Renewable Energy Standard

In November 2008, voters in Missouri approved by a ballot initiative (i.e., via an initiated state statute) the Missouri Clean Energy Act, also known as Proposition C, which repealed the state’s existing voluntary renewable energy and energy efficiency objective and replaced it with a mandatory renewable portfolio standard (RPS). The RPS requires investor-owned utilities to use eligible renewable energy technologies to meet of 15% of annual retail sales by 2021.

Eligible Technologies

Eligible renewable energy technologies include electricity produced using photovoltaics (PV); solar thermal; wind; small hydropower (10 megawatts (MW) or less); biogas from agricultural operations, landfills, and wastewater treatment plants; pyrolysis and thermal depolymerization of waste materials; various forms of biomass; fuel cells using hydrogen from renewable resources; and other renewable-energy resources approved by the Missouri Department of Natural Resources (DNR).

Waste materials are defined as "specifically segregated materials from a waste stream for the purposes of producing energy or that are capable of producing energy." Of note, this definition does not include all municipal solid waste (MSW) technologies, though some MSW technologies may be eligible if powered by waste materials as defined in the administrative rules.

Co-firing is permitted, but only the percentage of electricity generated by an eligible renewable resource can be counted towards a utility's renewable energy obligation. Pumped storage hydropower and nuclear energy are specifically identified as ineligible.

Requirements

The RPS applies only to the state’s investor-owned utilities and does not place any requirements on municipal utilities or electric cooperatives.

The standard sets the following minimum renewable energy benchmarks for the given calendar year for electric utilities based on annual electricity sales:

• 2% from 2011 to 2013,
• 5% from 2014 to 2017,
• 10% from 2018 to 2020, and
• 15% for 2021 and each year thereafter.

Carve-Outs

The RPS contains a solar electricity carve-out equal to 2% of the RPS requirement, meaning that solar-generated electricity as a share of annual electricity sales must be:

• 0.04% from 2011 to 2013,
• 0.1% from 2014 to 2017,
• 0.2% from 2018 to 2020, and
• 0.3% for 2021 and thereafter.

Utilities with renewable energy obligations under the standard are required to offer a solar rebate program. Systems of 100 kW or less qualify for rebates on the first 25 kW of installed capacity. Beginning in June 2014, the rebate will decrease annually until the rebates are phased out on June 30, 2020. Utilities own the solar renewable energy certificates (SRECs) of any system that receives a rebate for a period of 10 years.

Credit Multipliers

In-state renewable energy generation receives a multiplier of 1.25 compared to out-of-state generation (i.e., in-state generation is worth 25% more for compliance purposes).

Compliance

Compliance with the objective can be achieved through the procurement of renewable energy or renewable energy credits (RECs). A REC may be used for compliance with the standard for up to 3 years after the date it is generated. RECs can be used for compliance for the calendar year in which it expired as long as it was valid during some portion of the year. A utility is permitted to retire RECs for compliance with standard for up to three months after the end of the compliance year (i.e., the calendar year); however, no more than 10% of the compliance obligation may be met in this way and the RECs retired must have been generated prior to the end of the compliance year.

SRECs may be used to comply with the solar standard, or with the portion of the standard not specifically devoted to solar resources. Utilities are also permitted, but not required, to offer standard offer contracts for the purchase of SRECs produced by a customer-generator system. Any SRECs purchased through standard offer contracts may not be sold or traded but may be used to comply with the standard.

Customer-generators with a net-metered system retain title to RECs derived from energy produced by the system unless they participate in the solar rebate program.

Measurement, Reporting, and Verification

In January 2010, the North American Renewables Registry was selected as the REC tracking and verification program. Utilities must use this system for REC accounting purposes unless they apply for and receive a waiver from the Public Service Commission (PSC) for "good cause shown".

Utilities are required to file compliance plans by April 15th each year describing how they will meet the standard for the current year and the two subsequent years. Utilities are also required to file annual reports demonstrating compliance with the standard by April 15 after the most recently completed year. Previous compliance reports are available here.

Penalties

Utilities that do not meet their renewable and solar portfolio obligations under the standard are subject to penalties of at least twice the market value of RECs or SRECs. The revenue associated with such penalties will be used by the DNR to purchase RECs or SRECs to offset the shortfall, with any excess revenue used to fund renewable energy and energy efficiency projects. Costs associated with non-compliance penalties may not be recovered from ratepayers.

Cost Mitigation Measures

Utilities may be excused from their RPS obligation by the PSC for events beyond their control or if the cost of compliance with the standard increases retail electricity rates by more than 1% in any year. The 1% cost cap is determined by estimating and comparing the electric utility's cost of compliance with least-cost renewable generation and the cost of continuing to generate or purchase electricity from entirely nonrenewable sources, taking into proper account future environmental regulatory risk including the risk of greenhouse gas regulation. If the 1% cap is exceeded, the annual renewable energy obligation will be adjusted downward to a point where the cap is not violated.

Until June 30, 2020, if the maximum average retail rate increase would be 1% or less (ignoring the cost of a utility's investment in solar-related projects), then the utility must offer additional solar rebates in an amount up to the amount that would produce a retail rate increase equal to the difference between a 1% retail rate increase and the retail rate increase calculated.

In October 2013, the PSC in approved an agreement to implement the 1% cost cap through specific cost limits for the solar rebate program. The cost limits were set at $50,000,000 for KCP&L Greater Missouri Operations and $36,500,000 for KCP&L Missouri, inclusive of other compliance costs directly related to RPS compliance. These limits include solar rebates paid on or after September 1, 2012, and allow customers to participate in the solar rebate program through 2020 or until the respective rebate limit is met, whichever occurs first.

KCP&L Greater Missouri Operations filed an application in April 2014 to suspend payments under the solar rebates program because it estimated it would soon reach the cost limit (see Case No. JE-2014-0403 for the most recent information). The cost limit has not yet been reached for KCP&L Missouri. 

Empire District Electric did not start offering solar rebates until May 2015. In February 2015, the Missouri Supreme Court ruled that the passage of Proposition C repealed an legislative exemption to RPS requirements for which Empire qualified. Pursuant to the ruling, Empire began offering solar rebates in May 2015.