A Status Update on Renewable Portfolio Standards Hosted by Warren - - PowerPoint PPT Presentation

A Status Update on Renewable Portfolio Standards

Hosted by Warren Leon, Executive Director, CESA Thursday, November 6, 2014

State-Federal RPS Collaborative Webinar

www.cleanenergystates.org

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Housekeeping

www.cleanenergystates.org

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About CESA

Clean Energy States Alliance (CESA) is a national nonprofit

• rganization working to implement smart clean energy

policies, programs, technology innovation, and financing tools, primarily at the state level. At its core, CESA is a national network of public agencies that are individually and collectively working to advance clean energy.

www.cleanenergystates.org

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State-Federal RPS Collaborative

• With funding from the Energy Foundation and the US

Department of Energy, CESA facilitates the Collaborative.

• Includes state RPS administrators, federal agency

representatives, and other stakeholders.

• Advances dialogue and learning about RPS programs by

examining the challenges and potential solutions for successful implementation of state RPS programs, including identification of best practices.

• To sign up for the Collaborative listserve to get the monthly

newsletter and announcements of upcoming events, see:

www.cesa.org/projects/state-federal-rps-collaborative

www.cleanenergystates.org

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Today’s Guest Speaker

Galen Barbose, Staff Research Associate, Electricity Markets and Policy Group, Lawrence Berkeley National Laboratory (LBL)

Renewables Portfolio Standards in the United States: A Status Update

Galen Barbose

Lawrence Berkeley National Laboratory

Clean Energy States Alliance Webinar

November 6, 2014

This analysis was funded by the National Electricity Delivery Division of the Office of Electricity Delivery and Energy Reliability and by the Solar Energy Technologies Office of the Office of Energy Efficiency and Renewable Energy of the U.S. Department of Energy under Contract No. DE- AC02-05CH11231.

Summary of State RPS Experience-to-Date

• State RPS policies have been a significant driver for renewable

energy growth in the United States

• Significant growth in RE capacity required to meet future RPS

targets, but well in-line with pace of additions in recent years and with pipeline currently under development

• Generally high levels of compliance achieved, though shortfalls

beginning to materialize in some regions

• Compliance costs thus far relatively modest, and although

increasing targets may put upward pressure on costs, growth in RPS costs will be limited by cost caps in most states

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Outline

• RPS policy landscape
• Impacts on RE development
• Future RPS demand
• Compliance
• Costs
• Outlook

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RPS Policies Exist in 29 States and DC

7 More States Have Non-Binding Goals

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Existing State RPS Policies Apply to 56% of Total U.S. Retail Electricity Sales in 2013

Non-Binding Goal

Source: Berkeley Lab

WI: 10% by 2015 NV: 25% by 2025 TX: 5,880 MW by 2015 PA: 8.5% by 2020 NJ: 22.5% by 2020 CT: 23% by 2020 MA: 11.1% by 2009 +1%/yr ME: 40% by 2017 NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops) CA: 33% by 2020 MN: 26.5% by 2025 Xcel: 31.5% by 2020 IA: 105 MW by 1999 MD: 20% by 2022 RI: 16% by 2019 HI: 40% by 2030 AZ: 15% by 2025 NY: 30% by 2015 CO: 30% by 2020 (IOUs) 20% by 2020 (co-ops) 10% by 2020 (munis) MT: 15% by 2015 DE: 25% by 2025 DC: 20% by 2020 WA: 15% by 2020 NH: 24.8% by 2025 OR: 25% by 2025 (large utilities) 5-10% by 2025 (smaller utilities) NC: 12.5% by 2021 (IOUs) 10% by 2018 (co-ops and munis) IL: 25% by 2025

Mandatory RPS

VT: 20% by 2017 ND: 10% by 2015 VA: 15% by 2025 MO: 15% by 2021 OH: 12.5% by 2024 SD: 10% by 2015 UT: 20% by 2025 MI: 10% by 2015 KS: 20% of peak demand by 2020 OK: 15% by 2015 AK: 50% by 2025

