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The Legal and Economic Pains of a Transforming Energy Portfolio

As the call for renewable energy becomes more urgent, both federal and state governments have begun implementing new apparatuses to encourage the production of renewable energy. One mechanism being utilized by many states is called a Renewable Portfolio Standard (RPS) or a Renewable Electricity Standard. These are “regulations requiring or encouraging electricity producers within a given jurisdiction to supply a certain minimum share of their electricity from designated renewable resources such as wind, solar, geothermal, biomass and some types of hydroelectricity.”1 Because of various credit programs implemented by states, some of these standards result in a competitive advantage for in-state alternative energy producers.2 Fossil fuel producers have used this unequal treatment in order to challenge the legality of RPSs in general.

One hurdle that must be overcome on the path to renewable energy will be the pushback from large fossil fuel producers.3 While some fossil fuel corporations and employees will re-establish themselves in the renewable energy market, others will have a difficult time finding a new place in the changing market. Even if those producing fossil fuels are able to find a new role in the renewable energy market, the cost of doing so will be significant.4 For example, as a result of the changing market, the Coal industry has lost almost 50,000 jobs in just five years.5

To avoid these costs, fossil fuel corporations are funding legal battles against the implementation of state mandates requiring the use of renewable energy.6 These regulations have accelerated the prevalence of renewable energy and hastened the deterioration of fossil-fuel energy, causing many major corporations to begin to feel the adverse effects on profit margins.7

RPS regulations have become especially susceptible to legal challenges due to their apparent infringement of the Dormant Commerce Clause (DCC). The doctrine underpinning the DCC is derived from Article I of the U.S. Constitution, which grants, “Congress shall have the power to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes”.8 The courts have relied on this doctrine to advance unity and fairness because, “when states adopt economic regulations that affect out-of-state interest, those out-of-state interests are likely to be shortchanged because they are not represented in the political process that produces the regulations.”9 Therefore, states may not implement laws that aim to protect local economic interests. While the Dormant Commerce Clause is not universally accepted, it is the current prevailing doctrine and will most likely be followed in the foreseeable future10

One case challenging the mandate, American Tradition Institute v. Colorado, has already been filed by the Energy & Environmental Legal Institute.11 Specifically, the Colorado regulations requires that investor-owned utilities obtain 30% of the energy they sell from renewable energy sources by 202012 As this case is still pending, it is difficult to postulate as to its end effects on the industry. However, if the RPS is upheld, fossil fuel producers will face an even steeper uphill battle and will undoubtedly continue to look for legal arguments to give themselves an advantage in the energy marketplace.

Regardless of the result of this specific case, the fossil fuel industry will continue to face stringent regulation and challenges from both renewable energy producers and environmental groups alike. While major corporations may struggle with the transformation, some studies are predicting that there will be a net increase in jobs as renewable energy continues to grow.13 This is partially due to the fact that fossil fuel technologies are capital intensive whereas the renewable energy industry is more labor intensive. There are more jobs created for each unit of electricity generated from renewable sources than fossil fuels.14 Already, renewable energy standards have helped create many jobs. In 2009, the Union of Concerned Scientists conducted a study predicting the economic benefits of a 25% renewable energy standard by 2020.15 The group predicts that a policy like this would create almost 202,000 new jobs, three times as many as its counterpart in fossil fuels would create. Additionally, rural communities would benefit as they would become the homes to production of a substantial portion of energy producing technology.16

There will also be competition among the states to retain the tax and economic benefits that come from being net energy exporters. While those states with the resources to produce alternative energy will benefit, those who are only capable of producing fossil fuels may suffer. In general, the shift to renewable energy will not be easy. Often, the difficulties are attributed to business and technological reasons. However, as shown above, substantial legal challenges may stand in the way of a successful transformation.

  1. Most States Have Renewable Portfolio Standards, U.S. Energy Info. Admin. (Feb. 3, 2012), . 

  2. Id. 

  3. Cole Stangler, Peabody Energy Corporation (BTU) Prepares for Layoffs at St. Louis headquarters, Regional Offices in Wyoming, Indiana, Int’l Bus. Times (June 9, 2015, 11:17 AM),  

  4. Barriers to Renewable Energy Technologies, Union of Concerned Scientists, (last visited Nov. 23, 2015). 

  5. Chris Mooney, Study: Coal Industry Lost Nearly 50,000 Jobs in Just Five Years, The Wash. Post (Apr. 1, 2015),  

  6. Steven Mufson & Tom Hamburger, A Battle Looming over Renewable Energy, and Fossil Fuel Interests are Losing, The Wash. Post (Apr. 25, 2014), 

  7. Robert Pollin, Think We Can’t Stabilize the Climate While Fostering Growth? Think Again, The Nation (Oct. 27, 2015), 

  8. U.S. Const. art. 1, § 8. 

  9. Donald H. Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 Mich. L. Rev. 1091, 1161 (1986). 

  10. Richard D. Friedman, Putting the Dormancy Doctrine Out of Its Misery, 12 Cardozo L. Rev. 1745, 1745 (1986). 

  11. Am. Tradition Inst. v. Colorado, 876 F. Supp.2d. 1222, 1227 (D. Colo. 2012).  

  12. E&E Legal v. Colorado, E&E Legal Inst., (last visited Nov. 23, 2015).  

  13. Benefits of Renewable Energy Use, Union of Concerned Scientists, (last visited Nov. 23, 2015).  

  14. Id. 

  15. Id. 

  16. Id.