Renewable Energy Standard

With the passage of Initiative 937 in 2006, Washington became the second state after Colorado to pass a renewable energy standard by ballot initiative. Initiative 937, which was enacted as the Energy Independence Act (EIA), calls for electric utilities that serve more than 25,000 customers in the state of Washington to obtain 15% of their electricity from new renewable resources by 2020 and to undertake all cost-effective energy conservation. Investor-owned utilities, municipal utilities, rural electric cooperatives, and public utility districts are subject to this standard.* Of Washington's 62 utilities, 18 are considered qualifying utilities, representing about 80% of Washington's load (including load served by the Bonneville Power Administration).

The EIA also requires utilities to pursue all conservation that is cost-effective, reliable, and feasible. More information about the conservation requirements of the EIA is available here.

S.B. 5116 of 2019, the Clean Energy Transformation Act, requires the transition to 100% clean electricity by 2045. To begin the transition, all utilities must eliminate coal from their state portfolios by December 31, 2025. Starting in 2030, utilities must be greenhouse gas neutral, which allows utilities to meet a portion of the requirement through certain offsets. By 2045, all electricity in Washington must be renewable or non-emitting. The Washington Utilities and Transportation Commission is currently developing rules to implement the law. The summary below describes the Renewable Energy Standard, as enacted by Initiative 937.  

Requirements
Utilities subject to the standard must use eligible renewable resources or acquire equivalent renewable energy credits (RECs), or a combination of both, to meet the following annual targets:

• At least 3% of its load by 1/1/2012, and each year thereafter through 12/31/2015;
• At least 9% of its load by 1/1/2016, and each year thereafter through 12/31/2019; and
• At least 15% of its load by 1/1/2020, and each year thereafter.

Investor-owned utilities subject to the standard are entitled to recover all prudently incurred costs associated with compliance. 

Eligible Technologies
“Renewable resources" include electricity produced from: water, wind, solar energy, geothermal energy, landfill gas, wave, ocean, or tidal power, gas from sewage treatment facilities, biodiesel fuel (must meet specified standards), and biomass energy based on organic byproducts of the pulp and wood manufacturing process, animal waste, solid organic fuels from wood, forest, or field residues, or dedicated energy crops. Specifically excluded from the definition are wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chrome arsenic; wood from old growth forests; and municipal solid waste. S.B. 5128 (2017) allows incremental electricity produced as a result of a capital investment to qualify as an eligible renewable resource. The investment must be completed after January 1, 2010 and increase electric generation in a biomass facility. 

Electricity from renewable resources other than fresh water is eligible for compliance if the generation facility begins operation after March 31, 1999. The facility must be located in the Pacific Northwest or the electricity from the facility must be delivered into Washington State on a real-time basis. "Pacific Northwest" has the same meaning as defined for the Bonneville Power Administration in Section 3 of the Pacific Northwest Electric Power Planning and Conservation Act (94 Stat. 2698; 16 U.S.C. Sec. 839a).  For qualifying utilities that serve customers in other states, the electricity from a non-fresh water generation facility is eligible for the RPS if the facility is located in the state where the qualifying utility serves retail electrical customers, and the utility either owns the facility in whole or part or has a long-term contract with the facility of at least 12 months.  Electricity from qualified biomass energy that began operation prior to March 31, 1999 is eligible if it contributes to a qualifying utility's load and is owned by a qualifying utility or an industrial facility that is directly interconnected to the utility.  Hydroelectric generation projects are eligible if:

• Incremental electricity produced as a result of efficiency improvements completed after March 31, 1999, are made to hydroelectric projects owned by a utility subject to this standard and located in the Pacific Northwest where the generation does not result in new water diversions or impoundments; or 
• Hydroelectric generation in irrigation pipes, irrigation canals, water pipes whose primary purpose is for the conveyance of water for municipal use, and wastewater pipes located in Washington where the additional generation does not result in new water diversions or impoundments.

Credit Multipliers and Special Provisions
Distributed generation, defined as a "generation facility or any integrated cluster of such facilities" with a capacity of five megawatts (MW) or less, may be counted as double the facility's electrical output if the utility owns the facility, has contracted for the distributed generation and the associated RECs, or has contracted to purchase only the associated RECs. Eligible renewables from a facility that began operation after December 31, 2005 where the developer used an approved apprenticeship program during facility construction may count as 1.2 times the value. Multiplier credits may not be traded and turned in for compliance separately from the underlying RECs. 

Facilities that capture and destroy methane from a digester, a landfill gas collection system, or other means may separate the nonpower attributes into carbon offsets or greenhouse gas emission reduction credits and RECs, and may trade these credits or offsets separately from the RECs.   

Incremental electricity produced by efficiency improvements to hydroelectric generation may only be used for compliance by the utility taking the incremental generation, and may not be used to generate tradable RECs.

Compliance
On or before June 1, 2012, and annually thereafter, each utility must file a report with the Department of Commerce regarding its progress in meeting its conservation and renewable resource targets during the preceding year. A utility may use RECs from the year prior to or the year subsequent to the current year to meet its requirements for the current compliance year. Although some exemptions apply, a utility’s failure to meet the energy conservation or renewable energy targets will result in an administrative penalty of $50/MWh (adjusted annually for inflation starting in 2007) paid to the state of Washington. The funds will be deposited in a special account for the purchase of renewable energy credits or for energy conservation projects at public facilities, local government facilities, community colleges, or state universities.

Cost Mitigation Measures
A utility is not required to meet a renewable energy target if it spends at least 4% of its retail revenue requirement on the incremental cost of renewable energy and RECs. Incremental cost refers to the difference between the cost of the renewable resource and the cost of a comparable non-renewable resource. A utility that has no load growth is not required to spend above 1% of its revenue requirements on renewable energy and RECs.** 

* Public Utility Districts are subject to this legislation, but are not specifically listed under "applicable sectors", as they are a form of municipal utilities.

** Utilities with no load growth must also have not purchased electricity from resources other than renewable resources, and as of 2014, "coal transition power", as defined in RCW 80.80.10.