The Right Renewable Energy Contract Mechanism Aaron Rothschild November 14, 2011 Keeping Rates Low...
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Transcript of The Right Renewable Energy Contract Mechanism Aaron Rothschild November 14, 2011 Keeping Rates Low...
The Right Renewable Energy Contract Mechanism
Aaron RothschildNovember 14, 2011
Keeping Rates Low By Aligning The Interests Of Investors And Consumers
What Is the Goal of Promoting Renewable Generation In the U.S.?
It’s not just about providing renewable generation as cheaply as possible to consumers
It’s also about promoting the economy, energy security and innovation
What Are The Major Problems?
• Pricing subsidies• Offering investors a long-term subsidy
price schedule• Lack of developed long-term renewable
generation contract trading market
What Do Conflicting Policy Goals Mean?
Keeping rates as low as possible is more complicated, but no less important
And there is plenty we can do
I will present a long-term renewable contract that would provide the win/win for investors and consumers we are looking for
What Do Investors Want?
Long-term certainty• Eligible Technology (Solar, Wind…)• Volume Cap (Energy, Capacity…)• Subsidy Size ($ kWh and/or RECs…)• Location (State, Utility, Corn Field…)
Benefits of Providing Investors What They Are Looking For
Lower cost of capital
Lower electricity rates
Risk of Over Emphasizing Investors
Exorbitant profits at the expense of consumers
The Challenge of Providing Long-Term Certainty
• It is difficult to impossible know how technological advancement will affect the cost
• The option to change policy goals can become expensive if too many long-term contracts are in place
Types Of Long-Term Contracts Available To Regulators Feed-in Tariffs (FITs) for general
offerings
Power Purchase Agreements (PPAs) for project specific contracts
Components Of Long-Term Contracts
• Pricing
• Volume (Energy & Capacity)
• Technology Preference
• Location (Generation & Transmission)
Options For Pricing• Regulator Sets Price for FIT or PPA
• Market-Based - On-Going
• Market-Based - Long-Term Fixed Price
• Market-Based - Long-Term Fixed Price Contract That Does Not Start For 5 years + After Auction
Regulator sets price
Market-based subsidy rates
Market-based long-term contracts
The Most Effective Long-Term Renewable Contract
There is More Than Pricing
• Flexible Volume Management Builds Into Contract Auction Mechanism
• Market-Based Least-Cost Zones Incorporated Into Auction Mechanism
• Geographical Flexibility of Long-Term Contract Price for Energy/Capacity Contract
Role Of Administrative Organization
• Coordinating with Policy Makers• Translating Policy Objectives Into Auction and
Technical Requirements• Running Auction• Structuring Contracts For Institutional
Investors, Including Credit Rating and Contract Market
• Resource Planning Model and Simulation
Aaron Rothschild
(203) 894 1028
www.rothschildfinancial.com