Review of EDC Solar Long- term Financing Program Analysis
Transcript of Review of EDC Solar Long- term Financing Program Analysis
Review of EDC Solar Long-
term Financing Program
Analysis
Updated – February 16, 2012
Center for Energy, Economic, and
Environmental Policy
DRAFT
Summary of Changes & Additions
• Solicitation manager costs, auction manager costs, and internal utility administration costs were recalculated.
• Auction manager costs were updated from actual PSE&G invoices from NERA.
• Total outstanding obligations were calculated for PSE&G Solar Loan programs.
• Solar For All draft analysis added.
DRAFT 2
Review Assumptions and Caveats
• Center for Energy, Economic and Environmental Policy (CEEEP) asked to review the EDC Solar Long term Financing Programs.
• Current analysis includes ACE, JCP&L, RE, and PSE&G’s Solar Loan programs.
• This analysis: – Is NOT answering the question of whether the programs should
be continued in the future. – Is NOT a review of New Jersey solar programs, the New Jersey
SREC program, or the SREC short term market. – Does not include the environmental benefits of solar, the
impacts on the transmission and distribution system, or any other costs or benefits of solar other than those directly related to the EDC Solar Long term Financing Program.
• Assumed Capacity Factor from 2010 to 2012 is 14% ac (1,226 MWh/yr for a 1 MW facility) - the program caps SRECs at 1300 per MW per year.
• Assumes that the capacity contracted in any given year is installed in that same year and 100% of the SRECs are created.
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DRAFT
Goals of EDC Solar Financing Program
• On December 6, 2007 (I/M/O the Renewable Energy Portfolio Standards, Alternative Compliance Payments and Solar Alternative Compliance Payments, Docket No. E006100744), the Board also directed the OCE to “initiate a proceeding to explore whether additional mechanisms could be established to support the financing of solar generation projects by providing greater assurances about the cash flow to be expected from such projects, noting that such financing depends not only upon certainty about long-term maximum prices for SRECs, as provided by the established rolling eight-year SACP schedule, but also requires greater certainty about the minimum cash flow from such projects”
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Data Collection Issues
• CEEEP staff reviewed a “Solar Review Matrix” (matrix) developed by the BPU and completed by the EDC’s.
• Matrix included program goals, number of megawatts solicited, awarded, contracted and installed, the number of SRECs produced and auctioned and the revenues generated by that auction, as well as the various costs of each utility’s program – only through June 2011.
• CEEEP met individually with staff from each utility and received more detailed information about each solicitation and auction from NERA Economic Consulting (NERA), the solicitation and auction manager.
• Due to significant differences in how each utility completed the matrix and additional data needs, CEEEP drafted an updated matrix for the utilities to complete.
• Updated matrices were completed by utilities in late November/early December, with data through October 2011. 5
DRAFT
Solicitation Program Approximate Timeline (ACE, JCP&L, RE)
Last Loan Application Approximate Timeline (PSE&G Solar Loan I and II)
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Oct 2012 Feb 2012
Approximately 8 months 30-45 days
Dec 2011
45 days Approximately 1 year
Sept 2011 Nov 2012 Nov 2011 ~ July 2011
Timelines not drawn to scale
ACE JCP&L RE
Solicitation Date Awarded Contracted Installed Awarded Contracted Installed Awarded Contracted Installed
#1 August 2009 0.00 0.00 0.00 1.59 1.59 1.14 0.00 0.00 0.00
#2 December
2009 2.20 2.00 1.74 4.18 2.87 2.86 0.15 0.09 0.09
#3 March 2010 0.11 0.11 0.11 9.22 6.49 5.33 0.00 0.00 0.00
#4 June 2010 0.39 0.39 0.39 3.54 3.44 2.34 0.00 0.00 0.00
#5 October
2010 0.36 0.35 0.35 8.61 8.13 2.06 0.54 0.54 0.17
#6 February
2011 10.50 7.64 0.00 6.76 4.63 1.20 0.80 0.80 0.30
#7 June 2011 3.92 3.03 0.00 6.02 6.02 0.05 2.34 2.18 0.00
#8 September
2011 5.98 6.00 0.00 10.96 0.00 0.00 0.28 0.00 0.00
Total 23.47 19.52 2.60 50.86 33.17 14.98 4.11 3.61 0.56
ACE, JCP&L, and RECO Awarded, Contracted, and Installed Capacity (MW)
Awarded is capacity selected at solicitations, contracted is capacity that signs contract and pays deposit, and installed is capacity that is installed.
