Ohio: Open for Advanced Energy Business

by Richard T. Stuebi

I’ve been waiting a long time to write this blog….

On May 1, Governor Ted Strickland signed into a law an energy bill SB 221, which includes an advanced energy portfolio standard (AEPS) that finally puts Ohio in the advanced energy game.

By 2025, 25% of electricity sold in Ohio must come from “advanced” energy sources, including renewable energy, fuel cells, clean coal powerplants, next-generation nuclear technologies, and energy efficiency. Of this 25%, half (or 12.5%) must come from renewables (primarily wind, solar and biomass), and 0.5% must come from solar energy. Additionally, half of the 25% is directed to come from generation sources located within the state of Ohio. And, by 2025, 22% energy reductions must be achieved by energy efficiency programs.

Critically, unlike previous drafts of the legislation, the energy bill as passed includes a gradual ramp-up of AEPS requirements, beginning as soon as the end of 2009. This means that the advanced energy industry in Ohio can begin to emerge right away, as utilities are required to meet AEPS requirements almost immediately. Also of importance, utilities are subject to penalties for AEPS non-compliance, known as “alternative compliance payments”, whose proceeds will be used to install advanced energy assets that otherwise should have been developed.

The only significant “out” for utilities is the existence of a so-called 3% price cap provision, in which utilities can ask the Public Utilities Commission of Ohio (PUCO) to allow less/later compliance with the AEPS requirements if they can prove that full compliance would increase the costs of wholesale power supply acquisition by more than 3%. Obviously, this will be an area of contention, requiring vigorous and diligent intervention at the PUCO to ensure that the analyses and assumptions used by utilities cannot spuriously claim a significant cost increase associated with advanced energy so as to evade compliance with AEPS requirements. It will be incumbent on those of us promoting an advanced energy industry in Ohio to keep these evaluations honest. Obviously, advanced energy advocates would have preferred no price cap provision, or a provision that was worded more favorably. That said, if the 3% price test is applied fairly, the advanced energy industry is confident that it can work with the language that was ultimately adopted.

Significant pre-existing limitations on “net metering” – the ability for customers to install their own power generation source and sell excess generation back to the grid – were alleviated. This should greatly improve the economics of deploying solar energy, fuel cells, and other forms of so-called “distributed generation” technologies in Ohio.

My colleagues from the legal firm Bricker & Eckler have prepared summaries that provide an excellent overview with more detail on SB 221.

In short, the law represents a major step forward for advanced energy policy in Ohio, and will create a substantial market for advanced energy technologies in our state, thereby helping us build this important industry here. The law does not contain everything we would have wanted, and not all of the wording is exactly as we would have liked, for the interests of advanced energy, I’d score this bill at least a 7 and maybe an 8 on a scale of 1 (poor) to 10 (excellent).

With this law passed, Ohio will now be solidly on the advanced energy map. Advanced energy companies of the world, take heed: Ohio is now open for business. Ohio will be one of the largest regional markets in the U.S. for renewables, which will surely attract the attention of the renewable energy manufacturers and installers to set up operations here, employ people here, and pay taxes here.

The list of people to thank for their contributions towards the passage of this critical legislation for the economic revitalization of Ohio is too long for a short note, but must include the following:

Governor Ted Strickland for firmly inserting the AEPS concept into the energy debates last summer.
The Governor’s Energy Advisor Mark Shanahan and his staff (especially Michael Jung) for insisting that the AEPS could not be jettisoned from the deliberations about overall electricity markets and regulation.
House Speaker Jon Husted for strengthening most of the AEPS provisions that found their way into the final bill.
House Public Utilities Committee Chairman John Hagan and House Alternative Energy Committee Chairman Jim McGregor for holding many hearings on advanced energy topics to ensure that the final bill would be drafted soundly.
Senate President Bill Harris for leading his Senate colleagues to concur unanimously with the bill passed by the House.
Erin Bowser and Amy Gomberg of Environment Ohio for their diligent work in educating lawmakers on the importance of a strong AEPS policy in Ohio.
Terrence O’Donnell of Bricker & Eckler and the members of Ohio Advanced Energy (especially Norm Johnston of McMaster Energy) for expressing the voice of Ohio businesses who see advanced energy as a huge growth opportunity – if Columbus legislators would only create a favorable market environment.
Hans Detweiler of the American Wind Energy Association and Colin Murchie of SunEdison for compellingly portraying the views of the national wind and solar industries and their interests in Ohio – if good policy were to be instituted.
Jack Shaner of the Ohio Environmental Council and Janine Migden-Ostrander and staff of the Ohio Consumers’ Counsel for their tireless advocacy to promote strong energy efficiency standards in the final bill.
Gene Krebs of Greater Ohio for, well, being Gene Krebs: advising anyone who cared to listen on how to navigate the byzantine processes of the Ohio Statehouse, with good humor to boot.
Juanita Haydel and Kamala Jayaraman of ICF Incorporated for producing an excellent analysis of the potential impact of AEPS policy on electricity prices in Ohio.
Ronn Richard, J.T. Mullen, and Bob Eckardt and the grantmaking staff (especially John Mitterholzer) of The Cleveland Foundation for providing me enough latitude to assist in these various efforts in Columbus, and for providing some financial support to some of them too.
Due Amici in Columbus for providing an excellent location for an end-of-day debrief over cocktails – and for serving the cocktails too. (Alas, not gratis.)

Now that the bill is law, the first half of the game is over, and we’re ahead at halftime. The second half of the game will be played at the PUCO, where the intentions of the lawmakers must be codified into fair and workable rules and procedures that cause the advanced energy industry in Ohio to actually come into being. So while this law is essential, in many ways, it is just the beginning. Expect many months, and perhaps years, of activity before the details are fully sorted out in the PUCO.

As I wrote in an editorial in last week’s Crain’s Cleveland Business, the advanced energy community will need to maintain a high level of activity at the PUCO to protect the interests of building this new industry to revitalize Ohio. We’ll be there.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

3 replies
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  1. […] Ohio: Open for Advanced Energy Business by Richard T. Stuebi I’ve been waiting a long time… […]

  2. […] May 1, 2008, then-Governor Ted Strickland signed Substitute Senate Bill 221 (SB 221), making Ohio one of 29 states (plus DC) in the country to establish energy efficiency […]

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