Renewables Portfolio Standards: A Focus on Western States · 2019-12-19 · Environmental Energy...

Environmental Energy Technologies Division • Energy Analysis Department

Renewables Portfolio Standards: A Focus on Western States

Ryan H. WiserLawrence Berkeley National Laboratory

[email protected] (510.486.5474)

AWEA Wind Power Finance & Investment WorkshopMarch 27, 2007

San Francisco, California


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


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


State RPS Activity Significant in Recent Years

CO(2007)

1983 •• • • • ••••••••1991 1994 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006IA

IA MN(2002)

AZ NV(2001)

ME(2000)

MA(2003)

WI(2001)

PA (2001)

CT(2000)

TX(2002)

NJ(2001)

MN

AZ(2001)

NM(2002)

NV(2003)

NM(2006)

CA(2003)

CT(2004)

MN(2005)

RI(2007)

NY(2006)

MD(2006)

HI(2005)

NJ(2004)

NM(2006)PA

(2007)

MT(2008)

DE(2007)

DC(2007)

NV(2005)TX

(2007)

•1996NJ

(2006)WI

(2010)

AZ(2007)

CA(2007)

WA(2012)

2007•

HI(2010)

MN (2010)

Enactment (above timeline)

Major Revisions (below timeline)

( ) Year of First Requirement

WI(2000)

CT(2005)

CT(2006)

NM (2015)

Source: UCS; revised by Berkeley Lab


State RPS Policies: 21 States and D.C.

Additional renewable energy “goals” established in IL, IA, VT, and ME

WI: 10% by 2015

NV: 20% by 2015

TX: 5880 MW by 2015

PA: 8% by 2020NJ: 22.5% by 2021

CT: 10% by 2010

MA: 4% by 2009

ME: 30% by 2000

NM: 20% by 2020

CA: 20% by 2010

MN: 25-30% by 2020-25

IA: 105 aMWMD: 7.5% by 2019

RI: 16% by 2019

HI: 20% by 2020

AZ: 15% by 2025

NY: 24% by 2013

CO: 10% by 2015

MT: 15% by 2015

DE: 10% by 2019DC: 11% by 2022

WA: 15% by 2020

WI: 10% by 2015

NV: 20% by 2015

TX: 5880 MW by 2015

PA: 8% by 2020NJ: 22.5% by 2021

CT: 10% by 2010

MA: 4% by 2009

ME: 30% by 2000

NM: 20% by 2020

CA: 20% by 2010

MN: 25-30% by 2020-25

IA: 105 aMWMD: 7.5% by 2019

RI: 16% by 2019

HI: 20% by 2020

AZ: 15% by 2025

NY: 24% by 2013

CO: 20% by 2020

MT: 15% by 2015

DE: 10% by 2019DC: 11% by 2022

WA: 15% by 2020


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


A Focus on Western States• Most Western states already covered

by an RPS

• Arizona, New Mexico, California and Hawaii recently increased the stringency of their standards

• Colorado and California considering further increasing their RPS standards

• Oregon considering RPS this legislative session

• Montana trying to “fix” inadequate cost cap language under their RPS

• WREGIS REC-tracking program expected to be operational in 2007

NV: 20% by 2015NV: 20% by 2015

NM: 20% by 2020

CA: 20% by 2010

HI: 20% by 2020

AZ: 15% by 2025

CO: 10% by 2015

MT: 15% by 2015

WA: 15% by 2020








6. Conclusions


Half of All Wind Project Development in the U.S. from 2001-2006 Was RPS-Related

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2001 2002 2003 2004 2005 2006 2001-2006

Ann

ual U

S W

ind

Dev

elop

men

t (M

W)

Other (economical, green power, IRP, etc.) RPS-related Renewable Energy Fund-related

Half of all US wind power

capacity built from 2001-2006

was RPS-related


Recent Examples of Impact of RPS Policies on Wind Power Development in the West

• Wind contracting activity beginning• 90 MW NM project in 2006 contracted with APS