Notes: Compliance years are designated by the calendar year in which they begin. Mandatory standards or non-binding goals also exist in US territories (American Samoa, Guam, Puerto Rico, US Virgin Islands)

Enactment of New RPS Policies Has Waned, but States Continue to Hone Existing Policies

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CO (2007) HI (2005) IL (2008) MA (2003) CT (2000) MD (2006) DC (2007) NH (2008) MI (2012) ME (2000) PA (2001) NJ (2001) NY (2006) DE (2007) NC (2010) MO (2011) IA MN (2002) AZ (1999) NV (2001) WI (2000) TX (2002) NM (2002) CA (2003) RI (2007) MT (2008) WA (2012) OR (2011) OH (2009) KS (2011)

1983 1991 1994 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

IA MN AZ MN NM CT NJ CT AZ CA DC HI CO CA MA CO IL WI NV MN NM CO CA CO DE IL DE CT MD CT MA NV PA NV CT CT HI ME IL DC NJ MD OH TX HI DE MA MN MA DE NH MN OR NJ MD MD NV MD IL NM MT WI WI ME NJ OR NJ MA NY NM MN RI NY MD OH NV NJ NC NM WI PA TX

Enactment (above timeline) ( )

Year of First Requirement

Enactment (above timeline) Major Revisions (below timeline)

( )

Year of First Requirement

RPS Program Design Developments in 2014

• IL: Authorized IPA to procure PV with $30M existing ACP funds
• MA: Issued final rules for SREC II program; added renewable fuels

to alternative energy standard

• OH: Froze RPS (and EERS) for two years, eliminates requirement

for 50% in-state resources, other changes (e.g., cost disclosure)

• OR: Increased allowed usage of unbundled RECs by large public

utilities (up to 75% of final RPS target)

• WI: Froze RPS for several individual utilities
• Continuing refinement of eligibility rules: WA, WI, others

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Outline

• RPS policy landscape
• Impacts on RE development
• Future RPS demand
• Compliance
• Costs
• Outlook

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State RPS Policies Appear to Have Motivated Substantial Renewable Capacity Development

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Cumulative and Annual Non-Hydro Renewable Energy Capacity in RPS and Non-RPS States, Nationally

Though not an ideal metric for RPS-impact, 60% (45 GW) of all non-hydro renewable capacity additions from 1998-2013 are under-contract or owned by entities with RPS obligations and entered operation after RPS enactment

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Nameplate Capacity (MW)

Cumulative Capacity

Non-RPS RPS

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Nameplate Capacity (MW)

Annual Capacity Additions

Non-RPS RPS

State RPS’ Have Largely Supported Wind, Though Solar Has Become More Prominent

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RPS-Related* Renewable Energy Capacity Additions from 1998-2013, by Technology Type

* Renewable additions are counted as “RPS-related” if and only if the entity receiving RECs from the project is subject to RPS

• bligations, and the project commenced operation after enactment of the RPS. On an energy (as opposed to capacity) basis,

wind energy represents approximately 76%, biomass 12%, solar 8%, and geothermal 4% of cumulative RPS-related renewable energy additions, if estimated based on assumed capacity factors.

78% 1% 5% 16%

Cumulative RPS Capacity Additions

2,000 4,000 6,000 8,000 10,000 12,000 14,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Nameplate Capacity (MW)

Annual RPS Capacity Additions Geothermal Biomass Solar Wind

Solar and DG Set-Asides Have Proliferated

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17 states + D.C. have solar or DG set-asides, sometimes combined with credit multipliers; 3 other states only have credit multipliers

11 states created solar/ DG set- asides since 2007:

DE, IL, MA, MD, MO, MN, NC, NH, NM, OH, OR

Differential support for solar/DG also provided via long-term contracting programs (CT, DE, NJ, RI) and via up-front incentives/SREC payments