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PSE&G Awarded, Contracted, and Installed Capacity (MW)
Solar Loan I (SL I) Solar Loan II (SL II) Solar for All
Energy Year Awarded Contracted Installed Awarded Contracted Installed Awarded Contracted Installed
2008 3.87
2009 13.38 2.77 2.77
2010 4.90 11.24 11.24 1.42 0.01 0.01 29.90 5.60 5.60
2011 6.05 6.05 27.98 4.63 4.63 16.90 35.30 35.30
2012 1.32 1.32 2.58 3.64 3.64 4.00 5.10 5.10
Total 22.15 21.38 21.38 31.98 8.28 8.28 50.80 46.00 46.00
Awarded is capacity approved for loan, contracted is capacity that signs contract, and installed is capacity that is installed .
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DRAFT 9
Pipeline Success Rates
• There are still projects moving through the pipeline.
• Project contract to install takes about one year.
• The overall pipeline success rate is difficult to ascertain until all of data for the program is available.
• Because projects are still in the pipeline, ongoing project data will be needed from the EDCs to complete the analysis.
• Data is through October 2011, and will be revised as additional project data is received from the EDCs.
Energy Year SLI SLII S4A Total SLI SLII S4A Total SLI SLII S4A Total
2008 0% 0% 0% 0%
2009 21% 21% 100% 100% 21% 21%
2010 229% 1% 19% 47% 100% 100% 100% 100% 229% 1% 19% 47%
2011 17% 209% 102% 100% 100% 100% 17% 209% 102%
2012 141% 128% 153% 100% 100% 100% 141% 128% 153%
Total 97% 26% 91% 72% 100% 100% 100% 100% 97% 26% 91% 72%
Contracted/Awarded Installed/AwardedInstalled/Contracted
Pipeline Success Rates
Solicitation Date ACE JCP&L RE Total ACE JCP&L RE Total ACE JCP&L RE Total
#1 Aug 2009 100% 100% 72% 72% 72% 72%
#2 Dec 2009 91% 69% 60% 76% 87% 100% 100% 95% 79% 68% 60% 72%
#3 March 2010 100% 70% 71% 99% 82% 82% 99% 58% 58%
#4 June 2010 100% 97% 98% 100% 68% 71% 100% 66% 69%
#5 Oct 2010 97% 94% 100% 95% 100% 25% 32% 29% 97% 24% 32% 27%
#6 Feb 2011 73% 69% 100% 72% 0% 26% 37% 11% 0% 18% 37% 8%
#7 June 2011 77% 100% 93% 92% 0% 1% 0% 0% 0% 1% 0% 0%
#8 Sep 2011 100% 0% 0% 35% 0% 0% 0% 0% 0% 0%
83% 65% 88% 72% 13% 45% 16% 32% 11% 29% 14% 23%
93% 78% 60% 79% 90% 81% 100% 82% 83% 63% 60% 66%
Total
Total (#1-#4)
Contracted/Awarded Installed/AwardedInstalled/Contracted
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Solicitation Results
MW Solicited Number of Bids Received Number of Projects
Awarded
Solicitation ACE JCP&L RE ACE JCP&L RE ACE JCP&L RE
#1 (August 2009) 5.0 11.0 0 0 8 0 0 7 0
#2 (December 2009) 5.0 12.0 2.3 11 31 2 10 27 2
#3 (March 2010) 7.8 17.2 2.1 1 62 0 1 58 0
#4 (June 2010) 6.8 9.3 1.5 7 16 0 5 15 0
#5 (October 2010) 5.8 8.7 1.5 2 51 4 2 49 4
#6 (February 2011) 11.9 5.9 2.4 67 119 5 60 41 5
#7 (June 2011) 3.5 5.5 2.3 60 152 15 17 35 11
#8 (September 2011) 3.4 10.0 0.2 101 185 2 19 60 1
Total 49.3 79.6 12.1 249 624 28 114 292 23
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MW Awarded MW Contracted Weighted Average Awarded
Bid Price ($/SREC)
Solicitation ACE JCP&L RE ACE JCP&L RE ACE JCP&L RE
#1 (August 2009) 0.0 1.6 0.0 0.0 1.6 0.0 N/A $384 N/A
#2 (December 2009) 2.2 4.2 0.1 2.0 2.9 0.1 $372 $382 $460
#3 (March 2010) 0.1 9.2 0.0 0.1 6.5 0.0 $422 N/A
#4 (June 2010) 0.4 3.5 0.0 0.4 3.4 0.0 $431 $449 N/A
#5 (October 2010) 0.4 8.6 0.5 0.4 8.1 0.5 $463 $452 $456