Arizona

• 41 MW installed in 2006, more on the wayHawaii

• 428 MW installed in 2006, in advance of RPSWashington

• 90 MW installed in 2006 (for AZ) • 140 MW installed in 2005

New Mexico

• 60 MW installed in 2006 • ~775 MW in pipeline/negotiations

Colorado

• 211 MW installed in 2006 • ~3,000 MW new wind under contract

California

• 135 MW installed in 2005, in advance of RPSMontana


Looking Ahead, Existing State RPS Policies Could be a Major Driver of New Renewables Capacity

Source: UCS

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Californ

iaNew Je

rsey

Minneso

taTexa

sNew

Yor

k

Pennsy

lvania

Massac

huse

ttsW

ashingto

nW

iscons

inAriz

ona

Nevad

aNew

Mex

icoColo

rado

Montana

Rhode I

sland

Wash

ington

, D.C

.Dela

ware

Iowa

Conne

cticu

tHaw

aiiMaryl

andMaine

2020

New

Ren

ewab

les

Cap

acity

(MW

) UCS estimates ~45,000 MW of new RE capacity required by 2020 under existing state RPS policies, if all goes well14,200 MW of this capacity expected in Western region


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


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

California’s RPSprocurements aregoverned by“Least Cost,Best Fit” criteria

...and...

Wind may not always provide the “Best Fit”(even if “Least Cost”)

New, Repowered, or Re-Started Capacity, by Technology (minimum MW, IOUs only)

solar thermal

899 MW

wind782 MW

PVc0 MW

geothermal266 MW

small hydro6 MW

biogas35 MW

biomass134 MW








6. Conclusions


The Most Important (and obvious) Lesson Learned to Date

Elegant, cost effective, flexible policy to meet RE

targets

Poorly designed, ineffective, or costly

way to meet RE targets

?

The legislative and regulatory design details matter!!!

An RPS Can Be A…


RPS Design Varies Substantially From One State to the Next

Product- or company-based applicationApplication to LSEs - Who must meet targets?Resource diversity requirements or incentives

Duration of purchase obligationStart date

Percentage purchase obligation targetsStructure (e.g., single tier or multiple tiers)

Basis (energy vs. capacity obligation)Structure, Size and Application

Treatment of off-grid and customer-sited facilitiesTreatment of multi-fuel facilities

Definition of new/incremental generationEligibility of existing renewable generation

Resource type eligibilityGeographic eligibility

Eligibility

Cost recovery for regulated LSEs

Contracting standards for regulated LSEs

Implementing future changes to the RPS

Flexibility mechanisms (banking, borrowing, etc.)Cost caps

Enforcement mechanisms

Compliance filing requirements

Certification of eligible generators

Compliance verification (TRCs or contract-path)

Regulatory oversight body(ies)

Administration


Variations in Design Are Driven By Different Goals, Market Circumstances, Political Influences

• Unfortunate result is uneven historical and expected market impacts of state RPS policies

• Some RPS policies seemingly working well… – Texas, Minnesota, New Mexico, others

• Other policies are under-performing so far…– Under-compliance in Arizona, Nevada, Massachusetts, and

California so far

– Other policies have largely supported or will support existing (not new) renewable generation (ME, MD, etc.)

• Many others are just getting underway, but there are reasons to be concerned


Design Pitfalls in the West

Lenient Geographic Boundaries/Eligibility Restrictions• Can enlarge the market for RECs, but may also moderate need for

new wind and reduce local benefits

Force Majeure Clauses and Cost Caps• Compliance flexibility should be encouraged, but new RPS policies

increasingly including a lot of “wiggle room” to possibly allow escape from full compliance (e.g., MT, HI)

Funding Caps• Where funding caps are in place, they may be insufficient to allow the

RPS to be achieved (AZ, CA)

Application to Publicly Owned Electric Utilities• Publicly owned utilities often exempt or provided more lenient

requirements (CA, NM, NV, CO, MT, etc.)


Design Pitfalls in the West (cont.)

Inadequate Enforcement• Where full compliance is apparently not being achieved (NV,

CA)...will penalties be used to enforce compliance?

