NREL is a national laboratory of the U.S. Department of Energy, Office of Energy 

Efficiency & Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

Contract No. DE-AC36-08GO28308

Southeast Regional Clean 

Energy Policy Analysis 

Revised

Joyce McLaren

Technical Report

NREL/TP-6A20-49192

Revised April 2011
ERRATA SHEET

NREL REPORT/PROJECT NUMBER: TP-6A20-49192 

TITLE: Southeast Regional Clean Energy Policy Analysis 

AUTHOR(S): Joyce McLaren

ORIGINAL PUBLICATION DATE: January 2011 

DATE OF CORRECTIONS (MM/YYYY): 04/2011 

The following figures and tables were replaced: 

Page vii, Figure ES-2 

Page ix, Table ES-1 

Page 12, Table 1 

Page 20, Figure 10 

Page 51, Table 11 

Page 52, Figure 18 
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Efficiency & Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

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Contract No. DE-AC36-08GO28308

Southeast Regional Clean 

Energy Policy Analysis 

Revised

Joyce McLaren

Prepared under Task No. IGST.0102

Technical Report

NREL/TP-6A20-49192

Revised April 2011
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iii

Acknowledgments

This report benefited greatly from the thoughtful reviews of many individuals, including: 

Ted Abernathy, Southern Growth Policies Board 

Roger Babb, Operation Simulation Associates

Lynn Billman, NREL 

Sarah Bushe, NREL 

Elizabeth Doris, NREL

Gary Garrett, Southern States Energy Board 

Jenna Goodward, World Resources Institute 

Ben Hill, Georgia Institute of Technology 

Ed Holt, Ed Holt Associates 

Frank Howell, Mississippi State University

David Hurlbut, NREL 

Dan Lieberman, 3Degrees

James Marlow, Radiance Solar/Georgia Solar Association

Anelia Milbrandt, NREL

Robin Newmark, NREL 

Paul Quinlan, North Carolina Sustainable Energy Association 

Kate Shanks, Kentucky Department for Energy Development and Independence 

Katie Shepherd, North Carolina Green Power 

Carol Tombari, NREL

Ivan Urlab, North Carolina Sustainable Energy Association 
iv

NREL’s Clean Energy Policy Analyses (CEPA)

The CEPA suite of analyses and activities explore clean energy development and policy 

implementation at the regional, state, and local levels and disseminate that information to 

interested stakeholders. The activities gauge the effectiveness of and interactions between clean 

energy policies, provide insight into regional activities, investigate the interactions between local 

and state-level policies, and convene leading thought leaders to develop innovative regional, 

state, and local clean energy policies. The goal is to provide information to decision makers, 

researchers, and other stakeholders regarding the status of, barriers to, and possibilities for 

increased energy efficiency and renewable energy development at various levels of governance. 

For more information, see http://www.nrel.gov/cepa/. This report focuses primarily on energy 

use in electricity and buildings. For more information on transportation policies at the state and 

local level, please see the Alternative Fuels Data Center: http://www.afdc.energy.gov/afdc/. 
v

Executive Summary

Compared to the national average, the Southeast1 uses a slightly higher percentage of coal and 

nuclear energy and a lower percentage of natural gas to produce electricity (EIA 2010b). Coal 

fuels 51% of the region’s electricity production, however the southeastern states depend heavily 

on coal imports. Every state in the region, with the exception of Kentucky, is a net importer of 

coal. The majority of the coal is brought from outside the region, from as far away as Wyoming 

and South America, at a cost of billions of dollars per year for each state (Deyette and Freese 

2010). 

Figure ES-1 Fuel-mix for electricity generation by State (2009)

More than 50,000 MW of coal-fired plants were built in the Southeast during the 1950s and 

1960s, and many of these aging plants are planned for retirement between 2020 and 2030 (Hart 

2010). Although demand projections were decreased as a result of the economic recession, 

history alerts us to the possibility of rapid demand increases during periods of post-recession 

recovery (NERC 2010; NERC 2010). The southeast region is growing rapidly, and according to 

recent forecasts, regional electricity capacity will need to increase by nearly 50 GW by 2030 to 

 

1 This report covers the states that largely fall into the Southeastern Reliability Corporation (SERC) region: 

Alabama, Arkansas, Georgia, Louisiana, Kentucky, Missouri, Mississippi, North Carolina, South Carolina, and 

Tennessee. Actual SERC regional boundaries do not follow state lines, however, since this document focuses on 

state policy; state boundaries are used for the purposes of this report. If the majority of a state’s electricity demand 

is in the SERC region, then the state is discussed in this report. 
vi

meet demand (Brown et al. 2010). This increase amounts to approximately 20% of the regional 

capacity in 2008. 

The Southeast is making efforts to increase energy independence through energy efficiency and 

renewable energy implementation. States are defining their goals and priorities, focusing on job 

development opportunities and demonstrating efficiency and renewable energy use in public 

buildings. However, the region produced only 1.8% of the electricity from renewable resources 

other than conventional hydroelectricity in 2009, half of the national average (EIA 2010a). 

Biomass currently provides the majority of the region’s non-hydroelectric renewable electricity

(EIA 2010b). 
vii

Figure ES-2. Southeast renewable energy capacity by technology and state

Renewable Energy Potential

The Southeast has sufficient local renewable energy resources to support a strong clean energy 

economy (Howell et al. 2010; NREL 2010b; Porter et al. 2009). Most notably, the region is rich 

in untapped biomass resources, including residue resources (e.g., from forests, agriculture, mills, 
viii

in untapped biomass resources, including residue resources (e.g., from forests, agriculture, mills, 

and urban waste) (NREL 2010b). 

There is also the opportunity to develop a dedicated energy crop market in the Southeast. 

Dedicated energy crops, such as switchgrass and short-rotation woody crops, can be grown on 

Conservation Reserve Program lands, which have already been set aside for the growth of 

permanent vegetation rather than traditional crops. These crops can be grown on marginal lands, 

do not compete with traditional crops, and have fewer price spikes (Howell et al. 2010). 

Encouraging biomass co-firing in existing coal facilities would provide an immediate demand for 

biomass resources, support the early stages of a biomass supply market, and immediately reduce 

emissions from coal-fired facilities (Robinson et al. 2003). In states with renewable portfolio 

standards (RPS), co-firing is a low-cost alternative for utilities to meet renewable energy 

requirements. Limiting the amount of co-firing that is eligible for the RPS in later years will 

encourage diversification of the renewable portfolio. 

The Southeast has a variety of other clean energy resources besides biomass. Missouri has 

excellent on-shore wind potential. Louisiana has some of the best off-shore wind resources in 

the country. The Carolinas also have excellent off-shore wind potential. All of the states in the 

region have sufficient solar resources to produce distributed power from photovoltaic 

technology. The region has a high density of energy-intensive commercial and industrial 

facilities that are suitable for combined heat and power technologies. There are opportunities for 

methane-to-energy and small hydroelectric development in every state in the region.2

 

2

 See references listed in Table 11. 
ix

Table ES-1. Renewable Energy Potential in the Southeastern States

Clean Energy Benefits

Developing the clean energy resources of the Southeast will yield a variety of benefits. Clean 

energy development is an investment in energy security and independence, acts as insurance 

against energy price fluctuations, can increase the value of marginal lands, and provides local 

and global environmental paybacks. In today’s economy, however, job creation is one of the 

most commonly stated drivers for state-level clean energy investment.

Even accounting for job losses in the fossil fuel industry, the development of low carbon 

electricity sources, such as renewable energy, creates more jobs than fossil fuel generation per 

unit of energy delivered (Wei 2010). In addition, energy efficiency improvements could provide 

an estimated 4 million job-years in the United States through 2030 (Wei et al. 2010). The jobs 

created by the clean energy industry are for a wide range of skilled laborers, including scientists, 

construction workers, engineers, manufacturing workers, planners, and site managers. 

Clean Energy Policy

There are a variety of policies that support energy efficiency and renewable energy development. 

In the Southeast, the most common state-level policies to support efficiency improvements are 

rebates and loans. Most of the states in the region also have efficiency standards for public 

buildings or government purchases. 
x

Residential and commercial building codes meet current international standards in Georgia, 

Kentucky, Louisiana, North Carolina, and South Carolina; however, there is significant room for 

improvement in building codes in the other states (BACP 2010). 

There are several policy actions that can help establish a regulatory environment favorable to 

energy efficiency. Decoupling of utility revenue from sales removes the utilities’ incentives to 

sell more energy. Clear and standardized cost recovery processes reduce uncertainties and 

encourage utility participation in efficiency efforts. Integrated resource planning encourages 

utilities to value efficiency in their planning processes. Although a majority of the southeastern 

states have some form of decoupling and integrated resource planning, several clarifications and 

adjustments could strengthen the policies. Alabama, Louisiana, and Mississippi have no such 

policies in place. States can provide guidance to public utility commissions on balancing the 

provision of least-cost energy to consumers with goals for clean energy development. Rewards 

for utilities that implement effective customer-side efficiency programs can also stimulate energy 

savings, particularly when the incentives include clear metrics and verify results (NREL 2010a; 

Shirley et al. 2008). 

The most common state-level policies to support renewable energy development in the Southeast 

are personal and corporate tax incentives and loans. While many of the states in the region have 

net-metering and interconnection policies, built in limitations reduce their effectiveness in 

stimulating development. In particular, raising the installation size limits and program 

participation caps would encourage further deployment. 

Missouri and North Carolina are the only states in the region that have thus far implemented 

RPSs. RPS policy creates demand for clean energy that reduces uncertainty for investors. An 

RPS acts as a foundation policy on which other clean energy policies can be built. 

Development of the region’s unique biomass resources could be supported through policies that 

strengthen the supply-demand chain (such as favorable zoning and land use designations), 

information provision (to farmers and university extensions), incentives to retain biomass fuel in 

the region rather than exporting it, and providing loans and incentives for equipment 

manufacturers and biomass energy facilities. 
xi

Table ES-2. Clean Energy Development Opportunities in the Southeast
xii

Table of Contents

List of Figures ..........................................................................................................................................xiii

List of Tables ............................................................................................................................................xiv

1 Introduction .........................................................................................................................................1

1.1 Purpose of the Report...................................................................................................... 1

1.2 States Covered in this Report .......................................................................................... 1

2 The Energy Landscape in the Southeast.........................................................................................3

2.1 Southeast Electricity Sources .......................................................................................... 6

2.2 Electricity Demand ....................................................................................................... 13

2.3 Electricity Market Regulation in the Southeast ............................................................ 14

3 Clean Energy in the Southeast .......................................................................................................17

3.1 Energy Efficiency in the Southeast ............................................................................... 17

3.2 Renewable Energy Use in the Southeast ...................................................................... 18

3.3 Clean Energy Actors in the Southeast .......................................................................... 28

3.4 Clean Energy Policy in the Southeast ........................................................................... 30

4 The Potential for Clean Energy in the Southeast..........................................................................48

4.1 Energy Efficiency Potential .......................................................................................... 48

4.2 Renewable Energy Potential ......................................................................................... 50

5 The Benefits of Clean Energy to the Southeast............................................................................76

6 Overcoming Barriers: Opportunities for Clean Energy in the Southeast...................................79

6.1 Barriers to Clean Energy in the Southeast .................................................................... 79

6.2 Opportunities for Clean Energy in the Southeast ......................................................... 80

7 Conclusion ........................................................................................................................................86

7.1 Key Findings ................................................................................................................. 86

References.................................................................................................................................................88

Appendix: Definitions of State Policies and Incentives for Renewable Electricity Generation........95
xiii

List of Figures

Figure 1. States covered in this report .............................................................................. 2

Figure 2. Electricity consumption per customer by sector (2008): Southeast vs. 

U.S. average ...................................................................................................... 3

Figure 3. Average electricity prices by sector, 1990–2010 .............................................. 5

Figure 4. Type of electricity generation facilities built in the Southeast, 1950–2010 ..... 7

Figure 5. Electricity generation breakdown by technology (2009): Southeast compared 

to United States ................................................................................................. 8

Figure 6. Fuel-mix for electricity generation by state (2009) .......................................... 9

Figure 7. Net import/export of electricity (2009) ........................................................... 10

Figure 8. Electricity consumption in the Southeast (1960–2008) .................................. 14

Figure 9. Southeast renewable energy capacity by technology and region .................... 19

Figure 10. Southeast renewable energy capacity by technology and state ...................... 20

Figure 11. Total installed biomass energy capacity and generation in the Southeast 

(2003–2009) .................................................................................................... 22

Figure 12. Total installed solar energy capacity and generation in the Southeast 

(2003–2009) .................................................................................................... 23

Figure 13. Total installed wind energy capacity and generation in the Southeast 

(2003–2009) .................................................................................................... 24

Figure 14. Total installed hydroelectricity capacity and generation in the Southeast 

(2003–2009) .................................................................................................... 25

Figure 15. Residential state energy code status in the Southeast ..................................... 37

Figure 16. Commercial state energy code status in the Southeast ................................... 38

Figure 17. Energy efficiency policies for the Southeast: Potential energy savings and 

policy cost ....................................................................................................... 48

Figure 18. Coal used for electricity generation compared with renewable energy 

potential in the Southeast ................................................................................ 52

Figure 19. Forest residues available for energy production ............................................. 54

Figure 20. Primary mill residues available for energy production ................................... 55

Figure 21. Urban wood residues available for energy production ................................... 56

Figure 22. Crop residues available for energy production ............................................... 57

Figure 23. Methane emissions from manure management ............................................... 58

Figure 24. Methane emissions from domestic wastewater treatment .............................. 59

Figure 25. Methane emissions from landfills ................................................................... 60

Figure 26. Optimal production zones for dedicated energy crops in the Southeast ......... 64

Figure 27. Combined heat and power potential in the Southeast ..................................... 66

Figure 28. Solar hot water resource in the Southeast ....................................................... 67

Figure 29. Photovoltaic solar resource in the Southeast .................................................. 68

Figure 30. Geothermal resource in the Southeast ............................................................. 69

Figure 31. On-shore wind power resource in the Southeast ............................................. 70

Figure 32. Predicted mean annual wind speeds in Missouri ............................................ 71

Figure 33. Off-shore wind power resource in Louisiana .................................................. 72

Figure 34. Off-shore wind power resource in Georgia .................................................... 73
xiv

Figure 35. Off-shore wind power resource in North Carolina ......................................... 74

Figure 36. Off-shore wind power resource in South Carolina ......................................... 75

List of Tables

Table 1. Coal Use, Imports and Expenditures, Efficiency Expenditures, and 

Renewable Energy Potential in the Southeastern States .................................. 12

Table 2. Implementation of Energy Efficiency in the Southeast .................................... 18

Table 3. State Energy Program ARRA Funding and Activities in the Southeast .......... 27

Table 4. Energy Efficiency and Renewable Energy Actors in the Southeast................. 29

Table 5. State-level Energy Efficiency Incentives and Regulations .............................. 30

Table 6. State-level Renewable Energy Development Policies and Incentives ............. 31

Table 7. Renewable Portfolio Standards in the Southeast .............................................. 32

Table 8. Southeastern State Lead-by-example Policies ................................................. 35

Table 9. State and TVA Policies that Encourage Efficiency within Utilities ................ 42

Table 10. Net-metering and Interconnection Policies in the Southeast—Summary of 

NNEC’s 2009 Evaluation and Recommendations ........................................... 45

Table 11. Renewable Energy Potential in the Southeast: Summary Table ...................... 51

Table 12. Landfill Methane-to-energy Projects and Opportunities in the Southeast ....... 61

Table 13. Clean Energy Development Opportunities in the Southeast ............................ 85
1

1 Introduction

The southeastern states are making efforts moving toward a clean energy economy. 

