Joint Committee on the Electrification of Transportation, which is to study and make recommendations regarding transportation electrification in the state.

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Stay up to date on proposed legislation with DSIRE Insight’s 50 States of Solar, Grid Modernization, or Electric Vehicles quarterly reports, or with DSIRE Insight’s biweekly legislative and regulatory tracking services, included in all Single-Tech, All-Tech, and All-Access subscriptions. Learn more here, or contact us to discuss subscription options.

Status of State Net Metering Reforms

By: DSIRE Insight Team

State policymakers and regulators are continuing to consider major reforms to net metering policies, with states taking different approaches to successor tariff designs and implementation timelines. The NC Clean Energy Technology Center has tracked these changes for several years through its 50 States of Solar quarterly report series. To date, more than half of U.S. states have considered significant net metering reforms through legislation or regulatory proceedings. However, the majority of states continue to offer “traditional” or “retail rate” net metering that nets production and consumption over the monthly billing period.

Alternatives to Traditional Net Metering

Currently, eight states - Arizona, Hawaii, Indiana, Louisiana, Michigan, Mississippi, and Utah - have distributed generation (DG) compensation rules other than retail rate net metering. The predominant successor tariff structure is net billing, wherein production and consumption are netted at a sub-monthly interval (most net billing tariffs use instantaneous netting). Each of the above states offers a net billing tariff, although the credit rate for excess generation varies.

Net Metering and Distributed Generation Compensation Policies (May 2021)

New York also has a net billing tariff in place for larger commercial customer-generators, as well as remote net-metered and community solar projects. This tariff compensates customers at a rate based on the value of distributed energy resources for hourly grid exports. Residential and small commercial customers are still eligible for retail rate net metering in New York, though.

Minor Modifications to Traditional Net Metering

Other states have considered significant net metering reforms, but opted to make only minor policy changes and maintain monthly netting, for at least the time being. California was one of the first states to consider a net metering successor tariff, and opted to retain monthly netting, but require participation in time-of-use rates and the application of certain non-bypassable charges.

Most recently, regulators in Kentucky and South Carolina issued orders maintaining monthly netting while modifying some other aspects of net metering. The Kentucky Public Service Commission issued a decision on Kentucky Power’s net metering successor proposal, making only a minor change to the tariff by reducing the credit rate for monthly net excess generation from the retail rate to $0.09746 per kWh. In South Carolina, regulators approved mandatory time-of-use rates for residential solar customers. The tariff will use monthly netting by time-of-use period and include a minimum bill. Duke Energy’s tariff will also include a non-bypassable charge based on system capacity, as well as a grid access fee based on system capacity for systems over 15 kW. The Connecticut Public Utilities Regulatory Authority also issued a decision in 2021, approving a traditional net metering option, as well as a buy-all, sell-all tariff option.

Net Metering Successor Tariffs and Modified Net Metering Programs

State	Year of Decision	Netting Interval	Excess Generation Credit Rate	Fees
AR	2020	Monthly	Retail rate	Grid Access Fee for larger customers (currently set at zero)
AZ	2016	Instantaneous	Phasing down to avoided cost	DG Grid Access Fee or On-Peak Demand Charge
CA	2016	Monthly	Retail TOU rates	Non-bypassable charges
CT	2021	Monthly	Retail rate	Utilities are to file non-bypassable charge designs by 1/1/2022
		Buy-All/Sell-All	Fixed sell-all rate not yet determined	Utilities are to file non-bypassable charge designs by 1/1/2022
HI	2015, 2017	Instantaneous	Avoided cost rate	None
IN	2017 / 2021 (Vectren)	Instantaneous	1.25 times avoided cost (2.772 cents per kWh for Vectren)	None
KY	2021 (KY Power)	Monthly	9.746 cents/kWh	None
LA	2019	Instantaneous	Avoided cost rate	None
MI	2018	Instantaneous	Power supply rate	None
MS	2015	Instantaneous	Avoided cost rate plus non-quantifiable expected benefits adder (2.5 cents per kWh)	None
NH	2016	Monthly	Retail rate	Non-bypassable charges
NY	2020 (Mass Market)	Monthly	Retail rate	Monthly Customer Benefit Contribution based on DG system capacity
	2017 (VDER)	Hourly	Value of DER rate	Monthly Customer Benefit Contribution based on DG system capacity
SC	2021	Monthly	Retail TOU rates	Minimum bill, non-bypassable charge based on DG system capacity, & grid access fee based on DG system capacity (for systems >15 kW)
UT	2020	Instantaneous	Summer: 5.817 cents/kWh; Winter: 5.487 cents/kWh	None
VT	2017	Monthly	Retail rate with credit adjustors	None

Regulators in Arkansas and New York issued decisions on net metering successor tariffs last year. The Arkansas Public Service Commission elected to maintain retail rate net metering, but approved a grid access fee, which is currently set at zero, for certain larger systems. The New York Public Service Commission, meanwhile, approved a mass market successor tariff design, which also maintains retail rate net metering while adopting a monthly customer benefit contribution based on DG system size.

New Hampshire and Vermont modified their net metering tariffs a few years ago, with the New Hampshire Public Utilities Commission adjusting credits for monthly net excess generation and Vermont regulators adopting credit adjusters based on system size, siting, and renewable energy certificate ownership.

Net Metering Reversals

Notably, some states that have adopted net metering successor tariffs have later reversed these decisions and returned to a monthly, retail rate netting structure. In Nevada, regulators adopted a net billing tariff with avoided cost compensation for excess generation in 2015. However, in 2017, the state legislature restored traditional net metering. Similarly, Maine regulators approved a buy-all, sell-all tariff to replace net metering, with compensation rates phasing down to an avoided cost rate. The state legislature later restored traditional net metering in 2019. Most recently, the Kansas Corporation Commission modified Evergy’s DG customer tariff so that it now includes the same rates as the standard customer tariff and no longer includes a demand charge component. This follows an opinion from the Kansas Supreme Court, finding that the tariff was discriminatory and in violation of state law.

Opening the Door to Reforms Down the Road

A growing number of states are opting to keep traditional net metering in place for at least a certain period of time, providing a degree of certainty to the market, but opening the door to policy reforms several years down the road. Oftentimes, these states will set a specific date or level of installed DG capacity that triggers a review of net metering and the development of a new tariff design.

In Arkansas, utilities and other stakeholders may file net metering alternatives beginning in 2023, and in Iowa, regulators are to develop a value of solar methodology for future tariffs in 2027. Virginia and Washington lawmakers both enacted legislation increasing the states’ aggregate caps on net metering, while establishing successor tariff timelines. In Virginia, the State Corporation Commission is to open a successor tariff proceeding when the aggregate capacity of customer-generators reaches 3% for a utility. In Washington, utilities may file net metering successor tariffs to take effect when the 4% aggregate capacity limit is reached or July 1, 2029, whichever comes first.

Reforms Currently Under Consideration

Several states are in the midst of evaluating major net metering reforms. California regulators are in the process of developing a Net Metering 3.0 tariff, while the Illinois Commerce Commission is determining the DG rebate amount that will be a component of the state’s net metering successor tariff.

In Hawaii, the Public Utilities Commission is considering DG rate design proposals, including HECO’s proposal to implement a time-varying export credit rider. The Michigan Public Service Commission is also considering further changes to its inflow/outflow tariff through a working group focused on rate design for distributed energy resources. Mississippi regulators are also evaluating net metering changes in a new proceeding opened this year.

Energy Storage at Electric Cooperatives: State and Local Policy Factors

By: DSIRE Insight Team

The NC Clean Energy Technology Center (NCCETC) has been working with the Solar-Plus for Electric Cooperatives (SPECs) project, part of the National Renewable Energy Laboratory’s Solar Energy Innovation Network, to help develop resources to assist rural electric cooperatives to procure energy storage. The SPECs project period is ending later in Spring 2021, and the project team is preparing to publish resources. These include an economic modeling software package, procurement process guidance documents, and a white paper reviewing policy and institutional factors that affect storage deployment at cooperatives. DSIRE Insight team member David Sarkisian has led the SPECs research for the policy review, and identified several state and local policy factors relevant to energy storage at electric cooperatives, which are discussed below. Please check the NCCETC and SPECs project websites later this spring to see the full white paper and other resources.