#6 (February 2011) 10.5 6.8 0.8 7.6 4.6 0.8 $424 $379 $454
#7 (June 2011) 3.5 6.0 2.3 3.0 6.0 2.2 $322 $264 $335
#8 (September 2011) 6.0 11.0 0.3 6.0 0.0 0.3 $213 $215
Total 23.1 50.9 4.1 19.5 33.1 3.6 $372 $368 $382
Solicitation Results
The ACE reported awarded capacity was 3.916 MW for solicitation #7 (June 2011), but NERA records show the capacity as 3.516 MW. The NERA value is used. As of the date the data was requested, the 45-day waiting period for the September 2011 solicitation had not expired yet. CEEEP has requested updated data from the utilities. The total weighted average awarded bid price is the weighted average of all awarded projects The weighted average awarded bid price has been redacted when there is only one project due to confidentiality concerns.
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Weighted Average Awarded Bid Price
Vertical axis of graph does not start at zero. Some data has been redacted due to confidentiality concerns.
$200
$250
$300
$350
$400
$450
$500
$/S
REC
Solicitation
ACE
JCP&L
RE
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EDC Weighted Average Awarded Bid Price vs PSE&G Floor Price
Small Non-Res <=150 kW, Large Non-Res = 150 -500 kW
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$200
$250
$300
$350
$400
$450
$500
2010 2011 2012
$/M
Wh
SLI
SLII - Residential
SLII - Small Non-Res
SLII - Large Non-Res
SLII - 500kW-2000 kW
Avg Solicitation WeightedAwarded Bid Price
Auction Results
Number of SRECs Auctioned
Auction ACE JCP&L RE PSEG* (Solar Loan Programs)
Weighted Average SREC Auction Price
#1 (February 2010) N/A N/A N/A 2,800 $685.06
#2 (July 2010) N/A N/A N/A 5,750 $688.03
#3 (October 2010) N/A N/A N/A 5,841 $665.12
#4 (April 2011) 189 580 15 5,427 $669.69
#5 (July 2011) 404 1,528 23 5,710 $475.00
#6 (August 2011) 331 791 8 2,110 $479.75
#7 (October 2011) 915 3,140 102 10,747 $227.03
Total 1,839 6,039 148 38,385
ACE JCP&L RE PSE&G
Overall Weighted Average
Auction Price
$372.48 $366.17 $324.09 $515.65 *Solar Loan I and Solar Loan II PSE&G auctioned 1,352 SRECs in August 2009 15
DRAFT
Auction Prices and Auction Proceeds
Auctioned SRECs Auction Proceeds
Energy Year
ACE JCP&L RE PSEG ACE JCP&L RE PSEG
2010 0 0 0 4,152 $0 $0 $0 $2,849,048
2011 189 580 15 17,018 $126,571 $388,420 $10,045 $12,378,247
2012 1,650 5,459 133 18,657 $558,430 $1,822,889 $37,920 $20,960,918
Total 1,839 6,039 148 81,545 $685,001 $2,211,309 $47,965 $36,188,213
Auction SREC Auction Price Flett Exchange Monthly Average
Price
#1 (February 2010) $685 $663
#2 (July 2010) $688 $677
#3 (October 2010) $665 $647
#4 (April 2011) $670 $655
#5 (July 2011) $475 (EY11)
$480 (EY10)
$561 (EY11)
$546 (EY10)
#6 (August 2011) $480 (EY11) $501
#7 (October 2011) $227 (EY12)
$669 (EY11)
$216 (EY12)
$623 (EY11)
Auction Proceeds are determined using the auction bid clearing prices from each round
Auction results from: http://www.solarrec-auction.com/index.cfm?s=background&p=previousResults
Flett Exchange Monthly Average prices were calculated based on data from http://markets.flettexchange.com/new-jersey-srec/
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Auction Prices vs Flett Exchange SREC Market Prices
Flett Exchange does not report the volume of transactions and, when no transactions occur, the offered price is reported.
