Renewables Portfolio Standards: A Focus on Western States Ryan H. - PowerPoint PPT Presentation

Renewables Portfolio Standards: A Focus on Western States Ryan H. Wiser Lawrence Berkeley National Laboratory RHWiser@lbl.gov (510.486.5474) AWEA Wind Power Finance & Investment Workshop March 27, 2007 San Francisco, California Environmental Energy Technologies Division • Energy Analysis Department

Presentation Overview 1. Overview of State RPS 2. RPS Impact on Project Development 3. RPS Design and Design Pitfalls 4. Impact on Renewable Energy Contracting 5. Federal RPS Implications 6. Conclusions Environmental Energy Technologies Division • Energy Analysis Department

What Is a Renewables Portfolio Standard? Renewables Portfolio Standard (RPS): • A requirement on retail electric suppliers… • to supply a minimum percentage or amount of their retail load… • with eligible sources of renewable energy. Typically backed with penalties of some form Often accompanied by a tradable renewable energy credit (REC) program, to facilitate compliance Never designed the same in any two states Environmental Energy Technologies Division • Energy Analysis Department

State RPS Activity Significant in Recent Years CO (2007) HI (2005) WI DC MA MD (2000) (2007) (2003) (2006) NJ DE ME CT NY (2001) (2007) (2000) (2000) (2006) TX IA MN AZ NV PA NM CA RI MT WA (2002) (2002) (2001) (2001) (2002) (2003) (2007) (2008) (2012) • • • • • • • • • • • • • • • 1983 1991 1994 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 WI AZ NV NM CT NJ MN NV NJ IA (2001) (2001) (2003) (2006) (2004) (2004) (2010) (2005) (2006) MN TX WI NM MN NM (2007) (2010) (2015) (2005) (2006) Enactment (above timeline) PA CT HI (2007) (2005) (2010) Major Revisions (below timeline) CA (2007) ( ) Year of First Requirement AZ (2007) CT Source: UCS; revised by Berkeley Lab (2006) Environmental Energy Technologies Division • Energy Analysis Department

State RPS Policies: 21 States and D.C. ME: 30% by 2000 ME: 30% by 2000 WA: 15% by 2020 WA: 15% by 2020 MN: 25-30% by 2020-25 MN: 25-30% by 2020-25 MT: 15% by 2015 MT: 15% by 2015 MA: 4% by 2009 MA: 4% by 2009 NY: 24% by 2013 NY: 24% by 2013 WI: 10% by 2015 WI: 10% by 2015 RI: 16% by 2019 RI: 16% by 2019 NV: 20% by 2015 NV: 20% by 2015 PA: 8% by 2020 PA: 8% by 2020 CT: 10% by 2010 CT: 10% by 2010 IA: 105 aMW IA: 105 aMW NJ: 22.5% by 2021 NJ: 22.5% by 2021 MD: 7.5% by 2019 MD: 7.5% by 2019 CA: 20% by 2010 CA: 20% by 2010 CO: 10% by 2015 CO: 20% by 2020 DE: 10% by 2019 DE: 10% by 2019 DC: 11% by 2022 DC: 11% by 2022 NM: 20% by 2020 NM: 20% by 2020 AZ: 15% by 2025 AZ: 15% by 2025 HI: 20% by 2020 HI: 20% by 2020 TX: 5880 MW by 2015 TX: 5880 MW by 2015 Additional renewable energy “goals” established in IL, IA, VT, and ME Environmental Energy Technologies Division • Energy Analysis Department

State RPS Program Context • Load Covered: Roughly 40% of U.S. load covered by a state RPS • RPS Development: Most policies emanated from state legislation, but some from regulatory action (e.g., NY, AZ) and two from state ballot initiatives (CO, WA) • RPS Application: RPS typically applies to regulated IOUs and competitive energy service providers; publicly owned utilities often – but not always – exempt • Regulated vs. Restructured: Initially concentrated in restructured states, but now roughly half in monopoly markets • Operating Experience: Experience with policy is growing, but few states have >5 years experience Environmental Energy Technologies Division • Energy Analysis Department

A Focus on Western States • Most Western states already covered by an RPS WA: 15% by 2020 • Arizona, New Mexico, California and MT: 15% by 2015 Hawaii recently increased the stringency of their standards NV: 20% by 2015 NV: 20% by 2015 • Colorado and California considering further increasing their RPS standards CA: 20% by 2010 CO: 10% by 2015 • Oregon considering RPS this legislative session NM: 20% by 2020 AZ: 15% by 2025 • Montana trying to “fix” inadequate cost HI: 20% by 2020 cap language under their RPS • WREGIS REC-tracking program expected to be operational in 2007 Environmental Energy Technologies Division • Energy Analysis Department

