The following is a contributed article by Autumn Proudlove, senior policy program director at the North Carolina Clean Energy Technology Center.
States have been at the forefront of clean energy policy for many years and 2021 was no exception, with states enacting numerous bills promoting clean energy technologies, grid modernization, and transportation electrification. The NC Clean Energy Technology Center, which manages the national Database of State Incentives for Renewables and Efficiency, has long tracked clean energy legislation across the country, and identified the following noteworthy trends in 2021 legislative activity:
Power sector decarbonization targets
A significant trend among state legislatures in 2021 was establishing targets for power sector decarbonization in order to address growing climate concerns. Specific policy approaches taken by states include increasing existing renewable portfolio standard (RPS) requirements or adopting new clean electricity standards or emission reduction targets.
In North Carolina, lawmakers enacted H.B. 951, requiring a 70% reduction in electricity-related carbon emissions by 2030 and carbon neutrality by 2050. Similarly, Oregon legislators adopted a target of reducing greenhouse gas emissions associated with electricity by 100% by 2040. In Illinois, legislation sets a target for power sector decarbonization by 2045, while also increasing the state’s RPS to 40% by 2030. Delaware also increased its RPS to 40% by 2035.
Massachusetts lawmakers enacted legislation setting a target of net zero economy-wide greenhouse gas emissions by 2050, and Rhode Island is requiring the development of a plan to reach net zero emissions across the state’s entire economy by 2050.
Promoting energy storage deployment
Another popular topic among state policymakers this year was promoting the deployment of energy storage through state targets or tax incentives. Connecticut and Maine became the eighth and ninth states to adopt energy storage targets, with Connecticut setting a target of 1,000 MW by 2030 and Maine aiming for 400 MW by 2030.
A growing number of states are also extending eligibility for property or sales tax exemptions for renewable energy projects to energy storage systems. Legislation enacted in Arizona, Colorado, Massachusetts, Nevada, Vermont and Virginia allows energy storage projects to receive property tax exemptions or abatements available to renewable energy, while bills passed in Arizona, Indiana and Virginia extend renewable energy sales tax exemptions to energy storage systems.
Expanding rooftop and community solar programs
While net metering credit reforms have been in the spotlight at state legislatures in recent years, activity related to net metering and community solar programs in 2021 was more focused on program expansion, with several states increasing aggregate program caps or expanding system size eligibility.
Bills enacted in Maryland and Massachusetts increased aggregate caps on net metering, while Illinois legislation increased system size limits for net metering and community solar projects from 2 MW to 5 MW and opened a new block of incentives for community solar development. Delaware’s S.B. 2 also increased the size limit for community solar facilities and loosened certain program requirements.
New Mexico lawmakers established a new community solar program for the state, the details of which are currently under consideration at the Public Regulation Commission. Another noteworthy development expanding customer access to solar is West Virginia’s enactment of H.B. 3310, authorizing the use of third-party power purchase agreements for on-site solar.
Solar decommissioning and siting rules
With utility-scale solar development booming in many parts of the country, a number of states are creating new requirements for the siting and decommissioning of these facilities. Much of the interest in solar siting is focusing on agricultural land, while the decommissioning conversation is geared toward financial assurances.
Legislation enacted in West Virginia requires solar and wind developers to post bonds to cover decommissioning costs for projects 1 MW and up. Texas’ S.B. 760 specifies that lease agreements between landowners and solar operators must include provisions on facility removal and a financial assurance. In Maine, the state legislature passed a requirement for ground-mounted solar projects occupying three or more acres to submit a decommissioning plan including a financial assurance to cover decommissioning costs.
Maine lawmakers also enacted a bill that directs the Department of Agriculture, Conservation, and Forestry to convene a working group on ways to discourage the siting of solar facilities on high-value agricultural land and to encourage development on more marginal agricultural land. Ohio’s S.B. 52 also addresses project siting, giving county commissions new authority to prohibit the construction of large solar and wind farms in particular areas before the projects reach the Ohio Power Siting Board.
