Ohio’s Advanced Roadmap How the next governor can capture the economic benefits of diversifying ’s energy portfolio—and drive job creation and economic growth.

America’s energy system is undergoing a fundamental transformation driven by evolving consumer preferences, dynamic new technologies and services that give consumers more choices and control over their energy use and costs, and the need to modernize our aging energy infrastructure. Ohio is geographically blessed with three quadrants adequately situated for significant advanced energy development – abundant wind resources in the northwest, solar resources in central and southwest, and ample in the east thanks to the . Currently, the advanced energy industry supports over 105,000 jobs in Ohio and 3.3 million jobs across the United States – serving a $200 billion national advanced energy market.1 The advanced energy industry is poised to provide the technologies and services to accelerate the transition to an era of secure, clean, affordable energy.

Ohio’s next governor has the opportunity to harness the economic power of the advanced energy industry to grow the Ohio economy and create even more high quality jobs in-state. As a business association comprised of advanced energy companies and major corporate energy buyers, Ohio Advanced Energy Economy (Ohio AEE) has identified five priorities and essential policy options that will allow the next governor to pursue an economic development agenda that maximizes the potential of advanced energy.

PRIORITY ONE: Stabilize and expand market-based mechanisms to accelerate deployment of innovative, cost- effective renewable energy resources and energy efficiency savings for all Ohioans

While many other states have enacted legislation to speed the adoption of advanced energy in recent years, Ohio has been one of the few where legislation has destabilized advanced energy growth, diverting jobs and investments to neighboring states. Ohio lawmakers have delayed and diluted the state’s economically beneficial and achievable 12.5% renewable portfolio standard (RPS) and 22% energy efficiency resource standard (EERS).

1 Advanced Energy Now 2017 Market Report; https://info.aee.net/aen-2017-market-report. Uncertainty over Ohio’s direction on advanced energy has discouraged investment in the state and hampered the growth of the industry as a whole.

In spite of this uncertainty, Ohio consumers continued to benefit from advanced energy. By the end of 2017, Ohio reported more than 105,000 advanced energy jobs.2 Additionally, RPS and EERS targets have saved and will continue to save all consumers money by diversifying the state’s energy portfolio and reducing energy consumption. Meanwhile, the cost of large-scale wind and solar power has declined by 60% and 80%, respectively, since 2009,3 and technologies such as LED lighting and smart thermostats continue to improve and drive down energy spending by households and businesses.

The average monthly cost to Ohio’s consumers for investing in renewable energy was $0.34 in 2017 – an annual cost equal to a gallon of milk.4 Utility energy efficiency programs save consumers money, netting Ohioans $1.2 billion in energy savings.5

Well-designed and stable energy policies send a strong signal to businesses across the country that Ohio is committed to competitive markets and new investment opportunities. In addition to traditional project development and large corporate purchases, options like community solar and shared renewables increase advanced energy purchasing opportunities for small businesses and residents that are unable to host these projects onsite. These projects, which typically range from 5–20 MW, allow for multiple small business and residential subscribers to purchase a portion of the project’s output, bringing cost down for all purchasers.

The right policies would also stimulate the development of advanced energy resources beyond solar and wind, like battery storage, demand response, microgrids, and electric vehicles that reduce energy waste, improve the reliability and resilience of the grid, and keep consumer dollars in state.

Ohio’s next governor must set a new course on advanced energy to create jobs, attract private investment, and save Ohio families and businesses on their monthly energy bills. The first step is stabilizing Ohio’s energy standards.

PRIORITY TWO:

2 Clean Jobs Midwest, Ohio, 2017. https://www.cleanjobsmidwest.com/. 3 Unsubsidized Levelized Cost of Energy Comparison, March 2016. -https://www.lazard.com/media/438038/levelized-cost-of- energy-v100.pdf. 4 Ohio’s Public Utilities Commission Annual Renewable Portfolio Standard Compliance Report. All of Ohio’s Electric Distribution Utilities have filled average quarterly rate impacts for 2017 which were aggregated to provide an overall statewide rate impact. 5 Economic Impacts Of Energy Efficiency: Ohio, 2016; prepared by Cadmus for Midwestern Energy Efficiency Alliance, June 06, 2016. Eliminate barriers that prevent Ohio businesses from accessing low-cost wind energy