States are defining goals and priorities, focusing on job development opportunities, and 

otherwise taking advantage of the unique character, background, and resources of the 

region. This report highlights these efforts through a discussion of the clean energy 

resources in the region, the policies and programs that states have implemented, and the 

resulting energy savings and clean energy production. Opportunities to strengthen 

policies that could support the increased development of local resources are also 

described.

1.1 Purpose of the Report

Many southeastern states currently depend on imported coal for a significant portion of 

their electricity production, and coal provides over 50% of the electricity for the region as 

a whole. Although some states do have coal supplies, all but one state within the region 

is a net importer of coal. The majority of the coal is brought from outside the region—as 

far away as Wyoming and South America—costing billions of dollars per year for each 

state. 

This report aims to clarify the clean energy potential in the region and highlight the 

benefits and the opportunities in continuing the efforts of building a clean energy 

economy. It does so by: 

• summarizing the current electricity landscape: the regional and state 

electricity mix (Chapter 2);

• discussing the status of clean energy development in the region, including the 

policies used to encourage this development (Chapter 3); 

• defining the clean energy resource potential (Chapter 4); 

• clarifying the regional benefits of clean energy development (Chapter 5); and 

• pinpointing region-specific opportunities to advance clean energy through 

state-level policies that address current barriers (Chapter 6).

1.2 States Covered in this Report

This report covers the states that largely fall into the Southeastern Reliability Corporation 

(SERC) region: Alabama, Arkansas, Georgia, Kentucky, Louisiana, Mississippi, 

Missouri, North Carolina, South Carolina, and Tennessee. SERC is a regional division of 

the North American Electricity Reliability Corporation (NERC), a not-for-profit 

organization that oversees the reliability of the electric power system in North America, 

with oversight from the Federal Electricity Regulatory Commission (FERC). NERC 

develops and maintains reliability standards, which are then enforced by the eight 

regional entities. Actual NERC regional boundaries do not follow state lines; however, 

state boundaries are used in this document since they are most relevant to a discussion of 

state policy and development potential. 
2

Utilities in the same reliability region often collaborate on issues affecting grid operations 

and planning, which include several issues that are crucial to the development of clean 

energy. In addition, SERC is surrounded by organized, wholesale power markets: the 

Electric Reliability Council of Texas, the Southwest Power Pool, the Midwest 

Independent System Operator, and PJM Interconnection.3 This effectively defines the 

Southeast as a distinct region with respect to interstate power exchanges. With the 

exception of Texas, each of these markets is interconnected electrically through the 

Eastern Interconnection. 

Figure 1. States covered in this report

 

3 Florida is an exception; it is a separate NERC region but is not an organized wholesale power market.
3

2 The Energy Landscape in the Southeast

In 2008, the Southeast was responsible for 23.9% of the nation’s total electricity 

consumption. The regional electricity consumption was 16.1 MWh per person that year, 

which was 32.4% higher than the national average of 12.1 MWh per person. 

The Southeast consumed 0.41 GWh per million dollars of gross state product, 55% more 

than the national average of 0.26 GWh per million dollars of gross domestic product. 

Figure 2 compares the sectoral electricity consumption per person for the southeast 

region with that of the United States as a whole. In 2008, the Southeast’s residential 

sector used nearly 30% more electricity than the national average. The region’s 

commercial sector was less energy intensive, using 6% less than the national average. 

Most notably, the industrial sector uses over 230% more electricity than the national 

average. 

Figure 2. Electricity consumption per customer by sector (2008): Southeast vs. U.S. 

average
4

The high industrial electricity use in the region is likely the result of the region’s 

concentration of energy intensive industries. According to U.S. Census Bureau data for 

2007, the major industries in the Southeast include transportation equipment and vehicle, 

chemical, food, and beverage product manufacturing. Also making the top 10 for the 

region are the metal, iron, and steel product; pulp and paper; and machinery and electrical 

equipment manufacturing industries. Louisiana’s main industry is refining petroleum and 

coal products (U.S. Census Bureau 2010). 

Other factors likely influencing the relatively high percentage of electricity use per 

customer in the residential and industrial sectors include: 

• historically low electricity rates, which also typically draw energy-intensive 

industries (see Figure 3);

• wide annual temperature variations, requiring air conditioning in the summer 

and heating in the winter; and 

• relatively low levels of public expenditure on efficiency programs and 

historically limited use of energy conservation methods (discussed in section 

3.1) (Brown et al. 2010). 
5

Figure 3. Average electricity prices by sector, 1990–2010
6

The rest of this chapter discusses the distinctive energy landscape of the Southeast. It 

covers the current electricity sources used in the region and the electricity mix, imports 

and exports, level of demand, and regulatory environment within each state. Chapter 3 

will provide further context by specifically detailing the status of clean energy 

development. Together, Chapters 2 and 3 describe the unique character of the region and 

set the background for the remainder of the report. 

2.1 Southeast Electricity Sources

As new technologies become available, fuel costs change, and priorities shift, the source 

of electricity in a region changes. Figure 4 shows the types of generation plants that were 

brought online in the Southeast over the past 60 years. During the 1950s and 1960s, coalfired plants were the main source of electricity for the South, with limited hydro and 

natural gas capacity. By the 1970s and 1980s, nuclear was becoming a significant 

supplier of power. Low gas prices during the early 2000s lead to a spike in natural gas 

use for electricity production; nearly all new supplies that came online during this time 

were natural gas facilities. Looking into the near future, the planned facilities are more 

varied, with coal, natural gas, wind, hydro, nuclear, and biomass all contributing to the 

planned fuel mix (Ventyx 2010). 

Although a few new coal-fired plants are being discussed, the high cost of transporting 

coal, along with regulatory uncertainty and permitting difficulties, may make other 

resources more attractive in coming years. Co-firing biomass with coal is one alternative 

option (Ringe et al. 1998; Robinson et al. 2003) as is increased use of natural gas plants. 

These fuel decisions will also be affected by pre-existing contractual obligations, pipeline 

or transmission system constraints, power plant capacities, regulatory pricing rules, and 

any environmental costs that are internalized into the market (Platt 2009). 

The decisions made by state lawmakers, regulators, and utilities over the last 60 years 

have led to the current fuel mix. Fuel and technology availability and costs, economic 

development opportunities, and environmental and safety considerations are all factors 

that are considered in energy planning. As shown in Figure 5, over half of the region’s 

electricity is produced with coal, a quarter using nuclear technology, and 16% with 

natural gas. The remainder is generated with hydro, renewable energy technologies, and 

petroleum. Compared to the national average, the Southeast uses a slightly higher 

percentage of coal and nuclear and a lower percentage of natural gas. The region 

produced 1.8% of its electricity using renewable resources in 2009, compared with the 

national average of 3.6%. The majority of the region’s renewable energy came from

biomass resources (EIA 2010a). 
7

Figure 4. Type of electricity generation facilities built in the Southeast, 1950–2010
8

Figure 5. Electricity generation breakdown by technology (2009): Southeast compared to 

United States

Figure 6 depicts the specific mix of fuels used by each state in the region. As it shows, 

each of the southeastern states has a unique electricity resource mix; however, the states 

share many of the same issues. One of these is reliance on imported fuels and electricity. 

There is increasing focus on the desirability of energy independence and the need for job 

creation through local electricity production and the use of local fuels. 
9

Figure 6. Fuel-mix for electricity generation by state (2009)

Figure 7 shows the states in the region that are currently net importers of electricity and 

the states that are net exporters. Tennessee, Georgia, Kentucky, and North Carolina are 

all net importers of electricity. 
10

Figure 7. Net import/export of electricity (2009)

All of the states in the region, except Kentucky, are net importers of coal. The majority 

of this coal is purchased from outside the region or country, much of it from Wyoming. 

Some states import coal from as far away as South America. Table 1 shows key coal 

statistics for each state, including the percentage of coal each state uses to generate 

electricity, how much of the coal is imported, and how much the state spends on the net 

coal imports. Georgia, for example, generated 62% of its electricity from coal in 2008 

and imported all of this coal at a cost of $2.6 billion. In total, the region spent 

approximately $5.8 billion dollars on net coal imports. With the exception of Kentucky, 

which has positive revenues from coal exports,4

Table 1 also shows the percentage of state electricity that could potentially be derived 

from in-state renewable resources based on analysis presented in Chapter 4. Even 

excluding the significant potential of electricity from solid biomass resources such as 

residues and energy crops, most of the states have the potential to generate electricity 

from local resources in excess of that currently generated by imported coal. Although 

there are still social and economic barriers to realizing this potential, an important 

message here is that resource availability is not a barrier for the region. 

the states in the region spent between 

$110 and $297 per person on net coal imports. Comparatively, states spent between $0.00

and $1.62 per person on ratepayer-funded energy efficiency programs (Deyette and 

Freese 2010). 

 

4 As states continue to pursue the development of local resources and reduced coal use, Kentucky may 

experience a reduction in revenues from coal exports. 
11

The current fuel mix in the region is the baseline, or starting point, but it does not limit 

the future trajectory of the Southeast energy industry. While there are significant 

investments inherent in the current technology mix that create challenges to transition, 

there are substantial benefits of moving toward an alternative fuel mix. 

Those who influence energy decisions can preserve and draw on the unique 

characteristics and history of the region to help create an energy future that suits changing 

needs and goals. This may include tapping the deep agricultural tradition of the region to 

develop a robust biomass industry, drawing on the region’s hydroelectricity experience to 

take advantage of the small-hydro opportunities and benefiting from the region’s pride in 

independence to establish greater energy security through less dependence on imported 

fuels. 
12

Table 1. Coal Use, Imports and Expenditures, Efficiency Expenditures, and Renewable Energy 

Potential in the Southeastern States
13

2.2 Electricity Demand

As shown in Figure 4, more than 50,000 MW of coal-fired plants were built in the 

Southeast during the 1950s and 1960s. Many of these aging plants will be beyond their 

expected useful lives and are likely to be retired between 2020 and 2030 (Hart 2010). 

During the same time period, the Southeast is projected to have increasing electricity 

demands in response to the influx of population into the region and the continuing growth 

of the region’s metropolitan areas. Capacity requirements in the Southeast are forecasted 

to increase by nearly 50 GW by 2030 unless energy efficiency measures are implemented

(Brown et al. 2010). This is approximately a 20% increase in capacity5

NERC’s recent demand projections for 2010–2019 were lower than those made for the 

last 2 years. This year, projections for the year 2018 were 4.1% lower than those for 

2009 and 7.8% lower than the projection made for 2008. The decline in demand 

projections and the high over all reserve margins were the result of the economic 

recession, as well as advancements in demand-side management (NERC 2010). 

Although the recession has delayed expected demand levels by about 4 years, history has 

shown the possibility of a rapid increase in demand during the post-recession period 

(NERC 2010). For this reason, NERC stresses the importance of the electric industry 

maintaining a flexible generation supply in order to respond to higher than expected 

demand and unforeseen resource issues. NERC predicts an unprecedented shift in the 

generation fuel mix over the coming decade, including an increasing role of new gasfired, wind, solar, and nuclear capacity (NERC 2010). 

 (EIA 2009). 

Under one aggressive efficiency scenario, however, demand in the region could actually 

decline by 19 GW over the same time period (Brown et al. 2010). 

Typically, the actual capacity of electricity that comes online is significantly less than the 

amount of capacity planned and announced by utilities. This gap is due to delays and 

cancellations as well as regulatory uncertainties and economic change, which affect 

power plants of all types and fuel sources. In the southeastern region, four new coal-fired 

power plants were under construction at the beginning of 2010 (Shuster 2010). Only one 

additional plant had been permitted for construction at that time. Obtaining financing for 

new coal-fired plants is becoming more difficult as a result of uncertainties regarding 

climate policy and emissions regulations (Ball 2010; Berry 2008; Clayton 2010; Duke 

and Lashof 2008). As Figure 4 shows, other resources are being increasingly considered; 

in fact, more wind energy capacity has been proposed than natural gas or coal capacity 

(Shuster 2010). 

 

5 The states in the region had a total of 238.3 GW capacity in 2008 (EIA 2009).
14

Figure 8. Electricity consumption in the Southeast (1960–2008)

2.3 Electricity Market Regulation in the Southeast

Another defining characteristic of a state’s electricity system is the regulatory structure. 

All of the states in the southeastern region have regulated utility industries. Arkansas 

started a utility restructuring process in the late 1990s but has suspended the processes 

due to various concerns and uncertainties (EIA 2010d). 
15

A state’s regulatory structure affects the ways in which energy efficiency and renewable 

energy projects are supported and implemented. Public utility commissions (PUCs) are 

mandated to protect the interests of consumers and ensure least-cost energy. The way in 

which this mandate is interpreted and balanced with other policy goals, such as the 

development of clean energy, can vary considerably from state to state. While the 

development of clean energy options may increase costs to consumers in the short term, it 

may provide long-term price insurances and other benefits that are not captured in simple, 

short-term cost calculations. Providing clear guidance to PUCs on how to balance leastcost mandates with goals for clean energy development is an important consideration for 

state legislatures. Chapter 3 describes some legislative options that southeastern states 

can implement to provide a regulating environment supportive of clean energy 

development. 

The Tennessee Valley Authority

The Tennessee Valley Authority (TVA) is a federal corporation, created in 1933 

by Congress as part of the New Deal to assist the country out of the Great 

Depression. It is the largest publicly owned electric utility in the country with 155 

distributors, including municipal utility companies and cooperatives, which resell 

TVA power to their consumers. TVA is the primary electricity provider in 

Tennessee and also covers small areas of Mississippi, Alabama, Georgia, North 

Carolina, Kentucky, and Virginia. In addition, TVA power is sold directly to 51 

large industrial customers and 6 federal installations. Besides power production, 

TVA provides navigation, flood control, and land management issues for the 

Tennessee River system. 