As energy storage has become a more significant factor in the U.S. electric system, policy at all levels has started to adjust in order to take account of energy storage’s unique characteristics. Because of their unique institutional status, and in some cases, their isolation from larger electricity markets, rural electric cooperatives often appear insulated from policy changes that affect other utilities. However, many types of policy do affect cooperatives, whether through direct requirements and incentives or through indirect effects on other electricity market institutions and the broader electric system.

Deployment Requirements

Many states have requirements for utility deployment of renewable energy resources; typically, those requirements have come in the form of a Renewable Portfolio Standard, or RPS.[1] The application of RPS policies to electric cooperatives is often different than for investor-owned utilities. Some state renewable portfolio standards require deployment actions from cooperative utilities, which can lead to exceptions in wholesale contract all-requirements provisions. Additionally, as energy storage is not, in itself, a renewable generation resource, RPS policies’ interaction with storage deployment can differ between states. Some states have adopted policies targeting deployment of energy storage specifically.[2] As with RPS policies, the requirements imposed by these policies may be different for cooperatives than for other utilities; for instance, one state with aggressive storage deployment targets, New York, does not apply them to its cooperative utilities, which are relatively small and few in number.

Incentives

States have adopted tax credits, exemptions, and other incentives for deployment of energy storage. Some of these incentives are not directly applicable to electric cooperatives due to their non-profit status, although organizational arrangements exist that can allow cooperatives to indirectly benefit from income tax incentives. Other incentive programs have been designed to flow through large, typically investor-owned utilities, limiting their applicability to electric cooperatives.

Clean Peak Policies

A few states have adopted or considered “clean peak” policies, which aim to increase the amount of renewable energy being used to meet demand during peak times. As many renewable energy sources are not able to be dispatched on demand without storage support, energy storage plays an important role in complying with clean peak standards. Clean peak policies are similar to RPS policies in that they require a certain percentage of electricity to come from renewable or carbon-free sources, except that for clean peak policies this pertains specifically to electricity consumed during peak times.

The only state that has so far adopted a clean peak standard is Massachusetts, which adopted the policy in March 2020. Arizona and California have also considered clean peak standards. Compliance with Massachusetts’ clean peak policy requires that utilities purchase a certain percentage of their electricity from resources designated as clean peak resources; as the designation of these resources is done by state regulators, utilities do not have to manage their own peaking resources to comply with the policy. Massachusetts does not have electric cooperatives, and does not apply the Clean Peak Standard policy to municipal utilities.

Utility Compensation Policies

State policies for utility compensation of energy storage and other distributed resources pertain mostly to projects installed by customers of electric cooperatives rather than projects installed by cooperatives themselves. However, these policies can potentially affect utility programs that involve customer-owned storage.

Compensation policies here refers to policies like net metering and Public Utility Regulatory Policies Act (PURPA) contract rules that govern how utilities must pay for electricity supplied by customers or other alternative suppliers. State net metering policies do not always apply to electric cooperatives, or may be different for cooperatives than for investor-owned utilities. States that have considered the issue have generally ruled that paired solar and storage facilities are eligible for net metering, although some states, like Hawaii and New York have introduced separate policies for compensation of paired systems in order to manage storage’s ability to draw electricity from the grid.

Resource Planning

Some states require utilities to undertake a process called Integrated Resource Planning (IRP) in order to allow for regulatory commission review of utilities’ longer-term plans for electricity supply. In states that require IRP, the rules do not always apply to cooperative utilities; some states also require utilities to create resource plans, but do not require regulatory approval of these plans. IRPs may also be required for customers of power marketing administrations; customers of the Western Area Power Administration, for example, are required to submit IRPs every five years. Even in areas where cooperatives are required to submit IRPs, these requirements may be more stringent for Generation & Transmission (G&T) utilities than for distribution utilities, as many distribution utilities have few generation assets. This does not mean that distribution cooperatives that meet IRP requirements through their G&T provider should ignore IRP policies; the requirements that IRP policies place on G&T utilities may have significant implications for G&T interactions with their distribution partners. Some state regulatory commissions have required utilities undergoing the IRP process to more thoroughly consider storage as well as other resources available at the distribution level.

Distribution System Planning

As an analogue to generation resource planning processes, some states have begun to implement requirements for long-term planning of the distribution system. As most rural electric cooperatives operate on the distribution scale, distribution system planning may apply to them more directly than does integrated resource planning. As with other types of policy, though, distribution system planning requirements may be different for cooperatives than for other utilities. Energy storage’s capability to be used at both the generation and transmission system and as a distribution system-level resource means that storage can be incorporated into distribution system plans as well as integrated resource plans.

Local Permitting and Zoning

Electric cooperatives are often located in rural areas and therefore might be thought to face fewer obstacles regarding local land use than other utilities and storage developers in more densely populated areas. However, land use issues can still be an important consideration for cooperatives in considering storage deployment, particularly when paired with solar or other generation resources that use a relatively large amount of land.

Paired solar and storage facilities may need to undergo permitting processes at both the state and local levels, although facilities below a certain size can be exempted from some elements of the permitting process. For instance, Virginia has a less strict permitting process for solar facilities below 5 MW in capacity. However, local permitting processes still apply, and local residents with concerns about impacts on agricultural land use or amenity value may present obstacles for these projects. Electric cooperatives are often uniquely situated to create programs that share benefits with local stakeholders, which may let them ameliorate local opposition to solar and storage development.

[1] Database of State Incentives for Renewables and Efficiency (DSIRE). (2020, September). Renewable and Clean Energy Standards. North Carolina Clean Energy Technology Center. https://ncsolarcen-prod.s3.amazonaws.com/wp-content/uploads/2020/09/RPS-CES-Sept2020.pdf

[2] Database of State Incentives for Renewables and Efficiency (DSIRE). (2020, April). Energy Storage Targets. North Carolina Clean Energy Technology Center. https://ncsolarcen-prod.s3.amazonaws.com/wp-content/uploads/2020/04/DSIRE_Storage_Targets_April2020.pdf

2021 Legislative Update: Solar, Energy Storage, and Electric Vehicles on the Agenda

By: DSIRE Insight Team

With state legislative sessions in full swing, the DSIRE Insight team has been busy tracking proposed legislation related to distributed solar, grid modernization, and electric vehicles (specifically examining the topics tracked in the 50 States reports). As of mid-March 2021, at over 600 bills were under consideration across 46 states, with 10 of these bills being enacted so far.

Number of Distributed Solar, Grid Modernization, & Electric Vehicle Bills Under Consideration (As of Mid-March 2021)

Distributed Solar

As of mid-March 2021, state lawmakers were considering at least 111 bills related to net metering, community solar, third-party ownership, and distributed generation rate design.

Several bills have passed one legislative chamber so far, including a Montana bill increasing the net metering size limit for non-residential projects and a Wyoming bill directing the Public Service Commission to develop a net metering successor tariff.

The New Mexico Senate has passed a bill establishing a community solar program, and multiple bills introduced in Florida would authorize third-party ownership of solar energy systems for educational and public entities.

Top Solar, Grid Modernization, & Electric Vehicle Topics Addressed by Proposed Legislation (As of Mid-March 2021)

Grid Modernization

As of mid-March 2021, state legislators were considering at least 227 bills related to grid modernization, energy storage, and regulatory reform.

In Virginia, state lawmakers enacted bills adopting sales and property tax exemptions for certain energy storage systems. State legislatures in a number of other states, including Arizona, Indiana, South Carolina, and Texas, are also considering sales or property tax exemptions for storage projects.

The New Mexico State House passed a bill creating an energy storage income tax credit for residential systems. Legislation introduced in Maine would establish an energy storage target, and an Illinois bill calls for a move to performance-based ratemaking and a new multi-year integrated grid planning process.