As of 2013, Ohio was a national leader in wind-related manufacturing and ranked 12th in wind- related jobs. Ohio was also attracting investment in wind power development. According to Navigant Research, in 2011 and 2012 alone, wind turbine installations surged, adding more than 400 MW of new wind capacity in Ohio. From 2009 through 2013, the total value of wind project private investment was about $755 million.6

However, the state reversed course in 2014, when the Ohio General Assembly enacted an overly restrictive wind turbine setback regulation. While wind setback requirements are intended to protect people and property, Ohio lawmakers rewrote the setbacks so that similar guidelines apply to uninhabited property as in residential areas. This more than doubled the distance a wind turbine could be placed from the nearest property line, to 1,300 feet, more than double the pre-2014 requirement of 550 feet. Implementing this unnecessarily burdensome provision has made it all but impossible to develop new large-scale wind energy projects in Ohio. The current wind setback requirements also prevent private landowners from utilizing their property for an economically productive use.

Access to advanced energy and deployment by state leaders and decision-makers is a key consideration for the majority of Fortune 100 and 500 companies when considering where to locate or expand operations, in terms of meeting their sustainability goals. But continued policy uncertainty has caused businesses and investors to grow skeptical of Ohio’s commitment to embracing advanced energy technologies and the economic growth they can bring to the state.

Ohio could regain its competitive position if overly restrictive wind setbacks are lifted, allowing the state to capitalize on the economic benefits of wind development.

As an example, Blue Creek, the state’s largest wind farm, includes 152 wind turbines, a majority of which were constructed in Ohio. This project alone generated $25 million in local economic activity, created 500 jobs during the construction phase, and involved 30 companies in Ohio. Since this project has been operational, it has provided $2 million in annual lease payments to landowners while generating $2.7 million in tax revenue for Van Wert and Paulding County— benefits that will continue for the life of the project.7

6 Pew Charitable Trust, Clean Economy Rising Manufacturing powers clean energy in Ohio, Jan. 2015, Page 9; http://www.pewtrusts.org/~/media/assets/2015/01/oh_brief_final.pdf?la=en. 7 Iberdrola Renewables, “Blue Creek Wind Farm;” http://www.avangridrenewables.us/bluecreek/index.html. The next governor of Ohio should reverse burdensome policies that have prevented the nearly $4.2 billion of potential investment sitting in Ohio’s wind energy development pipeline. The current wind setback standards have acted as a de facto moratorium for the wind industry and Ohio continues to lose out on billions of dollars of investment to neighboring states. Removing this government-imposed barrier would allow the market to function, driving access to wind energy resources, including for corporate customers that want to invest in clean, affordable renewable power within the state.

PRIORITY THREE: Accelerate adoption of electric vehicles, including commercial fleets, and support charging infrastructure deployment in Ohio

Transportation electrification is a transformational trend in the U.S. economy that offers significant potential benefits to Ohioans. Nationally, sales of plug-in electric vehicles (EVs) have grown at a compound annual rate above 50% since 2011. Meanwhile, government and commercial fleets, totaling over 8.5 million vehicles nationwide, represent a tremendous opportunity to rapidly electrify a large segment of the market.8

Because of significantly lower fueling and maintenance costs, EVs have a lower total cost of ownership than gasoline- and diesel-powered vehicles.9 And with the price of batteries plunging over 70% since 2010, all major auto manufacturers are aggressively developing a full range of EV models, including General Motors, Mercedes-Benz, Volvo, and Honda.10 This goes beyond passenger vehicles; medium- and heavy-duty EVs are also are also making significant inroads, including transit buses, local delivery truck and long-haul trucks.

As a signal to the industry to invest in Ohio, the state should declare its interest in transportation electrification.