Offshore wind development
Several states enacted bills related to wind energy this year, with the majority of these focused on offshore wind specifically. Many of these bills are designed to promote offshore wind development, with coastal states racing to establish themselves as leaders in this technology.
Legislation enacted in Oregon sets a goal of having 3 GW of floating offshore wind off the state’s coast by 2030. California’s A.B. 525 also requires that the California Energy Commission establish offshore wind goals to meet by 2030. In Massachusetts, S.B. 9 directs the state to procure an additional 2,400 MW of offshore wind by 2027, on top of the 1,600 MW procurement required by previous legislation.
A major focus area across the nation in recent years has been transportation electrification, and state legislatures are playing a key role in developing the policy framework around electric vehicles and charging infrastructure. State lawmakers are addressing electric transportation in numerous ways, such as adopting procurement targets for state fleets, establishing incentives, and directing utilities and regulators to take specific actions.
Connecticut and Hawaii enacted bills creating new requirements for the procurement of zero-emission vehicles by state fleets. Connecticut now requires that at least 50% of cars and light-duty trucks purchased or leased by the state are zero-emission vehicles by 2030. In Hawaii, all new light-duty state fleet vehicle purchases must be zero-emission vehicles starting in 2022. Maryland legislators also passed a bill requiring state transit bus purchases to be zero-emission buses starting in fiscal year 2023.
In other cases, state legislators are calling for utilities and regulators to take action on transportation electrification. In Illinois, S.B. 2408 requires large utilities to file beneficial electrification plans including make-ready infrastructure deployment, rates for vehicle charging, and optimized charging programs. In South Carolina and Virginia, legislation directs state regulators to examine transportation electrification
Another topic related to transportation electrification that continues to receive attention from state legislatures is that of additional registration fees for electric and hybrid vehicles. New fees were adopted in Oklahoma and South Dakota during 2021, while registration fees were increased by legislation enacted in Missouri. Currently, 30 states have additional registration fees for electric vehicles in effect.
Utility business model reforms are receiving a growing amount of attention from both state legislatures and utility regulators, with performance-based regulation being one of the approaches of greatest interest right now. As opposed to cost-of-service regulation, where utilities have an opportunity to earn a return on capital investments, performance-based regulation allows utilities to earn a return based on their achievement of specific metrics. The intent behind this is to better align the utility’s interest and the public interest.
As part of Illinois’ massive energy bill enacted in September 2021, the Illinois Commerce Commission is to establish a comprehensive performance-based ratemaking framework for utilities serving more than 500,000 customers. State lawmakers in Washington also enacted legislation directing the Utilities and Transportation Commission to develop a policy statement addressing alternatives to cost-of-service regulation, including performance incentive mechanisms. While not mandating performance-based regulation, North Carolina’s H.B. 951 authorizes its use.
Wholesale market reform
Another approach to regulatory reform in the spotlight during 2021 was wholesale market reform, and particularly the topic of states joining regional transmission organizations (RTOs). While a lot of market reform activity has been occurring at the regulatory level, such as the establishment of a new Southeast Energy Exchange Market, state legislatures have also been weighing in on the topic.
In Nevada, S.B. 448 requires transmission providers in the state to join an RTO by 2030. Colorado legislators also passed a bill directing transmission utilities to join an organized wholesale market by 2030. Meanwhile, Oregon lawmakers enacted legislation directing the State Department of Energy to prepare a report on the benefits, challenges and opportunities of developing or expanding an RTO in the state.
While the trends above highlight clean energy policy issues that are receiving a lot of attention from lawmakers, states continue to act as laboratories of innovation, taking unique policy approaches and testing their own solutions to these issues. Although most states have wrapped up their 2021 legislative sessions at this point, 2022 is right around the corner, and we expect to see many of these issues pop up again in legislation next year.