Proposed Legislation Under Consideration by Topic (As of Mid-March 2021)

Electric Vehicles

As of mid-March 2021, state lawmakers were considering at least 319 bills related to electric vehicles and charging infrastructure.

The New Hampshire Senate passed an expansive bill including state zero-emission vehicle procurement requirements, registration fees for electric vehicles, and rate design guidelines for electric vehicle charging. Legislation passed by the Missouri Senate increases electric vehicle registration fees, while the South Dakota legislature enacted a bill establishing a new registration fee for all-electric vehicles.

A North Dakota bill unanimously passed by the House and Senate would exempt electric vehicle charging station owners from public utility regulation as long as the electricity being resold was procured from the utility. Bills passed in Virginia create an electric vehicle rebate program and an electric vehicle grant program.

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To keep up with proposed legislation across the country, check out the 50 States of Solar, 50 States of Grid Modernization, and 50 States of Electric Vehicles reports for quarterly updates or DSIRE Insight’s other subscription offerings for biweekly legislative tracking.

Community Solar Policy Update: States Exploring Low-Income Access and New Program Models

By: DSIRE Insight Team

Community solar has emerged as a popular policy option for states aiming to expand access to solar energy. Community solar programs allow customers to purchase solar-generated electricity from off-site solar facilities through subscriptions or upfront payments, giving people who cannot or prefer not to install rooftop solar a way to participate in the solar economy. Community solar subscriptions involve payments for electricity from specific facilities, which are typically located in the same local jurisdiction as the subscribers; as such, they can be differentiated from programs like green tariffs, which allow customers to buy renewable electricity but usually do not identify specific facilities and have looser location requirements. 

As community solar has grown as a segment of the solar market, state policymakers have taken interest, and several states have made community solar an important part of their overall solar policy framework. As of February 2021, 23 states and the District of Columbia have statewide policies enabling at least some form of community solar, and many other states have authorized specific community solar programs proposed by utilities. This post highlights some trends in community solar policy that have emerged recently as community solar has become a major part of the solar landscape.

State Community Solar Policies (February 2021)

Low-Income and Multifamily Access

State policymakers, throughout 2020 as well as in the early part of 2021, have shown an interest in modifying community solar programs to make them more accessible and advantageous to lower-income households and people living in multifamily dwellings. For example, in July 2020 Colorado’s Public Utilities Commission approved new rules for the state’s Community Solar Gardens program. The new rules expand access to the program for operators of affordable housing, facilitate donations of bill credits to lower-income customers, and remove limitations requiring subscribers to live in the same or adjacent counties to their community solar facility. 

New York’s Public Service Commission approved a proposal from the New York State Energy Research and Development Authority (NYSERDA) to create a Framework for Solar Energy Equity, which will direct additional funding from the NY-SUN program to projects that benefit lower-income people and communities. Virginia lawmakers passed legislation creating new shared solar programs for Dominion Energy, the state’s largest investor-owned utility. One of these programs includes a 30% program carve-out for lower-income customers, and another specifically enables shared solar programs for multifamily dwellings. 

So far in 2021, Illinois legislators have proposed numerous policy changes involving community solar as part of the Clean Jobs, Workforce, and Contractor Equity Act. This bill directs state programs which procure renewable energy credits from community solar projects to ensure that lower-income people have access to job opportunities in the construction of the projects. The bill also reserves some funds for support of community solar projects that are at least partially owned by lower-income residents, affordable housing owners, or organizations providing community services. Overall the bill has an emphasis on encouraging community ownership and governance of community solar facilities, which stands in contrast with the utility-led community solar model that has become prevalent in many states.

New Program Models

States have also been considering new programs that differ from the traditional community solar model, but that share the overall goal of providing wider access to the economic benefits of solar energy. New York in particular has been a hotbed for new program models. New York recently adopted a new program which, though not a community solar program by the traditional definition, offers a new model for sharing the benefits of solar more broadly. The Host Community Benefit program will require developers of large solar (and wind) projects to provide payments to residents of municipalities where the projects are located. The payments will be made through electric utilities and will be distributed on residents’ electric bills. 

Also in New York, two municipalities are preparing to launch a pilot “opt-out” community solar program in collaboration with Joule Community Power, an independent power provider active in the Community Choice Aggregation market. This program, referred to as Community Choice Solar, avoids many of the traditional participation barriers for community solar programs by automatically enrolling residents in the program, with an option to leave. The program was approved by the New York Department of Public Service in September 2020. 

Utility-Led Programs

Community solar has made an impact even in states without formal community solar policy. Utilities in some states have chosen to offer community solar programs without a legislative mandate to do so. Florida Power & Light’s SolarTogether program is an example of this approach. Through this program, approved by state regulators in 2020, Florida Power & Light is building 1.49 GW of solar capacity and offering it to customers through subscriptions. The program requires an upfront payment as well as monthly subscription payments, and provides monthly bill credits based on the value of the solar generation. Unlike many other utility-led programs, SolarTogether is projected to eventually provide a net bill reduction for subscribers, rather than requiring a perpetual “premium” for solar electricity. The first six solar plants to enter service through SolarTogether have already been fully subscribed; additional facilities are scheduled to begin operation in 2021.

Many municipal utilities and electric cooperatives have also created community solar programs in states without formal requirements. In North Carolina, a legislatively-mandated community solar program for the investor-owned Duke Energy utilities has yet to begin, but Fayetteville Public Works Commission (a municipal utility) and several members of the North Carolina Electric Membership Corporation already have community solar programs up and running. The Fayetteville program, like the SolarTogether program in Florida, expects to be able to provide subscribers with a net bill reduction over time. 

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Learn more about community solar policy changes under consideration with the 50 States of Solar quarterly reports, or DSIRE Insight’s Solar Single-Tech Subscription service. Contact us for more information or to request subscription samples.

Stimulus Bill Extends Federal Energy Tax Credits

By: DSIRE Insight Team

In a nearly annual tradition, Congress made a number of important changes to the tax code in the waning days of 2020. The Taxpayer Certainty and Disaster Relief Act of 2020 extended the expiration date of a number of tax incentives, giving system owners and developers additional time to place their systems in service or begin construction.

Investment Tax Credit

Legislation enacted in previous years established a step-down in the credit amounts for the Business Energy Investment Tax Credit (ITC). The deadlines for solar systems were extended by two years. Projects placed in service before December 31, 2022 will qualify for a tax credit based on 26% of the installed cost. Projects placed in service before December 31, 2024 will qualify for a 22% tax credit, before permanently dropping to 10%. Projects started before the end of 2024 and placed in service before the end of 2026 will also be eligible for a 22% tax credit.

The amendments to the ITC also made offshore wind projects eligible for the credit. Offshore wind projects started before the end of 2025 can qualify for a full 30% tax credit. The Residential Renewable Energy Tax Credit has a similar step-down schedule, except the credit phases out entirely for system installed in 2024 or later.

Federal Investment Tax Credit Step-Down Schedule for Solar Energy Systems

Production Tax Credit

The Renewable Electricity Production Tax Credit (PTC) was also modified in recent years to include a step-down for wind systems, and an expiration date for all systems requiring construction to start by the end of 2020. The new deadline established by the 2020 stimulus bill is the end of 2021. Wind projects started in 2020 or 2021 can qualify for a production tax credit based on 60% of the full rate. Interestingly, the step-down was not applied to the other PTC-eligible technologies, including biomass, landfill gas, waste heat to energy, and certain hydroelectric systems. Instead, the PTC for these systems was initially allowed to expire. When they were later reinstated, the step-down was not applied to them. Thus, the extended expiration date for these technologies allows such projects started by the end of 2021 to claim the full PTC.  

Energy Efficiency Tax Credits

The expiration date for the Residential Energy Efficiency Tax Credit and the Energy-Efficient New Homes Tax Credit for Home Builders were both extended by a year, making eligible projects completed by the end of 2021 eligible. And the Energy-Efficient Commercial Buildings Tax Deduction was made permanent with the exact value of the deduction being adjusted annually for inflation. 