A number of states around the country, including several in the Midwest, are trying to capture these benefits as well as the economic opportunity associated with establishing themselves as the home for an industry driving the future of mobility. With its historical leadership in the automotive industry and nation-leading smart city effort with an electrification focus in Smart Columbus, Ohio is well positioned to claim this title. The next governor could position Ohio as

8 Bobit Publishing Co. “Fleet Vehicles by Industry Segment”. 2017. Findings available online at http://www.automotive- fleet.com/statistics/?prestitial=1. 9 Constance Douris, "The Bottom Line On Electric Cars: They're Cheaper To Own," Forbes, October 24, 2017, https://www.forbes.com/sites/constancedouris/2017/10/24/the-bottom-line-on-electric-cars-theyre-cheaper-to-own/#6490ef7610b6. 10 Jess Shakelman, “The Electric Car Revolution Is Accelerating,” Bloomberg, July 6, 2017, https://www.bloomberg.com/news/articles/2017-07-06/the-electric-car-revolution-is-accelerating. the hub of transportation innovation and employment while creating substantial benefits for the citizens of Ohio.

Despite growing national demand, the lack of sufficient charging infrastructure and a supportive regulatory structure remain roadblocks to greater adoption of EVs in Ohio.

A number of studies have illustrated that a “range anxiety,” or EV driver concern about finding adequate charging along their route, is a key hurdle to adoption of EVs. At the same time, fleet owners, including those of medium and heavy duty vehicles, have clearly indicated that charging infrastructure and the regulation of charging is the primary impediment to their full adoption of EVs.

Ohio’s next governor has the opportunity to address these challenges by establishing clear ground rules around key issues such as rate design, charging infrastructure ownership, and customer awareness that will provide clarity for participants in the infrastructure market that could accelerate investments.

PRIORITY FOUR: Remove barriers to investments in technologies and services that reduce energy costs and consumption while increasing customer choices and control

Consumers are increasingly demanding access to resources like energy efficiency, smart thermostats, energy storage, distributed solar, and demand response services (collectively “distributed energy resources,” or DER) to reduce their overall consumption, lower their energy bills, and give them greater control over how much and what types of energy they use. These flexible, cost-effective resources have the potential to enable Ohio to meet its energy needs while improving grid performance and reducing costs for all consumers.

To provide the most value to consumers and the grid, market rules must ensure a competitive market for DER while aligning the utility business model with consumer interests.

Ohio’s current regulatory structure presents multiple opportunities to better align utility revenues and earnings with customer interests. More DER deployment means lower electricity sales. As such, a first step to consider is “revenue decoupling,” which breaks the link between utility revenues and the amount of energy they sell. Then, a natural next step for Ohio would be to better align the utility’s earnings opportunities with customer benefits, by establishing financial incentives linked to performance outcomes associated with DER deployment.

Savings for customers as well as utilities could result from a change in Ohio’s regulatory treatment of utility procurement, allowing utilities to take better advantage of cloud computing services. Cloud computing offers numerous benefits over utility-owned IT infrastructure and software, but the current regulatory model, which rewards utilities for capital investments over services, presents barriers to their utilization. Ultimately, these services lower consumer costs while providing more flexible, secure IT solutions.

PRIORITY FIVE: Modernize Ohio’s electricity systems by building upon PUCO’s PowerForward initiative to deliver benefits for consumers and enhance grid reliability

In 2017, PUCO launched PowerForward, an investigation into how Ohio could modernize its electricity grid, improve reliability and resilience, and incorporate new, innovative technologies to benefit Ohioans. This process brought together industry experts to lead conversations on subjects such as integrating DER into the evolving grid, incorporation of electric vehicle charging infrastructure, deployment of battery storage technologies, and redesigning Ohio’s ratemaking structure to better support investments in innovative energy resources.

As advanced energy deployment increases, Ohio must be prepared to integrate these new and innovative technologies into the existing system and to take advantage of the benefits they can provide.

Ohio’s next governor should recognize the importance of appointing commissioners to the PUCO who will continue the innovative and visionary work started during the PowerForward proceeding. This provides the incoming governor with the opportunity to harness best practices identified through PowerForward and translate that into sensible and actionable policy designed to benefit all Ohioans. This will not only encourage greater integration of advanced energy resources but also send a strong market signal to businesses with ambitious sustainability goals that Ohio is open to adopting all types of energy resources. Proactive implementation of the recommendations from PowerForward will enable Ohio’s utilities to continue to fulfill their obligations to maintain a safe, reliable, affordable electricity system while keeping up with the significant changes taking place in the electric power sector.