Biomass Thermal in Renewable Portfolio Standards
In 1932, U.S. Supreme Court Justice Louis Brandeis referred to the states as laboratories for policy experiments, popularizing the concept as a pillar of American federalism that is still relevant today. Nowhere is this more apparent than in energy policy. While there has been a lack of significant legislation on the federal level, states have moved ahead in developing innovative mechanisms, such as renewable portfolio standards (RPS), to encourage the development of our nation’s renewable energy resources. While thermal energy has not played a significant role in most RPS policies, there are a few laboratories to look to as the biomass thermal industry continues to move forward on this issue.
As of January, 29 states and the District of Columbia had enforceable RPSs or other mandated clean energy capacity policies. These programs require retail electric utilities to provide a specified percentage of their electricity from qualifying renewable sources. Even though the primary focus of an RPS is electricity generation, several states also include the output of renewable thermal energy. But of those, only four currently recognize thermal energy derived from biomass sources. Arizona, Iowa, North Carolina and Wisconsin all have varying policies on how they incorporate biomass thermal into their RPSs, and several states, such as Massachusetts, New Hampshire, Ohio, Vermont and Virginia, are actively considering adding biomass thermal as a qualifying renewable energy source.
The four existing state laws differ in both the definition of biomass thermal and the mechanisms used to measure the output of thermal energy. While the biomass industry is all too familiar with the inconsistencies among different governing bodies on what constitutes biomass, there are also differences on what qualifies as renewable thermal energy. Iowa simply expanded the eligibility for renewable energy credits (REC) to include heat generated for a commercial purpose from a renewable energy source, including biomass. Similarly, Wisconsin defines non-electric facilities, which qualify for renewable resource credits, as the thermal output generated from biomass, biogas, and densified fuel pellets. On the other hand, Arizona specifically incorporates biomass thermal systems into its RPS, not including wood stoves, furnaces, and fireplaces, while North Carolina has only added waste-heat derived from a renewable energy resource such as biomass and used to produce useful, measurable thermal energy.
Incorporating thermal energy into an RPS also requires mechanisms to support compliance. Both Arizona and Iowa explicitly define how thermal energy units are measured and integrated into the renewable energy trading system. In Arizona, one REC is granted for each 3,415 Btu of heat produced by a biomass thermal system, while in Iowa, renewable energy tax credits equal $4.50 per 1 million Btu. This is in contrast to Wisconsin law, in which RECs are created for thermal energy based on the amount of conventional electricity it displaces.
In addition to existing policies, legislation has been introduced in several state legislatures seeking to add biomass thermal to RPS programs. A New Hampshire bill would qualify biomass thermal energy for RECs under Class I of the state RPS. This additional revenue gained from the sales of RECs would incentivize switching to renewable biomass in a state that spends more than $1 billion annually on heating oil and propane, with almost 80 percent of that flowing out of New Hampshire’s economy. New Hampshire could displace its demand for heating oil and propane by an estimated 18.5 percent by utilizing sustainably sourced wood and agricultural biomass alone. In doing so, the state could potentially retain more than $250 million annually in its economy and create or retain up to 6,500 jobs.
Each state RPS signifies an important opportunity to recognize the significance of thermal energy and promote the use of renewable resources to meet this demand, which accounts for approximately one-third of our nation’s energy consumption. If states are truly the laboratories of policy experiments, it is essential that the biomass thermal industry continues to build upon this momentum within state legislatures. This becomes especially important as policy makers look to state RPS programs when evaluating the recently introduced Clean Energy Standard Act of 2012, which would create a national clean energy mandate that includes a provision to study how thermal energy may be incorporated in the future.
Author: Stephen Gunther
Policy and Government Affairs Fellow
Biomass Thermal Energy Council