Author: Caitlin Marquis 1/6/2021 Smart Energy Decisions
The year 2020 was certainly one for the history books, and for many of us, the cycle of bad news throwing wrenches into our lives and our livelihoods could not have ended soon enough. In terms of energy policy, however, the year brought some good along with the bad. As companies lay out their energy plans for 2021, it’s worth reflecting on the trends that dominated energy policy in 2020 and will be shaping the debate for the year ahead.
1. COVID diverted attention from energy legislation—but advanced energy stands ready to contribute to a rapid recovery. As many state legislatures transitioned to remote work and focused intensely on COVID relief and closing budget gaps, clean energy legislation took a backseat in places like Illinois, where momentum for comprehensive energy legislation had been building prior to the onset of the pandemic. As the country looks toward recovery, however, the hard-hit advanced energy industry is an obvious choice for policymakers considering how to spend stimulus dollars: In eight states analyzed by Analysis Group on behalf of Advanced Energy Economy and the Texas Advanced Energy Business Alliance, investments in advanced energy were shown to deliver a strong return on investment for the overall economy of each state (measured by Gross State Product, or GSP), ranging from a four-fold impact to as high as 14 times the public investment. The analysis projects that public investment in advanced energy would draw roughly two-and-a-half times as much in private capital, with both then rippling through the economy and producing millions of jobs. Companies interested in both a speedy economic recovery and a speedy transition to a cleaner energy system can advance both goals at once by calling for strong consideration of advanced energy in state and federal recovery efforts.
2. States continued to lead on clean energy, and are likely to remain central. This theme could be copied and pasted from annual clean energy policy trend reports over the last several years, but if it’s a broken record, it’s a welcome one. Virginia came out of the gates with a bang in 2020, passing the Virginia Clean Economy Act and setting the state on a path to 100% clean energy by 2050. The new law includes an “Accelerated Renewable Energy Buyers” provision allowing companies with corporate sustainability targets that have already made investments in Virginia or PJM to meet the renewable energy targets through their own purchases. More recently, the Arizona Corporation Commission approved rules requiring regulated utilities in the Grand Canyon state to transition to 100% clean energy by 2050. Across the country, more than one quarter of states now have a 100% clean energy policy or goal in place. Companies with an interest in clean energy should focus their attention on states like Illinois and Minnesota, where there are likely to be opportunities for progress, as well as in states where momentum will be building over the next year to enable action in 2022 and beyond.
3. Green tariffs continue to be a vital tool for companies to meet renewable energy targets in vertically integrated markets. Utility renewable energy programs, or green tariffs, have come a long way since the first handful of programs were approved in 2013, but they are utility-specific and subject to lengthy regulatory review, so these programs grow slowly despite their popularity. In 2020, new or expanded programs were approved in several states, including Florida (Florida Power & Light), Michigan (Consumers Energy), Kentucky (East Kentucky Power Cooperative), and Georgia (Georgia Power). Programs awaiting regulatory approval include Duke Energy Florida’s Clean Energy Connection and Detroit Edison’s Rider 19 in Michigan. With corporate engagement and support, additional utilities could move forward with proposals in 2021.
4. Some states started questioning their participation in competitive wholesale markets. Following FERC’s decision late last year to direct PJM Interconnection (PJM), the nation’s largest regional grid operator, to expand the minimum offer price rule (MOPR), which has been seen as undermining state clean energy policies, states in PJM and elsewhere have begun to consider taking back certain responsibilities currently served by competitive wholesale markets (for more on MOPR, see an earlier AEE post in Smart Energy Decisions). Large energy buyers have been vocal proponents of competitive, organized wholesale markets due to cost and reliability benefits, as well as the flexibility these markets afford for companies to procure advanced energy directly. Devolving certain aspects of these markets back to individual states threatens to diminish these benefits. The tension between state policies and federal regulations is certain to continue into 2021, and companies can engage in reform efforts at the Regional Transmission Organizations and Independent System Operators (RTOs/ISOs) as well as discussions in states like New Jersey, Maryland, and New York, where regulators are considering taking matters into their own hands.
