Florida has taken a major step towards becoming a “green” state through the enactment of a wide ranging piece of legislation in the session that ended in early May. Signed into law by Governor Crist on June 25, 2008, the legislation sets the stage for significant changes in how Florida residents and businesses will use energy and the sources of that energy.

Key elements of the legislation include the following:

  • The duties and responsibilities of the State Energy Program administered by the Department of Environmental Protection (DEP) and the activities of the Florida Energy Commission will be merged into a new 9-member commission known as the Florida Energy and Climate Commission (FECC). The FECC members will be appointed by the Governor and will be responsible for developing and implementing energy policies for Florida.
  • A consortium has been created that is designed to promote collaboration between experts in the state university system, the FECC, industry, and other affected parties, to develop and implement an energy strategic plan for Florida.
  • The Public Service Commission (PSC) is directed to adopt a rule establishing a Renewable Portfolio Standard (RPS) that requires public utilities to provide to consumers electricity generated from renewable energy sources. The PSC created RPS must be completed and presented to the Legislature for approval by February 1, 2009. When approved, Florida will join 26 other states and the District of Columbia in establishing a mandatory RPS. The RPS will not apply to municipal electric utilities and rural electric cooperatives, but those providers are required to develop standards for the promotion, encouragement and expansion of the use of renewable energy resources and energy efficiency and annually starting April 1, 2009 submit those standards to the PSC.
  • The PSC is required to adopt goals to increase and promote cost-effective demand-side and supply-side efficiency and conservation programs and renewable energy systems.
  • Net metering is required to be made available to complement demand side electric generation; public utilities are required to develop a standard interconnection agreement and net metering program for customer-owned renewable generation facilities on or before January 1, 2009 and municipal electric utilities and rural electric cooperatives are required to establish such agreements and programs on or before July 1, 2009. The legislation mandates the type of interconnection and net metering arrangements for customer-owned renewable generation recently implemented by rule by the PSC.
  • As a first step toward the regulation of the emission of greenhouse gas (GHG), the DEP is required to create reporting procedures and methodologies for electric utilities to report to The Climate Registry and authorizes the DEP to adopt rules to implement a state GHG cap-and-trade regulatory program.
  • Beginning December 31, 2010, all gasoline sold or offered for sale in Florida must be 10 percent agriculturally derived, denatured ethanol.
  • A number of requirements have been imposed that will ensure that governmental agencies will participate in the conservation of energy, use of renewable energy and reduction of GHG emissions, including the following:
    • All new construction and renovation of state agency buildings must meet increased energy standards.
    • State agencies may only use hotels or conference facilities for meetings and conferences if they have received the “Green Lodging” designation from the DEP.
    • Green building standards must be used for the construction of new government buildings.
    • State agencies must prepare and maintain a list of eligible positions for telecommuting.
    • The Department of Management Services (DMS) must identify and compile a list of state projects suitable for guaranteed energy, water and wastewater performance savings contracting
    • DMS must furnish the FECC with data on agencies’ emissions of greenhouse gases.
  • Power plant siting and transmission line siting laws have been revised to streamline those processes.
  • Metropolitan Planning Organizations are encouraged to consider strategies that integrate in their transportation and land use planning to provide for sustainable development and reduced GHG emissions.
  • Several tax incentives for renewable energy have been enhanced, including:
    • The property tax exemption for real property on which a renewable energy source device has been installed and is operated has been reinstated, providing for an exemption for 10 years.
    • The sales tax exemption for property used in certain renewable energy technologies has been modified to broaden the availability.
    • The investment tax credit provisions for property used in certain renewable energy technologies have been modified to expand the types of entities that can use the credits through pass-throughs or transfers.
    • The renewable energy production tax credit has been extended to cover uses of electricity produced from renewable energy technologies that is used by the producer when the producer would otherwise need to purchase the electricity and clarifies the ability to pass through the credits.

Renewable Portfolio Standard

The development of the RPS for the state will likely be the most important and controversial activity in the energy sector in the state for the year. Under current law, public utilities, as well as municipal electric utilities and rural electric cooperatives with annual sales greater than 2,000 gigawatts, are required to continuously offer power purchase contracts to generators using renewable energy technologies at avoided cost, the utility’s avoided cost of building a new unit. Because the prices needed to support reliable renewable energy technologies in Florida are typically greater than the avoided cost required to be paid under current law, the existing legislation has not resulted in the development by independent developers of significant renewable energy electric generating facilities in the state. The enactment of an RPS in other states has been a catalyst for such development in those states and, to the extent the RPS that is ultimately adopted encourages the purchase of capacity and energy from such facilities, even though at a higher cost than other competing forms of generation, the same result can be expected in Florida.

In June of 2007, Governor Crist issued Executive Order 07-127 in which he requested that the PSC, not later than September 1, 2007, initiate rulemaking to require that utilities produce at least 20% of their electricity from renewable sources with a strong focus on solar and wind energy. In response, the PSC held four workshops in 2007, hearing the views from representatives of state and local government, utilities, renewable energy generators, environmental advocates and large electric consumers. The results of the workshops showed the divergence of interests among the various groups in Florida and the challenges facing the state in meeting the goal laid out by Governor Crist.

Clearly, the first step facing the PSC is to establish the policy objectives for the RPS. The staff report from the workshop identified three sets of benefits to be achieved from the RPS: resource benefits, environmental benefits and economic benefits. Resource benefits include fuel diversity, energy independence, supply chain security, price stability and minimized costs. Environmental benefits include pollution control, natural resource conservation and reduction in GHG emissions.

Economic benefits include the development of new markets with the potential to create jobs and bring new industries to the state. The selection of the priority benefits to be achieved will be key in determining whether the RPS will look anything like the one Governor Crist envisioned in his Executive Order.

Achieving a target percentage of electricity production in the state, as it with most states in the Southeast United States, will be challenging because of the expected future load growth in the state, coupled with the lack of favorable wind and solar resources and the absence of geothermal resources, the three most proven sources of non-hydro renewable energy generation. Tidal and wave technology offer some promise, but such technology is several years away from providing cost effective solutions at significant generation levels. The limitations imposed by Florida’s geography will require that the public be willing to accept substantially increased costs associated with use of the renewable energy technologies in order to achieve a 20% target in a reasonable time frame. The key question will be at what level the PSC will and, ultimately, the Legislature is willing to push such cost increases onto a customer base already battered by other economic factors? Raising the volume and intensity of the debate surrounding that key issue may be the most significant result of this legislation for 2008.