Clean Energy Regulation Updated: Case Study of the Washington (WA) Clean Energy Transformation Act

Part One of this series outlines the success and shortcomings of early clean energy regulation, specifically renewable portfolio standards. The early clean energy regulation mandated the generation of renewable energy, with a focus on kilowatt-hours. In recent years, as the climate, equity, and infrastructure crises have deepened, states have looked to addressing these crises through clean energy regulation updates. In this post, we will detail the progressive Washington (WA) State regulation – the Clean Energy Transformation Act (CETA).

Included In This Series

Overview

In 2019, Governor Jay Inslee (formerly the country’s “Climate Candidate” for President) signed into law CETA, or Senate Bill 5116 (SB5116). CETA commits WA to the elimination of coal-fired resources by 2025, an electricity supply that is carbon neutral by 2030, and 100% carbon free by 2045. CETA goes beyond the generation of clean energy. It focuses on achieving zero carbon energy and addresses equity and infrastructure capacity.

No coal by 2025, GHG neutral standard by 2030, 100% clean standard by 2045

Figure 1 CETA Overview Source: WA Dept of Commerce

How Will WA Utilities Get to Zero Carbon?

To achieve CETA’s goals, utilities must implement a combination of energy efficiency and conservation, and clean energy generation. However, CETA also allows utilities to use alternative compliance options until 2044.

Efficiency and Conservation

The first pathway to zero carbon is pursuing cost-effective, reliable, and feasible conservation and efficiency resources to reduce or manage retail electric load. Energy conservation and efficiency measures (called “efficiency measures” for the remainder of this post) are crucial elements of achieving a 100% clean standard by 2045.

Efficiency measures will help to reduce the load, and peak load, on grid infrastructure. This reduction will reduce overall stress on equipment. Energy efficiency is the cheapest zero-emissions resource. Energy “not used” results in zero energy costs, reducing utility spend on generation, transmission, distribution, as well as consumer spend on electric charges.

Additionally, there is an opportunity to expand efficiency to demand flexibility. Demand flexibility optimizations building loads, including efficiency as well as demand response. Demand flexibility measures can be used to reduce peak loads, such as the loads that caused outages during the 2021 Pacific Northwest heat dome. It can reduce peak loads during acute periods or can shift consumption (e.g. pre-heating with electric heat) to persistently reduce peaks. This reduction in peak load and shifting of consumption can help to align renewable generation with demand and reduce the use of expensive, high-emitting “peaker plants”.

Renewable Generation

CETA’s second pathway to zero carbon is the use of electricity from renewable resources and non-emitting electric generation. Renewable resources are defined as: water; wind; solar energy; geothermal energy; renewable natural gas; renewable hydrogen; wave, ocean, or tidal power; biodiesel fuel that is not derived from crops raised on land cleared from old growth or first growth forests; or biomass energy.

Non-emitting electric generation is defined as electricity from a generating facility or a resource that provides electric energy, capacity, or ancillary services to an electric utility and that does not emit greenhouse gases as a by-product of energy generation.

Alternative Compliance Options

Until 2044, utilities may meet 20% of its compliance obligation with alternative compliance options. There are four alternative options (see Figure 2) included.

CETA alternative compliance options: pay the penalty, renewable energy credits, energy transformation projects, municipal solid waste Figure 2 CETA Alternative Compliance Options

Pay the Penalty

The first alternative compliance option is that utilities may choose to pay administrative penalty, without incurring a penalty for noncompliance. The administrative penalty of $100 per megawatt-hour (MWh) of fossil fuel generation is multiplied by a range of factors depending on if electricity is produced by coal (1.5x), gas-fired peaking power plants (0.84x), or gas-fired combined cycle power plants (0.60x). From both climate and equity perspectives, paying the penalty is the worst option for utilities.

Renewable Energy Credits

The second option is the purchase of Renewable Energy Credits (RECs). RECs represent the clean energy attributes of renewable electricity. RECs will be tracked and retired in the Department of Commerce tracking system.

Energy Transformation Projects

Investing in energy transformation projects is the third alternative compliance option. The definition of energy transformation projects is broad. However, these projects must achieve the following:

  1. Provide energy-related goods or services, other than the generation of electricity
  2. Result in a reduction of fossil fuel consumption and in a reduction of the emission of greenhouse gases attributable to that consumption
  3. Provide benefits to the customers of an electric utility.

Examples of energy transformation projects are:

  • Home weatherization or other energy efficiency measures, including market transformation for energy efficiency products
  • Support for electrification of the transportation sector
  • Investment in distributed energy resources and grid modernization to facilitate distributed energy resources and improved grid resilience
  • Renewable natural gas related investments
  • Contributions to self-directed investments in measures which serve the sites of large industrial gas and electrical customers
  • Energy efficiency and emissions reductions projects in the agriculture sector.

Municipal Solid Waste

The final alternative compliance option is generating electricity from an energy recovery facility using municipal solid waste as the principal fuel source.

How is Equity Considered?

CETA requires utilities to ensure that all customers are benefiting from the transition to clean energy and that the energy burden on low-income households is not increased. There is to be an equitable distribution of energy and nonenergy benefits, as well as a reduction of the energy burden on vulnerable populations and highly impacted communities. Utility actions should result in public health benefits and reduce environmental costs and risks. The combination of the aforementioned goals should also result in improved energy security and resiliency.

Public Participation

Public participation is an important element in CETA. Utilities must allow interested parties to effectively participate in shaping their clean energy implementation plans (CEIPs). The rules require each electric utility to form an equity advisory group to participate in the CEIP process and to keep other advisory groups informed about the process. Utilities are also required to submit a public participation plan by May 1 of each odd-numbered year.

CEIPs will be discussed in greater detail in part three of this blog series.

Reporting

Reporting equity consideration is required biennially by utilities. The report to the Department of Commerce must include an assessment of:

  1. The programs and mechanisms aimed at reducing energy burden and the effectiveness of the activities
  2. The strategies being used to encourage participation of vulnerable and highly impacted communities
  3. An assessment of previous energy assistance funding levels compared to funded levels needed to meet the goals of:
    • 60% of current energy assistance need, or increasing energy assistance by 15% over the amount provided in 2019, whichever is greater, by 2030
    • 90% of current energy assistance need by 2050.

Part three of this blog series will continue to provide insight into clean energy regulation updates – we will detail how Washington utilities will implement the zero-carbon pathway created for them by CETA.