17 DRAFT
Solicitation Manager Costs • The Solicitation Manager Costs are the cost associated with NERA
running the solicitation program. PSE&G has no solicitation manager costs since it does not participate in the solicitations.
• The Solicitation Manager Costs were divided by the total SRECs contracted over the term of the contracts. All projects in the solicitation program were assumed to have 10 year terms.
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DRAFT
Energy Year
ACE JCPL RE SL I SL II
2009
Not applicable
2010 $237,220 $584,014 $47,642
2011 $164,680 $542,345 $46,134
2012 $222,226 $390,863 $35,078
Total $624,126 $1,517,222 $128,854
Energy Year
ACE JCPL RE SL I SL II
2009
Not applicable
2010 $9.17 $4.37 $42.77
2011 $1.60 $2.73 $2.80
2012 $2.01 $1.87 $1.16
Total $2.61 $2.81 $2.70
Auction Manager Costs • The Auction Manager Costs are the cost associated with NERA
running the auction. The costs were taken from PSE&G’s NERA auction invoices, which had the total NERA invoiced for each auction and PSE&G’s portion of the bill.
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DRAFT
Energy Year
ACE, JCPL, RE Combined PSE&G
2009
2010 $190,051
2011 $13,751 $365,180
2012 $37,102 $255,398
Total $50,853 $810,629
Energy Year
ACE JCPL RE SL I SL II
2009 $9.62
2010 $9.62 $9.62 $9.62 $9.62 $9.62
2011 $9.62 $9.62 $9.62 $9.62 $9.62
2012 $9.62 $9.62 $9.62 $9.62 $9.62
Total $9.62 $9.62 $9.62 $9.62 $9.62
• The total Auction Manager Costs were divided by the total auctioned SRECs in each energy year. It is assumed that it costs the same price per SREC to hold the auction regardless of EDC.
Energy Year
ACE JCPL RE SL I SL II
2009 $21.37
2010 $1.21 $0.49 $0.35 $4.15 $3,095.59
2011 $0.54 $0.42 $0.78 $2.68 $14.12
2012 $0.22 $0.28 $0.32 $4.87 $11.34
Total $0.47 $0.38 $0.48 $6.04 $15.55
• The Internal Utility Administration Costs are the cost associated with the utilities running the solar long-term financing programs.
• The Internal Utility Administration Costs were divided by the total SRECs
contracted over the term of the contracts. All projects in the solicitation program were assumed to have 10 year terms. PSE&G loans are 10 years for Residential loans and 15 years for Commercial loans.
Please note that the internal utility admin. costs that are presented here were provided by the EDCs. Other costs associated with the Solar Long-term contracting program may be provided in rate base.
20
DRAFT
Energy Year
ACE JCPL RE SL I SL II
2009 1087816
2010 $31,356 $65,954 $393 $849,020 $380,757
2011 $55,120 $82,995 $12,886 $290,794 $1,125,605
2012 $24,881 $58,063 $9,631 $117,558 $713,710
Total $111,357 $207,012 $22,910 $2,345,188 $2,220,072
Internal Utility Administration Costs
“SREC Transaction Fee”
• As defined in the Program Stipulations, the EDC’s “will collect a fee, referred to as an "SREC Transaction Fee", for each SREC that is procured and subsequently sold pursuant to the Program.”