Since TVA is self-regulated, it is not subject to oversight by state public service 

commissions, as are other regulated utilities. This means that state-level policies 

do not apply to the area within the TVA district. TVA, however, is subject to 

PURPA and other applicable federal policies, and the TVA board considers the 

PUPRA standards in a similar fashion as state utility commissions (see PURPA 

text box in Chapter 3).
16

Electricity Regulation: Defining the Players and Terminology

PUCs are state-level organizations that regulate investor-owned utilities. They 

monitor rates, ensure quality of service, and enforce safety rules. PUCs are also 

called Public Service Commissions or Regulatory Commissions in some states.

Alabama http://www.psc.state.al.us/

Arkansas http://www.state.ar.us/psc

Georgia http://www.psc.state.ga.us/

Kentucky http://www.psc.state.ky.us/

Mississippi http://www.psc.state.ms.us/

Missouri http://www.ecodev.state.mo.us/psc/

North Carolina http://www.ncuc.commerce.state.nc.us/

South Carolina http://www.psc.state.sc.us/

Tennessee http://www.state.tn.us/tra

Virginia http://www.state.va.us/scc

National Association of Regulatory Utility Commissioners (NARUC) is a nonprofit organization that represents the state PUCs who regulate the utilities.

Federal Energy Regulatory Commission (FERC) regulates the interstate

commerce and transmission of electricity; protects the reliability of the high voltage 

interstate transmission system through mandatory reliability standards; reviews 

proposals to build new transmission; licenses and inspects hydroelectric projects; 

and monitors energy markets, including reviewing mergers, acquisitions, and 

corporate transactions. 

Rate cases are the formal processes that set the allowable price that public utilities 

may charge their customers for electricity and service.

Restructuring occurs when a fully regulated monopolistic system of electric 

utilities is replaced with a market system in which there is customer choice and 

competition between electricity providers.
17

3 Clean Energy in the Southeast

This chapter looks at the extent to which clean energy technologies are currently being 

employed in the Southeast and the policies the states have implemented to encourage this 

development.6

3.1 Energy Efficiency in the Southeast

 First, the extent to which the Southeast is using energy efficiency and 

renewable energy technologies is discussed. A brief overview of the major actors at the 

state level follows. Finally, the details of the policies that states have implemented to 

support this development are given. 

Although it is difficult to determine how much energy is not being used that would 

otherwise have been, there are several indicators that can be used to measure energy 

efficiency. One indication of the degree to which states are employing efficiency 

methods is given by the policies being implemented. Many of the southeastern states 

have government rebates and loans to encourage consumer energy efficiency. In 

addition, most of the states have efficiency standards for public buildings. A summary of 

these and other policies implemented in the region is given in Table 5 and some of the 

policies are detailed in Section 3.4. 

However, having a policy does not guarantee that it is being implemented effectively to 

reduce energy consumption. In a study managed by the Natural Resources Defense 

Council, researchers used energy consumption data for each state to determine the change 

in the residential energy use per capita over time, adjusting for annual weather 

differences (NRDC 2010). This delta is a measure of the energy efficiency of the state 

economy and provides an indication of the extent to which states are effectively 

implementing efficiency measures.

According to the study, none of the southeastern states reduced their adjusted residential 

energy use per capita between 1996 and 2006. Louisiana, Tennessee, and Kentucky had 

the least increase (indicating more efficiency), while South Carolina and Alabama had 

the highest increase in use (indicating less efficiency). The 10-year change for each state 

is given in Table 2. Smaller values indicate less growth in energy intensity—a positive 

trend (NRDC 2010). 

 

6 Some states, including Louisiana and West Virginia, have established regulatory frameworks to allow 

carbon capture and sequestration from coal plants, addressed long-term liability and ownership issues, and 

defined permitting and safety requirements regarding injection and long-term storage of carbon dioxide. 

These state policies are not evaluated in this report, as they fall more into the category of climate change 

policies rather than energy efficiency and renewable energy policies.
18

Table 2. Implementation of Energy Efficiency in the Southeast

3.2 Renewable Energy Use in the Southeast

The Southeast has substantial renewable energy resources (see Table 11 in Chapter 4). 

The World Research Institute estimates that the Southeast currently harnesses just over 

one-tenth of the practical renewable energy available, but by deploying currently 

available, cost-effective technologies, over 30% of the region’s total electricity needs 

could be met by renewable resources (Creech et al. 2009). 

Figure 9 shows the renewable energy capacity of the various U.S. regions and indicates 

the percentage of total regional generation that is produced by this renewable capacity. 

Figure 10 provides these figures for the individual southeastern states. As Figure 10 

indicates, Alabama leads the region in terms of total renewable energy capacity due to 

significant generation produced by hydroelectric facilities. Georgia, however, leads in 

non-hydro renewable energy with over 700 MW of biomass capacity. North Carolina by 

far has the most solar energy capacity, while Missouri leads in wind energy development. 

Missouri’s wind energy potential is discussed further in Chapter 5. 
19

Figure 9. Southeast renewable energy capacity by technology and region
20

Figure 10. Southeast renewable energy capacity by technology and state 

Figures 11–14 show the change in capacity and generation of each of the renewable 

energy technologies over the past 7 years. Despite the sizeable potential of biomass in 

the Southeast (discussed further in Chapter 4), biomass capacity growth has leveled off in 

the past 3 years and generation has declined. Wind energy use has increased sharply with 

the addition of 309 MW in Missouri and 29 MW in Tennessee, as well as some initial 

activity in Arkansas. The solar capacity is concentrated in North Carolina, although each
21

of the states has viable solar resources and some recorded capacity. Conventional 

hydroelectric capacity has remained unchanged, although generation dipped significantly 

between 2006 and 2009 due to regional droughts. Improvements in existing facility 

efficiency and the construction of small-hydro facilities (typically less than 10 MW) are 

likely to account for most of the hydroelectric capacity increases in the future. 
22

Figure 11. Total installed biomass energy capacity and generation in the Southeast 

(2003–2009)
23

Figure 12. Total installed solar energy capacity and generation in the Southeast (2003–

2009)
24

Figure 13. Total installed wind energy capacity and generation in the Southeast 

(2003–2009)
25

Figure 14. Total installed hydroelectricity capacity and generation in the Southeast 

(2003–2009)
26

The primary mechanism through which clean energy development is currently being 

supported within the southeastern states is the federally-funded State Energy Program 

(SEP),

7

 which was provided with $3.1 billion of funding in the American Recovery and 

Reinvestment Act of 2009 (ARRA). Table 3 indicates how much ARRA funding the 

southeastern states received for their SEPs and the types of clean energy projects they are 

funding. More information can be found at the Department of Energy’s (DOE’s)

Weatherization and Intergovernmental Program Web site: 

http://www1.eere.energy.gov/wip/sep.html. 

 

7

 SEP is a 30-year-old program administered by the Department of Energy’s Weatherization and 

Intergovernmental Program (WIP). It provides federal grants and technical assistance for the development 

of energy efficiency and renewable energy products and technologies. Grant awards require some cost 

sharing by states. The program emphasizes the state's role as the decision maker and administrator for the 

program activities, with State Energy Offices allocating funding and overseeing projects. Activities that 

can be funded include technical assistance, training, education, and project implementation. Funding may 

not be used for research activities or construction.
27

Table 3. State Energy Program ARRA Funding and Activities in the Southeast
28

Aside from the SEP, the DOE sponsors several other state-level programs, such as the 

Weatherization Assistance Program, the Energy Efficiency and Conservation Block 

Grant Program (EECBG), and Solar America Cities. The Southeast has two Solar

America Cities (Knoxville, Tennessee, and New Orleans, Louisiana) as well as EECBG 

projects.8 These DOE programs assist state, local, and tribal governments through 

funding and technical assistance to implement energy efficiency and renewable energy 

technologies and develop strategies to improve efficiency and reduce fossil fuel 

emissions. The State Energy Offices in each state are responsible for allocating the 

funding available under these programs and SEP. DOE’s Solar Energy Technologies 

Program is also supporting several southeastern states (Alabama, Georgia, and 

Mississippi) through a NARUC-DOE partnership in order to help states overcome 

barriers to development of solar technologies. For more information on these programs 

and the efforts of the State Energy Offices, see DOE’s EERE Web site at 

http://www.eere.energy.gov/ and the National Association of State Energy Officials Web

site at http://www.naseo.org. 

3.3 Clean Energy Actors in the Southeast

Besides the multitude of investor-owned utilities (IOUs), municipal utilities, cooperative 

utilities, and independent power producers who already produce or purchase renewable 

energy, there are numerous regulatory and non-regulatory stakeholders involved in clean 

energy development in the Southeast. Table 4 provides an overview of government, 

regulatory, and regional not-for-profit organizations that play a variety of roles in the 

development of clean energy. In addition to these stakeholders, there are numerous state 

and local not-for-profit organizations that are not listed.

 

8 More information on these projects can be found on the Solar America Cities Web site 

http://www.solaramericacities.energy.gov/ and the WIP Web site 

http://www1.eere.energy.gov/wip/eecbg.html. 
29

Table 4. Energy Efficiency and Renewable Energy Actors in the Southeast 
30

3.4 Clean Energy Policy in the Southeast

There is a wide range of state-level EERE policies, regulations, and incentives currently 

in place in the Southeast.9 Tables 5 and 6 indicate the states that have implemented each 

of these support mechanisms.10

Table 5. State-level Energy Efficiency Incentives and Regulations

 Definitions for each of the common policy mechanisms 

listed in the tables are included in the Appendix. Details regarding the implementation of 

some of these policies are provided in the following sections. 

 

9 Utility and local policies can and do make an important contribution to energy efficiency and renewable 

energy development. However, a discussion of utility and local-level policies is beyond the scope of this 

report. These policies, as well as the potential interactions between policies at state, local, utility, and 

federal levels need to be considered and will be addressed in other CEPA reports, including the “Analysis 

of the Status and Impact of Clean Energy Policies at the Local Level” (Bushe 2010). In many cases, 

policies at multiple levels of governance can be designed to support each other and work together to have 

greater impact than they would alone. In addition, there are cases in which state policy is necessary in 

order to open the door to effective local policies (e.g., state-level policy may be necessary to allow local 

governments to offer certain financing options such as property assessed clean energy programs). 

10 Voluntary green power programs are not included in this list since they are not considered to be state 

incentives. 
31

Table 6. State-level Renewable Energy Development Policies and Incentives

3.4.1 Renewable Portfolio Standards and Energy Efficiency Resource 

Standards 

Renewable portfolio standards (RPS) and energy efficiency resource standards (EERS) 

are increasingly common policies used by states to encourage clean energy development. 

These standards require utilities to provide a percentage of electricity from renewable 

energy resources or reduce demand through efficiency. Two southeastern states (North 

Carolina and Missouri) have set mandatory standards (Table 7), while others have set 

goals or are implementing trial standards.

11

In 2007, North Carolina implemented an EERE standard requiring the state’s IOUs to 

meet 12.5% of demand with renewable energy by 2021. Municipal and cooperative 

utilities must provide 10% of electricity from renewable resources by 2018. Currently, 

IOUs may meet 25% of this requirement through energy efficiency measures, with an

increase to 40% after 2021. A small percentage of the requirement must be met using 

solar technologies, poultry waste, and swine waste. Municipal and cooperative utilities 

may meet 100% of the requirement through efficiency, with the exception of the solar, 

poultry, and swine waste requirements (DSIRE 2010). A price cap limits the cost of 

 South Carolina, for example, has a goal of 

reducing energy use by 20% between 2000 and 2020 (EIA 2010c). 

 

11 The Tennessee Valley Authority’s goal across its seven-state territory is 50% zero- or low-carbon 

generation by 2020 (FERC 2010b). Kentucky has the goal of generating at least 25% of its projected

energy demand (the equivalent of 1,000 MW) from energy efficiency, renewable energy, and biofuels by 

2025 while continuing to produce safe, affordable, and abundant food, feed, and fiber (Commonwealth of 

Kentucky 2010). 
32

compliance (ACEEE 2009). More information on North Carolina’s EERE standard can 

be found at: http://www.ncuc.commerce.state.nc.us/reps/reps.htm. 

Table 7. Renewable Portfolio Standards in the Southeast

In 2008, Missouri voters approved a 2008 ballot initiative to replace the state’s voluntary 

renewable energy and energy efficiency standard with a mandatory RPS. The Missouri

RPS requires IOUs to generate 15% of their electricity through renewable sources by 

2021, with 2% coming from solar power. The final administrative rules were issued in 

July 2010 (DSIRE 2010). 

In October 2010, Louisiana approved the plan for a pilot renewable energy program that 

could be a step toward a state RPS. The program has two components: a research 

requirement for small-scale projects and a long-term development component through 

requests for proposals (RFP). The research component requires utilities to develop at 

least three projects, either self-built or through a standard offer tariff. Utilities may have 

one self-built facility of up a maximum of 5 MW and two of a maximum of 300 kW. In 
33

the standard offer option with a contract up to 5 years, utilities may not buy more than 

5 MW from any single project. Costs for both options are capped. 

The longer-term RFP component requires utilities to obtain a total of 350 MW of 

electricity from renewable resources, which would come online between 2011 and 2014. 

Contracts of 10–20 years are to be offered through the RFP process to non-affiliated 

developers. This component provides utilities with experience with larger renewable 

energy projects built by third parties. After the pilot program period, an analysis of the 

pilot will help the Public Service Commission determine whether to implement an RPS 

(Louisiana Public Utility Commission 2010). Louisiana’s RPS discussion and pilot was a 

policy originating from the state’s Public Service Commission. 

3.4.2 PACE

Property assessed clean energy (PACE) financing allows property owners to borrow 

money to pay for energy improvements. The amount borrowed is typically repaid over a 

period of years by the homeowner via a special assessment on their property tax bill. If 

the property changes hands, the loan is thus transferred to the new owner who takes over 

the benefits of the energy upgrades. PACE programs were supported via EECBGs

established by ARRA, and states were encouraged to move forward with legislation to 

authorize such programs. 

The implementation of PACE programs is currently on hold, due to the recent Federal 

Housing Finance Agency declaration that residential PACE financing programs do not 

meet the financial requirements of Fannie Mae and Freddie Mac (Federal Housing 

Finance Agency 2010). When, and if, these issues are resolved, however, two southern 

states are poised to move forward with PACE programs: Georgia and North Carolina. 

In May 2010, Georgia authorized county, city, or town development authorities to 

provide financing for the installation of renewable energy systems, energy efficiency or 

conservation improvements, and water efficiency or conservation improvements to 

residential, commercial, industrial, or other qualifying properties. 