5. Wholesale market expansion efforts moved forward in two new regions, but not quickly or smoothly. In the West, discussions about potential RTO expansion or creation advanced slowly. One step forward came in Nevada, where legislative leaders called on the Governor, the state’s utility regulators, and its largest utility to pursue an integrated regional power market. In the Southeast, a joint utility proposal for a “Southeast Energy Exchange Market” (SEEM) was met with skepticism and criticism when it leaked earlier this year. The proposal falls far short of creating a fully competitive RTO/ISO in the region, which a study released earlier this year found would produce $384 billion in savings by 2040. Regardless of whether FERC approves SEEM, much work remains to achieve the potential cost and clean energy benefits of an RTO/ISO in both the West and Southeast.
6. Meanwhile, FERC moved forward two key policies that should benefit advanced energy resources. In September, FERC issued Order No. 2222, a long-awaited final rule directing RTOs/ISOs to enable aggregated distributed energy resources (DERs) to participate in wholesale markets. Such participation could provide new revenue streams for owners of onsite solar and other DERs. Development of these market rules will be a key focus for RTO/ISO stakeholders in 2021, and interested companies can engage in that process. FERC also issued a draft policy statement that, if finalized, would confirm its authority to review and approve RTO/ISO tariffs that reflect a state-set carbon price, and encouraging RTOs/ISOs to work with states to adopt such rules. While still a draft and currently limited to carbon pricing, this policy opens the door for the broader RTO/ISO reform discussions mentioned above, efforts that companies can engage in and support.
7. Electric vehicles continued to gain traction with policymakers, large companies, and consumers. As Smart Energy Decision has reported, companies like Amazon, Uber, and IKEA North America have all ramped up plans to electrify their fleets. State policymakers have also made significant commitments to electrification, with California taking multiple notable actions this year. In June, the California Air Resources Board (CARB) approved the world’s first zero-emission commercial truck requirement, the Advanced Clean Trucks (ACT) rule, which requires manufacturers of trucks to sell an increasing percentage of zero-emission trucks in the state. Then, in July, the state signed onto an Memorandum of Understanding (MOU), along with 15 other states and the District of Columbia, which calls for 100% of new truck and bus sales in the state to be zero-emission by 2050. Finally in September, Gov. Gavin Newsom signed an executive order requiring that 100% of light-duty vehicles sold in the state be zero emission by 2035 as well as 100% of medium- and heavy-duty vehicles by 2045. New York approved over $700 million in EV infrastructure spending, and regulators and legislators in Florida, New Jersey, and North Carolina all moved forward with EV policies this year. With consumers also choosing EVs at a growing rate, the focus on electrification will continue to spread, creating opportunities for companies looking to electrify their fleets in states across the country in 2021 and beyond.
8. Policymakers and companies worked to better integrate environmental justice and equity into their clean energy policy priorities. As the nation’s attention turned to issues of racial justice, and as the pandemic shone a spotlight on social and economic inequities, efforts to incorporate justice, equity, and inclusion in their sustainability policies ramped up. Announcements about procurements that prioritize community benefits, investments in environmental and social justice efforts, and new ways of evaluating and amplifying the equity and environmental justice impact of clean energy efforts by companies like Microsoft, Google, and Salesforce were mirrored by policy efforts in states like Illinois and New Jersey. This trend is one that will only become more prominent moving forward, and companies would be well served by taking a close look at how their policy engagement and clean energy procurement efforts align with the goals of equity and environmental justice advocates.
This is hardly an exhaustive list from an exhausting year, but as we look forward to 2021, these trends from 2020 should inform how and where companies choose to spend their time and resources in pursuit of the clean energy they want to power their operations.
Caitlin Marquis serves as a technical and strategic expert across multiple initiatives at AEE. She leads the regulatory and legislative engagement of the Advanced Energy Buyers Group, a coalition of leading companies that are working to expand their use of advanced energy. Caitlin also supports AEE’s engagement on wholesale markets, with a particular focus on ISO-New England, as well as AEE’s efforts on federal carbon regulation and policy. Before joining AEE, Caitlin worked at Altenex, LLC (now Edison Energy), helping companies with renewable energy procurement.