• PSE&G Solar Loan Programs do not have “SREC Transaction Fee”.*
21 DRAFT
Energy Year
ACE JCPL RE SL I SL II
2009
Not applicable
2010 $22.59 $31.21 $39.11
2011 $22.59 $31.21 $39.11
2012 $22.59 $31.21 $39.11
Total $22.59 $31.21 $39.11
*While ACE, RE, and JCP&L have an “SREC Transaction Fee”, PSE&G Administration Costs may contain a return on capital component.
• Total Combined Costs is the summation of the solicitation manager costs, auction manager costs, internal utility administration costs and the “SREC Transaction Fees”.
• PSE&G’s total cost is lowest; PSE&G does not have an “SREC Transaction Fee” that is charged to ratepayers.
• It is important to remember that not all of the data is available on the programs since there are still projects in the pipeline.
Total Costs per Contracted SREC Compared
22
DRAFT
Energy Year
ACE JCPL RE SL I SL II Total
PSE&G
2009 $30.99 $30.99
2010 $42.59 $45.69 $91.85 $13.77 $3,105.20* $15.63
2011 $34.35 $43.98 $52.31 $12.30 $23.74 $17.14
2012 $34.44 $42.98 $50.21 $14.48 $20.96 $19.16
Total $35.28 $44.02 $51.91 $15.66 $25.17 $18.22
*Due to start up costs
DRAFT 23
Percentage of Various Cost Components to Total Cost
Energy Year ACE JCPL RE PSE&G
Solicitation Manager
7% 6% 5% 0%
Auction Manager 27% 22% 19% 53%
Internal Admin 1% 1% 1% 47%
Transaction Fee 64% 71% 75% 0%
Total 100% 100% 100% 100%
SREC Auction Proceeds are uncertain due to unknown future SREC prices.
Does not include any environmental benefits of solar, the impacts on the transmission and distribution system, or any other costs or benefits of solar other than those directly related to the EDC Solar Long term Contract Program.
Ratepayer Exposure for Long-term Financing Programs Only
Ratepayer Exposure is not for the overall SREC Program, but only for the Long-term financing Program.
24 DRAFT
Ratepayer Exposure for Long-term Financing Programs Only • A: Solicitation Obligations are the summation of total
SRECs contracted over the contract term multiplied by the SREC price awarded.
• B: Various Program Costs including NERA’s solicitation and auction management costs, internal utility administrative costs, “other costs” (PJM-GATS registration fees), and “SREC Transaction Fees.”
• C: SREC auction proceeds are difficult to estimate into the future because of the uncertainty of SREC costs in the future.
• If the solicitation obligations and program costs exceed the auction proceeds then the ratepayer will make a payment.
• If the solicitation obligations and program costs are less than the auction proceeds then the ratepayer will receive a refund. 25 DRAFT
Solicitation Obligations for ACE, JCP&L, and RE
Total Contracted SRECs Solicitation Obligations
Energy Year ACE JCP&L RE ACE JCP&L RE
2010 2,588 13,368 111 $964,176 $5,435,400 $51,224
2011 12,865 33,235 4,433 $5,336,812 $13,832,566 $1,696,076
2012 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253
2013 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253
2014 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253
2015 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253
2016 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253
2017 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253
2018 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253
2019 23,939 54,084 4,770 $8,138,521 $18,663,067 $1,824,253
2020 21,352 40,716 4,659 $7,174,345 $13,227,666 $1,773,029
2021 11,074 20,849 337 $2,801,709 $4,830,501 $128,177
Total 239,393 540,842 47,704 $81,385,210 $186,630,666 $18,242,530
Total values are not net present values. 26 DRAFT
Note that not all contracted SRECs will be installed. To accurately calculate the obligations, It is necessary to know both the number of contracts that are installed and the specific projects installed.
Solicitation Obligations
• The total solicitation obligations are estimated by multiplying the incremental SRECs for each year by the weighted average awarded solicitation price for that year and summing them up.
• The incremental SRECs are Total SRECs – Auctioned SRECs
• The weighted average bid prices are: Weighted Awarded Average Bid Price
($/SREC)
Energy
Year
ACE JCP&L RE
2010 $373 $407 $460
2011 $425 $423 $381
2012 $253 $232 $380
27 DRAFT
Note: Contracted
average bid price
may be different
than awarded average
bid price due to projects
dropping out.
