Renewable Portfolio Standard

As part of the Oregon Renewable Energy Act of 2007 (S.B. 838), the state of Oregon established a renewable portfolio standard (RPS) for electric utilities and retail electricity suppliers. This RPS was updated by S.B. 1547* in 2016 to raise the target to 50% renewable energy by 2040. Different RPS targets apply depending on a utility's size. Electricity service suppliers must meet the requirements applicable to the electric utilities that serve the territories in which the electricity service supplier sells electricity to retail consumers.

Requirements

Large investor-owned utilities -- those with 3% or more of the state's load -- must ensure that a percentage of the electricity sold to retail customers in-state be derived from eligible renewable energy resources according to the following schedule:

• 5% by 2011
• 15% by 2015
• 20% by 2020
• 27% by 2025
• 35% by 2030
• 45% by 2035
• 50% by 2040

Smaller utilities are subject to lower standards. Utilities with less than 1.5% of state load must meet a 5% RPS by 2025. Utilities with more than 1.5%, but less than 3% of state load must meet a 10% RPS by 2025. However, utilities that buy into a new coal plant or sign a new contract specifically for new coal power and publicly-owned utilities that annex investor-owned utility territory without consent (aside from municipal utilities under certain conditions) are subject to the “large utility” standards. Utilities with less than 3% of state load as of 2007 that subsequently serve over 3% of retail load in three consecutive years must meet a 25% RPS within 20 years. Large consumer-owned utilities must also meet a 25% target for 2025 and subsequent calendar years.

Eligible Technologies
Eligible renewable resources include electricity generated from solar, solar thermal, wind, hydropower, ocean thermal, wave, and tidal power, geothermal, hydrogen derived from certain renewable sources, municipal solid waste, and biomass, including biogas. S.B. 1547 (2016) also made thermal energy for a secondary purpose produced by facilities that generate electricity from biomass eligible. Only 9 MW of municipal solid waste can count towards the RPS each year. Incineration facilities using chemically-treated wood are not eligible. Eligible resources must be located within Western Electricity Coordinating Council (WECC) territory or must be designated environmentally preferable by the Bonneville Power Administration (BPA).

To qualify as an eligible renewable resource, electricity must be generated by a hydroelectric facility that becomes operational on or after January 1, 1995. Electricity from facilities operational before January 1, 1995 may be eligible if the electricity is attributable to efficiency upgrades completed on or after January 1, 1995, or if the facility is certified as low-impact. A limited amount of hydropower from facilities operational before 1995 can qualify as an eligible resource under certain conditions. 50 average MW of utility-owned, pre-1995, low-impact hydropower can be used for compliance; 40 average MW of non-utility-owned, pre-1995, low-impact hydropower can be used for compliance. H.B. 3674 (2010) allowed pre-1995 biomass and municipal solid waste facilities to be eligible for RPS compliance. Additionally, with the passage of H.B. 2622 (2011), electricity generated by facilities that burn coal as a fuel source, but stop burning coal completely and convert to renewable energy after January 1, 2012, can be used to comply with the RPS.

Compliance

the use of bundled renewable energy credits (RECs) issued or acquired during the compliance year, unbundled or banked RECs , or alternative compliance payments.The purchase of renewable energy credits (RECs) must occur through the Western Renewable Energy Generation Information System (WREGIS). RECs may be either bundled with, or purchased separately from, electricity contracts. RECs must come from a facility located within the Western Electricity Coordinating Council (WECC). Unbundled RECs can meet only 20% of a large utility's compliance obligation and 50% of a large consumer-owned utility's obligation until 2020. After 2020, large consumer-owned utilities can use up to 20% unbundled RECs to meet their compliance obligations.** A consumer owned utility that transitions from the small to large utility category may use up to 100% unbundled RECs to comply when its compliance requirement is 5%; 75% unbundled RECs when its compliance requirement is 15% and 20%; and 20% unbundled RECs when its compliance requirement is 25%. Most RECs associated with renewable energy that come online by 2022 may be banked and carried forward for compliance indefinitely.*** RECs associated with renewable energy sources that become operational in 2023 or later may be banked or carried forward for five years.

