Renewable Portfolio Standard (RPS)

• An RPS forces increased use of renewable energy

Senate energy bill has RPS, House bill does not

• RPS will be one of many contentious issues in conference

• Requires investor owned electric retailers to have “renewable energy credits” as a percentage of sales

• Percentage: 1% in 2005 increasing to 10% in 2019


Renewable Energy Credits

• Renewable energy credits are issued by DOE to applicants based on kWh of renewable generation

• Renewable energy: solar, wind, ocean, geothermal, biomass, and landfill gas

• Credits are normally bankable for up to 4 years and can be sold

• An active national credit market is expected

• DOE will sell credits at 1.5 ¢/kWh establishing price cap

• Credits from use of an existing unit ( e.g. co-firing biomass) cannot be banked or sold


RPS Biomass Definition

“(1) BIOMASS.—The term ‘biomass’ means any organic material that is available on a renewable or recurring basis, including dedicated energy crops, trees grown for energy production, wood waste and wood residues, plants (including aquatic plants, grasses, and agricultural crops), residues, fibers, animal wastes and other organic waste materials, and fats and oils, except that with respect to material removed from National Forest System lands the term includes only organic material from—
“(A) thinnings from trees that are less than 12 inches in diameter;
“(B) slash;
“(C) brush; and
“(D) mill residues.


RPS Implementation Points

• Electric retailers don’t have to actually generate or use renewable energy, just have credits

• Credits will be produced where cheapest and sold to other areas

• Analyses have indicated that credit prices may be well below the 1.5¢/kWh cap, at least in early years


Current Renewable Tax Credits

Wind and closed-loop biomass*
• Facility built after 1992 & before 2004
• 1.5 ¢/kWh tax credit for 10 years
Open loop-biomass
• No tax credit

* Using vegetation planted exclusively for use as a fuel in a qualified facility to produce electricity


Proposed Renewable Tax Credits

Wind and closed-loop biomass
• Facility built after 1992 & before 2007
• 1.5 ¢/kWh tax credit for 10 years

Open-loop biomass
• Facility built before enactment
• 1 ¢/kWh tax credit for 3-5* years
• Facility built after enactment but before 2005-2007*
• 1.5 ¢/kWh for 3-10* years

* Indicates Senate and House dates


Tax Open-Loop Biomass Definition*

OPEN-LOOP BIOMASS.—The term ‘open-loop biomass’ means any solid, nonhazardous, cellulosic waste material which is segregated from other waste materials and which is derived from—
(A) any of the following forest-related resources: mill residues, precommercial thinnings, slash, and brush, but not including old-growth timber,
(B) solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes (other than pressure-treated, chemically-treated, or painted wood wastes), and landscape or right-of-way tree trimmings, but not including municipal solid waste (garbage), gas derived from the biodegradation of solid waste, or paper that is commonly recycled, or
(C) agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.

• From House version of Energy Bill. Senate version is slightly different.