DRAFT 28
PSE&G Solar Loan Outstanding Obligations
• Solar Loan Outstanding Obligations are the summation of total SRECs contracted over the loan term multiplied by the floor price.
• Floor price varies by program and by segment.
Solar Loan I Solar Loan II
Segment 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
Residential $475 $475 $475 $475 $475 $450 $428 $400
<150 kW $475 $475 $475 $475 $475 $410 $388 $360
150-500 kW $475 $475 $475 $475 $475 $380 $358 $330
500-2000 kW
$475 $475 $475 $475 $475 $380 $345 $325
Total Contracted SRECs Outstanding Obligations*
Energy Year Solar Loan I Solar Loan II Solar Loan I + II
2008 0 0 $0
2009 3,397 0 $1,613,636
2010 17,182 12 $8,166,904
2011 24,614 5,690 $13,777,224
2012 26,233 10,155 $16,078,993
2013 26,233 10,155 $16,078,993
2014 26,233 10,155 $16,078,993
2015 26,233 10,155 $16,078,993
2016 26,233 10,155 $16,078,993
2017 26,233 10,155 $16,078,993
2018 26,233 10,155 $16,078,993
2019 26,220 10,155 $16,073,168
2020 25,742 10,142 $15,840,458
2021 25,153 9,051 $15,094,225
2022 25,129 8,241 $14,758,804
2023 25,129 8,241 $14,758,804
2024 21,744 8,241 $13,150,994
2025 8,438 8,241 $6,830,435
2026 1,594 3,655 $1,966,348
Total 387,972 142,753 $234,583,952
DRAFT
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PSE&G Solar Loan Outstanding Obligations
Total values are not net present values. * Before Auction Proceeds
Net Ratepayer Refund or Payment for Long-term Financing Programs Only
• Net Ratepayer Exposure is not for the overall SREC Program , but only for the Long-term financing Programs.
• Net Ratepayer Refund or Payment = (Proceeds of Remaining SRECs)-(Auction Proceeds)-(Solicitation Obligations)
• Proceeds of Remaining SRECs = (Total SRECs) - (Auctioned SRECs) X (Value of Remaining SRECs)
• The value of remaining SRECs were determined under three price scenarios: $200, $400, and SACP.
• For Solicitation #8, it was assumed that 100% of the awarded capacity would be contracted. This assumption will need to revised at a later date as more project information is available.
30 DRAFT
Results/Conclusions for ACE, JCP&L, and RE
• Due to projects still being in the pipeline, ongoing data will be needed from EDCs to update results in future.
• If all remaining SRECs are valued at $200, ratepayers have a total payment of over $125 million.
• If all remaining SRECs are valued at $400, ratepayers will receive a total refund of over $38 million.
• If all remaining SRECs are valued at the SACP, ratepayers will receive a total refund of over $167 million.
• The breakeven SREC price, or the price where the solicitation obligations will be equal to the SREC and auction proceeds, ranges from $345 to $384, depending on the utility.
• This analysis is only one small part of how SREC prices affect ratepayers and is not meant to suggest that SREC prices should be higher
• Conclusion: Ratepayer refunds or payments as a result of the program depend almost exclusively on the SREC price that is obtained over the term of the program.
Total values are not net present values.