RECs cannot be counted toward compliance with both Oregon's RPS and an RPS of another state or use in voluntary “green power” programs. However, RECs can be counted toward both Oregon's RPS and a federal RPS should one be enacted.

In order to reflect changes made by Senate Bill 1547 (2016), the Oregon Department of Energy's Rulemaking in 2017 amended the requirements for stranded thermal generation, updated the language on allowable REC vintages, and required that electricity service suppliers (ESSes) and distribution utilities must mutually agree upon a delivery point for generation eligible to produce bundled RECs.

Carve-Outs and Credit Multipliers
S.B. 1547 also established a requirement that by 2025 at least 8% of Oregon's aggregate electrical capacity come from small-scale, community renewable energy projects with a capacity of 20 megawatts (MW) or less. Community renewable energy projects may include small scale renewable energy projects as well as combined heat and power facilities using biomass. This requirement existed as a goal under the previous legislation. S.B. 339 (2017) allowed up to 20 MW from combined heat and power facilities using biomass to meet the 8% community-based renewable energy projects requirement described above.

The RPS also includes a multiplier for small solar. PV systems with a capacity of 500 kW to 5 MW installed within Oregon prior to January 1, 2016 will be credited for two kilowatt-hours (kWh) for each kWh generated, with respect to RPS compliance.

Cost Mitigation Measures
There are two mechanisms that serve as cost protections for Oregon consumers -- an alternative compliance payment (ACP) mechanism and an overarching “cost cap” on utility RPS expenditures. In lieu of procuring renewable resources, utilities can pay an ACP to be placed in a holding account to be spent on energy conservation programs or procuring eligible resources. The Oregon Public Utilities Commission (PUC) established the 2014-2015 ACP rate as $110 per megawatt-hour (MWh) for Portland General Electric, Pacific Power, and electric service providers. The governing body will establish an ACP rate for consumer-owned utilities. Electric utilities are not required to fully comply with a renewable portfolio standard during a compliance year to the extent that compliance costs exceed 4% of the utility's annual revenue requirement for the compliance year.

Utilities are also exempt from RPS compliance requirements if the purchase of electricity from eligible sources would:

• exceed a utility's projected load requirements;
• require the utility to substitute eligible renewable electricity for sources other than coal, natural gas or petroleum;
• require the utility to substitute eligible renewable electricity from existing large hydropower located on the Columbia River; or
• reduce a consumer-owned utility's purchase of the lowest price electricity from the BPA.

Investor-owned utilities are allowed to recover all of their prudently-incurred costs, including above-market costs, associated with RPS compliance in electricity rates.

Investor-owned utilities and electricity service suppliers must submit a compliance report annually to the PUC. Consumer-owned utilities must submit the report to the members or customers of the utility. The PUC can impose penalties against investor-owned utilities or suppliers that fail to comply with the RPS in an amount the PUC determines -- in addition to any alternative compliance payment. Payments will be transmitted to the Oregon Energy Trust to support renewable energy and energy efficiency programs.

In addition, the PUC has authority by statute to temporarily suspend a utility’s RPS obligations if meeting those obligations would threaten reliability standards established by North American Reliability Corporation.

* The 2016 legislation also requires Oregon’s large utilities to phase out coal-fired resources from their allocation of electricity by 2030, as well as to pursue all cost-effective energy efficiency and demand-response measures, and to propose programs for transportation electrification. It establishes a community solar program and orders the PUC to craft rules for participation.

** There is no limit to unbundled RECs associated with facilities located in Oregon that are net metered, not directly connected to a distribution or transmission system, or qualifying facilities under the Public Utility Regulatory Policies Act.

*** Certain RECs may only be banked and carried forward for five years. Those are RECs associated with qualifying renewable energy that came online on or before the effective date of S.B. 1547 or between 2016 and 2022 under a contract of less than 20 years; or RECs issued more than five years after a qualifying energy source becomes operational