Presentation Overview 1. Overview of State RPS 2. RPS Impact on Project Development 3. RPS Design and Design Pitfalls 4. Impact on Renewable Energy Contracting 5. Federal RPS Implications 6. Conclusions Environmental Energy Technologies Division • Energy Analysis Department

Half of All Wind Project Development in the U.S. from 2001-2006 Was RPS-Related 10,000 Annual US Wind Development (MW) Other (economical, green power, IRP, etc.) 9,000 RPS-related 8,000 Renewable Energy Fund-related 7,000 6,000 5,000 4,000 Half of all US wind power 3,000 capacity built 2,000 from 2001-2006 was RPS-related 1,000 0 2001 2002 2003 2004 2005 2006 2001- 2006 Environmental Energy Technologies Division • Energy Analysis Department

Recent Examples of Impact of RPS Policies on Wind Power Development in the West California • 211 MW installed in 2006 • ~3,000 MW new wind under contract Colorado • 60 MW installed in 2006 • ~775 MW in pipeline/negotiations New Mexico • 90 MW installed in 2006 (for AZ) • 140 MW installed in 2005 Montana • 135 MW installed in 2005, in advance of RPS Washington • 428 MW installed in 2006, in advance of RPS Hawaii • 41 MW installed in 2006, more on the way Arizona • Wind contracting activity beginning • 90 MW NM project in 2006 contracted with APS Environmental Energy Technologies Division • Energy Analysis Department

Looking Ahead, Existing State RPS Policies Could be a Major Driver of New Renewables Capacity 7,000 UCS estimates ~45,000 MW of new RE 2020 New Renewables Capacity (MW) 6,000 capacity required by 2020 under existing state RPS policies, if all goes well 5,000 14,200 MW of this capacity expected in Western region 4,000 3,000 2,000 1,000 - . y a s o d t a a k n n a o a e i d s a C a e u i e r i t c i t o i d n r a n a n t n d n n w n o o s . c e i a s t a w x o a x a a D a i a n i r s Y g r s w o a l t o e e r t l v z v s c a e e o y u n o n I M , f T i e a l M I e J w c n H r i n y i r h l o l h l A N o a s e o n a n e s e c M w s M i w C d n C i n t D N a W a M g e o n o s e W n N h C e s N i P a R h s M a W Source: UCS Environmental Energy Technologies Division • Energy Analysis Department

New/Revised RPS Policies in the West May Add to These Totals • California (33% by 2020) � ~ 7,500 MW above current RPS by 2020 • Colorado (20% by 2015) � ~ 900 MW above current RPS by 2015 • Oregon (25% by 2025) � ~ 2,600 MW by 2025 Source: Union of Concerned Scientists Environmental Energy Technologies Division • Energy Analysis Department

Wind Expected to Fare Very Well, But May Not Always Be the Hands-Down Winner Most RPS requirements have been met with wind so far, but increased competition in some states from geothermal (Nevada, California), and solar thermal (California, Southwest) in particular New, Repowered, or Re-Started Capacity, California’s RPS by Technology (minimum MW, IOUs only) procurements are governed by wind “Least Cost, biogas 782 MW 35 MW Best Fit” criteria PVc biomass 0 MW 134 MW ...and... Wind may not always geothermal provide the “Best Fit” 266 MW (even if “Least Cost”) solar small hydro thermal 6 MW 899 MW Environmental Energy Technologies Division • Energy Analysis Department

Presentation Overview 1. Overview of State RPS 2. RPS Impact on Project Development 3. RPS Design and Design Pitfalls 4. Impact on Renewable Energy Contracting 5. Federal RPS Implications 6. Conclusions Environmental Energy Technologies Division • Energy Analysis Department

The Most Important (and obvious) Lesson Learned to Date An RPS Can Be A… Elegant, cost Poorly designed, ? effective, flexible ineffective, or costly policy to meet RE way to meet RE targets targets The legislative and regulatory design details matter!!! Environmental Energy Technologies Division • Energy Analysis Department

RPS Design Varies Substantially From One State to the Next Structure, Size and Application Administration Basis (energy vs. capacity obligation) Regulatory oversight body(ies) Structure (e.g., single tier or multiple tiers) Compliance verification (TRCs or contract-path) Percentage purchase obligation targets Certification of eligible generators Start date Compliance filing requirements Duration of purchase obligation Resource diversity requirements or incentives Enforcement mechanisms Application to LSEs - Who must meet targets? Cost caps Product- or company-based application Flexibility mechanisms (banking, borrowing, etc.) Eligibility Implementing future changes to the RPS Geographic eligibility Contracting standards for regulated LSEs Resource type eligibility Cost recovery for regulated LSEs Eligibility of existing renewable generation Definition of new/incremental generation Treatment of multi-fuel facilities Treatment of off-grid and customer-sited facilities Environmental Energy Technologies Division • Energy Analysis Department