31 DRAFT
Scenario 1: SREC Price = $200
Energy Year ACE JCP&L RE
2010 ($446,635) ($2,761,848) ($28,953)
2011 ($2,928,197) ($7,689,898) ($822,510)
2012 ($4,239,085) ($10,760,908) ($934,700)
2013 ($3,350,655) ($7,846,219) ($870,180)
2014 ($3,350,655) ($7,846,219) ($870,180)
2015 ($3,350,655) ($7,846,219) ($870,180)
2016 ($3,350,655) ($7,846,219) ($870,180)
2017 ($3,350,655) ($7,846,219) ($870,180)
2018 ($3,350,655) ($7,846,219) ($870,180)
2019 ($3,350,655) ($7,846,219) ($870,180)
2020 ($2,904,020) ($5,084,370) ($841,227)
2021 ($586,830) ($660,741) ($60,716)
Total ($34,559,355) ($81,881,296) ($8,779,366)
Net Ratepayer Refund or Payment under Four SREC Price Scenarios
Total values are not net present values. 32 DRAFT
Scenario 2: SREC Price = $400 Scenario 3: SREC Price = SACP
Energy Year ACE JCP&L RE ACE JCP&L RE
2010 $70,906 ($88,296) ($6,681) $829,103 $3,828,457 $25,946
2011 ($393,009) ($1,158,810) $61,101 $3,092,873 $7,821,436 $1,276,067
2012 $218,780 ($1,035,860) ($7,227) $5,969,427 $11,509,452 $1,189,213
2013 $1,437,210 $2,970,629 $83,893 $7,206,588 $16,004,931 $1,233,551
2014 $1,437,210 $2,970,629 $83,893 $6,823,559 $15,139,583 $1,157,225
2015 $1,437,210 $2,970,629 $83,893 $6,440,530 $14,274,236 $1,080,899
2016 $1,437,210 $2,970,629 $83,893 $6,081,440 $13,462,972 $1,009,344
2017 $1,437,210 $2,970,629 $83,893 $3,232,660 $7,026,947 $441,670
2018 $1,437,210 $2,970,629 $83,893 $2,945,388 $6,377,937 $384,426
2019 $1,437,210 $2,970,629 $83,893 $2,658,116 $5,728,926 $327,182
2020 $1,366,305 $3,058,926 $90,574 $2,220,370 $4,687,585 $276,935
2021 $1,628,048 $3,509,019 $6,746 $1,949,206 $4,113,634 $16,528
Total $12,951,501 $25,079,384 $731,764 $49,449,258 $109,976,096 $8,418,986
Net Ratepayer Refund or Payment under Four SREC Price Scenarios
Total values are not net present values. 33 DRAFT
Breakeven Price ($/MWh)
ACE $345
JCP&L $353
RE $383
Solar Loan I $475
Solar Loan II $356
DRAFT 34
Breakeven Prices for the EDC Programs
• The total loans paid out under the Solar Loan Programs are $107,473,432
– Solar Loan I - $79,650,076
– Solar Loan II - $27,823,356
• The total principal paid on these loans is $10,972,858 and the total interest paid is $14,128,737
• Loan recipients owe $85,527,717 in principal*
– Solar Loan I - $70,100,664
– Solar Loan II - $26,399,911
• Ratepayers are on the hook for the outstanding loan balances if the customers holding the loans default.
DRAFT 35
Results/Conclusions for PSE&G Solar Loan Programs
* Does not include interest accrued or residential interest differential
• The weighted average floor price for:
– Solar Loan I is $475
– Solar Loan II is $356
– Both loan programs combined is $442
• If the loans are paid off before the loan period expires, PSE&G can exercise the call option.
• The call option allows PSE&G to purchase SRECs from customer at 75% of the market price for remainder of loan agreement.
• The difference between auction price and purchase price is either a credit or loss for ratepayers.
• To accurately calculate this, CEEEP would need to develop assumptions on % of loans paid off early and future auction prices.
DRAFT
36
Results/Conclusions for PSE&G Solar Loan Programs
• If SRECs production is less than expected the loan recipients will need to make additional payments which are calculated during a “true-up”.
• To determine the full impact, CEEEP would need to develop assumptions on loan default rates and future auction prices and how the two are associated.