North Carolina has authorized certain local governments to establish “energy assessment 

programs,” which are similar to PACE programs authorized in other states. Senate Bill

97, enacted in August of 2009,12

 

12 The original act was modified by S.L. 2010-167 (H 1829) in August 2010 to provide clarifications on 

local government authority and fund energy financing programs. 

authorizes counties and cities to make special 

assessments in order to finance the installation of distributed generation renewable 

energy sources or energy efficiency improvements that are permanently fixed to 

residential, commercial, industrial, or other real property. The legislation authorizes local 

governments to impose special assessments on the real properties to which the energy 

projects are affixed and establish a variety of energy financing programs, including 

energy rebate programs, energy audit and retrofit programs, and weatherization 

programs. Funding for PACE programs can be provided through revenue bonds, general 

obligation bonds, or general revenues, among others. Some of these programs require 

partial or full federal grant funding (Millonzi 2010a; Millonzi 2010b). 
34

The fact sheet “Property Assessed Clean Energy (PACE) Enabling Legislation: Ten Key 

Components of PACE Legal Authority” (Vote Solar and Renewable Funding 2010) 

provides information on the components of state-level legislation that best enable PACE 

programs. The fact sheet highlights the importance of: 

• identifying existing financing and assessment authority within state statutes, 

• ensuring that assessments are secured by liens on the property benefitted, 

• establishing the mechanism for creation of financing districts and programs, 

• authorizing financing of improvements on private property, 

• ensuring that state law authorizes local governments to finance energy 

efficiency and renewable energy improvements; 

• including legislative findings that the improvements are in the public interest,

• creating an opt-in assessment feature,

• authorizing bonding and the use of bonds or grants to finance improvements, 

• enabling statewide or multi-jurisdictional PACE programs to allow 

coordination and take advantage of economies of scale, and 

• ensuring that bonds are not backed by full faith and credit of the government, 

but are secured by the assessment or tax lien on the property benefitted. 

3.4.3 Lead by Example/EERE in Public Buildings

State governments are increasingly leading by example by setting design and energy 

efficiency standards for new and existing public buildings; setting energy consumption 

goals; installing energy efficient lighting, computers, appliances, and power-monitoring 

equipment in public facilities; purchasing clean energy for public facilities; and installing 

on-site renewable energy systems. Table 8 summarizes the lead-by-example initiatives 

undertaken in the southeastern states. 

A variety of resources are available to states to help strengthen existing lead-by-example 

programs. To help states assess the costs and benefits of lead-by-example actions and 

identify further resources, the Environmental Protection Agency (EPA) published the 

Clean Energy Lead by Example Guide: Strategies, Resources, and Action Steps for State 

Programs (2009; http://www.epa.gov/statelocalclimate/resources/example.html).
35

Table 8. Southeastern State Lead-by-example Policies
36

The Consortium for Energy Efficiency provides a set of guidebooks to help states 

implement government efficiency measures: http://www.cee1.org/gov/purch/guides.php3. 

The guidebooks are directed to specific audiences in state and local governments 

including: 

• government purchasing organizations,

• government property and facility management organizations, 

• government policymakers, and 

• third-party architects/engineers who work with state and local government 

property/facility management organizations.

3.4.4 Building Codes

Given the long life of most buildings, lowering their energy intensity through efficient 

design and material and appliance choices can save significant amounts of energy. 

Building codes specify the minimum level of efficiency that a new or renovated building 

must meet. Building codes are either adopted through the legislative process, through the 

regulatory process via a state agency that has been assigned the power to issue code, or 

through a combination of both methods. 

State-level policy regarding building codes varies greatly from state to state and can even 

vary within a state. However, under the U.S. Energy Policy and Conservation Act, states 

are required to certify that their building energy codes meet or exceed the requirements of 

the standard energy code within 2 years of being updated or submit a reason for not doing 

so. The standard codes are the International Energy Conservation Code (IECC) for the 

residential sector and the ASHRAE Standard 90.1 for the commercial sector, both of 

which are updated regularly. 

In October 2010, final action hearings of the International Code Council (ICC) took place 

in North Carolina to determine the new standards that will appear in the 2012 version of 

the code. The newly adopted code is estimated to improve residential and commercial 

building efficiency by 30%. Residential requirements include improved sealing, more 

efficient windows, increased home insulation, reduced energy losses from heating and 

cooling ducts, improved hot water distribution systems, and improved lighting efficiency. 

The code for commercial buildings advances requirements for continuous air barriers and 

daylighting controls and increases the number of climate zones where economizers are 

required. In addition, building designers must reduce the building’s carbon footprint 

through a choice of renewable energy use and through the installation of higher 

efficiency HVAC equipment and more efficient lighting systems. It also requires lifelong 

performance monitoring to ensure that efficiency is maintained according to the 

building’s design (EECC 2010). 
37

Figures 15 and 16 show the extent to which each of the southeastern states meets the 

standard code. Alabama, Mississippi, and Missouri do not have mandatory state codes, 

and none of the other southeastern states meet the current national standard code set in 

2009. 

A set of studies by the DOE estimated the potential savings if each of the southeastern 

states updated the current state code to meet the 2009 IECC standard code (U.S. DOE 

2009). According to the reports, the savings would amount to a 14%–18% energy 

reduction in the residential sector alone, providing a savings of $173–$336 per household 

per year. Additional savings would occur with updates to the commercial codes as well. 

The reports provide details on the specific efficiency measures that lead to these savings 

and the differences between the current state codes and the 2009 IECC standards. The 

reports for each state and other information on building codes can be downloaded at 

http://www.energycodes.gov/states/. 

Figure 15. Residential state energy code status in the Southeast
38

Figure 16. Commercial state energy code status in the Southeast

More detailed and up-to-date information about state building codes can be found at the 

Building Code’s Assistance Project and their online network (OCEAN) at http://bcapocean.org and from the DOE Building Codes Program at http://www.energycodes.gov/. 
39

3.4.5 Utility Efficiency Cost Recovery (Decoupling), Integrated Resource 

Planning, and Performance Incentives for Efficiency Programs

A direct connection between the amount of electricity that a utility sells and the revenue 

the utility earns can discourage the utility from supporting and implementing energy 

efficiency measures. “Decoupling” is a policy approach that severs the link between 

kilowatt-hours sold and utility earnings. Utilities are able to recover the fixed costs of 

providing service. Under decoupling, a customer’s bill is still connected with the amount 

of electricity consumed, so there is still incentive for customers to implement efficiency 

to reduce consumption (NREL 2010a). 

PURPA’s Relevance to Renewable Energy Development

Congress enacted the 1978 Public Utility Regulatory Policies Act (PURPA) in 

response to the oil crisis of that decade. The three aims of PURPA are to:

1. encourage energy conservation by electric utilities, 

2. promote the efficient use of facilities and resources, and 

3. ensure equitable rates to customers.

PURPA sets forth standards for the consideration of state regulatory authorities 

and certain non-regulated utility companies (including the TVA). These 

authorities must determine whether it is appropriate for each electricity utility 

to implement the standards for the purposes of carrying out the three aims of 

PURPA. New standards have been added as amendments over the years, 

including those dealing with interconnection, net metering, integrated resource 

planning, smart grid investment, and information provision to consumers. 

Initially, PURPA had a major impact on the development of renewable energy 

projects. The Act required utilities to buy electricity from qualifying 

independent companies—referred to as Independent Power Producers (IPPs)—

that could produce power for less than what it would cost for the utility to 

generate that power (the avoided cost). The rates paid for this power tended to 

be highly favorable to the producer and were intended to encourage more 

production of this type of energy as a means of reducing emissions and 

dependence on other sources of energy. This created a market for IPPs, 

stimulating the development of renewable energy projects and, in particular, 

natural gas fired co-generation plants. 

The current effects of PURPA on renewable energy development, however, 

are less evident. This is because today’s low avoided costs mean that fewer 

renewable energy projects are able to compete with traditional generation 

based on price factors alone. Currently, FERC does not include benefits such 

as economic stimulation, environmental quality, or public health as factors in 

PURPA decisions. In addition, many of the original contracts signed between 

IPPs and utilities during the early days of PURPA are now expiring. 
40

Decoupling can be implemented in several stages. In its most complete form, decoupling 

completely insolates a utility’s earnings from any difference between actual sales and 

expected sales, regardless of the reason for this difference (e.g., increased investments in 

energy efficiency, weather, and economic climate). Through standard rate-case methods, 

the total revenues the utility needs in order to provide safe, adequate, and reliable service 

to customers is determined for a certain period. Only changes in expenses during the ratecase period can change the utility’s profits (Shirley et al. 2008). 

Partial decoupling is similar, except that only a portion of the utility’s revenue collections 

is separated from the difference between expected and actual sales (e.g., 90%). Any 

variation in sales of the remaining portion results in an adjustment in utility revenues 

during the next period through electricity rate changes. Under partial decoupling 

policies, only specified causes of variations in sales result in adjustments, such as 

variations due to weather or the economy (Shirley et al. 2008). 

Decoupling has benefits other than removing the disincentive to efficiency: it also 

reduces financial risks to utilities because it reduces the volatility of traditional pricing 

mechanisms. Overall costs to the utility and customers may go down over time, as the 

utility benefits from increased leverage in the capital structure. Bond ratings may 

increase due to reduced risks. The costs of the overall rate-making process may go down 

if the decoupling process reduces the need for general rate cases (NREL 2010a). 

Well-designed decoupling policy reflects the true cost of electricity production and 

delivery. Decoupling can also reduce utility resistance to state-level policies encouraging 

or requiring renewable energy development, including feed-in tariffs and renewable 

energy standards, since the revised rate structure allows the recovery of fixed costs and 

makes utilities more receptive to third-party power production (NREL 2010a). 

While decoupling removes the incentive for the utility to sell more electricity, it does not 

provide an incentive for the utility to increase the level of energy efficiency. Other 

mechanisms are needed in combination with decoupling to encourage utility participation 

in efficiency. One mechanism is the establishment of an integrated resource planning 

process that treats demand-side resources equal to or more valuable than supply-side 

resources. Another is the implementation incentive structures that encourage utilities to 

establish effective efficiency programs (Shirley and Schwartz 2009). Performance-based 

incentives are some of the most commonly employed incentive structures. This method 

increases utility earnings as a reward for effective programs to encourage customer-side 

efficiency. Effectiveness can be measured through a variety of metrics, including market 

transformation indicators, cost-effectiveness of the program, net benefits achieved, and 

program equity. These incentives are most effective when performance metrics are 

clearly stated (as well as observable, measurable, and verifiable) and when there are 

financial risks and rewards directly associated with the metrics. Implementing this policy 

in an effective manner involves a degree of oversight and analysis. Other incentives 

include setting a budget based on avoided-costs in order to fund standard offer contracts 

for the provision of efficiency measures and setting aside a percent of the utility budget 

for efficiency program management (which encourages utility spending on efficiency but 

does not guarantee effectiveness) (Shirley and Schwartz 2009). 
41

Decoupling, integrated resource planning, and efficiency program incentives work 

together to align utility and customer interests, allowing utilities to recover the costs of 

efficiency measures and partner with customers to reduce electricity demand. 

State governments can impact the implementation of these policies in the regulated utility 

environment by requiring PUCs to implement some level of decoupling policy, integrated 

resource planning that includes efficiency, and efficiency program incentives. An 

amendment to PURPA (as part of the Energy Independence and Security Act of 2007) 

required regulating authorities to consider standard rate design modifications to promote 

utility energy efficiency efforts. Table 9 summarizes the policies and methods that the 

regulatory bodies in the southeastern states currently use to encourage efficiency within 

their utilities. 
42

Table 9. State and TVA Policies that Encourage Efficiency within Utilities
43

3.4.6 Interconnection Standards and Net-metering Policies

Since the implementation of the PURPA, electricity consumers have had the opportunity 

to produce their own power using small-scale, distributed generation technologies. Two 

state-level policies, in particular, have played an important role in establishing standards 

and pricing rules to facilitate distributed generation systems: interconnection standards 

and net metering. The goal of these policies is to reduce the uncertainty and costs of 

connecting distributed generation technologies to the electrical grid and to ensure that 

independent electricity producers receive a reasonable payment for any electricity their 

system contributes back to the grid. 

An NREL report identifies a list of issues that states may want consider as they design a 

net-metering policy (Doris et al. 2009). The issues include: 

• defining eligible renewable technologies, 

• identifying the customer classes that can net meter, 

• identifying the utilities that must offer net metering,

• assigning or disallowing additional fees for net-metering customers, 

• directing the renewable energy certificate (REC) ownership of the renewable 

energy system generation,

• directing the allowance or disallowance of meter aggregation,

• determining compensation for net excess generation, 

• defining the aggregate amount of net metering allowed on the system, and 

• setting the maximum individual system size that can net meter. 

The Interstate Renewable Energy Council (IREC) maintains model rules for 

policymakers to refer to as they consider adopting, revising, or expanding net-metering 

and interconnection policies (see IREC’s “Connecting to the Grid Program” at 

http://www.irecusa.org/). The Energy Policy Act of 2005 amended PURPA to require 

regulatory agencies to consider standards for net metering and interconnection 

The Network for New Energy Choices (NNEC) publishes best practices for these 

policies, tracks the details of their implementation within the various states,13

 

13 The NNEC report does not track TVA’s net-metering and interconnection policies; however, information 

on these policies is provided in the footnotes of Table 10.

 and 

publishes a scorecard to indicate the extent to which state policies effectively support the 

development of distributed generation technologies, such as rooftop photovoltaic systems 

(Network for New Energy Choices 2009). The NNEC’s “Freeing the Grid” report, 

although subject to methodological scrutiny, is the only comprehensive scoring system 

with which to compare state net-metering and interconnection policies. Table 10 

summarizes NNEC’s evaluations of these policies in the southeastern states, as they were 

executed in 2009. In many cases, the report suggests increasing the system size cap. An 

NREL study concluded that increasing the system size cap may encourage the 
44

development of more distributed generation, including a larger average size of solar PV 

systems and a broader array of stakeholders. In addition, system administrators do not 

report negative impacts on ratepayers as a result of the increase in system size limit, 

likely because of the relatively small impact of these distributed systems on the larger 

utility grids (Doris et al. 2009). 
45

Table 10. Net-metering and Interconnection Policies in the Southeast—Summary of NNEC’s 

2009 Evaluation and Recommendations
46

Five Southeastern States have Adopted Climate Action Plans

By 2010, five of the Southeastern states had adopted (or were in the process of 

formulating) state-level Climate Action Plans: Arkansas, Kentucky, Missouri, North 

Carolina, and South Carolina. 

Climate Action Plans identify specific, cost-effective opportunities for reducing GHG 

emissions, taking into account the economics, resources, and political structure of the 

state. Some plans also specify a target for emission reduction or identify possible 

climate change adaptation needs or strategies. 

The Center for Climate Strategies (CCS) has assisted many states in formulating 

Climate Action Plans and determining the estimated costs and savings of climate 

policy actions. According to CCS estimates, Arkansas, for example, could reduce 

emissions by 522 million tons of CO2 equivalent by 2020 if the policies in the state’s 

Climate Action Plan were implemented this year (CCS 2010). The challenge facing 

states now is to implement the actions prioritized in the plans.

