Ohio Requires 25% Renewable or Advanced Energy by 2025

May 7, 2008

Ohio Governor Ted Strickland approved a bill on May 1 that will require the state's utilities to draw on renewable or advanced energy for 25% of their electricity supply by 2025. Senate Bill 221 requires renewable energy to meet at least half of that requirement, which starts at 0.5% by the end of 2009 and gradually ratchets up to 25% by the end of 2024. So the actual renewable energy requirement starts at 0.25% at the end of 2009 and increases to 12.5% by the end of 2024. The bill defines renewable energy as electricity produced from solar electric systems, wind power, geothermal energy, biomass energy, low-impact hydropower, and fuel cells, regardless of their type and the fuel they use. A small fraction of the renewable energy must come from solar energy, starting at 0.004% of all electricity sales by the end of 2009 and increasing to 0.5% of electricity sales by the end of 2024. At least half of the renewable energy facilities must be located within the state, and renewable energy credits may be used to meet the requirement.

The bill deviates from most state renewable energy requirements by allowing half of the 25% requirement to be met through demand-side management, energy efficiency improvements for customers, and efficiency improvements at existing power plants that increase the plants' generating capacity. It also allows for power produced from customer-located cogeneration systems, which produce both heat and electricity, and from "clean coal" power plants, advanced nuclear power plants, and advanced waste-to-energy plants. Utilities that fail to meet the requirements will have to make payments to the state's advanced energy fund, unless the utility can show that the electricity from renewable or advanced energy sources would cost at least 3% more than electricity from traditional energy sources. The bill also lifts some restrictions on net metering of customer-located power generators and lifts all restrictions on net metering of generators located at hospitals. Net metering is a method of giving credit for power fed into the grid by customers.

While allowing energy efficiency and demand-side management programs to meet a portion of the advanced energy requirement, the bill also establishes separate requirements for energy efficiency and demand-side management. Starting in 2009, utilities will have to implement energy efficiency programs that achieve annual energy savings equal to at least 0.3% of their electricity sales, gradually increasing to 1% of sales for 2014-2018, then doubling to 2% of their sales for 2019-2025. By 2025, this will achieve a cumulative energy savings greater than 22% of today's electricity sales. Utilities will also have to implement demand reduction programs designed to achieve a 1% reduction in peak demand in 2009 and an additional 0.75% reduction each year through 2018. To further encourage such programs, the state's utility commission may approve measures to decouple utility revenues from actual electricity sales, that is, if sales go down because of energy-saving programs, the utility's profits won't suffer. Such "revenue decoupling" measures may also be established for natural gas utilities. Utilities must also report on their greenhouse gas emissions and establish plans to control those emissions. See the governor's press release and the full text of the bill.