Rls Renewable Portfolio Standard: Overview of Design Recommendations

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Rls Renewable Portfolio StandardOverview of
Design Recommendations

• Robert C. Grace
• Sustainable Energy Advantage, LLC
• R.I. Greenhouse Gas Action Plan
• Stakeholder Group
• February 12, 2003

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Overview

• What does the design recommendation represent?
• Design recommendation highlights
• Transition to legislation and regulations

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Development of RPS Design Recommendations

• RPS Working Group developed best design possible
  for RI RPS based on
• Design objectives
• Best practices
• Regional consistency
• Consensus recommendations on all details except
• Overall Narragansett Electric prefers no RPS,
  and (if there is one) that it not apply to them
  (Standard Offer and Last Resort)
• Design details
• The ultimate target (more later)
• The need for contracting standards for Standard
  Offer and Last Resort Service suppliers
  (Narragansett dissent)

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Design Recommendation Highlights

• RPS Standard and Structure
• Eligibility Issues
• Administrative Issues
• Interaction with Other Policies

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RPS Standard and Structure 1

• RPS requirement for all obligated entities to
  derive a minimum of their retail sales from
  eligible renewable energy sources
• Obligated Entities
• All suppliers of electricity to retail customers
  competitive electricity suppliers, Pascoag, Block
  Island, Standard Offer Last Resort Service
• Exempt self-generators for now, reconsider later
• Percentage Targets and Tiers
• 2-tier standard (1) a maintenance tier to
  maintain historical contribution to RI mix from
  eligible existing renewables and (2) a growth
  tier to increase contribution of new renewables
• Target percentages
• Starting in 2005 (or 2006, depending on
  legislative timetable), at least 3 of retail
  sales to RI customers from eligible sources,
  escalating to 20 by 2020 20 majority but
  not consensus 5 votes _at_20 2_at_15 1 opposed
• lt 2 of total may be met from existing
  renewables (maintenance tier)
• Standard must be met for each product sold

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RPS Standard and Structure 2

• Duration, Termination, and Changes to the RPS
  Standard
• Once reached in 2020, final obligation
  maintained indefinitely
• RPS administrator may propose to eventually
  eliminate RPS only after (i) full amortization of
  generation investments, and (ii) demonstration of
  market transformation that makes the RPS
  unnecessary.
• After 2010, RPS administrator can either
  accelerate or slow scheduled increases towards
  meeting ultimate target. Only in the event of
  well-defined trigger circumstances, with
  substantial advance notice and a hearing.
• Target may not be reduced below any level reached
  to that point

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EligibilityGeographic Scope

• Obligated entities may comply through either
• NEPOOL Generation Information System (GIS)
  certificates from any renewable plant certified
  as eligible
• Current GIS rules NE generation, plus imports
  into NEPOOL meeting strict limitations (energy
  attributes transmitted in a bundled fashion)
• Renewable Energy Credits (RECs) from certified
  eligible plant in NY, without requiring an
  associated energy import to NE
• Only if supported by an acceptable verification
  regime
• Today, NYs disclosure/accounting regime does not
  support this mechanism, but this is likely to
  change in the future

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EligibilityResource Type

• Solar electric, wind, ocean, geothermal, fuel
  cells using renewable fuels
• Hydroelectric plants lt 30 MW capacity, and (for
  growth tier) only incremental hydro not requiring
  new impoundment
• Biomass plants in compliance with valid air
  permit
• must utilize eligible fuel sources (consistent w/
  MA RPS eligible fuels)
• including brush, stumps, lumber ends and
  trimmings, wood pallets, bark, wood chips,
  shavings, slash and other clean wood not mixed
  with other solid wastes
• agricultural waste, food material and vegetative
  material
• energy crops biogas organic refuse-derived fuel
  that is collected and managed separately from
  MSW
• neat biodiesel and other neat liquid fuels that
  are derived from such fuel sources
• co-firing of biomass with fossil fuels allowed
  (pro-rata to fuel input)
• municipal solid waste is excluded