State

Climate Action 

Plan Completed Link to Plan

Missouri 2002 http://www.dnr.mo.gov/pubs/pub1447.pdf

South 

Carolina 2007 http://www.scclimatechange.us/plenarygroup.cfm

North 

Carolina 2007 http://www.ncclimatechange.us/index.cfm

Arkansas 2008 http://www.arclimatechange.us/stakeholder.cfm

Kentucky In progress http://www.kyclimatechange.us/home.cfm

Examples of Policy Priorities from State Climate Action Plans

• Incentives to capture waste heat

• Encouragement for energy production from local farm and forest products 

• RPS/renewable energy feed-in tariff

• Combined heat and power incentives 

• Demand-side management programs 

• Public benefits funds 

• Encouragement for green power purchasing 

• “Beyond-code” building design incentives/improved appliance efficiency 

standards

• Incentives for waste-to-energy and methane-to-energy plants

• Carbon dioxide tax on the electricity sector

• Efficiency increases in government buildings
47

The southeastern states continue to make progress in the development of clean energy. 

However, there are many opportunities for strengthening policies to support further 

development. As state clean energy policies mature and have time to affect markets, as 

new policies are adopted and as efforts currently underway build results, the Southeast is 

likely to gain headway toward a stronger clean energy economy. 

Databases of State-level EERE Policies and Actions

Database of State Incentives for Renewable Energy (DSIRE)

http://www.dsireusa.org/

ACEEE State Policy Database

http://www.aceee.org/sector/state-policy

Online Code Environment & Advocacy Network (State Building Codes) 

http://bcap-ocean.org 

Center for Climate Strategies’ State Policy Tracker

http://www.climatestrategies.us/Climate_Policies_Work.cfm

EPA’s State Climate and Energy Program: Policy Tracking

http://www.epa.gov/statelocalclimate/state/index.html

EPA’s State Climate Action Plans Database

http://yosemite.epa.gov/gw/statepolicyactions.nsf/webpages/index.html

National Conference of State Legislatures’ Energy, Environment Legislation 

Tracking Database (Legislation introduced)

http://www.ncsl.org/ 
48

4 The Potential for Clean Energy in the Southeast 

4.1 Energy Efficiency Potential

Several recent analyses conclude that investing in efficiency measures to reduce 

electricity usage costs less than half the cost of conventional electricity generation 

supplies for both the residential and commercial sectors (Committee on America's Energy 

Future 2009; Friedrich et al. 2009; Laitner 2009). Without efficiency measures, energy 

consumption in these sectors is predicted to increase by 16% between 2010 and 2030 

(Brown et al. 2010). Efficiency can off-set the need for new electricity generation 

facilities, transmission lines, and supporting infrastructure, and it is not subject to the 

same regulatory, planning, and construction uncertainties as the construction of power 

plants. This is a particular benefit in the Southeast where many coal-fired plants will be 

decommissioned at a time of increasing demand. 

The Southeast Energy Efficiency Alliance (SEEA) reports that 25 GW of older power 

plants in the region could be decommissioned without replacing the supply if energy 

efficiency were prioritized, say, through a number of policies. SEEA studied common 

efficiency policies in the residential, commercial, and industrial sectors to determine their 

potential to provide energy savings and the cost of their implementation in the Southeast. 

Figure 17 summarizes their findings by charting policies according to their cost per 

kilowatt-hour and potential electricity savings.

Figure 17. Energy efficiency policies for the Southeast: Potential energy savings and 

policy cost
49

As Figure 17 shows, commercial appliance standards are found to have the highest 

potential for efficiency savings and the lowest levelized cost per kilowatt-hour saved. In 

the residential sector, retrofit incentives combined with equipment standards for heating, 

cooling, and water heating provide significant potential for energy savings at a low cost. 

For reference, the average electricity cost is between $0.062/kWh for industrial 

customers and $0.105/kWh for residential customers. Thus, all but two of the efficiency 

policies studied are more cost effective than purchasing the electricity at commercial 

rates (Brown et al. 2010). 

According to the SEEA study, implementing these efficiency measures would not only 

cut utility bills in the Southeast by $41 billion but would also: 

• reduce the need to build/replace fossil fuel power facilities, 

• create 380,000 jobs, 

• moderate electricity rate increases, 

• provide significant freshwater savings, and 

• grow the regional economy by $1.23 billion (Brown et al. 2010). 

The CCS recently concluded a study for NREL and DOE in which the costs and emission 

benefits of implementing various clean energy policies and actions at the state level were 

estimated. For North Carolina, implementing improved building codes and appliance 

efficiency standards and requiring higher levels of efficiency and green power purchasing 

for government buildings could actually save money while reducing green house gases 

(GHG)—as much as $120 of savings per ton of GHGs reduced. Providing technical 

assistance and energy audits for the residential, commercial, and industrial sector and 

providing technology development programs could save an additional $65/ton of GHGs 

reduced (Center for Climate Strategies 2010). 

The American Council for an Energy Efficient Economy (ACEEE) has recently 

conducted in-depth studies for North Carolina, South Carolina, and Arkansas and has 

begun work on a report for Missouri. The reports provide detailed information about the 

status and potential for efficiency in these states (Eldridge et al. 2010; Neubauer et al. 

2010). 

In their analysis of North Carolina, ACEEE finds that investments in energy and water 

efficiency measures can meet almost 25% of the state’s increased electricity demand by 

2025, as well as lower energy and water bills. The report highlights the opportunity to 

increase overall state energy efficiency by concentrating efforts on ensuring the 

efficiency of new construction in rapidly growing areas. In particular, there are 23 

counties that are experiencing rapid population growth. North Carolina can enjoy 

significant savings, comfort, and job creation by focusing efficiency efforts in these 

areas. This is both easier and more cost effective than retrofitting existing infrastructure. 

The report lists 11 suggested policies, such as new building initiatives, building code 
50

enforcement, and financing programs, to support increased efficiency in the state 

(Eldridge et al. 2010). 

In the report for South Carolina, ACEEE acknowledged the state’s recent commitments 

to efficiency through reducing consumption in government buildings, strengthening 

building codes, and investing in home weatherization. In addition, working with 

stakeholder groups to define the state’s most pressing issues and barriers, ACEEE 

identified additional efficiency initiatives that would most benefit South Carolina, 

including: efficiency assessments and training in the manufacturing and agricultural 

sectors, low-income and manufactured home weatherization programs, and encouraging 

residential energy saving by providing personalized energy-use information. The state 

government can further support efficiency through enabling policies such as 

strengthening building energy codes, broadening the academic and technical areas 

covered by existing workforce development initiatives, and expanding demand response 

programs (Neubauer et al. 2009).

In their recommendations for Arkansas, ACEEE included residential energy programs, 

low-income and manufactured home weatherization, industrial and agricultural 

initiatives, and demand response programs, as well as other policies to support increased 

efficiency. State strengthening of building codes, financing programs, and research and 

development is also recommended for Arkansas. It is estimated that the policy suite 

would produce an energy savings that would provide virtually all of the projected energy 

demand growth and add over 10,000 net jobs by 2025 (Neubauer et al. 2010). In all of 

the ACEEE reports, the EERS, which mandates utilities to reach a targeted energy 

savings, is recommended as a core policy that can act as a foundation on which other 

policies are built. All of the ACEEE reports can be accessed at 

http://www.aceee.org/sector/state-policy/scerp. 

4.2 Renewable Energy Potential

There is a common misconception that the Southeast does not have substantial renewable 

resources. Current data indicates that there is the potential for the region to generate 

power from local solar, biomass, methane, wind, and geothermal resources using current 

technology. The World Resources Institute estimates that over 30% of the Southeast’s 

total electricity needs could be met by renewable resources (Creech et al. 2009). Other 

estimates based on individual resources are even more positive, particularly for biomass 

potential. Table 11 summarizes the resource potential for renewable resources in the 

Southeast and is based on the most current data available. The sections that follow 

provide detail for each of these resources, including a breakdown of the counties and 

states that hold the greatest potential for each. 

There is a substantial potential for increasing the region’s energy independence through 

the development of local clean energy resources. While this move to a locally supplied 

clean energy source may require short-term shifts in costs and system operations, it 

promises substantial long-term benefits in independence and security of energy supply. 

Each state enjoys a unique mix of resources and an opportunity to define and specialize 

in its own clean energy path going into the future. 
51

Table 11. Renewable Energy Potential in the Southeast: Summary Table
52

Figure 18. Coal used for electricity generation compared with renewable energy potential 

in the Southeast
53

4.2.1 Biomass Potential

The Southeast is seeing increased investments in its biomass industry, and there is much 

potential for expansion. Biomass electricity production is unique in that there are a 

variety of fuels that can be used as well as a variety of methods to convert these fuels to 

electricity. 

Biomass resources for electricity production include: 

• agricultural residues like wheat straw and corn stover; 

• forestry residues from logging, dead wood, and small pole trees; 

• mill residues and urban wood waste from construction and demolition; 

• methane from animal waste, landfills, and wastewater treatment; and

• dedicated energy crops, including switchgrass and short-rotation woody crops, 

such as poplar and willow. 

Biomass residues and methane resources are easier to estimate than dedicated crop 

potential since the sources of the residues and methane can be identified and the biomass 

output quantified. 

The Southeast has an abundant supply of biomass from forests, mills, urban wood, and 

agricultural residues (Figures 19–22). Forest and mill residues are most concentrated in 

Louisiana, North Carolina, and South Carolina, although there are forest residues in 

almost every county in the region. North Carolina and South Carolina also have 

particularly dense urban wood residues, as do certain counties in the other states. Crop 

residues are densely concentrated along the Mississippi River and in Missouri but are 

available in lesser quantities throughout the region. 
54

Figure 19. Forest residues available for energy production
55

Figure 20. Primary mill residues available for energy production
56

Figure 21. Urban wood residues available for energy production
57

Figure 22. Crop residues available for energy production 
58

Methane emissions from manure management are densely concentrated in North Carolina 

and Arkansas (Figure 23). North Carolina and South Carolina have significant methane 

resources from domestic water treatment, as do other dispersed counties across the region 

(Figure 24). 

Figure 23. Methane emissions from manure management
59

Figure 24. Methane emissions from domestic wastewater treatment
60

Landfill gas resources exist in each state. Some projects have already been developed to 

tap this resource. Table 12 indicates the number of existing methane-to-energy projects 

at landfills, as well as the remaining opportunities for development in each state. The 

data is provided by the EPA's Landfill Methane Outreach Program (LMOP), an 

assistance program that helps state and local governments, project developers, and other 

stakeholders assess project feasibility, find financing, and market the benefits of landfill 

methane power development. More information can be obtained from 

http://www.epa.gov/lmop/. 

Figure 25. Methane emissions from landfills
61

Table 12. Landfill Methane-to-energy Projects and Opportunities in the Southeast

In addition to the biomass residues and the potential to produce biomass energy from 

methane, there is significant potential for growing dedicated energy crops in the 

Southeast. This option provides benefits to both farmers and the biomass market (see 

text box “Benefits of Dedicated Energy Crops for Biomass Energy Production”). 

Estimating the potential of this resource, however, is more difficult than estimating 

biomass from residues. Dedicated crop potential is greatly affected by farmer choice, 

agricultural policy, land use needs, and energy priorities. 

Several studies have been conducted regarding farmers’ views, land availability, and the 

economic and regional impacts of dedicated energy crops for bioenergy production in the 

Southeast. A 2009 study at the University of Kentucky examined the potential to grow 

dedicated energy crops on abandoned agricultural land and mine land considering current 

land uses, soil fertility/contamination, energy content of native grasses, and emissions 

related to biomass fuel production (Debolt et al. 2009). The researchers conclude that a 

significant percentage of the energy needs in Kentucky and similar southeastern states 

can be fueled through dedicated energy crops while reducing net carbon dioxide

A survey and behavior study by the University of Tennessee investigated farmer views 

on growing switchgrass as an energy crop (Velandia et al. 2010). Overall, farmer 

attitudes toward switchgrass production are positive, and a large percentage of the 

producers who were interviewed are likely to continue growing the crop after their 

emissions.
62

current contracts expire. About 85% of switchgrass farmers surveyed believed that 

growing the energy crop would likely increase and stabilize their income as well as help 

them better allocate resources during the agricultural off-season. 

The study also found that the decision of farmers to continue to grow energy crops is 

influenced by their families’ and communities’ perceptions about bioenergy crops and the 

support of university extension programs. University extension support was found to be 

more important in a farmer’s decision to grow the crop than direct contractual 

negotiations of private companies. Demographics (such as age, experience, percentage of 

farm income, and size of cropland) did not affect a farmer’s decision to grow energy 

crops; however, expectations about the development of the switchgrass market within the 

next 5 years was significantly associated with the decision to continue growing the crop 

(Velandia et al. 2010). 

These findings suggest that education and involvement of the local communities and 

Extension staff in bioenergy initiatives could positively influence farmer decisions to 

grow energy crops and assist in the development of a stable biofuel supply. 

A recent study by Howell et al. (2010) has identified the most optimal zones for 

dedicated energy crop production, taking into account these and other factors. 

The study provides an analysis of biomass production potential and the socio-economic 

factors and policy considerations involved in its development. Accounting for potential 

crop yield, land costs, and production costs, the researchers identified the most viable 

biomass crop production zones across the country for the two types of dedicated energy 

crops (switchgrass and the short rotation woody crops) (Howell et al. 2010; Porter et al. 

2009). 

According to the study, the Midwest and Southeast are by far the regions of greatest 

potential for biomass energy development in the United States (Howell et al. 2010). The 

Benefits of Dedicated Energy Crops for Biomass Energy Production

• Dedicated energy crops can be grown on marginally productive land, 

unused land, pastures, and for the Conservation Reserve Program. 

• Dedicated crops do not introduce competition with food crops. 

• Dedicated energy crops suffer fewer price spikes than some other 

agricultural products, resulting in more stable agricultural markets.

• Switchgrass is a perennial that requires less chemicals/fertilizers and fewer 

field operations, which saves time and money and reduces the overall 

environmental impact of agricultural processes.

• The root structure of perennial grasses works to improve soils and provide 

enhanced carbon sequestration. 
63

most optimal zones for switchgrass are along the coasts of North Carolina, South 

Carolina, and Georgia. The potential for short-rotation woody crop production is optimal 

in a broad area of the Southeast, including most of North Carolina, South Carolina, 

Georgia, Alabama, and Tennessee (Howell et al. 2010). Figure 26 shows the optimal 

production zones for the southeastern states in green.

