Catching the Wind: A Legal and Economic Comparison between South Dakota's Renewable, Recycled and Conserved Energy Objective and a Renewable Portfolio Standard

Article excerpt

I. INTRODUCTION

In rural Bon Homme, Hutchinson, Charles Mix, and Douglas Counties, a group of local investors and landowners have leased enough land to support a significant wind farm. (1) This is no small feat; their efforts represent years of preparation and the leasing of over 30,000 acres of land. (2) They even have requested three interconnection points to integrate potential turbines to the Western Area Power Administration's power transmission grid. (3) If ever there were a place in South Dakota deserving of a wind farm, this is it. But despite their efforts, they cannot find a buyer of the wind energy they would like to produce in their counties. (4)

The local investors and landowners in Bon Homme County represent a story that South Dakotans have come to accept as truth: South Dakota's wind industry is not what it should be. South Dakota ranks fourth in wind potential (5) but was ranked sixteenth in total installed wind capacity at the end of 2010. (6) Unfortunately, this discrepancy is likely to continue. Development has come to a halt despite continued development in North Dakota. (7) Now, wind development has slowed nationally due to Congress' failure to extend the wind production tax credit. (8) As a result, 92 South Dakotans lost their good-paying jobs creating wind turbines. (9)

With all state economies suffering from the same national paralysis, we believe South Dakota has the unique opportunity today to revive South Dakota's wind industry by implementing a Renewable Portfolio Standard ("RPS") to kick start our wind economy rather than simply waiting for one transmission line to develop after 2015. In fact, the South Dakota legislature already took significant steps to create the kind of regulatory framework necessary to develop wind energy when the legislature passed the South Dakota Renewable, Recycled, and Conserved Energy Objective ("RRCEO") in 2008. (10) While the RRCEO was a step in the right direction, the law suffers from one substantial flaw and must be changed. South Dakota would benefit from restructuring the RRCEO to create an RPS that would require South Dakota retail electricity generators to dedicate a portion of their electricity generation to renewable energy, or be subject to penalties.

This Article uses an econometric model to compare the estimated wind production the current South Dakota RRCEO is expected to generate with the estimated wind production generated by a typical RPS. Specifically, Part II will describe the RRCEO's legal structure and the basic changes necessary for the South Dakota legislature to amend the RRCEO to create an RPS. Part III will explain the model developed to compare the RRCEO and an RPS and conclude by reporting the results of the model.

II. A COMPARISON OF THE RRCEO AND AN RPS

A. RENEWABLE, RECYCLED, AND CONSERVED ENERGY OBJECTIVE

The South Dakota legislature enacted, and Governor Rounds signed, the RRCEO in February 2008. (11) The RRCEO establishes a goal for each retail electricity provider to dedicate ten percent of retail electricity sales to renewable or recycled energy by 2015. (12) The law was amended in 2009 to also allow conserved energy to count towards the ten-percent objective. (13) The South Dakota Public Utilities Commission ("SD PUC") promulgated rules for the RRCEO in January 2012. (14) This section will explore the laws and rules that constitute the RRCEO.

S.D.C.L. section 49-34A-101 establishes that "a state renewable, recycled, and conserved energy objective that ten percent of all electricity sold at retail within the state by the year 2015 be obtained from renewable, recycled, and conserved energy sources." (15) The RRCEO applies to all retail electricity providers in the state "regardless of the ownership status of the electricity retailer." (16) This means that the objective applies to municipal and rural electric cooperatives as well as public utilities such as Northwestern Energy or Xcel Energy. …