NV: 1.5% solar by 2025 2.4x multiplier for PV until 2015 PA: 0.5% solar PV by 2020 NJ: 4.1% solar electric by 2027 AZ: 4.5% customer-sited DG by 2025 (half from residential) NY: 878 GWh retail DG by 2015 CO: 3% DG by 2020 for IOUs (half from retail DG) 1% DG by 2020 for coops 3x multiplier for munis/coops for solar installed before July 2015 DC: 2.5% solar by 2023 WA: 2x multiplier for DG NM: 4% solar electric by 2020 0.6% customer-sited DG by 2020 (2x multiplier for all solar) DE: 3.5% solar by 2025 3x multiplier for solar installed before Jan. 2015 (applies only to solar used for general RPS target) MD: 2% solar by 2020

Set-aside Multiplier

NC: 0.2% solar by 2018 NH: 0.3% solar electric by 2014

Set-aside with multiplier

TX: 2x multiplier for all non-wind OH: 0.5% solar electric by 2024 MA: 456 GWh customer-sited solar PV (no specified target year) MO: 0.3% solar electric by 2021 MI: 3x multiplier for solar OR: 20 MW solar PV by 2020 2x multiplier for PV installed before 2016 IL: 1.5% solar PV by 2025, 1% DG by 2015 (50% <25 kW)

Note: Compliance years are designated by the calendar year in which they begin Source: Berkeley Lab

MN: 1.5% solar by 2020 for IOUs

Impact of Solar/DG Set-Asides is Substantial: 60-80% of Non-CA PV Additions Since 2005

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*PV capacity additions are attributed to the solar/DG set-aside only if installation occurred no more than one year before commencement

• f set-aside compliance obligations in the host state and if eligible for the set-aside and not attributed general RPS obligations.

Dip in set-aside capacity additions in 2013 reflects depressed SREC pricing and reduced or eliminated incentives in a number of states

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 200 400 600 800 1,000 1,200 1,400 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Percent of U.S. Annual Grid-Connected PV Installations (%) NH MO DC IL DE OH MD NY PA NM NV MA NC CO AZ NJ

Percent of Total U.S. grid-connected PV capacity additions [right axis] Percent of U.S. grid-connected PV capacity additions, excluding California [right axis]

Annual Grid-Connected PV Installations for Solar/DG Set-Asides (MWac)

General RPS Obligations Also Driving Significant Solar Additions in California and Elsewhere

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Sizable number of large solar projects (9 PV + 2 CSP, 100-300 MW each) added to meet general RPS obligations in CA & AZ in 2013 Substantial solar capacity in excess of set-aside requirements also built and applied towards general obligations in NC and NV

1,000 2,000 3,000 4,000 5,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Nameplate Capacity (MW)

Annual Solar Capacity Additions

Non-RPS RPS Set-Asides General RPS Obligations

CA 3038 MW AZ 462 MW NC 295 MW NV 227 MW Others 61 MW

Solar for General RPS Obligations

Outline

• RPS policy landscape
• Impacts on RE development
• Future RPS demand
• Compliance
• Costs
• Outlook

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Future RPS Requirements are Sizable, But Within Recent RE Growth Rates

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• Total of 98 GW of RE

capacity required by 2020 (123 GW by 2035)

• Depending on availability
• f existing RE capacity,

RPS will require incremental build of 3-7 GW/yr through 2020 and 1-2 GW/yr thereafter

• By comparison, RPS-

driven additions averaged ~6 GW/yr since 2008 (10 GW/yr for all RE)

Note: Values shown in figures represent required renewable capacity beyond what was supplied to each state at the time its RPS was

• enacted. The values do not represent incremental renewables required relative to current supply.