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EligibilityOther

• Vintage Incremental renewable generation
  eligible to meet entire standard
• New Generators first starting operation after
  December 31, 1997
• Incremental Production from Vintage (existing)
  Generators production in a calendar year above
  historical 1995-1997 avg. baseline
• Existing renewable generation (all production
  from eligible resources not deemed incremental)
  eligible to meet only the maintenance tier
• Off-Grid and Behind-the-Meter Generators
• eligible if located in RI supported by NEPOOL
  GIS

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Administration and Enforcement

• Oversight and Administration RI PUC
• Accounting and Verification NEPOOL GIS or NY REC
  registry/GIS deemed compatible with NEPOOL GIS
• Certification of Generator Eligibility
• PUC qualifies eligible renewable generators via
  advance filings
• Qualification subject to spot checks, audit,
  certification withdrawal, and/or advisory rulings
• Where eligibility is the same, allow MA
  qualification for RI
• Failure to Comply
• results in PUC sanctions license suspension or
  revocation and requirement to file compliance
  plans

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Flexibility Mechanisms Ease Compliance Burden

• Alternative Compliance Mechanism (ACM) de facto
  cost cap
• in lieu of providing certificates or RECs, pay 5
  /kWh (esc. _at_ CPI) to RI Renewable Energy Fund
  administrator, dedicated to purchase
  certificates/maximize new renewables
• Annual settlement period
• Banking excess compliance for 2 yrs, capped at
  30 of current years obligation (for new
  renewables only)
• Early compliance (2004)

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Contracting Standards for SO/DS Providers

• Authorize PUC to develop minimum contracting
  standards for SO and/or LRS provider (e.g.
  medium-to-long term commitments)
• Address potential (transitional) market failure,
  balancing desire to
• Assure new renewable generation can attract
  commercial financing
• Assure ratepayers bear minimum cost of compliance
• Minimize interference with emerging competitive
  market opportunities
• Require annual compliance plan filings
• PUC should allow cost recovery for certificate
  purchases by the SO/LRS supplier if fully
  consistent with compliance plan and contracting
  standards
• Note Narragansett dissent regarding need for
  standards

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Interaction with Other Policies

• Coordination between RPS System-Benefits Charge
• avoid inefficiencies windfalls, added costs for
  RI without benefits
• Federal RPS Interaction
• PUC should monitor, anticipate Federal policy
  efforts on RPS assess interaction issues,
  including coordinating accounting/verification
• If Federal RPS with different eligibility or
  targets, and if RI standard is effectively
  higher, PUC should make necessary adjustments to
  meet the RI RPS objectives
• Treatment of Emissions Credits
• Many air quality regs, GHG reduction efforts rely
  on market mechanisms
• Emission markets create potential challenge to
  relying on RPS for emission reductions
• Legislation should
• clearly state objectives of GHG air pollutant
  emissions reductions
• require that production from plants receiving
  tradable emission rights will not be eligible for
  RPS compliance to the extent that such rights are
  sold
• Documentation and attestations to this effect are
  necessary to the extent that such treatment is
  not tracked in the NEPOOL GIS

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Next Steps Transition to Legislation
Regulations

• Key decisions include determining what design
  features to define in legislation, and which to
  leave to regulatory implementation
• Most important lesson learned from other states
  is beware of the RPS design details!
• Inadvertent or seemingly unimportant legislative
  language can substantially undermine RPS
  effectiveness.
• If legislative process can handle the details,
  all RPS design elements should be addressed in
  some way in legislation
• With clear legislative guidance but minimal
  detail, many details can best be addressed in
  administrative process
• detailed definition of new, incremental
  generation
• certification of eligible generators
• compliance filings
• certain aspects of flexibility mechanisms, and
• contracting standards for SO/DS providers

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Sustainable Energy Advantage, LLC4 Lodge
LaneNatick, MA 01760tel. [phone]fax
508.653-6443bgrace_at_seadvantage.comwww.seadvantag
e.com