An important policy issue arises from the overlap of the metropolitan areas with the 

optimal biomass production zones. Many of the areas that are optimal for biomass 

growth in the Southeast are close to or overlapping metropolitan areas, which are 

continuing to experience population growth and urban expansion. Competition for 

housing and other urban development may result in higher land prices and zoning 

challenges for biomass growers in these areas (Howell et al. 2010). This presents an 

important policy consideration for the development of biomass in the Southeast. If 

utilizing the optimal growth areas for biomass production is deemed desirable, then 

policies that help biomass growers obtain the most productive land for their crops will be 

an important factor in the development of a bio-economy in the Southeast. This may 

include the joint consideration of strategic energy planning and land-use planning to 

ensure that energy priorities and land resource allocations are in alignment. In addition, 

concerted discussions regarding the use of available biomass resources for the production 

of electricity, transportation fuel, and direct heat could assist the formation of a more 

strategically developed biomass market and alleviate strain caused by competition 

between biomass uses. 

 

The Southeast has a strong biomass potential, however, many of the optimal 

lands for growing dedicated energy crops are close to urban areas. Statelevel policy could play an important role in developing a strong bio-economy 

in the Southeast by helping growers and developers utilize the most favorable 

locations. 
64

Figure 26. Optimal production zones for dedicated energy crops in the Southeast 
65

4.2.2 Combined Heat and Power Potential

Combined heat and power (CHP; also called co-generation) is the generation of electrical 

or mechanical power from the waste energy of another process (e.g., an industrial 

process, factory, or commercial building). A variety of technologies and fuels can be 

employed for CHP, depending on the industrial process or building characteristics. CHP 

systems have efficiencies in the range of 80% (Shipley et al. 2008). 

Total system efficiency is improved through the use of energy that would have otherwise 

been wasted. CHP technologies have a variety of benefits to both system owners and the 

broader society. CHP systems: 

• can be deployed quickly, economically, and in a wide variety of locations; 

• provide reduced energy costs, increased energy independence, and a reduced 

carbon footprint to system owners; 

• have a lower perceived risk to financers compared to some energy 

technologies; 

• are reliable and have small footprints; 

• typically do not consume water for cooling; and 

• can free long distance transmission capacity for other sources of electricity 

when located near load centers. 

Given the intensity of industrial activity in the Southeast and the relatively high usage of 

electricity in the industrial sector of this region, the potential for employing CHP 

technologies is significant. Industries with high and continuous demand for both 

electrical and thermal energy, such as food processing, paper manufacturing, petroleum 

refineries, chemical industry, and metal production, are particularly well suited to the 

application of CHP technology (U.S. DOE 2010). According to the U.S. Census data, 

these are the exact industries that make up the top 10 industries in the southeastern states 

(U.S. Census Bureau 2010). 

The summary in Table 11 shows the percentage of generation that each state could 

potentially produce using CHP technologies, while Figure 27 shows the potential in terms 

of megawatts of capacity. All of the states in the region have CHP potential. North 

Carolina and Georgia have the potential to develop over 2,000 MW of CHP capacity 

(Onsite Sycom 2000; Shipley et al. 2008). 
66

Figure 27. Combined heat and power potential in the Southeast

4.2.3 Small and Incremental Hydroelectric Potential

Development of currently untapped hydro resources can allow states to make use of 

existing technologies and draw on the long-term history of hydroelectricity in the 

southeast region. A 2006 study conducted by Idaho National Laboratory for DOE 

identified the potential for increasing hydroelectricity capacity through the use of low 

power and small hydroelectric facilities (Hall et al. 2006). The majority of this capacity 

does not require the construction of new dams, making use of run of the stream or 

incremental capacity technologies. 

Using a set of feasibility criteria, researchers identified the possible locations and 

potential capacity additions for each state. According to the study, most of the states in 

the region have the potential to produce between 1–2 GW of additional capacity of small 

and low-power hydroelectricity. For detailed information about these opportunities, see 

the full report “Feasibility Assessment of the Water Energy Resources of the United 

States for New Low Power and Small Hydro Classes of Hydroelectric Plants,”

downloadable from http://hydropower.inel.gov/resourceassessment/index.shtml/. 
67

4.2.4 Solar Potential

Energy from the sun can be tapped using several technologies, including solar hot water 

heating units, photovoltaic panels, and concentrating solar power (CSP) technologies. In 

the Southeast, both solar hot water heating and the generation of electricity through 

photovoltaic panels are feasible opportunities. For many applications, the entire region 

has sufficient solar resource to benefit from solar hot water and photovoltaic technology 

deployment. 

Figure 28 shows the number of therms per year that are available to heat or preheat water. 

The Federal Energy Management Program (FEMP) and NREL have identified areas 

where it is currently cost effective to install solar hot water heating systems (see 

http://www.nrel.gov/gis/femp.html). The analysis takes into account solar resources, 

current technology costs, electricity prices, natural gas prices, and incentives. 

Figure 28. Solar hot water resource in the Southeast

Figure 29 shows the solar resource in the Southeast as it pertains to electricity generation 

from photovoltaics. In many counties in Georgia, South Carolina, and southern 

Louisiana, the potential for generating electricity from photovoltaic technology is 

significant. As electricity prices increase and photovoltaic technology prices decrease, 

generating electricity from photovoltaic technologies will become an increasingly 

attractive option in a wide variety of locations across the Southeast. According to the 
68

FEMP-NREL analysis referenced above, installing photovoltaic systems is currently cost

effective using incentives available to government and not-for-profit entities in 

Tennessee, much of Georgia, and parts of North Carolina (NREL 2010b). 

Figure 29. Photovoltaic solar resource in the Southeast

4.2.5 Geothermal Potential

Of the southeastern states, Louisiana has the greatest potential to generate electricity from 

geothermal resources (Figure 30). Mississippi and Missouri also have limited potential. 

In 2010, Louisiana had 5.3 MW of geothermal power capacity planned, while Mississippi 

had 0.5 MW planned. There is increasing discussion and demonstration of combined 

geothermal oil production. Energy can be harnessed at working oilfields and used to 

power them without interrupting their operation. One southeastern company, Gulf Coast 

Green Energy, is exhibiting this relatively new technique in both Mississippi and 

Louisiana (http://www.renewableenergyworld.com/rea/news/article/2010/07/oil-and-gascoproduction-expands-geothermal-power-possibilities/). Both fluids recovered from oil 

and gas wells as well as the use of low-temperature or highly pressurized fluids have 

The potential is great for governments and non-profits to lead by example 

and demonstrate solar technologies in the Southeast. Current technology 

and incentives make investments cost effective in many locations across 

the region.
69

great potential in the Southeast, and the development and demonstration of these 

technologies is underway.14 

Figure 30. Geothermal resource in the Southeast

4.2.6 Wind Potential

Several states in the Southeast have already begun developing wind energy projects. 

Although the onshore wind resource is not as strong as in states such as Texas and Iowa, 

there are locations in the Southeast that have viable wind resource and lands that are 

appropriate for its development. Figure 31 shows the on-shore wind resources in the 

Southeast. 

 

14 For more details on the potential of geothermal production, see the 2007 report from MIT: “The Future 

of Geothermal Energy – Impact of Enhanced Geothermal Systems (EGS) on the United States in the 21st 

Century,” which is available at http://geothermal.inel.gov/publications/future_of_geothermal_energy.pdf. 
70

Figure 31. On-shore wind power resource in the Southeast

Of the southeastern states, Missouri has the greatest potential for on-shore wind energy 

development. A recently updated wind resource map for the state of Missouri, published 

by the DOE Wind Program and NREL (Figure 32) shows the predicted mean annual 

wind speeds at 80 m high. 

As Figure 32 shows, much of the state has wind speeds above 6.0 m/s, which is the 

minimum resource necessary for utility-scale turbines, according to the American Wind 

Energy Association (www.awea.org). As the red areas indicate, there are particularly 

strong wind resources in the northwest portion of the state.15

In fact, according to NREL estimates, Missouri has 70,000 km

 

2 of land area that has 

sufficient technical potential for wind energy development. With this, Missouri has the 

potential to build 275,000 MW of wind energy capacity and produce over 800,000 GWh 

of electricity per year.16

 

15 The areas of Missouri with the greatest wind potential are not in the SERC region. However, this report 

uses state boundaries, not reliability regions.

 

16 Assumes a 30% gross capacity factor at 80 m and 5 MW/km2 of installed nameplate capacity and 

excludes national park, wilderness, and other sensitive land areas and lands incompatible with wind energy 
71

Figure 32. Predicted mean annual wind speeds in Missouri

Several states in the region, particularly Louisiana, also have significant potential for offshore wind power production. Although off-shore wind technology faces technical and 

economic challenges, the benefits are great. Many coastal areas have high electricity 

demands and limited land space for constructing on-shore wind turbines. 

The DOE and NREL are currently producing a validated national database that will 

quantify resource availability and its distribution. From this resource data, potential can 

be evaluated based on exclusion areas and other factors. Figures 33–36 show the offshore wind energy resources for Louisiana, Georgia, North Carolina, and South Carolina. 

 development (e.g., urban areas, airports, and wetlands). It does not take into consideration current 

transmission access.
72

Figure 33. Off-shore wind power resource in Louisiana 
73

Figure 34. Off-shore wind power resource in Georgia 
74

Figure 35. Off-shore wind power resource in North Carolina
75

Figure 36. Off-shore wind power resource in South Carolina
76

5 The Benefits of Clean Energy to the Southeast

Developing the clean energy potential described in Chapter 4 will require state 

commitment through policy development, dedicated involvement of the commercial and 

industrial sector, and public support. 

The southeastern states face rising electricity demand, driven by rapid population growth 

and increasing energy use per capita. Utilizing the clean energy resources highlighted in 

the section above could help address this increasing energy demand as well economic 

development and energy security needs. Specific drivers for the development of clean 

energy technologies in the Southeast include: 

Upcoming power plant retirements. 

As discussed in Chapter 2, many of the coal-fired plants in the Southeast were built in the 

1950s and 1960s. Many of them will reach the end of their useful life over the next 10–

20 years (Hart 2010). Financing for new coal-fired power plants is becoming 

increasingly difficult under a variety of regulatory policy uncertainties (Ball 2010; Brown 

2010; Clayton 2010). 

Job creation/local economic development. 

Investments in clean energy create jobs, develop markets, and can increase the 

competitive advantage of the Southeast. Given favorable conditions, the Southeast could 

become a major supplier of equipment for the solar and wind industries. There is also 

significant potential for job creation and economic growth from investments in the 

biomass market, which would likely spur growth in other related sectors as well (Creech 

et al. 2009). 

A recent study at the University of California, Berkeley, synthesized 15 studies on the job 

creation prospects of renewable energy and developed a model to project job creation 

over time, accounting for job losses due to reduced fossil fuel use. The study concluded 

that all renewable energy and other low carbon electricity sources create more jobs than 

fossil fuel plants per unit of energy delivered (Wei et al. 2010). The jobs created are for a 

wide range of skilled laborers, including those in science, construction, engineering, 

manufacturing, and planning, as well as site managers. 

Energy efficiency, which is almost always the least-cost investment, can also yield 

significant job creation benefits, estimated at over 4 million job-years through 2030 (Wei 

et al. 2010). Brown et al. (2010) find that the construction and manufacturing industries 

that support energy efficiency improvements generate over 16 jobs per $1 million spent. 

This is more than the region’s electric utility industry, which employs 5.6 jobs per 

$1 million spent, and the remaining sectors, which provide an average of 13.9 jobs per 

$1 million spent (Brown et al. 2010). 

The North Carolina Sustainable Energy Association conducts an annual statewide survey 

of renewable energy and energy efficiency businesses. The 2010 census indicates that 
77

the clean energy industry currently provides 12,500 full-time equivalent jobs in North 

Carolina, with 32% of these within manufacturing firms. Furthermore, the businesses 

surveyed projected an additional 20% increase in employment over the next 12 months. 

By conservative estimates, the sector generated more than $3.5 billion in annual revenue 

for the state this year (Quinlan and Crowley 2010). 

Increased security of supply and energy independence. 

Despite the perception that the Southeast has abundant fossil resources, the region spends 

billions of dollars every year to import fuels for electricity generation. As shown in 

Table 1, southeastern states spent in excess of $100 billion on imported coal in 2008. 

Utilizing local resources can reduce the need for imports and increase the energy 

independence and security of the Southeast. Some foreign supply can be replaced by 

utilizing the renewable resources in the Southeast. Even renewable energy that is 

imported from outside of the region provides benefits over fossil fuels because it can 

provide insurance against price fluctuations, as discussed below.

Insurance against price increases and fluctuations in fossil fuels (and accompanying 

benefits). 

Coal prices have been steadily increasing from 1949, when prices were $5.24 per short 

ton, to 2009, when the cost was $32.92 per short ton (nominal 2005 dollars) (EIA 2010a). 

But perhaps more risky is the price volatility of natural gas, which fuels an increasingly 

greater proportion of the electricity supply. Natural gas prices in the electric power 

sector fluctuated over the last decade between $2.62 and $9.26 per thousand cubic feet 

(nominal 2005 dollars). Annual changes of $2.00 or more were not unusual (EIA 2010a). 

The interest in shale gas as an alternative to coal is growing and is not immune to these 

wide price fluctuations. This volatility, and the risk that is inherent in it, highlights the 

value of a diversified fuel supply. Implementing efficiency measures and using 

renewable resources that offer zero fuel costs, such as the wind and sun, protect 

consumers against the sometimes sudden and profound fluctuations that can occur with 

fossil fuels. Protection against price fluctuations could provide increased economic 

stability and risk reduction that would support industry and small business development 

in the region. Energy efficiency could even reduce electricity rates up to 17% for 

residential customers by 2030 (Brown et al. 2010). 

Increased land values on contaminated and marginal lands. 

Renewable energy projects can often be built on previously contaminated (brownfield) or 

underutilized lands, increasing the value of marginal or unusable land. Growing biomass 

can serve to preserve habitat for some species (Howell et al. 2010). 

Environmental benefits. 

Increased use of clean energy technologies significantly reduces harmful emissions such 

as sulfur dioxide, nitrogen oxide, particulates, and GHG emissions, including carbon 

dioxide. These emissions are a leading cause of pollution-related illnesses and global 
78

climate change. According to a recent study by the United State Global Change Research 

Program, average temperatures in the Southeast are expected to rise by 4.5°F by the 

2080s under lower emission scenarios, while a higher emission scenario could cause a 9–

10° increase and higher heat indexes across the region (U.S. Global Change Research 

Program 2009). Increased illnesses and deaths due to heat stress would likely occur, as 

well as decreased production of livestock on rangelands, reduction in agricultural 

production and forest growth, and loss of aquatic species diversity.

The Water–Energy Connection

The connection between water and energy production and use is multi-faceted. As 

demand for energy increases and competition for freshwater heightens, the need to 

address the energy-water connection becomes more urgent. 