5 10 15 20 25 30 35 40

IA ME RI MT NH DC DE HI NM CT NV WI KS MI NY AZ NC OR PA MO WA MD CO MA TX MN OH NJ IL CA

2020 2035

RPS Demand (Est. Nameplate GW)

0% 5% 10% 15% 20% 25% 30% 35% 40%

IA TX NC NY MI PA AZ ME WI MO MT OH WA KS NM RI DE IL MD DC CO OR NV CT NJ NH MN MA CA HI

2020 2035

RPS Demand (Percent of Statewide Retail Sales)

RE Currently Under Development May Be Enough to Meet Future RPS Demand in Some Regions

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Notes: RE under development and under construction refer only to RPS states within each region and therefore do not include additional new RE from other states in the region or from outside the region. RPS requirements in MW terms reflect regionally specific assumptions about RPS resource mix and capacity factors. Data source for RE Under Construction and Under Development: SNL Energy.

Future RPS Requirements Compared to Current RPS Supply plus New RE Capacity Under Construction and Under Development

20,000 40,000 60,000 80,000 100,000 120,000 West

RE Capacity Capacity (MW)

5,000 10,000 15,000 20,000 25,000 30,000 35,000 Mid-Atlantic 5,000 10,000 15,000 20,000 25,000 Midwest 1,000 2,000 3,000 4,000 5,000 6,000 7,000 New England 1,000 2,000 3,000 4,000 5,000 6,000 7,000 New York RE Under Development (RPS States) RE Under Construction (RPS States) RPS Capacity Additions to-Date RPS Requirement (2020) RPS Requirement (2035)

Solar Market Growth is on Pace to Meet Future Solar/DG Set-Aside Requirements

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• Requirement grows to 8,000 MW by 2020 and 10,000 MW by 2035
• Given existing supply, will require average annual solar capacity additions of

650 MW/yr through 2020, tapering off thereafter

• By comparison, PV additions for set-asides averaged 800 MW/yr in 2011-2013

2,000 4,000 6,000 8,000 10,000 12,000 200 400 600 800 1,000 1,200 1,400 2010 2015 2020 2025 2030 2035 NJ MA AZ MD IL OH PA MN CO NM DE NY DC NC NV MO NH OR Required Annual Capacity Additions (left axis) Cumulative Capacity Required (right axis)

Cumulative Solar Capacity (MWac) Annual Solar Capacity Additions (MWac)

Outline

• RPS policy landscape
• Impacts on RE development
• Future RPS demand
• Compliance
• Costs
• Outlook

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Main Tier RPS Targets Largely Achieved

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Percent of Main Tier RPS Target Met with Renewable Electricity or RECs

(including available credit multipliers and banking, but excluding ACPs)

Note: Percentages less than 100% do not necessarily indicate that “full compliance” was not technically achieved, because of ACP compliance options, funding limits, or force majeure events.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% AZ CA CO CT DC DE HI IA IL KS MA MD ME MI MN MO MT NC NH NJ NM NV NY OH OR PA RI TX WA WI

2010 2011 2012 2013

Achievement of Solar/DG Set-Aside Targets Has Also Generally Been High or Increasing

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Note: "Percent of Solar/DG Target Met with Solar/DG Electricity or RECs" excludes ACPs but includes applicable credit

• multipliers. In cases where this figure is below 100%, suppliers may not have been technically out of compliance due to solar

ACP compliance options, funding limits, and force majeure provisions.

Percent of Solar/DG Set-Aside Target Met with Solar/DG Electricity or SRECs

(including available credit multipliers and banking, but excluding ACPs)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% AZ CO DC DE IL MA MD MN MO NC NH NJ NM NV NY OH OR PA

2010 2011 2012 2013

Outline

• RPS policy landscape
• Impacts on RE development
• Future RPS demand
• Compliance
• Costs
• Outlook

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RPS Costs in Restructured States Are Partly a Function of REC Prices

• Rising Class I REC prices in Northeastern states reflect tightening

supply, while pricing in Mid-Atlantic states and TX remain low

• Depressed SREC prices in most states show enduring over-supply
• f solar, muting the cost impacts of rising set-aside targets

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Main Tier/Class I RECs SRECs

Sources: Spectron, SRECTrade, Flett Exchange, PJM-GATS, and NJ Clean Energy Program. Depending on the source used, plotted values are either the mid-point of monthly average bid and offer prices, the average monthly closing price, or the weighted average price of all RECs transacted in the month, and generally refer to REC prices for the current or nearest future compliance year traded in each month.

