December 22, 2010 | General

Biomass Energy Outlook: When Well-Intentioned Policies Collide

BioCycle December 2010, Vol. 51, No. 12, p. 61
Mark Jenner

State-level energy policies and programs play a role in evolution of biomass and carbon economies. With the outlook for federal renewable energy policies uncertain in the new Congress, along with the sagging economy, there is growing interest in the role that state and local policies play in reducing carbon emissions and promoting biomass energy. The complexity of carbon as both a resource and a liability make the comparison of energy and the environment difficult.
Some states have elaborate renewable energy programs, but also require businesses to pay more taxes to do business in these states. When the cost of doing business is high enough, the renewable energy incentives may merely offset a high tax overhead, rather than encourage a net benefit to a project.
One of the greatest energy policy tools on the Internet is the Database of State Incentives for Renewables & Efficiency ( This is a comprehensive summary of federal, state, local, utility, and nonprofit programs and policies on renewable energy and energy efficiency. With a few clicks, one can identify state or federal programs and laws, or learn about how specific programs are administered. The DSIRE is arguably biased toward wind and solar power, but this bias also includes net metering and interconnect policies that influence biogas and other small-scale biomass power projects. It also tracks some biogas and wood policies. It does not include transportation fuels. Summary tables are organized by incentives and regulations for renewable energy and energy efficiency for each state and the federal government.
To get an indicator of renewable energy activity, I tabulated the state, local, utility-based and nonprofit renewable energy programs listed in the DSIRE within each state. The “number” of programs doesn’t necessarily mean energy progress, but states with many renewable energy programs and policies could have some advantage over those with fewer. Many of these nonfederal programs supplement similar federal counterparts. States without the additional, supplemental nonfederal programs are simply relying on the federal government for incentives and overseeing adoption of renewable energy production and use.
The top 10 states for renewable energy financial incentives had 409 nonfederal entries in the DSIRE. The financial incentives include tax credits, rebates, grants, loans, bonds and a few other programs. About 60 percent of these are local utility-administered programs such as low interest loans or rebates through specific utilities. So states with multiple, aggressive utilities will have a higher policy count regardless of whether they are generating and using more renewable energy. The top 10 states in this category were: Minnesota, California, Oregon, Texas, Colorado, Washington, Wisconsin, Maryland, Pennsylvania and Indiana.
The top 10 states for renewable energy regulations were: California, North Carolina, Oregon, Arizona, Colorado, Texas, Maine, New Jersey, New York and Delaware. The renewable energy rules and regulations include renewable portfolio standards, net metering, interconnection, equipment standards and certification, building codes, public benefits funds and green power rules. The total nonfederal energy regulations for these states came to 141. In this case, 60 percent of the rules were state-based (as opposed to local). Four states – California, Colorado, Oregon, and Texas -made the top 10 in both lists.
For the bottom 10 states in both financial incentives and regulations, the numbers are less compelling. There were 59 nonfederal, financial incentive programs and 24 nonfederal, regulations on renewable energy in these groups. These states tend to have only state-level programs without the supplemental utility incentives or local regulations. Some of the states that made both lists include Alaska, Nebraska, North Dakota, West Virginia and Wyoming. Again, these less populous states rely primarily on federal programs for renewable energy development.
It is less clear from my assessment if these extensive renewable energy incentives spur investment and renewable energy adoption. The political attention seems to be on the headline-catching, doling-out of billions of public and private dollars than on comparing the overall benefits and costs of invested in green energy. Access to a broader metric could put total benefits and costs from renewable energy spending into some perspective.


One such broader metric is the 2011 State Business Tax Climate Index released in October by the Tax Foundation. We tend to think of government agency leadership for biomass and carbon policy development as being provided through agricultural, energy or environmental laws, but the taxing entities have a large influence at the federal, state and local levels.
The Tax Foundation looks at corporate, individual income, sales, unemployment and property taxes from a business perspective, as opposed to the renewable energy aspect. Their index reflects states that have developed tax policies to encourage business development (highest score) and other states that have tax policies that are not as business friendly (lowest scores). For 2011, the top ranking business tax climate states are: South Dakota, Alaska, Wyoming, Nevada, Florida, Montana, New Hampshire, Delaware, Utah and Indiana. Interestingly there are some bottom 10 renewable energy policy states on the best business tax climate list. It could be that states with the best business tax climate may see the addition of nonfederal renewable energy policies as counter-productive (additional bureaucratic costs), or that they have abundant access to fossil fuels.
Conversely the lowest ranking business tax climate states are: North Carolina, Rhode Island, Minnesota, Maryland, Iowa, Ohio, Connecticut, New Jersey, California and New York. About half of these states are known for their pioneering efforts in biomass energy. It seems that the supplemental, nonfederal renewable energy policies play a role in offsetting the higher costs of doing business in these states, rather than creating a “carrot” of renewable energy structure above what other states are offering.
Operational costs of all kinds matter to businesses. For any new project, risk and uncertainty mean additional costs. This is also true for renewable energy projects. Whether the additional costs come from complying with carbon emission reduction, and/or bioindustry market development, startup costs must be competitive with existing industries. Businesses move around to be competitive. Biomass supplies make transportation distance difficult, so economic development of biomass resources will depend on whether they can compete with other renewable and nonrenewable alternatives available in each location.
The U.S. is at a crossroads regarding the cost of energy, food and environmental policies. There is little or no public cost associated with creating additional legal layers, yet many of these policies can be integrated into complementary programs. Success of a green energy sector is dependent on streamlining policies to encourage green economic growth. With or without a coordinated federal policy approach, the state programs are weighing in on the development of the bioeconomy.

Mark Jenner, PhD, and Biomass Rules, LLC, has joined the California Biomass Collaborative. Burning Bio News and other biomass information is available at

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