• Almost two-thirds of all freshwater extracted in the Southeast are sent to 

power plants for cooling needs. For every kilowatt-hour of electricity 

produced, a gallon of water is used. Most of the water is lost into the 

atmosphere through evaporation. Regional droughts in 2008 nearly 

caused the closure of several large power plants (Chandler et al. 2009). 

• An average home spends $250/year on energy to heat water. 

• Treating freshwater and wastewater accounts for 30% of municipal 

energy costs (Chandler et al. 2009). 
79

6 Overcoming Barriers: Opportunities for Clean Energy in 

the Southeast

6.1 Barriers to Clean Energy in the Southeast

The Southeast has faced several significant barriers to the development of clean energy. 

One of the most significant factors has been the low cost of electricity in the region, 

which limits the amount of incentive for customers to reduce energy use and demand 

clean energy products and production (Bumgarner and Garret 2010). 

Other challenges result from the regulatory structure of the electricity industry. 

Regulatory pricing has inhibited the development of renewable energy technologies 

because third parties have been required to supply electricity at prices at or below utility 

fuel costs, which is often below retail rates (Creech et al. 2009). 

While moves toward decoupling utility profits from sales have been made in some states, 

the lack of thorough decoupling policies for regulated utilities has also created a barrier to 

effective implementation of renewable energy and efficiency programs. The inability to 

recover the additional costs of renewable energy creates a disincentive for many utilities 

to explore these options and makes it difficult for third parties to obtain suitable power 

purchase agreements. Aligning the interests of utilities with broader goals of clean 

energy development through the use of clean energy requirements (e.g., RPS policies) 

and incentives for effective efficiency programs could help overcome these barriers. 

Better alignment of the interests of builders and building users and those of 

manufacturers and customers would also result in greater building and appliance 

efficiency.

The lack of strong interconnection standards and net-metering policies is also limiting 

clean energy development in the region. Limiting the size of distribution generation 

systems that may connect to the grid limits CHP and commercial-scale clean energy 

project development (Shipley et al. 2008). Similar system capacity limits for net 

metering also limit commercial-scale development. And total program participation for 

both interconnection and net metering restrict the amount of in-state clean energy 

development that can occur (Varnado and Sheehan 2009). 

Challenges in the development of a biomass market include the reluctance of farmers to 

switch to biomass crops if they are unsure if there will be a demand for the crops and the 

reluctance of potential investors to make large investments in biomass energy without 

long-term commitments from growers (Howell et al. 2010; Porter et al. 2009). 

The initial costs of investment in new clean energy technologies, the lack of a supporting 

infrastructure, and the difficulty in obtaining financing also continue to pose challenges 

for all clean energy technologies the Southeast, as is the case in many regions across the 

country. Other factors include the social resistance to and lack of public awareness of the 

benefits and opportunities that clean energy development might provide the region 

(Bumgarner and Garret 2010), as well as the traditional paradigm that favors centralized 

electricity generation over distributed systems. 
80

6.2 Opportunities for Clean Energy in the Southeast

Fortunately, there are concrete and viable ways to overcome the barriers to clean energy 

described above. The potential for clean energy in the Southeast is huge. Opportunities 

for taking advantage of this potential include the following: 

Focus on encouraging the growth of dedicated energy crops through policies that 

support these crops specifically.

The biomass potential in the Southeast is significant. The establishment of the biomass 

economy can be encouraged by distribution of information on the optimal biomass 

production areas, zoning to encourage biomass production in optimal areas, providing tax 

incentives to biomass growers, increasing farmer education regarding opportunities, and 

connecting farmers with investors/power producers to encourage a sustainable supplydemand chain. 

Provide outreach to farmers about the opportunity to grow long-rotation biomass crops 

on land that is under contract with the Conservation Reserve Program (CRP). 

The CRP is a government program through which farmers rent out their land to the 

government and grow permanent vegetation, under contract, for 10–15 year periods. 

Farmers participating in this program have already chosen to grow permanent vegetation 

rather than traditional crops; thus, growing biomass for energy on these lands does not 

result in increased competition with traditional crops (Howell et al. 2010). 

The longer rotation crops can be grown on the CRP lands may also have an economic 

advantage in the biomass market. Studies indicate that farmers who grow biomass crops 

enjoy the same profits as those who choose traditional crops; however, corn, canola, and 

soybeans may only provide modest profits and may require subsidies in order to be 

profitable (Howell et al. 2010; Robinson et al. 2003). 

Overall, the low initial investment needed to transition to biomass production makes it a 

good opportunity for revitalization in many rural communities in the Southeast (Howell 

et al. 2010). 

Research indicates that growing longer-rotation, woody biomass crops may 

provide farmers in the Southeast with advantages over short-rotation crops: 

• less competition with exiting agricultural products,

• potentially higher profitability than shorter rotation biomass 

crops, and 

• ability to take advantage of the federal CRP.
81

Expand the use of co-firing coal and biomass in power plants. 

More than half of the Southeast’s electricity was derived from coal in 2009 (EIA 2010a). 

Although the percentage is likely to decline as the coal plants age and the cleaner energy 

technologies replace them, the transition away from coal will take many years. Co-firing 

coal and biomass (typically 2%–20% biomass) in existing coal-fired plants is a low-cost, 

near-term opportunity to reduce carbon dioxide, sulfur, and nitrous oxide emissions and 

assist the development of a biomass market. Research indicates excellent success in cofiring both coal and biomass in power plants in the Southeast (Ringe et al. 1998; 

Robinson et al. 2003). 

Co-firing biomass provides an opportunity to move toward a clean energy economy 

without the same economic, political, and social risks associated with some other energy 

technologies. Power plants may return to using coal only if sufficient biomass fuel is not 

available at any time. This flexibility provides the necessary security for both power 

producers and the electricity system during the initial development of the bio-economy. 

As the biomass supply becomes stronger, the percentage of biomass in the co-firing mix 

can increase. Eventually, full-biomass fueled plants can be supported with the growing 

supply. 

According to calculations by a research group at Carnegie Mellon University, a carbon 

tax of approximately $50 per ton of carbon could lead to a 10% reduction in carbon 

dioxide emissions from coal-fired power plants through co-firing (Robinson et al. 2003). 

Increasing the use of co-firing is a less expensive, near-term option to the immediate 

replacement of these coal plants and establishment of carbon taxes and tradable permits 

for carbon dioxide, similar to those that have been implemented for sulfur dioxide and 

nitrous oxide. The expanded availability of tax credits that apply to co-firing biomass 

would also encourage the implementation of this opportunity. Many state-level policies 

currently exclude biomass for co-firing in an attempt to encourage replacement 

Co-firing biomass and coal in existing coal-fired power plants provides many 

benefits:

• Increases job potential by providing an immediate market to 

biomass producers

• Retains flexibility in fuel sources during the initial stages of 

establishing a bio-economy

• Provides low cost carbon dioxide reductions for existing coal-fired 

plants 

• Can be implemented in a short (2–3 years or less) time horizon

• Increases the diversity of the energy supply with minimal 

disruption to the current energy economy.
82

technologies such as solar and wind (Robinson et al. 2003). Putting policies in place that 

do not create competition between the “replacement technologies” and biomass for cofiring would further assist the transition to a clean energy economy as well as the 

development of a biomass market. In states with RPSs, co-firing is a low-cost alternative 

for utilities to meet renewable energy requirements. Limiting the amount of co-firing that 

is eligible for the RPS in later years will encourage diversification of the renewable 

portfolio. 

Government leadership by implementing EERE technologies on public sites. 

State and local governments can make significant contributions to the development of 

EERE technologies, the distribution of information about technologies and opportunities, 

and the expansion of EERE markets simply by leading by example. Some states already 

require government facilities to purchase energy efficient products and appliances and 

undertake retrofits during remodeling. Other opportunities for governments to lead by 

example include implementing water recycling for public facilities, such as rainwater 

harvesting, grey-water use for landscaping, and above-ground drainage systems for 

landscaping. 

Best practices for government leadership in EERE and model legislation designed to 

facilitate the implementation of EERE in public buildings is available from the Energy 

Services Coalition (http://www.energyservicescoalition.org/).

Energy efficiency through decoupling, integrated resource planning, and rewards for 

effective efficiency programs. 

Many states are already encouraging utility contribution to energy efficiency through the 

separation of utility profits from sales and rewards for effective efficiency programs. 

However, there are few states in the region that have implemented a true decoupling 

policy, and there is also room for improvement in the integrated resource planning 

process. State governments can play an important role through requiring PUCs to 

strengthen decoupling and integrated resource planning processes. Creating more 

standardized practices for rewarding utilities for efficiency and allowing cost-recovery, 

rather than reviewing on a case-by-case basis, could reduce uncertainty and provide 

further incentive for utility involvement in efficiency.

Upgrade interconnection standards and net-metering policies.

Interconnection standards encourage renewable energy development by lowering risk and 

uncertainty for all parties involved and reduce total project costs to distributed generators. 

In states that have RPSs, strong interconnection standards reduce overall project costs, 

which ultimately result in savings to ratepayers. Clear interconnection standards that are 

uniform across utilities reduce confusion to third-party producers. Larger systems (e.g., 

up to 20 MW in size) allow for the development of CHP systems, which may have 

capacities over the lower limits (Shipley et al. 2008). A tiered process that expedites and 

simplifies the application process for smaller systems will also encourage more 
83

development. Raising restrictions on the total amount of distributed generation that can 

connect to the grid will allow greater development of in-state resources. 

Net-metering policies ensure that distributed generators receive reasonable compensation 

for power returned to the grid. In regulated environments, utilities may be resistant to

net-metering policies unless they are able to fully recover their costs. Decoupling 

policies and other mechanisms to ensure that utilities may recover fixed costs may reduce 

utility resistance to net metering. Allowing larger system sizes (e.g., 2 MW) to be 

eligible and providing for higher program capacity totals encourages more development 

and allows greater flexibility to project developers (Varnado and Sheehan 2009). 

Upgrade efficiency standards and building codes. 

While decoupling policy encourages efficiency from the utility end, efficiency standards 

for appliances and up-to-date building codes result in increased efficiency from the 

consumer end. Although some federal appliance efficiency standards exist, these are 

limited, and efficiency can be greatly increased through state-level standards. 

The Appliance Standards Awareness Project publishes model legislation for state-level 

legislation to set appliance standards.

17

Small hydroelectric development and retrofitting of non-power producing dams. 

 The most recent version includes standards for six 

products, none of which are covered under federal standards and all of which can be met 

with current technologies. The potential for energy, emission, and cost savings of 

implementing this model legislation in the southeastern states are estimated to be 

substantial. Updating building codes to meet the international and national standards will 

also lead to significant improvements in efficiency of new and remodeled buildings. 

The recent market for new hydroelectricity facilities has been extremely limited because 

of its high price compared to electricity from natural gas and coal-fired generators. 

However, there are opportunities to take advantage of the southeastern historical 

experience with hydroelectric power and the untapped hydro resources in the region. A 

state-mandated RPS, for example, could allow for and facilitate the construction of new 

smaller-scale hydropower projects and retrofits to existing, non-power dams (Konigsberg 

2009). Utilities may regard such facilities as an attractive resource since these options 

are based on familiar technology, have no additional environmental effects (and thus 

should have few permitting hurdles), provide no-carbon electricity supply, and are less 

intermittent than solar and wind technologies. Although larger hydroelectric projects 

would still be subject to permitting review by FERC, they have recently focused on 

easing the permitting process for small hydroelectric facilities and have a new resource 

on its Web site (www.ferc.gov/) to provide outreach and assistance to potential 

developers of small hydro projects (FERC 2010b). A handful of retrofit and small hydro 

projects across the Southeast are already being proposed. Arkansas Electric Cooperative 

Corporation, for example, is moving forward with retrofits after determining it to be a 

low-cost option to reduce carbon emissions in the service territory. The Arkansas project, 

 

17 Model legislation can be found at http://www.standardsasap.org. 
84

as well as projects in Tennessee and Kentucky, has been certified as low impact by the 

Low Impact Hydropower Institute (Low Impact Hydropower Institute 2010). 

Encourage expanded use of CHP technologies. 

Given the intensity of industrial activity in the Southeast and the relatively high usage of 

electricity in the industrial sector of this region, the potential for employing CHP 

technologies is significant. Providing information on the variety of applications of CHP, 

the technological options, and the benefits of CHP to potential producers as well as 

financiers could assist in deployment. Ensuring that net-metering policies are applicable 

to CHP systems and providing support to businesses that supply and maintain equipment 

will also encourage development. 
85

Table 13. Clean Energy Development Opportunities in the Southeast
86

7 Conclusion

With concerted action, such as a focus on the opportunities highlighted in this report, the 

Southeast can strengthen its economy, increase job growth, develop its natural resources, 

and ensure a secure supply of electricity through the development of clean energy 

technologies and markets. The region has both the drivers to encourage this transition 

and the resources to succeed. 

7.1 Key Findings

• Coal fuels 51% of the region’s electricity production. The southeastern states 

depend heavily on coal imports. Every state in the region, with the exception 

of Kentucky, is a net importer of coal. The majority of the coal is brought 

from outside the region, from as far away as Wyoming and South America, at 

a cost of billions of dollars per year for each state (Deyette and Freese 2010). 

• The region produced only 1.8% of the electricity from renewable resources 

other than conventional hydroelectricity in 2009, half of the national average 

(EIA 2010a). Biomass currently provides the majority of the region’s nonhydroelectric renewable electricity (EIA 2010b). 

• The region is rich in untapped biomass resources including residue resources 

(e.g., from forests, agriculture, mills, and urban waste) (NREL 2010b). There 

is also the opportunity to develop a dedicated energy crop market. 

Switchgrass and short-rotation woody crops can be grown on CRP lands that 

have already been set aside for the growth of permanent vegetation rather than 

traditional crops. These crops can be grown on marginal lands, do not 

compete with traditional crops, and have fewer price spikes (Howell et al. 

2010). 

• Encouraging biomass co-firing in existing coal facilities would provide an 

immediate demand for biomass resources, support the early stages of a 

biomass supply market, and immediately reduce emissions from coal-fired 

facilities (Robinson et al. 2003). 

• Although the commercial sector used slightly less electricity per capita than 

the national average, the residential sector in the Southeast used nearly 30% 

more electricity than the national average in 2008. High residential usage may 

result from the region’s historically low electricity rates, wide annual 

temperature variations, and relatively low levels of public expenditure on 

efficiency programs and limited use of energy conservation methods (Brown 

et al. 2010). 

• The industrial sector used over 230% more electricity than the national 

average. The potential for employing CHP technologies in the Southeast is 

significant. The main industries in the Southeast include iron, steel, and other 

metal production; chemical production; food and beverage processing; oil and 

coal product refining; pulp and paper manufacturing; and vehicle and 

machinery production (U.S. Census Bureau 2010). The high and continuous 
87

demand for both electrical and thermal energy of these processes is

particularly well suited to the application of CHP technology (U.S. DOE 

2010). 