$0 $10 $20 $30 $40 $50 $60 $70 $80 2010 2011 2012 2013 2014

CT Class I DC Tier I DE Class I IL Wind MA Class I MD Tier I ME New NH Class I NJ Class I OH In-State PA Tier I RI New TX

Avg Monthly REC Price (2013$/MWh)

$0 $100 $200 $300 $400 $500 $600 $700 $800

2010 2011 2012 2013 2014

DC DE MA MD NH NJ OH PA

Avg Monthly REC Price (2013$/MWh)

Restructured States: REC + ACP Costs Typically <3% of Average Rates, But Are Rising

Differences across states and years reflect:

• RPS target levels
• Underlying REC and

ACP prices

• Mix of resource tiers

Rising costs in some states due to:

• Increasing targets
• Elevated REC prices

(esp. in Northeast)

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RPS compliance costs in restructured states can be approximated by REC + ACP costs and expressed as a fraction of average retail electricity rates

Simplified approach: Ignores some ratepayer costs (e.g., integration) and benefits (e.g., wholesale electricity and natural gas price suppression); may overstate costs to ratepayers in states where ACP costs are not passed through

0% 1% 2% 3% 4% 5% 6% CT DC DE IL MA MD ME NH NJ NY OH PA RI TX

2010 2011 2012 2013 Estimated Incremental Cost of RPS* (Percent of Average Statewide Retail Electricity Rate)

* Incremental costs are estimated from REC and ACP prices and volumes for each compliance year, which may differ from calendar years. If available, REC prices are based on average prices reported by the PUC (DC, IL, MD, ME, OH, NJ, PA); they are

• therwise based on published spot market prices, supplemented with data on long-term contract prices where available.

Incremental costs for NY are based on NYSERDA's annual RPS expenditures and estimated REC deliveries.

Regulated States: Varying Methods Generally Show Estimated Costs <3% of Average Retail Rates

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Utility and PUC cost estimates rely on varying methods but can nevertheless be compared

• Relatively high costs in

AZ, CO, and NM due partly to solar/DG set- aside costs, where costs are front-loaded

• Low costs in states with

low RPS targets during analysis period and/or where targets met primarily with pre- existing renewables

• Net savings estimated

in HI, OR

Utility/PUC estimates of incremental RPS costs typically based

• n comparisons of RE procurement costs to proxy non-RE

generators or to wholesale prices, or via system modeling

• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% AZ CO HI MI MN MO NC NM OR WA WI

2010 2011 2012 2013

* Incremental costs are based on utility- or PUC-reported estimates and are based on either RPS resources procured or RPS resources applied to the target in each year. Data for AZ include administrative costs, which are grouped in "General RPS Obligations" in the right-hand figure. Data for CO are for Xcel only. Data for NM in the left-hand figure include SPS and PNM in all years shown, but data in right-hand figure include only SPS. States omitted if data on RPS incremental costs are unavailable (CA, IA, KS, MT, NV).

