State Policies and Incentives Promoting Woody Biomass Production and Utilization

By: M. Rahmani, A.W. Hodges, and M. Monroe

State and local governments usually follow the regulatory policies set by federal governments; however, in some cases they may adopt their own policies and incentives to further promote the use of renewable resources for energy production.


State and Local Policies

Several policies related to renewable energy, including woody biomass, have been established in the U.S., including generation disclosure rules, renewable portfolio standards, interconnection, construction and design standards, and green power purchase. While not specifying woody biomass, many of these policies make it easier for institutions and businesses to use alternative energy resources. These regulations can be implemented at the state or local level or by regional utilities. The following explains these rules, regulations, and policies in greater detail.

Generation Disclosure Rules

Generation disclosure rules require utility companies to provide information regarding the energy they supply to their customers. This type of information, which may include fuel mix percentages and emission statistics, is often included on a customer’s monthly bill. Customers can also access fuel source data on the U.S. Environmental Protection Agency Clean Energy Website by entering a zip code and selecting from a list of energy providers.

Related to disclosure, certification is an industry practice that guarantees customers that the utility company uses the types and amounts of renewable energy it claims to. By providing consumers with detailed information about local energy systems, practices like disclosure and certification can help raise consumers’ awareness about their energy supplies (North Carolina State University, 2007).

Renewable Portfolio Standards/Set Aside

These standards require that utility companies generate a certain amount of energy from renewable resources by a certain date. For example, a certain percentage of the utility’s electric power sales, measured in megawatt-hours (MWh), must be generated from renewable resources such as wood, wind, and solar by a determined year. The term “set aside” refers to similar regulations that require new utility installations to have a certain amount of generating capacity from renewable resources (North Carolina State University, 2007). Twenty-three states and the District of Columbia have set renewable portfolio standards (Pew Center for Climate Change, 2008). Standard levels and definitions of renewable energy vary from state to state. Some states have specific mandates concerning power generation from renewable energy.

Interconnection or Line Extension Analysis

Many states have policies regarding interconnection or line extension analysis. When power lines are extended to customers outside of the existing power grid, the customers are charged distance-based fees. In some of these cases, it may be more economical for customers to generate their own energy on-site using renewable energy systems rather than pay the extra fees associated with distance. In some states, utility companies are required to provide information on renewable energy options when customers request a line extension (North Carolina State University, 2007).

Construction and Design Standards

Several types of building construction and design policies are included in this category. State construction policies require an evaluation of the costs and benefits of using renewable energy technologies for new state construction projects, such as schools, office buildings, and other new facilities. In addition, green building guidelines are being developed in many cities to either encourage or require developers, architects, builders, and engineers to design and construct projects that feature renewable energy technologies.

Local energy codes are another type of standard that can be implemented to increase energy efficiency by requiring building construction or renovation to exceed the state requirements for resource conservation. Builders or renovators can meet this requirement by incorporating renewable energy technologies (North Carolina State University, 2007).

Green Power Purchasing/Aggregation Policies

State and local governments, businesses, and other nonresidential customers can serve as role models to the rest of the community by purchasing electricity from renewable resources, a practice commonly called green power purchasing. Some states even require that state government buildings use a certain amount of renewable energy. Green power purchasing can supply energy for various applications, including local governmental facilities, street lights, or water pumping stations. The process by which local governments combine electric loads from the whole community, or in cooperation with other communities, to form a green power purchasing block is called “community aggregation” or sometimes “community choice.” Utility green pricing programs, green power marketers, special contracts, or community aggregation are different ways to achieve green power purchasing (North Carolina State University, 2007). State and local regulations and policies may also include green pricing programs, required utility green power option programs, statewide net metering, and public benefits funds, as described in the next section.

Green Pricing Programs

Green pricing programs offer customers the option to pay an additional fee beyond their regular electric bills to support the utility’s effort to provide power from renewable sources. Customers who participate in these types of programs do not receive “green energy” directly, but help fund utilities’ efforts to generate or purchase more of its power from renewable sources (Pew Center for Global Climate Change, 2008). In 2006, there were 484 electric utilities in 44 states offering green power to their customers (U.S. DOE, 2008). Some states have mandatory green pricing programs, where utilities are required to offer customers the option to purchase power from renewable energy sources, while in other states it is voluntary for utilities. Utilities may fulfill this requirement by generating power from their own renewable resources, through contracts, or through purchasing credits from a certified renewable energy provider (North Carolina State University, 2007).

State and Local Incentives

Net Metering

Twenty-one states and the District of Columbia had statewide net metering statutes in 2008 (Pew Center for Climate Change, 2008). Net metering is a system for customers who have their own electricity generating units. When customers generate more electricity than their demand, the excess electricity is provided to the local power grid. The customers’ electric meter keeps track of the excess electricity as credit toward future power purchases (North Carolina State University 2007).

Public Benefit Funds

Some states have funds, called Public Benefit Funds (PBF), which are used to support efforts such as energy efficiency, renewable energy projects, and programs for low-income households. The money for these support funds is commonly acquired by charging customers an added fee (as small as 0.2 cents per kWh) based on their electricity consumption. These funds can be used for rebates on renewable energy systems, funding for renewable energy research and development (R&D), and development of renewable energy education programs. The Clean Energy States Alliance consists of twelve states that work together to direct investments in renewable energy that are supported with public benefit funds (North Carolina State University, 2007).

Various state and local incentives also exist for generating energy from renewable resources, including woody biomass. Incentives are usually expressed in state and local policies in the form of tax credits, rebates, grant and loan programs, or industrial and production incentives (Werner, 2004). For example, in Florida, a comprehensive four-year plan, the Florida Renewable Energy,
Technology & Energy Efficiency Act of 2006, provides rebates, grants, and tax incentives in order to increase the state’s investments in renewable energy resources such as solar, hydrogen, and biofuels (Florida Energy Office, 2006).


  • Florida Energy Office. 2006. Florida’s Energy Act.
  • North Carolina State University. 2007. Database of State Incentives for Renewable Energy. North Carolina Solar Center and Interstate Renewable Energy Council. (accessed August 28, 2008).
  • Pew Center for Global Climate Change. 2008. Energy Sector State Action Maps. http://www.pewclimate. org/what_s_being_done/in_the_states/state_action_maps.cfm (accessed August 28, 2008).
  • Werner C. 2004. Bioenegy: Technologies, Federal and State Incentives. Environment & Energy Study Institute, Washington, DC.