Policy Instability• Uncertainty in RPS duration, target, or eligible technologies can

impede development (e.g., CA, others)

Transmission Bottlenecks• CA, NM, CO trying to be more proactive with transmission planning/

construction, but transmission remains a key barrier in many states

Design Complexity• Is the complexity inherent in the California RPS worth it?








6. Conclusions


RPS-Driven REC Markets Are Not Particularly Relevant in the West, Because...

$0

$10

$20

$30

$40

$50

$60

Aug-02

Oct-02

Dec-02

Feb-03

Apr-03

Jun-0

3Aug

-03Oct-

03Dec

-03Feb

-04Apr-

04Ju

n-04

Aug-04

Oct-04

Dec-04

Feb-05

Apr-05

Jun-0

5Aug

-05Oct-

05Dec

-05Feb

-06Apr-

06Ju

n-06

Aug-06

Oct-06

Dec-06

Ave

rage

Mon

thly

RE

C P

rices

($/M

Wh)

CT Class I MassachusettsNJ Class I TexasMD Class I DC Class I


Two Types of RPS Markets Exist, and Western States Are Predominantly Regulated

Regulated Markets

Dominated by long-term bundled contracts for electricity and RECs

Utility RFP solicitations or bilateral negotiations, with PUC oversight

Restructured Markets

More often dominated by short-term trade in RECsto multiple parties, without PUC oversight

Developers often sell electricity and RECsseparately

WREGIS will provide increased REC-tracking functionality starting in 2007, but is unlikely to alone be sufficient to jump start

the RECs market in the West


Regulated Markets: RPS Helps Create Buyers for Renewable Energy

• RPS’ can yield profitable/financeable long-term deals, but…

• Often an RFP-driven environment, with fierce competition among developers for contracts

• Emerging concern that utilities are selecting low-priced contracts that may fail to yield operating projects– CA: Of 2,121 MW of new RE under contract – 7% cancelled; 55%

delayed; 38% on track

– NV: As of early 2006, of 414 MW of new RE under contract since RPS began; 57% cancelled; 37% delayed; 6% online or on track

• In other cases, PPAs impose contractual requirements (construction milestones, performance, credit) that some view as unduly severe likely to favor the larger developers








6. Conclusions


State RPS Impacts Relative to Possible Federal RPS Policies

Aggregate impact of existing state RPS policies likely to be somewhat modest (by some standards): increased RE equates to ~3% of national electricity demand by 2020, meets ~16% of load growth over 2006-2020

0

100

200

300

400

500

600

700

800

900

1978 1984 1990 1996 2002 2008 2014 2020

Bill

ion

kWh

Historic

EIA

+ existing state RPS (UCS)

+ 1 /2 o f new state RPS potentia l (UCS)

Senate 10% RPS

Senate RPS + existing + 1 /2 new states

20% by 2020 RPS

*In addition to hydro and MSW. Sources: EIA and UCS

Percent of U.S. Sales

4.0%

11.1%9.4%

5.9%7.3%

17.2%


Federal and State RPS Policies• Multiple RPS policies proposed at Federal level, and

Federal RPS has passed Senate in the past– Standard levels of 10-20% are in play, but with numerous

exceptions/exemptions• No unique insight into likely fate of RPS this legislative

session, or in any future session• But... If a Federal RPS is passed, then interactions

between state and federal RPS policies become key• Federal pre-emption seemingly unlikely, but also

somewhat unclear whether states would require that in-state utilities purchase at levels above the Federal RPS... issue not addressed in most state RPS policies








6. Conclusions


Conclusions

• State RPS policies, in West and otherwise, are a principal form of support for wind projects, and are becoming increasingly popular

• A state RPS can effectively deliver wind power and associated benefits at a low cost

• RPS is opening markets for wind, but not without corresponding risks

• Designing an effective RPS requires careful attention – the devil is in the details!!!

Renewables Portfolio Standards: A Focus on Western States · 2019-12-19 · Environmental Energy...

Documents

Transcript of Renewables Portfolio Standards: A Focus on Western States · 2019-12-19 · Environmental Energy...