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Visit the Database of State Incentives for Renewables and Efficiency (DSIRE) for more information on federal and state incentives for renewable energy energy efficiency technologies. View DSIRE Insight offerings to stay on top of state policy changes.

2020 Federal and State PURPA Updates

By: DSIRE Insight Team

This month’s blog post focuses on state and federal policy changes concerning the Public Utilities Regulatory Policy Act, or PURPA. PURPA requires electric utilities to purchase electricity from small renewable or cogeneration facilities, termed Qualifying Facilities, or QFs, at the utilities’ avoided cost of electricity. While PURPA is a federal law, states have a large role in PURPA policy, with states largely responsible for determining how avoided costs are calculated and setting PURPA contract terms. Differences in state PURPA implementation can have a large effect on patterns of renewable development across states.

PURPA policy has seen some major changes since our last PURPA blog post, most notably the issuance of Federal Energy Regulatory Commission (FERC) Order 872, which significantly adjusts state and utility obligations under PURPA, primarily in the direction of limiting the size and type of QFs that are required to be served through PURPA contracts. Some states have begun revising their own PURPA rules following Order 872. FERC and the states have also continued to grapple with other policy questions, including how energy storage fits into the PURPA framework.

States Considering Changes to PURPA Implementation, Jan. 2020 - Dec. 2020

Major Developments:

FERC Order 872

FERC Order 872, issued in July 2020, makes several significant changes to PURPA implementation requirements. The order followed from a Notice of Proposed Rulemaking (NOPR) issued in September 2019 and contains many of the same elements, although Order 872 did not adopt all of the changes proposed in the NOPR. Order 872’s changes generally go in the direction of limiting the availability of PURPA contracts. Major elements include:

• Reducing the maximum system size at which access to competitive markets is presumed from 20 MW to 5 MW.

• Adopting a rebuttable presumption that locational marginal prices (LMPs) established through competitive procurement processes reflect utility avoided costs.

• Revisions to the language determining whether facilities located nearby to each other are part of the same QF.

• A requirement that QFs demonstrate commercial viability and financial commitment before being entitled to a contract or legally enforceable obligation (LEO).

• Allowing states to require that PURPA contracts include avoided costs that vary over time (rather than being set at a fixed price) and allowing states to use projected energy costs in determining avoided costs.

The NOPR had proposed several additional elements, which were either not included in Order 872 or significantly scaled back. These included:

• A provision allowing utilities to reduce PURPA obligations through use of retail choice programs.

• A larger decrease to the maximum system size at which access to competitive markets is presumed (to 1 MW rather than 5 MW).

• Adoption of a per se rule (rather than a rebuttable presumption as in the order) that LMPs reflect avoided costs.

States will adjust their PURPA regulations in order to adopt the changes required or allowed by Order 872. Several states, including Colorado, Michigan, Missouri, and New Mexico, have already opened new dockets or incorporated discussion of Order 872 into existing PURPA dockets.

QF + Storage Combinations 

As the role of energy storage in the electricity system has grown, questions about how PURPA applies to combinations of renewable generation and storage have emerged. 

FERC recently had the opportunity to address this issue in case QF17-454, concerning a solar-plus-storage facility in Montana. However, FERC elected to resolve this case without ruling on the storage question; the matter was decided based on the size of the solar element alone. The ruling does have implications for QFs more broadly, as it indicates that QF capacity is determined through the “power production capacity” of the QF rather than the capacity that it is capable of providing to the grid at any one time (the facility in question has 160 MW of solar PV capacity, but its inverter only allows 80 MW to be supplied to the grid). 

State regulatory commissions have also been considering storage treatment under PURPA. Idaho regulators adopted rules in October 2020 for QFs that include storage. The rules establish a separate category for storage systems with less than 100 kW of capacity, with QFs in this category eligible for 20-year standard contracts. Systems above 100 kW in capacity can receive 2-year contracts. The avoided cost methodology to be used to compensate capacity for larger storage systems is based on a methodology developed by Duke Energy.

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Learn more about PURPA changes under consideration or current investor-owned utility avoided cost rates through our DSIRE Insight PURPA and avoided cost offerings, which were recently updated in December 2020. For more information or to request a sample, email us at afproudl@ncsu.edu.

Guest Post: Eco-Friendly Ways to Prep Your Home for Winter

By: Mike Cahill, Redfin

While winter brings the holidays, sweaters and scarves, and cozy nights curled up by the fire, this blustery season also brings harsh conditions that can wear at the exterior of your home. That’s why it’s so important to ensure your home is prepared to weather the winter season in an environmentally conscious manner. So we reached out to the experts in eco-friendly home winterization practices from Hawthorne to Castle Hills to provide you with some tips for winterizing your home in 2020.

Harness solar energy year-round

When people think of solar energy they, naturally, focus on months with a lot of sunny days.  The truth is that a large part of the year the days are shorter and a bit less sunny.

While it’s true that the summer will get you a much larger piece of the annual solar production, there is a place for solar energy in the winter months.  If the home is powered through non-electric sources there is an overall reduction of electricity used in the home.  This coincides with the cutback in solar energy generation, so they line up nicely.

When the weather is cold it cools down the panels, which increases the voltage.  This allows the panels to produce more electricity, per sunny hour, when compared to a summer month.  The cold decreases Electric Resistance.  This makes solar production more efficient while working with less sunlight. – PowerLutions Solar

One of the ways you can optimize your home during the winter is to install solar. There’s a misconception that solar only works well during the summer, and that’s not quite true. Solar works well whether it’s summer or winter because we use energy constantly throughout the year. During the hot summer months, your solar panels overproduce energy, which means that you’ll have extra, cleaner energy during the cloudy winter months to help reduce your energy bill. Another benefit of going solar is to take advantage of current Federal Tax Credits to help reduce the cost of the solar system. However, keep in mind that these Federal Tax Credits are going away soon, so make sure you take advantage of it now to save even more money while it’s still available. – James the Solar Energy Expert

When it comes to installing solar panels in the winter, many homeowners don’t realize that this is probably the best time to get it installed. The reason being, many homes utilize gas to heat their homes in the winter months. As a result, electricity usage is generally much lower than the summer and allows homeowners to build up “net metering” credits. These credits can then be used in the summer when electricity usage tends to be higher due to running your air conditioner and allows homeowners to not have low summer electric bills. – Enlyten Energy

Learn what solar can do for you

Many electric utility companies across the country offer free or subsidized home energy audits that can reveal the most valuable efficiency improvements for your home. Many utilities also provide rebates or financing to help purchase new energy-efficient equipment or solar panels. The DSIRE website provides information about all the available financial incentives for energy efficiency and renewable energy in all 50 states. Simply enter your zip code on the homepage to see them all. – DSIRE

Swap out gas for electric

Replacing your old gas boiler with an electric heat pump will help reduce methane and CO2 emissions. Because of the improved energy efficiency of heat pumps, you will likely save money over the lifetime of the new equipment when compared to the cost of replacing your gas boiler, especially if you combine the system with a ground or water source heat loop. Be sure to combine your electrification investments with smart thermostats so you are ready to be a part of the residential demand response solution that will support our renewable energy transition. – Land Art Generator

Ensure your windows are up to date

One great way to save energy during our winter and summer months is to replace any older windows.  Over the last ten years window efficiency has increased tremendously.  If your windows are over ten years old it will make a massive difference replacing them.  Another way to help with efficiency is by insulating your attic space.  R60 or 20” of insulation is the recommended level for blown-in insulation.  Most of the older homes we inspect are not insulated properly and have 10” or less of insulation.  This can make a large difference in energy efficiency. At All Seasons Exteriors, we also install the best and most eco-friendly shingle on the market which is Malarkey shingles.  All the shingles we install are rubberized and impact resistant.  They also have smog reducing granules in them.  These granules react with UV rays and pull smog out of the air.  Every roof we install is the same as planting 2-3 full-grown trees.  NO other manufacturer uses these granules in their shingles.  Remember there is always a reason to call All Seasons… – All Seasons Exterior

