By: Watson, Van de Putte S.B. No. 541

(In the Senate - Filed January 26, 2009; February 17, 2009, read first time and referred to Committee on Business and Commerce; April 30, 2009, reported adversely, with favorable Committee Substitute by the following vote: Yeas 5, Nays 2; April 30, 2009, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 541 By: Watson

A BILL TO BE ENTITLED

AN ACT

relating to incentives for Texas renewable energy jobs and manufacturing.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. The purpose of this Act is to continue Texas' leadership in installing clean, renewable energy in Texas in a market-based manner that drives manufacturing jobs and provides price protection for businesses and consumers.

SECTION 2. Section 39.904, Utilities Code, is amended by amending Subsections (a), (b), (c), (d), (n), and (o), and adding Subsections (a-1), (c-1), and (c-2), and (p), to read as follows:

(a) It is the intent of the legislature that by January 1, 2015, an additional 5,000 megawatts of generating capacity from tier 1 renewable energy technologies will have been installed in this state. The cumulative installed renewable capacity in this state shall total 5,880 megawatts by January 1, 2015, and the commission shall establish a target of 10,000 megawatts of installed renewable capacity by January 1, 2025. The cumulative installed tier 1 renewable capacity in this state shall total 2,280 megawatts by January 1, 2007, 3,272 megawatts by January 1, 2009, 4,264 megawatts by January 1, 2011, 5,256 megawatts by January 1, 2013, and 5,880 megawatts by January 1, 2015. [Of the renewable energy technology generating capacity installed to meet the goal of this subsection after September 1, 2005, the commission shall establish a target of having at least 500 megawatts of capacity from a renewable energy technology other than a source using wind energy.]

(a-1) It is the goal of the legislature that by January 1, 2020, an additional 3,000 megawatts of tier 2 renewable energy will have been installed in this state. Of the renewable energy generating capacity installed to meet the goal of this subsection, up to 1,000 megawatts of renewable energy storage may qualify to meet the tier 2 goal. The cumulative installed tier 2 renewable energy resource capacity in this state shall total 150 megawatts by January 1, 2011; 300 megawatts by January 1, 2012; 700 megawatts by January 1, 2013; 800 megawatts by January 1, 2014; 1,000 megawatts by January 1, 2015; 1,300 megawatts by January 1, 2016; 1,500 megawatts by January 1, 2017; 1,800 megawatts by January 1, 2018; 2,400 megawatts by January 1, 2019; and 3,000 megawatts by January 1, 2020.

(b) The commission shall establish a tier 1 renewable energy credits trading program and a tier 2 renewable energy credits trading program. Any retail electric provider, municipally owned utility, or electric cooperative that does not satisfy the requirements of Subsection (a) by directly owning or purchasing capacity using renewable energy technologies shall purchase sufficient renewable energy credits to satisfy the requirements by holding renewable energy credits in lieu of capacity from renewable energy technologies. In calculating capacity factors for tier 2 renewable energy credits, the commission shall encourage a diverse portfolio of tier 2 renewable energy technologies.

(c) Not later than January 1, 2000, the commission shall adopt rules necessary to administer and enforce this section. At a minimum, the rules shall:

(1) establish the minimum annual renewable energy requirement for each retail electric provider, municipally owned utility, and electric cooperative operating in this state in a manner reasonably calculated by the commission to produce, on a statewide basis, compliance with the requirement prescribed by Subsections (a) and (a-1) [Subsection (a)]; and

(2) specify reasonable performance standards that all renewable capacity additions must meet to count against the requirement prescribed by Subsections (a) and (a-1) [Subsection (a)] and that:

(A) are designed and operated so as to maximize the energy output from the capacity additions in accordance with then-current industry standards; and

(B) encourage the development, construction, and operation of new renewable energy projects at those sites in this state that have the greatest economic potential for capture and development of this state's environmentally beneficial renewable resources.

(c-1) Not later than January 1, 2011, the commission shall adopt rules necessary to provide a "Made in Texas" incentive for tier 1 and tier 2 renewable energy credits generated by generation equipment that is wholly produced or substantially transformed by a Texas workforce, as determined by the commission. The incentive under this subsection shall be available for the first three years after the renewable energy equipment first produces electricity on a commercial basis.

(c-2) Not later than January 1, 2010, the commission shall adopt rules necessary to track and account for renewable energy credits earned from electric generating capacity derived from renewable energy storage. The rules shall:

(1) allow for the renewable energy storage to be located on the same or on a different site as the renewable generation being stored;

(2) ensure that only one renewable energy credit is retired for every megawatt hour of renewable energy generated prior to being stored for later release onto the electricity grid; and

(3) account for any loss in energy resulting from storage for later use.

(d) For purposes of [In] this section:

(1) "Tier 1 renewable energy technology" [, "renewable energy technology"] means any technology that exclusively relies on an energy source that is naturally regenerated over a short time and derived directly from the sun, indirectly from the sun, or from moving water or other natural movements and mechanisms of the environment. Renewable energy technologies include those that rely on energy derived directly from the sun, on wind, geothermal, hydroelectric, wave, or tidal energy, or on biomass or biomass-based waste products, including landfill gas. A renewable energy technology does not rely on energy resources derived from fossil fuels, waste products from fossil fuels, or waste products from inorganic sources.

(2) "Tier 2 renewable energy" means tier 1 renewable energy technology excluding energy derived from wind with a capacity of more than 150 kilowatts.

(3) "Renewable energy storage" means energy storage technology that stores for later release energy derived from tier 1 or tier 2 renewable energy.

(n) Notwithstanding any other provision of law, the commission shall have the authority to cap the price of renewable energy credits and may suspend the goal contained in Subsections (a) and (a-1) [Subsection (a)] if such suspension is necessary to protect the reliability and operation of the grid.

(o) The commission may establish tier 1 and tier 2 [an] alternative compliance payments [payment]. An entity that has a renewable energy purchase requirement under this section may elect to pay the alternative compliance payment instead of applying renewable energy credits toward the satisfaction of the entity's obligation under this section. [The commission may establish a separate alternative compliance payment for the goal of 500 megawatts of capacity from renewable energy technologies other than wind energy.] The tier 1 alternative compliance payment for a renewable energy purchase requirement that could be satisfied with a renewable energy credit from wind energy may not be less than $2.50 per credit or greater than $20 per credit. Prior to September 1, 2009, an alternative compliance payment under this subsection may not be set above $5 per credit. The tier 2 alternative compliance payment that could be satisfied with a tier 2 renewable energy credit shall not exceed $90 per renewable energy credit before December 31, 2014; $80 per renewable energy credit before December 31, 2015; $65 per renewable energy credit before December 31, 2016; $45 per renewable energy credit before December 31, 2017; $40 per renewable energy credit before December 31, 2018; $35 per renewable energy credit before December 31, 2019; $30 per renewable energy credit before December 31, 2020. In implementing this subsection, the commission shall consider:

(1) the effect of renewable energy credit prices on retail competition;

(2) the effect of renewable energy credit prices on electric rates;

(3) the effect of the alternative compliance payment level on the renewable energy credit market; and

(4) any other factors necessary to ensure the continued development of the renewable energy industry in this state while protecting ratepayers from unnecessary rate increases.

(p) Tier 2 alternative compliance payment funds collected by the commission shall be deposited into the Texas emerging technology fund or other fund and allocated exclusively for the research and development of tier 2 renewable energy technologies and to renewable energy storage technologies for the purpose of making tier 2 renewable energy more affordable for consumers.

SECTION 3. This Act takes effect September 1, 2009.

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