Estimated Incremental Cost of RPS* (Percent of Average Statewide Retail Electricity Rate)

0% 1% 2% 3% 4% 5% 6%

2010 2011 2012 2013 2010 2011 2012 2013 2011 2012 2013 AZ CO NM

DG and/or Solar Set-Aside General RPS Obligations

Rising RPS Targets Could Put Upward Pressure

• n Future Compliance Costs

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• Final-year RPS targets (closed circles) constitute, on average, roughly a three-fold

increase in RPS obligations compared to most-recent year targets (open circles)

• Future RPS costs will depends on many factors: RE technology costs, natural gas

prices, federal tax incentives, environmental regulations, and RPS cost caps The figure shows RPS costs for the most-recent year along with recent and final RPS targets

• 20%
• 10%

0% 10% 20% 30% 40%

• 4%
• 2%

0% 2% 4% 6% 8% CT DC DE IL MA MD ME NH NJ NY OH PA RI TX AZ CO HI MI MN MO NC NM OR WA WI Restructured Regulated Estimated Incremental RPS Costs (Most-Recent Year) RPS Target or Procurement (Most-Recent Year) RPS Target (Final Year) Estimated Incremental RPS Costs (% of Average Retail Rates) RPS Target (% of Retail Sales)

* For most states shown, the most-recent year RPS cost and target data are for 2012 or 2013. MA does not have single terminal year for its RPS; the final-year target shown is based on 2020. Excluded from the chart are those states without available data on historical incremental RPS costs (CA, KS, HI, IA, MT, NV). The values shown for RPS targets and costs exclude any secondary RPS tiers (e.g., for pre-existing resources). For most regulated states, data for the most-recent historical year reflect actual RPS procurement percentages in those years .

Most States Have Capped Rate Impacts Below 10% and Many Below 5%

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• Where ACPs used, they generally cap costs at 6-9% of average retail rates
• Among states with some other form of cost containment, effective cost caps are

more restrictive (1-4%) and have already become binding in several states The figure compares each state’s “effective” cost cap with actual costs for the most-recent year

0% 5% 10% 15% 20% CT DC MA MD ME NH NJ RI CO DE IL MI MT NM NC NY OH OR TX WA Cost Containment Based on ACP Other Cost Containment Mechanisms Historical Compliance Cost Estimate (Most-Recent Year) Effective Cost Cap (Max Retail Rate Increase)

* For states with multiple cost containment mechanisms, the cap shown here is based on the most-binding mechanism. MA does not have a single terminal year for its RPS; the calculated cost cap shown is based on RPS targets and ACP rates for 2020. "Other cost containment mechanisms" include: rate impact/revenue requirement caps (DE, KS, IL, NM, OH, OR, WA), surcharge caps (CO, MI, NC), renewable energy contract price cap (MT), renewable energy fund cap (NY), and financial penalty (TX). Excluded from the chart are those states currently without any mechanism to cap total incremental RPS costs (AZ, CA, IA, HI, KS, MN, MO, NV, PA, WI), though some of those states may have other kinds of mechanisms or regulatory processes to limit RPS costs.

RPS Cost Containment Mechanisms* (Equivalent Maximum Percentage Increase in Average Retail Rates)

Outline

• RPS policy landscape
• Impacts on RE development
• Future RPS demand
• Compliance
• Costs
• Outlook

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The Future Role and Impact of State RPS Programs Will Depend On…

 The outcome of ongoing and future legislative and legal challenges  Outcome of EPA carbon emissions regulations  Whether cost caps become binding (which in turn depends on RE costs, gas prices, PTC/ITC, etc.)  How other related issues and barriers affecting RE deployment are addressed (transmission, integration, siting, net metering, etc.)  How policymakers re-tune RPS’ in response to all of the above and to changing market conditions more generally

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Thank You! For further information:

LBNL RPS publications and resources: rps.lbl.gov LBNL renewable energy publications: emp.lbl.gov/reports/re Contact information: Galen Barbose, glbarbose@lbl.gov, 510-495-2593

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Thank you for attending our webinar

Warren Leon RPS Project Director, CESA Executive Director wleon@cleanegroup.org Visit our website to learn more about the State-Federal RPS Collaborative and to sign up for our e-newsletter: http://www.cesa.org/projects/state-federal-rps-collaborative/ Find us online: www.cesa.org facebook.com/cleanenergystates @CESA_news on Twitter