The weakest link in a building’s envelope (walls, floors and ceilings) is generally the windows. Replacing them with the highest performance windows you can find and making sure they are installed properly – weather and airtight is critical – will make a tremendous difference in the comfort/livability and energy efficiency of a home. Note also, some manufacturers can tune the windows to the sun’s orientation with high solar gain on the south and varying options on the east, west and north sides to optimize their performance. Note that windows and doors are not all the same and one aspect is the air tightness.  If the manufacturer isn’t able to provide their air infiltration rating, look elsewhere. – AE Building Systems

Regulate your home’s humidity

Winter brings lower temperatures and lower indoor air humidity. Keeping the indoor air humidity at 30-40% minimizes the forced air heating costs, prevents hardwood and solid wood furniture from drying out, and greatly improves breathing comfort and air filtration efficiency.  Make sure that circulation of the warm air near the windows is not restricted by shutters or heavy blinds, otherwise, the inner surfaces of the windows may go colder than the dew point and start producing excessive condensation.  Besides working against your humidifier and sucking the moisture out of the air, condensation leads to unsightly puddles that damage the window sills and, if mixed with dust, create a perfect breeding environment for mold. – Aztech Doors & Windows

If you live in an area with dry winters, we recommend maintaining some humidity in your home. You can add room humidifiers or even a whole house humidifier, but plants are also a great way to add humidity to your home. Plants gradually release moisture into the air, help trap heat, and can be great design pieces. Adding moisture to the air during winter is not only good for the wood elements of your home, it makes your home’s air more breathable and is great for skin health. – Invalesco Real Estate

Check and replace faulty weatherstripping throughout

Your windows and doors can be a big reason for air leakage.  Check and replace weatherstrip around windows and doors once a year.  Oftentimes the wear and tear can cause weatherstrip to lose its effectiveness.  In some cases, the better solution is to upgrade to new Energy Star rated windows with a .30 U factor or less.  In the process of replacing the window, the Certified window installer can ensure proper insulation is installed between the window and the home’s framing, further reducing air leakage around the windows. – Lake Washington Windows & Doors

To prep, your home for winter the biggest challenge and the best bang for your investment buck is to seal any cracks where cold winter air may enter, add blown-in fiberglass or cellulose into your attic (if you have one- some homes have cathedral ceilings), and especially find convenient, attractive and inexpensive ways to insulate all windows at night, especially the larger ones. This is called “moveable insulation,” or “nighttime insulation.” Sometimes windows lose more heat on cold and long winter nights than the rest of the house combined! – Crestone Solar School

Look out for sagging doors

The top hinge bares most of the weight of the door and over time the door will tend to pull away from the hinge-side frame. This can result in the top of the door rubbing against the frame on the lock side. It can also affect the weather seal. To correct this the first step is to tighten hinge screws that may have loosened. If they’re tight, remove 1 or 2 of the screws from the top hinge, replacing them with 3″ screws that will bite into the studs behind the door frame/jamb. This will pull things toward the stud, straightening the door. If that doesn’t work, try putting a shim (something the thickness of a cereal box) behind the bottom hinge. Kicking out the bottom can straighten the door in its frame. – Door Renew

States Consider EV Adoption Targets for the General Passenger Vehicle Market

By: DSIRE Insight Team

The Governor of California attracted a lot of attention in September 2020 when he signed an Executive Order calling on regulators in the state to require all passenger cars and trucks sold in California by 2035 to be zero-emission vehicles (ZEVs). State policymakers across the country have taken a wide variety of approaches to building robust markets for electric vehicles (EVs), but will any other state follow California’s lead and directly ban the sale of gasoline-powered vehicles?

According to research conducted by the DSIRE Insight team, six states, including California, have considered legislation in the past two years that would establish goals or requirements to transition passenger vehicles to zero-emission or electric vehicles. While most of these bills have failed to pass, two states have been successful in passing legislation, although both bills stop short of outright banning the sale of emission-producing vehicles.     

Electric Vehicle Adoption Target Bills (2019-2020)

California

The Executive Order signed by Governor Newsom followed three unsuccessful attempts by the state legislature over the past two years to adopt different EV adoption targets. A.B. 40, introduced in December 2018, would have required the State Air Resources Board to develop a comprehensive strategy by January 1, 2021 to ensure that all new motor vehicle and light-duty truck sales are ZEVs by 2040. The bill moved from committee to committee during 2019 and 2020, but ultimately died. A.B. 1411, which was introduced in 2019, also died in 2020. The bill would have established a state goal for the deployment of 200,000 zero-emission medium- and heavy-duty vehicles and off-road vehicles and equipment, and the corresponding infrastructure to support them, by 2030. 

A.B. 1046, introduced in 2019, would increase the goal of the Charge Ahead California Initiative from placing in service at least 1 million zero-emission and near-zero-emission vehicles by January 1, 2023, to placing in service of at least 5 million ZEVs by January 1, 2030. The Assembly passed the bill in May 2019. While the bill is still technically alive, it has not seen any action since being referred to the Committee on Appropriations in August 2019.

Hawaii

Hawaii lawmakers have considered the greatest number of bills related to EV adoption targets. Six bills were introduced in either 2019 or 2020, though none managed to pass even one chamber. H.B. 1320 and S.B. 1338, both introduced in 2019, would have prohibited the sale of internal combustion vehicles after December 31, 2029; while H.B. 2396 and S.B. 2580 would have prohibited new fossil fuel vehicles from being used for commercial transportation in 2025 and thereafter. H.B. 1370 and S.B. 996, meanwhile, would have required motor vehicle lessors to have increasing percentages of light-duty passenger vehicles in their rental fleets be zero-emission by certain dates.

Massachusetts

Lawmakers in Massachusetts introduced five bills in 2019 to establish EV adoption targets for different sectors. While the bills are still technically alive, none has passed a chamber yet. H. 3121 would adopt a target of 50% EVs by December 31, 2030 for transit agencies and school bus operators. H. 2872 and S. 1927 focus on state and municipal fleets, fleets used for commercial ride-sharing and ride-hailing, fleets used for public transportation, and fleets used as commercial motor carriers, freight services, limousine services, and taxis. The bills would require 50% of these fleet vehicles to be low-emission or zero-emission by 2025, increasing to 75% by 2030, and 100% by 2035. H. 2869 and S. 2116, meanwhile, apply broadly and require all vehicles submitting an application for original registration to be ZEVs beginning January 1, 2038.

New Jersey

New Jersey lawmakers introduced three bills in 2018, which carried over into the 2019 session. S.B. 2252, signed into law in January 2020, established a goal for at least 85% of all light-duty vehicles sold or leased in the state to be plug-in EVs by December 31, 2040. Additionally, by December 31, 2020, goals for medium-duty and heavy-duty vehicle electrification are to be developed. A.B. 3688 and S.B. 1975, meanwhile, would have established statewide goals for the adoption of PEVs and EV charging infrastructure. Some of the end goals include having two million registered PEVs by 2035 and having 90% of all vehicles sold be PEVs in 2040.

Oregon

S.B. 623, which was introduced in 2019, would have required that a person whose residence is in a county with a population of 600,000 or more cannot register a new vehicle in the state after December 31, 2034 unless the vehicle is a new EV.

Washington

Two bills were introduced in 2019 to establish EV adoption targets. Both bills carried over into the 2020 session and one bill died while the other was signed into law. S.B. 5811, enacted in March 2020, adopts the California ZEV program for use in Washington. This program requires a certain percentage of vehicles produced and delivered to Washington for sale to be ZEVs. H.B. 2515, meanwhile, would have required all privately owned and publicly owned light duty vehicles of model year 2030 or later sold or registered in the state to be EVs.

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Keep up with legislation related to electric and zero-emission vehicles with the 50 States of Electric Vehicles reports or DSIRE Insight’s biweekly EV policy tracking reports.