• The most common state-level policies to support efficiency improvements in 

the Southeast are rebates and loans. Most of the states in the region also have 

efficiency standards for public buildings or government purchases. 

• Residential and commercial building codes meet current international 

standards in Georgia, Kentucky, Louisiana, North Carolina, and South 

Carolina; however, there is significant room for improvement in building 

codes in the other states (BACP 2010). 

• Six of the ten southeastern states have some form of decoupling and integrated 

resource planning; however, several clarifications and adjustments could 

strengthen the policies. Four of the southeastern states have no such policies. 

Cost recovery processes in the region could also be clarified and standardized 

to reduce uncertainties and encourage utility participation. 

• The most common state-level policies to support renewable energy 

development are personal and corporate tax incentives and loans. While many 

of the states in the region have net-metering and interconnection policies, 

limitations reduce their effectiveness in stimulating development. In 

particular, increasing facility size limits and participation caps would 

encourage further deployment. 

• Missouri has excellent on-shore wind potential. Louisiana has some of the 

best off-shore wind resources in the country. North Carolina and South 

Carolina also have excellent off-shore wind potential. All of the states in the 

region have sufficient solar resources to produce distributed power from 

photovoltaic technology. The region has a high density of energy-intensive 

commercial and industrial facilities that are suitable for CHP technologies. 

There are opportunities for methane-to-energy and small hydroelectric 

development in every state in the region. 

• Development of the region’s unique biomass resources could be supported 

through policies that strengthen the supply-demand chain (such as favorable 

zoning and land use designations), information provision (to farmers and 

university extensions), incentives to retain biomass fuel in the region rather 

than exporting it, and providing loans and incentives for equipment 

manufacturers and biomass energy facilities. 

 
88

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Coal for Power Generation in Kentucky: A Case Study." Forest Products Journal (48:4); 

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Robinson, A.L.; Rhodes, J.S.; Keith, D.W. (2003). "Assessment of Potential Carbon 

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95

Appendix: Definitions of State Policies and Incentives for 

Renewable Electricity Generation Sources: DSIRE 2010; REEEP 2010

Access Laws

Access laws establish a homeowner’s or facility owner’s right to install and operate a 

solar or wind energy system. Some solar access laws also secure a system owner’s access 

to sunlight. These laws may be implemented at both the state and local levels. In some 

states, access laws prohibit homeowners associations, neighborhood covenants, and local 

ordinances from restricting a homeowner’s right to use solar energy. Easements, the most 

common form of solar access law, establish an owner’s rights to access to a renewable 

resource, such that nearby property cannot be developed in a way that restricts preexisting access to a renewable resource. An easement is usually transferred with the 

property title. At the local level, communities use several policies to protect solar access, 

including solar access ordinances, development guidelines requiring proper street 

orientation, zoning ordinances that contain building height restrictions, and solar permits. 

Bonds

Bonds allow governments (and corporations) to raise money by borrowing. Investors 

purchase the bonds and, in turn, receive interest payments over a predetermined period of 

time. The interest paid on the bond is often tax exempt. At the end of the bond’s term, 

the principal value of the bond is repaid to the investor by the issuing entity. A few states 

and local governments have established bond programs to support renewable energy and 

energy efficiency for government-owned facilities. The energy savings resulting from the 

projects can be used to repay the investors. A tax credit bond is a particular type of bond 

in which a government pays an investor in the form of tax credits, rather than tax-exempt 

interest payments. This provides funding for government initiatives at a very low interest 

rate. 

Permitting Standards (Construction and Design)

Permitting standards can facilitate the installation of wind and solar energy systems by 

specifying the conditions and fees involved in project development. Some local 

governments have adopted simplified or expedited permitting standards for wind and 

solar. Fast-track permitting saves system owners and project developers time and money. 

Some states have capped fees that local governments may charge for a permit for a solar 

or wind energy system. In addition, some states have developed (or have supported the 

development of) model wind ordinances for use by local governments. 

Energy Standards for Public Buildings

Governments at various levels have chosen to lead by example by requiring new 

government buildings to meet strict energy standards. These policies establish green 

building standards, energy-reduction goals, equipment-procurement requirements, and 

the use of on-site renewable energy. Many of these policies require that new government 

buildings (and renovated buildings, in some cases) attain a certain level of certification 

under the U.S. Green Building Council’s Leadership in Energy and Environmental 

Design (LEED) program. Equipment-procurement policies often mandate the use of the 
96

most efficient equipment, such as equipment that meets the federal Energy Star standard. 

Policies designed to encourage the use of on-site renewables generally establish 

conditional requirements tied to life-cycle cost analysis. 

Contractor Licensing

Some states have adopted a licensing process for renewable energy contractors. Several 

states have adopted contractor licensing requirements for solar water heating, active and 

passive solar space heating, solar industrial process heat, solar-thermal electricity, and 

photovoltaics. These requirements are designed to ensure that contractors have the 

necessary knowledge and experience to install systems properly. Solar licenses typically 

take the form of either a separate, specialized solar contractor’s license or of a specialty 

classification under a general electrical or plumbing license. 

Corporate Tax Incentives

Corporate tax incentives include tax credits, deductions, and exemptions. These 

incentives are available in some states to corporations that purchase and install eligible 

renewable energy or energy efficiency equipment or construct green buildings. In a few 

cases, the incentive is based on the amount of energy produced by an eligible facility. 

Some states allow the tax credit only if a corporation has invested a minimum amount in 

an eligible project. Typically, there is a maximum limit on the dollar amount of the credit 

or deduction. In recent years, the federal government has offered corporate tax incentives 

for renewable energy and energy efficiency. 

Equipment Certification

Equipment certification policies, which require renewable energy equipment to meet 

certain standards, serve to protect consumers from buying inferior equipment. These 

requirements not only benefit consumers, they also protect the renewable energy industry 

by making it more difficult for substandard systems to reach the market. 

Generation Disclosure

Disclosure policies require utilities to provide customers with information about the 

electricity they supply. This information, which is often included on the monthly bill, can 

include an explanation of fuel mix percentages and information on the related emissions. 

In states where the electricity market has been restructured, generation disclosure 

provides customers with valuable information that allows them to make informed choices 

on the electricity and provider they choose. Additionally, there may be a requirement that 

the utility provide certification that any renewable energy sources that they use are 

certified as renewable. The Green-e certification, offered by the Center for Resource 

Solutions, is one example of a verifiable certification that can be used by utility 

companies. 

Grants

States offer a variety of grant programs to encourage the use and development of 

renewable energy and energy efficiency. Most programs offer support for a broad range 

of technologies, while a few programs focus on promoting a single technology, such as 

photovoltaic systems. Grants are available primarily to the commercial, industrial, utility, 

education, and government sectors. Most grant programs are designed to pay down the 
97

cost of eligible systems or equipment. Others focus on research and development or 

support project commercialization. In recent years, the federal government has offered 

grants for renewable energy and energy efficiency projects for end users. Grants are 

typically competitive. 

Industry Recruitment and Support

To promote economic development and the creation of jobs, some states offer financial 

incentives to recruit or cultivate the manufacturing and development of renewable energy 

systems and equipment. These incentives commonly take the form of tax credits, tax 

exemptions, and grants. In some cases, the amount of the incentive depends on the 

quantity of eligible equipment that a company manufactures. Most of these incentives 

apply to several renewable energy technologies, but a few states target specific 

technologies, such as wind or solar. These incentives are usually designed as temporary 

measures to support industries in their early years, and they commonly include a sunset 

provision to encourage the industries to become self-sufficient. 

Interconnection Standards

Interconnection standards specify the technical and procedural process by which an 

electric customer connects an electricity-generating system to the grid, facilitating the 

development of small-scale renewable energy systems by removing certain obstacles. 

Interconnection standards include the technical, contractual, metering, and rate 

arrangements that system owners and utilities must abide by. Standards for systems 

interconnected at the distribution level are typically adopted by state PUCs, while FERC 

has adopted standards for systems interconnected at the transmission level. Not all states 

have adopted interconnection standards, and some states’ standards apply only to IOUs—

not to municipal utilities or electric cooperatives. 

Line Extension Analysis

When a prospective customer requests electric service for a home or facility that is not 

currently served by the electric grid, the customer usually must pay a distance-based fee 

for the cost of extending power lines to the home or facility. In some cases, it is cheaper 

to use an on-site renewable energy system to meet a prospective customer’s electricity 

needs. A few states require utilities to provide information regarding renewable energy 

options when a line extension is requested. 

Loans

Government loan programs help customers overcome the financial barriers associated 

with renewable energy installations and energy efficiency improvements by providing 

low-cost financing, thus spreading capital costs over a longer period of time. State 

government loans are available to the residential, commercial, industrial, transportation, 

public, and non-profit sectors. Loan rates and terms vary by program; in some cases, they 

are determined on an individual project basis. Loan terms are generally 10 years or less. 

In recent years, the federal government has also offered loans for renewable energy and 

energy efficiency projects. 
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Net Metering

For electric customers who generate their own electricity with small-scale renewable 

energy systems, net metering allows for the flow of electricity both to and from the 

customer—typically through a single, bi-directional meter. With net metering, during 

times when a customer’s generation exceeds the customer’s use, electricity from the 

customer flows back to the grid, offsetting electricity consumed by the customer at a 

different time. In effect, the customer uses excess generation to offset electricity that the 

customer otherwise would have to purchase at the utility’s full retail rate. The law in most 

U.S. states requires net metering, but these policies vary drastically. 

Personal Tax Incentives

Personal tax incentives include income tax credits and deductions. Many states offer 

these incentives to reduce the expense of purchasing and installing renewable energy or 

energy efficiency systems and equipment. The percentage of the credit or deduction 

varies by state, and in most cases, there is a maximum limit on the dollar amount of the 

credit or deduction. An allowable credit may include carryover provisions, or it may be 

structured so that the credit is spread out over a certain number of years. Eligible 

technologies vary widely by state. In recent years, the federal government has offered 

personal tax credits for renewable energy and energy efficiency. 

Production Incentives/Performance-based Incentives/Feed-in Tariffs 

Production incentives (also called performance-based incentives or feed-in tariffs) require 

utilities to pay renewable energy power producers a fixed, premium rate for renewable 

energy generation based on the number of kilowatt-hours fed into the grid. Requiring 

that these payments are based on a system’s actual performance, rather than the system’s 

rated capacity, encourages system performance. Note that this policy differs from tax 

incentives that are based on renewable energy production in that the premium payments 

are made at the time of purchase of the renewable energy.

Property Tax Incentives

Property tax incentives include exemptions, exclusions, abatements, and credits. Most 

property tax incentives provide that the added value of a renewable energy system is 

excluded from the valuation of the property for taxation purposes. For example, if a new 

heating system that uses renewable energy costs more than a conventional heating 

system, the additional cost of the renewable energy system is not included in the property 

assessment. In a few cases, property tax incentives apply to the additional cost of a green 

building. Because property taxes are collected locally, some states have granted local 

taxing authorities the option of allowing a property tax incentive for renewable energy 

systems. 

Public Benefit Funds (PBF)

Public benefit funds are a policy tool used to secure stable, long-term funding for state 

energy programs and initiatives. The funds are commonly supported by a small, fixed fee 

added to the customer’s electricity bill each month (e.g., $0.002/kWh). This charge is 

sometimes referred to as a "system benefits charge." Public benefit funds often support 

rebate or loan programs, research and development initiatives, and energy education 

programs. 
99

Rebates

Rebates are direct cash subsidies, typically paid after installation is complete, that 

promote the installation of renewable energy systems by reducing the initial capital cost 

of the project. The majority of rebate programs that support renewables are administered 

by states, municipal utilities, and electric cooperatives; these programs commonly 

provide funding for solar water heating or photovoltaic systems. Most rebate programs 

that support energy efficiency are administered by utilities. 

Required Green Power Option

Several states require that electric utilities offer customers the option to buy electricity 

generated from renewable resources. The utility programs offering such options are 

commonly known as “green power programs.” 

Renewable Portfolio Standard/Renewable Energy Standard

An RPS (sometimes called a renewable energy standard–or RES) is a regulatory 

mechanism that requires retail electricity suppliers to procure a minimum quantity of 

eligible renewable energy by a specific date or according to a schedule. The required 

amount of renewable energy is expressed in either a percentage of the total electricity or a 

flat megawatt-hour term. Utilities may either generate the renewable energy or purchase 

the electricity from other generators. Accounting may be accomplished through RECs, 

which are assigned to each unit of renewable energy generated and then bought and sold 

through a market system. The term “set-aside” or “carve-out” refers to a provision within 

an RPS that requires utilities to use a specific renewable resource (usually solar energy) 

to account for a certain percentage of their retail electricity sales (or a certain amount of 

generating capacity) within a specified time frame. A few states have renewable 

portfolio goals, which are similar to RPS policies but are not legally binding. 

Sales Tax Incentives

Sales tax incentives typically provide an exemption from, or refund of, the state sales tax 

(or sales and use tax) for the purchase of a renewable energy system, an energy-efficient 

appliance, or other energy efficiency measures. Some types of equipment purchases may 

be eligible for only a partial abatement of the sales tax. Several states have established an 

annual “sales tax holiday” for energy efficiency measures by annually allowing a 

temporary exemption—usually for one or two days—from the state sales tax. 
F1147-E(10/2008) 

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4. TITLE AND SUBTITLE

Southeast Regional Clean Energy Policy Analysis

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Joyce McLaren

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14. ABSTRACT (Maximum 200 Words)

More than half of the electricity produced in the southeastern states is fuelled by coal. Although the region produces 

some coal, most of the states depend heavily on coal imports. Many of the region’s aging coal power facilities are 

planned for retirement within the next 20 years. However, estimates indicate that a 20% increase in capacity is 

needed over that time to meet the rapidly growing demand. The most common incentives for energy efficiency in the 

Southeast are loans and rebates; however, total public spending on energy efficiency is limited. The most common 

state-level policies to support renewable energy development are personal and corporate tax incentives and loans. 

The region produced 1.8% of the electricity from renewable resources other than conventional hydroelectricity in 

2009, half of the national average. There is significant potential for development of a biomass market in the region, 

as well as use of local wind, solar, methane-to-energy, small hydro, and combined heat and power resources. 

Options are offered for expanding and strengthening state-level policies such as decoupling, integrated resource 

planning, building codes, net metering, and interconnection standards to support further clean energy development. 

Benefits would include energy security, job creation, insurance against price fluctuations, increased value of marginal 

lands, and local and global environmental paybacks.

15. SUBJECT TERMS

CEPA; clean energy; Southeast; United States; policy; energy efficiency; renewable energy; coal; biomass; dedicated 

energy crops; wind; photovoltaics; PV; incentives

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