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Is Requiring In-State Generation Unconstitutional?

Jun 21, 2010

There are generally two ways to procure renewable energy. One way is to develop as much as possible as quickly as possible, with little regard to where it's coming from, as long as it's done cheaply. The second approach is more focused on how to maximize the benefits of renewables like job growth and local economic activity.

Neither way is necessarily wrong or right. It simply depends on what the goals of a community, state or region are.

Here in the U.S., many states have opted for the second approach by encouraging or requiring a certain portion of their renewable energy target to come from in-state resources (usually solar).

While this approach often wins the favor of local companies (again, usually solar), it also raises the ire of larger energy suppliers that transmit electrons across state boundaries.

In Massachusetts, an interesting legal battle has been brewing over this exact issue: Is it unconstitutional under the Interstate Commerce Clause to require a certain portion of a Renewable Portfolio Standard to come from in-state resources? ::continue::

In a nutshell, The Commerce Clause stipulates that states can't regulate trade across their boundaries – only the federal government has that power.

In April, the energy supplier TransCanada sued a number of high-level Massachusetts officials over provisions in the Green Communities Act that require a certain portion of the state's 15% by 2020 target to come from within the state. By preventing power from its Maine-based Kibby Wind Plant to be sold in Massachusetts, TransCanada says that the state is violating the Commerce Clause.

Carrie Hitt, President of the Solar Alliance, said that the renewable energy industry expected some sort of action. TransCanada had brought up the issue a number of times as the program was being formed.

“It wasn't a suprise, but it was dramatic. It certainly got everyone's attention – suing individual members of the government,” said Hitt.

The suit had two components. The first addressed the 400 MW solar carve out, which explicitly promotes behind-the-meter generation. TransCanada filed a lawsuit over this portion of the RPS, saying it was unconstitutional to barr out-of-state resources from the program. Finally, earlier this month, the lawsuit was settled. TransCanada had existing contracts grandfathered in, ensuring the company pays a lower penalty if it can't meet the solar targets.

Now that the solar carve-out portion of the suit is over with (although the constitutionality issue wasn't really addressed in the settlement), the solar community is breathing a huge sigh of relief, said Hitt.

“There was a lot of uncertainty over the last eight weeks, and I think a lot of people are relieved that a settlement was reached,” she said.

But there's another issue still in flux. This involves the broader RPS program, which required utilities and energy suppliers to negotiate contracts with in-state projects. TransCanada sued over this as well, again saying that it prevented the company from selling wind electricity from Maine into Massachusetts.

On June 10th, the state issued emergency regulations that reduce the burden on suppliers to promote in-state generation. But the regulations still call upon distribution companies to “enter into cost-effective long-term contracts to facilitate the financing of renewable energy generation.”

Does that mean that projects that are already mostly built – like TransCanada's Kibby Wind Farm – won't qualify if they are not assisting with the development of new generation? Is MA saying to suppliers: “Don't come in here if a project is built”?

These are questions that still need to be answered in Massachusetts. Renewable energy advocates are surely watching the state, wondering if the outcome will have any broader impact on other markets in the U.S.

“While the lawsuit was in massachusetts, the impact may be far broader in that the same arguments would appear to apply to some other state policies,” said Bob Grace, president of Sustainable Energy Advantage, based in Framingham, Massachusetts.

The potential for further lawsuits is there, but action is not certain. Most states don't have RPS language about requiring in-state resources that is as strong as Massachusetts'.

As the Solar Alliance's Carrie Hitt put it: “There are many shades of grey in state policy.”

But with more states setting aside portions of their RPS for solar carve outs, or with additional incentive multipliers for in-state generation, the potential for future litigation based upon the Commerce Clause is on the table. Politicians, lawyers and regulators should be prepared for such challenges, said Grace.

“I'm hopeful that people are making contingency plans. There is certainly the possibility that some activity could be frozen.”

The information and views expressed in this blog post are solely those of the author and not necessarily those of or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.

I am a reporter with, a blog published by the Center for American Progress. I am former editor and producer for, where I contributed stories and hosted the Inside Renewable Energy Podcast. Keep in touch through twitter! My profile name is: Stphn_Lacey


Volume 18, Issue 4


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