States Expanding Renewable and Clean Energy Standards

By: DSIRE Insight Team

This past month, our team published an updated version of the Renewable and Clean Energy Standards map on the Database of State Incentives for Renewables and Efficiency (DSIRE) website. There have been several notable policy changes recently adopted by states, with some states adopting new renewable and/or clean energy standards or goals, and others expanding (or in one case, reducing) their existing standards. In some of these states, legislatures have enacted laws setting the overall requirements, while state regulators are undertaking proceedings to determine the specific means of achieving these requirements.

Renewable and Clean Energy Standards (September 2020)

Connecticut

The Governor of Connecticut issued an executive order in September 2019 requiring state regulators to develop a plan to reach a 100% carbon-free electricity sector by 2040.

Maine

In June 2019, Maine lawmakers enacted legislation expanding the state’s renewable portfolio standard to 80% by 2030 and 100% by 2050.

New Jersey

The Governor of New Jersey issued an executive order in 2018 setting out a 100% clean energy goal for 2050. In January 2020, the state released an Energy Master Plan which contains strategies for reaching this goal.

New York

In July 2019, the New York State Legislature enacted legislation expanding its renewable portfolio standard to 70% by 2030 and its clean energy standard to 100% by 2040. The Public Service Commission is required to develop regulations to meet these requirements by June 30, 2021.

Ohio

In July 2019, Ohio lawmakers enacted legislation reducing the state’s renewable energy requirement from 12.5% by 2026 to 8.5% by 2026. The legislation also removed the state’s solar carve-out.

Rhode Island

In January 2020, Rhode Island’s Governor issued an executive order setting a goal of 100% renewable electricity by 2030.

Virginia

Virginia lawmakers passed legislation in April 2020 setting 100% renewable energy requirements. The date for achieving this 100% goal varies by utility; Dominion Energy’s target date is 2045, while Appalachian Power’s target date is 2050. 

Wisconsin

Wisconsin’s Governor issued an executive order in August 2019 calling for the state to have 100% carbon-free electricity by 2050. The order creates a new state Office of Sustainability and Clean Energy and directs this office to ensure that the goal is met. As the order does not create legal requirements for utilities, it is classified here as a goal rather than a standard.

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Learn more about renewable portfolio standards with the Database of State Incentives for Renewables and Efficiency. To inquire about DSIRE Insight’s custom research and consulting, please email afproudl@ncsu.edu.

Where are Solar PV Incentives in 2020?

By: DSIRE Insight Team

Many states and utilities offer a variety of financial incentives for solar photovoltaics (PV) in order to encourage solar adoption and achieve state solar development goals. As the cost of solar has declined, many states have phased out their incentive programs. However, at least 44 states offer at least some type of financial incentive for solar energy, with property tax exemptions being the most common type of incentive.

State and Utility Solar PV Incentives (August 2020)

Tax Credits

At the federal level, solar energy projects are eligible for a 26% investment tax credit. This credit will decrease to 22% in 2021 and again to 10% in 2022. The credit will remain at 10% for commercial projects, while the credit will expire completely for residential projects at the end of 2021.

In addition to the federal investment tax credit, 9 states currently offer income tax credits for which solar is an eligible technology. New Mexico lawmakers enacted legislation earlier in 2020 bringing back a revised version of its expired Solar Market Development Tax Credit, which provides a credit for 10% of system costs up to $6,000.

Rebate Programs

State or utility solar rebate programs currently exist in 17 states (including only utilities with at least 40,000 customers). Most rebate programs provide an incentive based on the capacity of the solar system, while a few provide a flat incentive. Most rebate programs provide incentives between $0.20 per Watt and $0.75 per Watt, with some incentives providing as much as $3.00 per Watt.

The Virginia Department of Mines, Minerals, and Energy is currently developing a solar rebate program focused on low to moderate income customers, pursuant to legislation enacted earlier in 2020. The legislation specifies that the incentive may be up to $2.00 per Watt.

Performance-Based Incentives

At least 11 states and DC offer performance-based solar incentives that provide a per-kWh payment to project owners based on actual system production. Xcel Energy’s Solar*Rewards program is an example of a performance-based incentive, where Colorado and Minnesota solar owners can receive payments ranging from $0.005 to $0.07 per kWh of production.

A number of states that have solar energy carve-outs within their renewable portfolio standards also have active markets for Solar Renewable Energy Certificates (SRECs). An SREC represents 1 MWh of solar energy, and electric power suppliers must generate or procure a certain number of SRECs to comply with their state’s standard.

Property and Sales Tax Incentives

Property and sales tax incentives are the most common types of solar incentives across the country. Thirty-six states have adopted property tax exemptions for solar energy systems, or authorized local governments to implement property tax exemptions. While the majority of these exemptions apply to the full added value of the solar installation, some states’ property tax incentives apply to a percentage of the added value or allow an exemption for only a certain number of years.

Another 22 states exempt solar energy systems from sales taxes. Like property tax incentives, most sales tax incentives for solar provide a full exemption. In Washington, solar energy systems up to 100 kW are eligible for a full sales tax exemption, while systems over 100 kW and up to 500 kW are eligible for a 50% exemption.

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Learn more about incentives for solar energy with the DSIRE Insight Solar Single-Tech Subscription ($4,500 per year) or the Solar Policy Data Sheet ($500). Contact us for more information.

States Evaluating EV Registration Fees and Alternatives to Support Transportation Infrastructure Funding

By: DSIRE Insight Team

States rely on gasoline tax revenues in large part to fund transportation infrastructure. Gas taxes serve roughly as a fee on road usage; people that drive more generally buy more gas and therefore pay more in gas taxes. However, this system of allocating road infrastructure expenses has never been perfect, as fuel use is not exactly analogous to the burden that a vehicle places on road infrastructure. States have been facing declining transportation infrastructure funding due both to increasing vehicle fuel efficiency and the fact that gas taxes in many states have not risen with inflation. Increased adoption of electric and other alternative fuel vehicles could exacerbate this issue, as these vehicles do not use gasoline, and therefore their drivers do not pay gas taxes. As states seek to increase electric vehicle (EV) adoption in order to meet decarbonization and other policy goals, they face the challenge of determining a way to recoup transportation infrastructure expenses while still enabling the development of the EV market. States have largely addressed this issue so far by adopting increased registration fees for electric vehicles, but some states are considering other methods.

Registration Fee Increases Through 2019

By the end of 2019, 28 states had adopted increased registration fees for EVs. The amount of these fee increases varies considerably among the states that have adopted them. These increases for EVs range from $50 (in Hawaii) to $225 (in Washington state). Fees proposed in state legislation have been even more varied, ranging from $25 to $1,000. Some fees are determined based on formulae that approximate how much an EV owner would pay in gas taxes if they drove a comparable conventional vehicle, although the specifics of these formulae vary among states.

State Electric Vehicle Registration Fee Increases At the End of 2019

Alternative Methods to Charge for Transportation Infrastructure

While most states have addressed this issue with simple flat-rate fees or fees based on vehicle type, a few states have considered alternative reforms to transportation infrastructure funding mechanisms.

One method is to charge a per-kWh excise tax on electricity supplied by EV charging equipment. This is essentially the same as a gas tax, just charged on electricity. This system is relatively simple to administer, as it can be applied to electricity sales from the utility supplying the electricity, which are already taxed for standard sales tax purposes. However, this does require electricity supplied to EV charging equipment to be metered separately from other electricity consumption.

Another method is a charge on vehicle miles traveled, which could either replace or supplement gas taxes. This system removes the dependence on vehicle fuel consumption as a measure of road usage, making it able to address the gas tax revenue decline from higher-efficiency conventional vehicles as well as electric vehicles (although some proposed mileage fees only apply to EVs). However, mileage is also not a perfect representation of the effect a vehicle has on roads, as a larger vehicle will cause more burden on roads per mile driven than a smaller vehicle. Mileage charges can vary based on vehicle weight in order to address this issue (existing state vehicle registration systems already apply different registration fees based on vehicle type or weight). Mileage charges are potentially more complex to administer than gas or electricity excise taxes, though, as mileage is not something that is already part of a taxable transaction.

