Local governments routinely impose “exactions” — fees or other requirements — on real estate developers to ensure they bear the burdens their development projects place on schools, roads, water and other local services. However, one essential type of burden is seldom accounted for in this process: the additional energy burden a new real estate project creates.
Electric utilities, typically regulated at the state level, continuously expand their infrastructure to accommodate urban growth and then pass along the costs of those expansions to their ratepayers. Although this approach provides a funding source for new power lines, it creates minimal incentives for utilities to promote sustainable energy strategies.
A pair of faculty members from Vanderbilt University Law School, Jim Rossi and Christopher Serkin, suggest that municipalities could use exactions to hold real estate developers more accountable for their impacts on the electricity system. Their proposal is detailed in their paper “Energy Exactions,” which was just awarded the 2020 Morrison Prize — an honor established in 2015 and administered through the Law and Sustainability Program at the Arizona State University’s Sandra Day O’Connor College of Law.
The ASU Morrison Prize Contest awards a $10,000 prize annually to the authors of the most impactful sustainability-related legal academic article published in North America during the previous year. The prize is named after its benefactor, Richard N. Morrison, who is also a co-founder of the Morrison Institute for Public Policy at ASU.
Rossi serves as the Judge D.L. Lansden Chair and associate dean for research at Vanderbilt’s law school, and Serkin is a professor and associate dean for academic affairs.
“We are thrilled to have our work recognized by this prestigious prize,” the pair said in a statement. “Past winners have significantly advanced the goals of sustainability. We are particularly pleased by the added attention that this prize will bring to our work, and hope that it will make a real impact on how municipalities think about energy resources in the land use and development process. We could not be more grateful for this recognition.”
The argument for energy exactions
Rossi and Serkin argue that energy exactions could be a powerful way to encourage developers to incorporate more energy efficiency technologies, rooftop solar and other sustainable energy strategies into their projects.
Although a growing number of builders promise “net carbon zero” development as part of their marketing strategy for new projects, Rossi and Serkin suggest that adding requirements to the land use permitting process would back up those promises and ensure that developers truly bear more of the energy burden of their activities.
Municipal energy exactions, Rossi and Serkin say, would improve long-term planning by changing a system that relies on state regulators and private utilities to make the most critical decisions affecting energy demand into one that more heavily involves real estate developers in that process.
“Faced with the prospects of global climate change, limits on fossil fuels, and slow deployment of renewables, the current system makes little sense,” they write. “It is often far better and cheaper to slow the growth in customer demand for energy than to speed up investments in utility-owned power supply.”
Rossi and Serkin point to flaws in the conventional energy-planning process, in which private utilities present customer-demand forecasts to energy regulators, who then evaluate the various options for expanding energy supply infrastructure to meet that demand.
“Under this paradigm, a utility’s proposed energy resources that advance customer reliability goals are routinely approved by regulators, who prioritize systemwide reliability in their planning decisions,” they write.
“Regulators’ primary fixation on the approval of power supply capacity to meet forecasted needs (where customer demand is a mere input) gives short shrift to the potential that customer demand itself can provide an energy resource.”
Rossi and Serkin point out that unconsumed energy — either through efficiency or conservation — is effectively the same as additional production, but that it is harder for utilities to capture the economic value of that unconsumed energy.
“The failure to recognize the potential of customers as energy resources is a major flaw with traditional utility planning,” they write, arguing that when customers are incentivized to conserve energy, they can significantly reduce peaks and overall usage. Customers can also self-generate energy through technology such as distributed solar.
Rossi and Serkin further point out that local energy exactions could produce valuable information about energy demand, diversify risks in infrastructure investment, and promote intergovernmental competition to promote grid reliability and carbon reduction. In short, they argue that exactions could bring significant improvement over the conventional state utility-planning and rate-setting process, which “often produces concentrated benefits for the few at the expense of the many” and “has done a poor job of encouraging demand reduction, distributed energy supply, and a resilient energy grid.”
About the Morrison Prize
Each year, law professors from throughout the world who have recently published articles in North American legal academic journals are eligible to enter the Morrison Prize Contest. All entries undergo independent review and scoring by a group of professors, not affiliated with ASU, who teach in environmental sustainability-related areas at various North American law schools. The scores from these judge are aggregated to determine the prize winner.
Professor Troy Rule is the faculty director of the Law and Sustainability Program at ASU Law. He says Rossi and Serkin, like past winners of the Morrison Prize, have provided innovative ideas that can effect significant change.
“ASU’s Law and Sustainability Program is delighted to encourage and recognize meaningful sustainability policy innovation through the Morrison Prize Contest,” Rule said. “As in years past, this year’s winning paper contains ideas that could truly move the needle in building a more sustainable society. We’re all indebted to Richard Morrison for his continued and crucial support of this prestigious prize.”
Rossi and Serkin’s paper was originally published in the March 2019 issue of the Cornell Law Review. The pair will travel to Phoenix to present their article and formally accept the prize at the sixth annual SRP Sustainability Conference of American Legal Educators. The conference will be held on May 15, at ASU Law’s Beus Center for Law and Society in downtown Phoenix.
In 2019, a six-author team won the Morrison Prize for an unprecedented analysis of the structuring of conservation easements in the face of rapid climate change. The article, titled “Climate change challenges for land conservation: Rethinking conservation easements, strategies, and tools,” was co-written by Federico Cheever, a professor at the University of Denver Sturm College of Law; Jessica Owley, director of the environmental law program at University of Buffalo – State University of New York; Adena R. Rissman, an associate professor at the University of Wisconsin-Madison Department of Forestry and Wildlife Ecology; M. Rebecca Shaw, chief scientist at the World Wide Fund for Nature; Barton H. Thompson Jr., a professor of natural resources at Stanford Law School; and W. William Weeks, director of the Conservation Law Clinic at Indiana University’s Maurer School of Law.
In 2018, Minnesota Law School professor Hari M. Osofsky and Jacqueline Peel, associate dean of the University of Melbourne Law School in Australia, won the prize for their academic article “Energy Partisanship.” They outlined the critical importance of circumventing fierce political divisions in order to combat climate change, and provided guidance for doing so.
In 2017, Vanderbilt University professors Michael P. Vandenbergh and Jonathan Gilligan won the prize for "Beyond Gridlock." The article underscored the difficulties of effecting change through government and highlighted the underutilized potential to reduce greenhouse-gas emissions through the private sector.
In 2016, Dave Owen, a professor at University of California, Hastings College of Law, and Colin Aspe, a freshwater conservation adviser at the Nature Conservancy, were the inaugural winners of the Morrison Prize. Their article, “Trading Dams,” described creative new policy approaches for better balancing hydroelectric energy generation and environmental protection on the nation’s river system.
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