Where most state governments have undertaken measures to promote the development of renewable energy resources and improve the efficiency of energy being used, an effort has been made recently in Ohio to scale back these initiatives. Since 2008, Ohio has mandated that by 2025, 12.5% of its electricity be developed from renewable sources, half of which must be located within the state, while also requiring that utilities reduce energy costs by 22% through energy efficiency. These goals are the target of Substitute Senate Bill 58, which was recently introduced by State Senator William Seitz, the chairman of the Senate Public Utilities Committee.
Big Bad Substitute Senate Bill 58
So what makes Senate Bill 58 such a dangerous proposition?
Well, it comes down to two provisions…
First let’s take a look at the proposed changes to renewable energy.
Mr. Seitz’s bill would leave in place, albeit begrudgingly, the state’s renewable energy portfolio standard, which requires, by the year 2025, that at least 12.5% of Ohio’s electricity be generated from renewable sources. However it would strip away the requirement that at least 6.25% of that renewable energy be sourced in state. Seemingly a small change, it is one that will have significant impact on electricity prices in Ohio, as well as on the state’s economic development.
Raiding the Consumers Wallet
Because renewable electricity generators would now have little incentive to locate in Ohio under this bill, Ohioans can expect to begin paying more for their electricity. The reason being because renewable generation sources, such as solar and wind, tend to produce electricity very cheaply. The cheap electricity that they produce is bid into PJM’s day-ahead power markets, helping lower wholesale electricity prices due to the stacked-bid process. Furthermore, the inexpensive electricity produced by renewable sources is bid into PJM’s yearly capacity auctions. Again, the stacked-bid nature of this process, allows this cheaper electricity to displace more expensive natural gas, bringing prices down for capacity, a sizeable component of electricity prices. Without the contributions of renewable electricity generation, Ohioans could end up paying hundreds of dollars more in electricity costs each year – and that’s not good for anyone.
A Blow to Economic Development
If there’s one thing that Ohio doesn’t need, it’s anything that impedes economic development, yet that is something this bill threatens to do. The current energy standards in place have been estimated to have already produced over 3,000 jobs, and an additional 3,000 jobs are expected to be created by 2025. Many of those jobs could be lost or fail to materialize by removing the incentive for the development of renewable energy within the state. And it won’t just be those directly associated with renewable electricity projects that will be affected. Industries, such as construction and manufacturing will also be hurt without further development of renewable electricity. Hundreds of companies in Ohio and thousands of employees are involved in one form or another in providing renewable electricity, and all would be negatively impacted by these proposed changes.
And what about those changes Senate Bill 58 would make to energy efficiency?
Current law requires utilities to reduce retail electricity sales by 22% by the year 2025, mainly through the implementation of energy efficiency projects. Qualifying projects are required to save customers more than they cost, and customers that implement such projects can enjoy those savings until Ohio reaches its cost reduction. Utilities are able to help customers pay for these projects through a special rider that all Ohio electricity consumers pay each month. There are also incentives in place for utilities to achieve increased savings beyond the mandated targets. On top of this, Ohio utilities are required to bid energy efficiency projects into the PJM capacity markets, something that helps lower required capacity in the region, saving consumers money.
The current law certainly sounds like promising legislation, but Senate Bill 58 would draw red lines through much of it. The requirement to reduce retail electricity sales by 22% would still remain, but little else would. The definition of energy efficiency projects would be expanded. Sounds good, except those expansions would allow projects that promote water efficiency and use of recycled material to qualify. Also, upgrades made to power plant equipment and transmission and distribution systems by utilities would be considered as energy efficiency projects. These types of projects are all worthwhile pursuits, except that none of them help reduce the demand for electricity, which after all is the goal of the bill. On top of this, Senate Bill 58 would impose a spending cap towards the achievement of reducing electricity demand. So in other words, they would like to limit the money available for energy efficiency, yet spend that money on projects that really don’t improve energy efficiency. Sounds like a great way to reduce electricity demand.
This proposed bill will also remove any incentives for utilities to go beyond meeting the efficiency targets. Until those targets are met, utilities will get a third of the benefits of such projects, but nothing once those targets are achieved. Oh, and all these energy efficiency projects will no longer be required to be bid into PJM’s capacity auctions by the utility. Only when demand reductions have been achieved, will utilities have to bid energy efficiency into the auction, which means that Ohio electric consumers can expect to pay more for the capacity portion of their electricity.
Can the Advance be Stopped?
While Senate Bill 58 seems inherently inconsiderate to the energy goals of Ohio, it does seem to have some political traction, as the Ohio House of Representatives has plans to develop a companion bill to this with hopes of voting on something this year. Despite this support, this bill has already received considerable pushback from consumer groups, environmentalists and even the Mayor of Cleveland, Frank G. Jackson. The utilities themselves also seem a little unsure of whether Senate Bill 58 is actually a good thing.
Senate Bill 58 doesn’t have to happen. Ohioans – still stand up for lower electricity costs and cleaner, local electricity, and prevent the assault on your energy goals!
The following is an opinion post by David Thurnau. David writes content for several companies on topics related to energy, sustainability, and government policy.
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