Some proposals in state legislatures have taken a hybrid approach between a flat-rate registration fee increase and a more complex reform like mileage fees. These proposals increase registration fees for electric vehicles, but also increase fees for higher-efficiency conventional vehicles by a smaller amount, with the amount of the fee proportional to the gas mileage of the vehicle. These sorts of proposals aim to allocate transportation infrastructure expenses more accurately among all types of vehicles without necessitating a broad change in the policy framework.

State Electric Vehicle Registration Fee Increases At the End of Q1 2020

Registration Fee and Alternative Proposals in 2020

Only one state, Virginia, has passed an increased EV registration fee so far in 2020 (Virginia already had an increased fee, with the 2020 action increasing it further). Virginia’s new fee system allows EV (and hybrid) drivers to choose between paying an increased registration fee or participating in a mileage-based user fee system. Several other states considered registration fee increases or other alternatives, but none of these proposals have been enacted, and many have died with the end of their states’ legislative sessions.  Some state lawmakers also introduced bills aiming to repeal previously adopted fee increases, but none of these bills have advanced either.

Legislators in Vermont and Washington proposed alternative EV fee systems. A Vermont bill expressed support for the adoption of a per-kWh EV charging fee that would be phased in according to the level of EV adoption. The bill does not specify the amount of the fee or the phase-in schedule, delegating those decisions to state regulators. Washington legislators proposed a miles-traveled fee for EVs and hybrid vehicles, with the fee set at 3.5 cents per mile for EVs and plug-in hybrids and 2 cents per mile for conventional hybrids. The bill requires the state transportation department to develop an implementation plan for administering the fee, including a mileage-reporting system and a payment system. Neither of these bills has advanced in their respective legislatures.

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You can keep up with EV fee and alternative proposals through the 50 States of Electric Vehicle reports or DSIRE Insight’s biweekly EV policy tracking reports.

Energy Storage Targets on the Rise Across the Country

By: DSIRE Insight Team

Energy storage has the potential to provide a wide array of benefits to the electric grid, and states across the country are increasingly considering statewide targets for the deployment of energy storage resources. The Database of State Incentives for Renewables and Efficiency (DSIRE) recently added energy storage targets and incentives to the database.

First Movers: California, Oregon, Massachusetts, New York, & New Jersey

California was the first state to adopt an energy storage target, setting a 1,325 MW target across the state’s three major investor-owned utilities, Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison. The California Public Utilities Commission (CPUC) officially established the target in 2013, pursuant to legislation enacted in 2010, with the requirement for each utility subdivided by systems installed at the transmission, distribution, and customer levels.

State Energy Storage Targets (adopted as of 3/31/2020)

Several years later in early 2017, Oregon became the next state to adopt a storage target, requiring Portland General Electric and PacifiCorp to each procure a minimum of 5 MWh of energy storage by 2020 (10 MWh total). Later in 2017, the Massachusetts Department of Energy Resources established a 200 MWh energy storage target, following the completion of an energy storage cost-benefit study. In 2018, Massachusetts lawmakers increased this target to 1,000 MWh by the end of 2025.

New York became the fourth state to adopt an energy storage target, with 2017 legislation directing the Public Service Commission to develop a specific target. The Governor announced a goal of 1,500 MW of storage by 2025 in early 2018, and the Commission later issued an order establishing a target of 3,000 MW by 2030. New York’s storage target follows the recommendations of the state’s Energy Storage Roadmap, published in 2018.

New Jersey became the fifth state to adopt an energy storage target in 2018, setting its target at 2,000 MW by 2030, with a short-term target of 600 MW by 2021. New Jersey researchers published an energy storage analysis in 2019 including policy recommendations to help achieve these targets.

New in 2020: Nevada

Nevada became the latest state to adopt an energy storage target in March 2020, with the Public Utilities Commission of Nevada setting a target of 1,000 MW of storage capacity by 2030. In 2017, Nevada lawmakers enacted legislation directing the Commission to determine whether it is in the public interest to adopt energy storage procurement requirements and to study all measurable costs and benefits. The Commission released its final study in October 2018, which found that 700 MW to 1,000 MW of battery storage could be cost-effectively deployed by 2030.

On the Horizon: Virginia

Virginia may soon become the seventh state to adopt an energy storage target. In March 2020, Virginia legislators passed S.B. 851, which includes a storage target of 3,100 MW by 2035, as well as a target of 100% renewable energy by 2050. The Governor has until April 11, 2020 to act on the bill, and the legislature is set to reconvene on April 22nd to address the Governor’s amendments and vetoes to 2020 legislation. However, these dates may be pushed back due to COVID-19.

The DSIRE Insight team is also tracking proposed legislation in Connecticut, which would establish an energy storage procurement target of 1,000 MW by December 31, 2030, as well as multiple Massachusetts bills that would increase the state’s storage target. Legislation introduced in Pennsylvania would also direct the Public Utility Commission to determine an appropriate storage target.

Keep up with legislation and regulatory proceedings related to energy storage targets and other energy storage policies with the 50 States of Grid Modernization report or DSIRE Insight’s other grid modernization policy tracking subscriptions.

Highlights and Trends from a Busy Year in State Solar, Grid Modernization, and Electric Vehicle Policy

By: DSIRE Insight Team

The year 2019 was an exceptionally busy one for state energy policy, and the DSIRE Insight team at the North Carolina Clean Energy Technology Center is working to help you follow all of the action. The team recently released the Q4 2019 and 2019 Annual Review editions of the 50 States of Solar, Grid Modernization, and Electric Vehicles reports. These reports track all of the proposed state bills and regulatory proceedings in the policy areas of distributed solar, grid modernization, and electric vehicles, allowing readers to follow the details of state policy changes while also getting a sense of big picture policy trends across the United States.

Record Numbers of Actions

The three reports found that a record number of actions [1] were under consideration over the entirety of 2019. While the increase in number of actions was very modest for distributed solar (265 actions in 2019 vs. 264 in 2018), both grid modernization (612 actions in 2019 vs. 460 in 2018) and electric vehicles (601 actions in 2019 vs. 424 in 2018) saw huge jumps in activity this year. The number of policy actions in grid modernization and electric vehicles has more than doubled since 2017.

50 States of Solar

While the total number of policy actions for distributed solar did not change much in 2019, the types of actions under consideration shifted considerably. Fixed and solar-specific charge proposals declined in 2019; utilities proposed fewer and smaller fixed charge increases during 2019 than in previous years, and no utilities proposed mandatory residential demand charges. Some utilities did propose charges based on solar system capacity, but only one of these was approved. Replacing the activity on fixed charges and additional fees were actions on community solar program rules (many of them seeking to increase low-income participation), actions on incorporation of solar-plus-storage systems into interconnection rules and crediting systems, and actions on third-party ownership options. and

2019 Action on Distributed Solar Policy & Rate Design

Action on net metering and related compensation systems for distributed solar continued in 2019. Several states initiated the move to net metering successor tariffs, while others initiated value of solar studies to inform the development of successor tariffs in the future. Some states elected to retain traditional net metering after consideration of successor tariffs, and one state returned to traditional net metering from a successor tariff adopted in a previous year. In addition to these actions on crediting rules, 2019 also saw many actions refining net metering program rules to establish different customer classes, increasing system size limits, and adopting rules for solar-plus-storage systems.

50 States of Grid Modernization

Grid modernization refers to actions seeking to make the grid more resilient, responsive, and interactive, among other goals, and is used to describe a wide range of topics including both deployment of new technology and adoption of new policies, utility business practices, and rate designs.  All of these topics interrelate, and utility commissions have increasingly recognized and acted on this interrelation. State regulators denied several utility technology deployment proposals in 2019 because the utilities did not demonstrate how the technology deployments would be coupled with rate design changes in order to maximize customer benefits.