• As of October 2011, there has been a net gain of $908,199 on the sale of SRECs to ratepayers
– Solar Loan I has a net gain of $1,051,233
– Solar Loan II has a net loss of $143,034
DRAFT 37
Results/Conclusions for PSE&G Solar Loan Programs
Solar For All (S4A) Description
Segment
Name
Description Total MWs
1a PSE&G Owned Sites 34.56
1b 3rd Party Owned Sites
1c UEZ Sites, including Publicly Owned 5.4
2 Pole Top 40.0
S4A Revenues:
• Wholesale energy ($/MWh)
• Wholesale capacity ($/MW-
day)
• SRECs ($/SREC)
S4A Costs:
• Capital Costs (after tax benefits)
• Cost of Capital (11.8%)
• Operations & Maintenance
(O&M)
• Lease payments, if applicable
38 DRAFT
=> Ratepayer exposure = Revenues - Costs
Levelized Revenue Cost of Electricity (LRCOE)
Low Cost High Cost Average Description
Segement 1a +
1b $ 424.90 $ 478.65 $ 451.77
PSE&G and 3rd
Party Sites
Segment 1c $ 549.51 $ 620.11 $ 584.81 UEZ Sites
Segement 2 $ 563.41 $ 699.27 $ 631.34 Pole Top
DRAFT 39
PSE&G provided two costs scenarios: Low and High
These LRCOE do NOT include revenues from the sale of wholesale energy, capacity
and SRECs (see next slide)
The LRCOE is based upon PSE&Gs revenue requirement model, i.e., what is the
revenue stream over time does PSE&G need to receive to recover all of its costs,
including their cost of capital
LRCOE After Subtracting 2011 CY Revenues
(Energy, Capacity & SRECs)
Low Cost (Decrease) High Cost Average Description
Segment 1a +
1b $ 410.10 (14.80) $ 463.86 $ 436.98
PSE&G and 3rd
Party Sites
Segment 1c $ 515.14 (34.37) $ 585.74 $ 550.44 UEZ Sites
Segment 2 $ 530.91 (32.50) $ 666.77 $ 598.84 Pole Top
DRAFT 40
Going forward, the above numbers are the breakeven values:
If revenues exceed them, ratepayers receive a refund
If revenues are below them, ratepayers pay the difference
KEY QUESTION: What is the sum of future energy, capacity and
SREC revenues?
0
50
100
150
200
250
300
350
400
450
1 1001 2001 3001 4001 5001 6001 7001 8001
2007 LW LMP Price
2008 LW LMP Price
2009 LW LMP Price
2010 LW LMP Price
2011 LW LMP Price
New Jersey LMP Price Duration Curve
Note: LMPs are load weighted values for the four New Jersey based zones (AE, RECO, JC and PS).
LM
P (
$/M
Wh
)
Historical NJ Wholesale Energy Prices
(Not Weather Normalized)
Calendar Year Load Weighted Average of Highest 1300 Hours
($/MWh)
2008 141.73
2009 72.45
2010 94.46
2011 103.65
DRAFT 42
Future NJ Wholesale Energy Prices?
Depends on (among other reasons)
• Price of natural gas
• Transmission additions
• EPA environmental policies that affect coal
• New NJ generation including off-shore wind and LCAPP
• NJ solar policies
NJ Capacity (RPM) Prices
• Forecasts of $150/MW-day (through
2015/16) to $375/MW-day (through
2022/23) are publicly available
– UBA Investment Research, Feb. 2, 2012
– Long-Term Capacity Agreement Pilot
Program, March 21, 2011, p. 61
• Solar is rated at 38% for RPM purposes,
i.e., 1 MW of solar is the equivalent of 0.38
MW of capacity in PJM’s RPM market
DRAFT 43
Translating Capacity Prices into Equivalent $/MWh
DRAFT 44
Capacity Price ($/MW-day) Equivalent $/MWh
100 11.31
150 16.96
200 22.62
250 28.27
300 33.93
350 39.58
400 45.24
Solar RPM Capacity Credit 38%
Assumed Solar Capacity Factor (ac) 14%
Some Stylized Scenarios
Revenues – Costs (In $/MWh)
DRAFT 45
Low Cost High Cost Average Description
Segment 1a +
1b $ 410.10 $ 463.86 $ 436.98
PSE&G and 3rd
Party Sites
Segment 1c $ 515.14 $ 585.74 $ 550.44 UEZ Sites
Segment 2 $ 530.91 $ 666.77 $ 598.84 Pole Top
$/MWh Scenario 1
Today’s
Prices
Scenario 2
Historically
High Prices
Scenario 3
High Wholesale/
Low SRECs
Energy (avg. price during
solar producing hours)
100 150 150
Capacity 20 50 50
SRECs 200 400 200
Cost 500 500 500
Residual -180 100 -100