Texas
Incentives/Policies for Renewables & Efficiency
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Last DSIRE Review: 06/17/2009
| Incentive Type: |
Renewables Portfolio Standard |
| State: |
Texas |
| Eligible Renewable/Other Technologies: |
Solar Water Heat,
Solar Thermal Electric,
Photovoltaics,
Landfill Gas,
Wind,
Biomass,
Hydroelectric,
Geothermal Electric,
Geothermal Heat Pumps,
Tidal Energy,
Wave Energy,
Ocean Thermal
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| Applicable Sectors: |
Investor-Owned Utility,
Retail Supplier,
(Municipal Utilities and Coops May Opt-in)
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| Standard: | 5,880 MW by 2015; goal of 10,000 MW by 2025 |
| Technology Minimum: | Non-Wind: Goal of 500 MW |
| Credit Trading: | Yes |
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Web Site: |
http://www.puc.state.tx.us/
rules/subrules/electric/25.173/25.173ei.cfm
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Authority 1:
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Texas Utilities Code § 39.904
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| Date Enacted: | 06/18/1999 (subsequently amended) |
| Date Effective: | 09/01/1999 |
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Authority 2:
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PUCT Substantive Rule 25.173
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| Date Enacted: | 12/16/1999 (subsequently amended) |
| Date Effective: | 01/10/2000 |
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Summary:
In 1999 the Public Utility Commission of Texas (PUCT) adopted rules for the state's Renewable Energy Mandate, establishing a renewable portfolio standard (RPS), a renewable-energy credit (REC) trading program, and renewable-energy purchase requirements for competitive retailers in Texas. The 1999 standard called for 2,000 megawatts (MW) of new renewables to be installed in Texas by 2009, in addition to the 880 MW of existing renewables generation at the time. In August 2005, S.B. 20 increased the renewable-energy mandate to 5,880 MW by 2015 (about 5% of the state's electricity demand), including a target of 500 MW of renewable-energy capacity from resources other than wind. Wind accounts for nearly all of the current renewable-energy generation in Texas. The 2005 legislation also set a target of reaching 10,000 MW of renewable energy capacity by 2025.
To address concerns about the adequacy of the state’s transmission systems, the new law instructs the PUCT to require utilities to add to their transmission systems as necessary to meet the renewable energy goal, and to allow utilities to recover the cost of such projects in their electric rates.
The schedule of renewable energy capacity required and the corresponding compliance dates are as follows: - 2,280 MW by 1/1/2007
- 3,272 MW by 1/1/2009
- 4,264 MW by 1/1/2011
- 5,256 MW by 1/1/2013
- 5,880 MW by 1/1/2015
Qualifying renewable energy sources include solar, wind, geothermal, hydroelectric, wave or tidal energy, biomass, or biomass-based waste products, including landfill gas. Qualifying systems are those installed after September 1999. The RPS applies to all investor-owned utilities and to municipal and cooperative utilities that voluntarily elect to offer customer choice.
The PUCT established a renewable-energy credit (REC)-trading program that began in July 2001 and will continue through 2019. Under PUCT rules, one REC represents one megawatt-hour (MWh) of qualified renewable energy that is generated and metered in Texas. A capacity conversion factor (CCF) is used to convert MW goals into MWh requirements for each retailer in the competitive market. The CCF was originally administratively set at 35% for the first two compliance years, but is now based on the actual performance of the resources in the REC-trading program for the previous two years.
Pursuant to meeting the 500 MW non-wind goal contained in S.B. 20 of 2005, the PUCT has elected to award a "compliance premium" for each non-wind REC generated after December 31, 2007. Compliance premiums are functionally equivalent to an REC for the RPS compliance purposes and may only be awarded to non-wind facilities that were installed and certified by the PUCT after September 1, 2005. This method effectively doubles the compliance value of electricity generated by renewable resources other than wind.
Each retailer in Texas is allocated a share of the mandate based on that retailer’s pro rata share of statewide retail energy sales. The program administrator maintains a REC account for program participants to track the production, sale, transfer, purchase, and retirement of RECs. Credits can be banked for three years, and all renewable additions have a minimum of 10 years of credits to recover over-market costs. An adminstrative penalty of $50 per MWh has been established for providers that do not meet the RPS requirements.
In 2004, the PUCT amended the RPS regulations to change the formula for calculating final REC purchase requirements, add a mechanism to account for corrections to retail sales data, and allow the program administrator of the REC-trading program to petition for deadline changes under certain circumstances. The program website listed above contains the full list of PUCT rule proposals and adoptions since the inception of the program.
The PUCT has the authority to cap the price of RECs and may suspend the standard if necessary to protect the reliability and operation of the grid. For more information on RECs, including annual compliance reports, visit the ERCOT Renewable Energy Credit Trading Program website.
HB 1090 of 2007 clarified that RECs retired for other purposes (e.g. sold through a voluntary green power program) could not be counted toward the RPS requirements. HB 1090 also permits large utility customers served by transmission voltage to opt out of the RPS requirements. Finally, HB 1090 empowers the PUCT to establish alternative compliance payments (ACP) for the RPS and for the non-wind target. Thus far the PUCT has declined to set an ACP for either portion, although as noted above, an administrative penalty exists for providers that do not meet the general renewable energy obligation. The non-wind portion remains effectively voluntary without a penalty or an ACP.
Regulations for the "opt-out" provision were adopted by the PUCT effective January 2, 2009. The 2008 RPS report issued by ERCOT indicates that a total of 93 transmission voltage customers (unique meter IDs) elected to opt-out during 2008. Data such as the customer name and load (MWh) associated with these opt-outs remains confidential.
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