In August 2005 Gov. Rick Perry altered the state’s 1999 renewable energy mandate (REM). The new provision increased the amount of energy required to be generated from renewable sources to 5,880 megawatts (MW) or about 5 percent of the state’s demand by 2015. The requirement includes a 500 MW mandate from non-wind renewables and a 10,000 MW target for renewable energy capacity by 2025.
Qualifying sources include solar, wind, geothermal, hydroelectric, wave or tidal energy, biomass, biomass-based waste products, and landfill gas.
The law sets a gradated compliance schedule and the Public Utility Commission of Texas (PUCT) requires utilities to add new transmission capacity where necessary to meet the demand for renewables.
The PUCT established a renewable energy credit (REC) trading system for utilities to buy and sell credits to meet the requirement.
The PUCT awards a compliance premium for all RECs purchased after December 31, 2007. The compliance premium is equivalent to one REC to be used toward satisfying the mandate.
The PUCT assesses a $50 per megawatt-hour (MWh) penalty to utilities that do not meet compliance requirements. The PUCT is empowered to establish an alternative compliance payment (ACP) but has issued no regulations for it.
Also, the PUCT can institute cost caps or suspend the requirement altogether if it deems it necessary to protect the reliability of the state’s electricity grid.
Large utility customers served by transmission voltage may execute an opt-out option from the REM. Ninety customers opted out during 2009.
Source: Database of State Incentives for Renewables and Efficiency