HELENA – Montana’s leading providers of wind energy are urging the governor to veto two utility-sponsored bills that they argue would destroy state-mandated renewable energy quotas.
Senate Bills 257 and 403 passed the Legislature and await action by Democratic Gov. Brian Schweitzer. He has until May 11 to sign or veto the bills. If he does neither, they automatically become law.
The companies Invenergy and NaturEner USA, along with three other renewable energy businesses, sent the governor a letter dated April 23 expressing concern the bills would stall renewable development in the state.
“It’s finding ways to reduce the amount of renewable power that will be developed in Montana and we think there’s a lot of great potential in the state,” said Mark Jacobson, director of development for Chicago-based Invenergy.
Invenergy operates the 130-megawatt Judith Gap Wind Farm in central Montana and NaturEner USA owns the new Glacier Wind Farm north of Great Falls. Together the two companies represent almost 90 percent of the total wind energy produced in Montana, which despite its vast wind resources is ranked 15th in the nation for production.
NextEra Energy Resources, a subsidiary of Florida Power and Light Group, Inc. that is the largest provider of wind and solar energy in North America, also signed the letter, along with the Irish wind company Gaelectric and photovoltaic manufacturer REC Silicon.
Senate Bill 403, sponsored by NorthWestern Energy, is a complex piece of legislation that seeks to make it easier for the company to meet renewable quotas set by state mandates.
At the center of conflicts over the bill stands an esoteric commodity known as a renewable energy credit. These certificates — often called RECs or ‘wrecks’ — are granted to developers for each megawatt hour of clean power generated.
“RECs are traded like potbellies, like gold, so they’re an environmental commodity and their prices goes up and down every day,” said Jeff Swenerton, spokesman for the Center for Resource Solutions, a nonprofit that certifies about half of the credits sold in the United States and which opposes the bills.
Under Montana law, utilities must buy an increasing amount of electricity from renewable sources, such as wind, solar or geothermal, stopping at a cap of 15 percent in 2015. But they also have to match those energy purchases with an equal amount of RECs — the goal being both to spur renewables’ development and ensure the power is only used once to meet mandated quotas.
SB 403, which passed the Legislature handily, would allow NorthWestern Energy and others to forego buying both the RECs and the energy.
“The effect is going to be to drive small-scale independent renewable folks out of the market and the reason for that is these RECs will be double counted,” said Sen. Ron Erickson, D-Missoula, during the Senate debate over the bill.
If counted twice, opponents contend the RECs will be worthless in regional trading markets.
But the utility has argued the measure is only intended to address what is essentially a double requirement for renewable purchases that results in higher bills for its customers.
Federal law already requires purchases from small renewable producers, also known as qualifying facilities. But NorthWestern says these producers usually do not sell their RECs along with the power, instead choosing to seek higher bids in regional markets. Under SB 403, NorthWestern could count power purchased from these facilities toward meeting their quota, even without purchasing the associated REC.
“We are out to protect the Montana consumers and still meet all of our guidelines under the renewable portfolio standard,” said Claudia Rapkoch, spokeswoman for NorthWestern Energy.
The second bill opposed by the wind developers, SB 257, has been shepherded by another large utility, PPL Montana.
It would allow hydroelectric dam upgrades to generate RECs. Since it applies retroactively to 2004, the measure would cover upgrades to the Kerr Dam southwest of Polson, as well as the planned Rainbow Dam upgrade.
The letter from the wind producers charges the change would flood the state’s REC market, in effect eroding mandates for purchasing renewable energy.
According to the governor’s office, if the state’s renewable portfolio standards were left alone, they would generate demand for about 11,000 credits between now and 2014, but under the change proposed by Senate Bill 257, roughly 300,000 credits would be generated by PPL Montana’s dam upgrades.
The hydroelectric company rejects the claim that counting upgrades as a renewable would undermine state incentives.
“If you talk about destroying a renewable energy credit market in Montana, you’re talking about a market that doesn’t even exist today,” said Dave Hoffman, spokesman for PPL Montana.
That’s because currently NorthWestern Energy already has enough RECs from the Judith Gap project to meet its quotas until at least 2013, leaving only a handful of smaller utilities with unfilled quotas.
But critics say that altogether the changes imposed by both bills could leave renewable developers in Montana holding RECs and power they cannot sell either in state or out of state.
“If you can’t tie a REC back to actual energy the chances are really good that there will be a lot of states that will view Montana’s RECs skeptically,” said Andrea Coon, director of Western Renewable Energy Generation Information System, which tracks credits for Western quota compliance markets. “It could be possible that a lot of states will just refuse energy being generated in Montana.”
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