2019 Action on Grid Modernization, Energy Storage, & Utility Reform

Although proposals for new technology deployments and technology incentive programs increased in 2019, consideration of more fundamental policy changes also emerged as action categories. Several states considered or are now considering major utility business model reforms, such as introducing retail competition and joining regional wholesale markets. Many states are also considering new utility performance incentive mechanisms and advanced rate design pilots.

Energy storage remains a key part of the grid modernization policy environment. Proposals for energy storage deployment were again the most common single type of action, and many other policy actions, such as changes to integrated resource planning and distribution system planning, updates to interconnection standards, and additions to energy efficiency and demand-side management plans, are taking place in order to incorporate energy storage into the electric system.

50 States of Electric Vehicles

Electric vehicle policy activity has expanded dramatically since our tracking began in 2017. While the raw number of actions under consideration has grown, another notable indicator of activity is the geographic spread of electric vehicle policy action. Forty-nine states and DC considered electric vehicle policy, regulation, studies, and deployment in 2019, with only West Virginia not addressing these issues. This makes electric vehicles the most geographically widespread category out of the three reports, as both distributed solar and grid modernization saw action in 46 states and DC.

2019 Action on Electric Vehicles & Charging Infrastructure

States are grappling with several major policy questions as electric vehicle use and infrastructure development expands. One question is whether to regulate providers of electric vehicle charging stations as public utilities. In 2019, states that considered this question universally decided that the answer is “no.” All states that reached a conclusion on the public utility regulation question during 2019 decided not to regulate charging stations as public utilities, opening the market to third-party providers. However, states have taken different approaches on the related question of whether utilities are allowed to own charging infrastructure.

Another major policy question is whether (and how) to charge electric vehicle owners an additional fee in order to make up for the reduction in gasoline tax revenue associated with electric vehicle use. Ten states elected to increase electric vehicle registration fees during 2019, with the additional fees ranging from $50 to $225. Some states have considered more complicated methods for recouping road infrastructure costs from drivers, such as mileage or vehicle weight-based charges, but all of the new fees going into effect have been simple fixed annual fees, although often with differentiated fees for all-electric and hybrid vehicles.

States and utilities are also considering a variety of policies and programs to spur electric vehicle use. Some states are requiring utilities to develop comprehensive transportation electrification plans, providing incentives for electric vehicle or charging infrastructure purchases, or adopting procurement targets for state government vehicle fleets. Utilities are also taking independent steps to increase electrification, such as proposing bus electrification programs, subscription pricing pilots, and rate design innovations to promote DC fast charger development.

Looking Ahead

The year 2020 figures to be another busy one for policy actions in distributed solar, grid modernization, and electric vehicles. It will be interesting to see what existing trends continue and new trends emerge. For access to all of these reports as well as detailed biweekly policy tracking, please consider subscribing to DSIRE Insight.

[1] An action is defined as a relevant (1) bill that has been introduced or (2) a regulatory docket, investor-owned utility rate case, or rulemaking proceeding. For the 50 States of Solar, only proposed legislation that has passed at least one chamber is included.

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View the executive summaries or purchase full copies of the latest 50 States reports here. For more information, email us at afproudl@ncsu.edu.

Three Trends in State PURPA Implementation

By: DSIRE Insight Team

Our team recently announced the launch of two new research offerings through DSIRE Insight related to the Public Utility Regulatory Policies Act, or PURPA, and investor-owned utility avoided cost rates. PURPA has been a key policy for renewable energy development in the U.S., requiring utilities to purchase electricity from small renewable or cogeneration facilities (termed Qualifying Facilities, or QFs) at the utility’s avoided cost of electricity. While PURPA is a federal law, states have a large role in PURPA implementation; states are largely responsible for determining how avoided costs are calculated and setting PURPA contract terms. Differences in PURPA policies can have a large effect on patterns of renewable development across states.

States Considering Changes to PURPA Implementation, Jan. – Aug. 2019

Our team tracks changes to PURPA and changes to state implementation of PURPA under consideration across the country and identified three recent trends among states:

1) States Moving Toward Competitive Procurement Mechanisms

Several states are adopting competitive procurement methods for determining avoided costs under PURPA. Traditionally, avoided costs have been determined through a regulatory process using utility cost data. With a competitive procurement process, QFs instead submit bids to supply a certain amount of generation and/or capacity, with avoided costs being determined by the winning bids. Competitive procurement processes rely on there being a set amount of capacity to be supplied by QFs, which can conflict with PURPA’s requirement for utilities to purchase all capacity offered by QFs. However, states have a number of policy options available to induce QFs to participate in quantity-limited competitive procurements even with PURPA “must-buy” provisions still in effect.

One approach, taken by North Carolina through H.B. 589 of 2017, is to make contract terms more favorable for contracts entered into through competitive procurement. In North Carolina, traditional PURPA contracts using standard avoided costs are now only available for a maximum term of 5 years, while competitively-bid contracts can last 20 years. As longer terms are considered more favorable, developers have an incentive to participate in the competitive procurement process despite the generally lower purchase prices.

Another approach is to set avoided costs for all PURPA contracts using the results of a competitive procurement process. Michigan adopted this process for Consumers Energy in June 2019. With avoided costs being determined by the competitive process, developers have an incentive to bid, as they otherwise risk being undercut by other developers who do participate.

Colorado has used a competitive bid process to set PURPA avoided costs for decades. Unlike Michigan and North Carolina, Colorado has until recently not allowed QFs to enter into contracts with utilities without using the competitive bid process. Due to concerns that these rules conflict with PURPA requirements, Colorado regulators are considering rules that would establish alternative means for at least some QFs to enter into PURPA contracts, although these methods may still use market-based mechanisms.

2) States Considering Standard Offer System Size Limit Changes

PURPA requires the use of avoided costs only in standard contracts, which are available for QFs up to a certain system size limit (based on generation capacity). QFs above this size limit must negotiate purchase rates with utilities even in states without competitive procurement processes. States can set the system size limit for standard contracts anywhere from a minimum of 100 kW to a maximum of 80 MW. Some states are considering changes to their standard contract size limit.

Washington regulators recently adopted rules increasing the standard offer size limit from 2 MW to 5 MW. The Missouri Public Service Commission is considering draft rules that would increase the standard contract size limit to 1 MW from the current 100 kW. The rates for standard contracts above 100 kW would be different than those offered to smaller QFs.     

North Carolina, on the other hand, lowered the state’s standard offer size limit from 5 MW to 1 MW in 2017, with a further decrease to 100 kW to occur when a total of 100 MW of projects have been awarded the standard offer. A Michigan utility has proposed to lower the standard offer size limit to 150 kW from the current 2 MW, but state regulators have not yet approved this change; the Michigan Public Service Commission increased the standard offer size limit to 2 MW in 2017.

3) States Examining Treatment of QF + Storage Pairings

As energy storage has grown as part of the electricity system, questions about how PURPA applies to combinations of renewable generation and storage have emerged. The Federal Energy Regulatory Commission (FERC) was considering many of these issues in a case concerning Montana wind projects where the developer proposed to add battery storage while maintaining the projects’ status as QFs. The total capacity of the projects would exceed 80 MW, the maximum for QFs, if the storage capacity counted towards the total capacity, but not if only generation capacity was counted. The matter was withdrawn before any substantive ruling was made. In the meantime, it is not clear whether storage that is added to an existing QF has to register as a separate QF, or whether the storage capacity counts in determining the total capacity of the QF.

In the absence of FERC rulings, a few states have been considering how to treat energy storage under PURPA. North Carolina regulators are in the process of determining what will happen when QFs with existing PURPA contracts add energy storage, with utilities proposing that the addition of storage should require the QF to enter into a new contract using current avoided cost rates. South Carolina’s major energy legislation passed in 2019 contains provisions on PURPA requiring new avoided cost methodologies be developed that consider the costs and benefits of energy storage. The Oregon Public Utility Commission is also conducting a regulatory proceeding examining the prices to be paid to renewable QFs paired with storage.

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Learn more about PURPA changes under consideration or current investor-owned utility avoided cost rates through our new DSIRE Insight offerings. For more information or to request a sample, email us at afproudl@ncsu.edu.