Course on Regulation and Sustainable Energy in Developing Countries - Session 5
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Transcript of Course on Regulation and Sustainable Energy in Developing Countries - Session 5
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RENEWABLE PORTFOLIO, GREEN CERTIFICATES ANDOTHER POLICIES FOR DEVELOPING COUNTRIES
WEBINAR 9 FEBRUARY 2012
Chad LaurentSenior Consultant - MCG's General Counsel
Course on Regulation and Sustainable Energy in Developing Countries –Session 5
www.leonardo-energy.org/course-regulation-and-sustainable-energy-developing-countries
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WHAT IS A RPS?
• A Renewable Portfolio Standard (RPS) or Renewable Energy
Standard (RES) or Quota System requires a percent of energy
sales (MWh) or installed capacity (MW) to come from
renewable resources.– There is often a target (e.g. 20% renewables by 2020)
– There frequently is an incremental percentage increase over time.
– Usual the utility or load serving entity is required to meet the RPS and comply with the percentage requirements.
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com
WHAT IS A RPS?
• Publicly owned utilities can be exempted from the RPS, or
given more lenient requirements
• Various customer rate-class exemptions have also been
offered (low-income ratepayers or commercial ratepayers).
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com
WHAT IS A REC?
• Renewable energy certificates or credits (RECs, tradable RECs, TRECs, etc.)
are often the mechanism used to quantify and verify RPS compliance.
• Utilities may comply either by owning generation or purchasing RECs from
independent power producers.
– Some RPS policies create a separate agency which serves as the purchaser of all RECs (e.g. New York State, Illinois, USA)
• An alternative compliance payment (ACP) is often set to account for
shortfalls or to act as a penalty payment.
Sources: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010; B. Grace, Sustainable Energy Advantage 2011.
www.mc-group.com
WHAT IS A REC?
• A REC is a tradable certificate, typically in electronic form
• Represents 1MWh of generation from a specific plant
• Carries type, location, timing, and emissions data
• Can represent environmental “attributes”
• RECs may be “bundled” with electricity or “unbundled”
• REC can represent the “gap”
REC
Renewable Electricity
Commodity Electricity
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WHY RECS?
• Relatively simple, less costly
verification
• Low potential for fraud or double
counting
• Relatively low transaction costs of
trading RECs
• Potential price visibility• Buyers can procure just as many RECs
as they need• Settlement over time rather than at
the time the electricity is produced• Can avoid transmission constraint
issues
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REC MARKETS AND PRICES
• REC prices can vary widely.• Prices in Massachusetts between $15/MWh for Class I and $525/MWhfor SRECs.
Compliance market (primary tier) REC prices, January 2008 to December 2011Sources: Spectron Group (2012).
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WIDE VARIABILITY IN DESIGN
• Structure (who purchases RECs)
• Standard levels (1% of load, 20% of load)
• Resource eligibility (“traditional renewbles,” solar hot water, fuel cells)
• Treatment of existing plants (“new” renewables only or separate REC classes for existing generator that would have otherwise qualified)
• Tiers and bands (for “new” vs “old” plants, or for “cleaner” vs. “dirtier” renewables)
• Methods to enforce
• Cost caps
• Contracting requirements
• Role of Government funding mechanisms
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com
WIDE VARIABILITY IN DESIGN
• Start and end dates
• Application of standards (requirements for run-of-river hydro or
sustainable biomass)
• Enforcement/penalties (just the ACP or actual fines)
• Flexibility mechanisms (purchasing future RECs or applying RECs across
generation years)
• Renewable energy credit (REC) trading mechanism (in-state only vs. out-
of-state and tracking systems)
• Voluntary Market
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com
POTENTIAL DESIGN ISSUES
• Too Narrow Applicability
– If applied un-equally to suppliers will limit the impact of the RPS, Poorly
• Balanced Supply-Demand Condition
– Enough time to comply and build generation
– If too low then no certainty for project development
• Insufficient Duration and Stability of Targets
– Standards must be durable and stable
– Energy projects need long-term contracts in order to be financed
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com
ADDITIONAL DESIGN ISSUES
• Insufficient Enforcement– Non-compliance, policy failure
• Lack of Contracting Standards and Cost Recovery Mechanisms– Consider long-term contract standards for utilities
• Imputed debt obligations
• Undue Design Complexity– Complex policies that require considerable and detailed regulatory
oversight may be unwieldy
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com
EFFECTIVE DESIGN CRITERIA
• Strong political support and regulatory commitment (longevity)
• Clear and renewable energy eligibility rules
• Predictable long-term targets (certainty)
• Standards that are achievable given permitting challenges (transparency)
• Credible and automatic enforcement – penalties should exceed cost of compliance (transparency)
• REC purchase requirements tied to a credit-worthy entity and allow long-term contracts (certainty)
Sources: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010, MCG Research, DBCCA
www.mc-group.com
BEST PRACTICES/RECOMMENDATIONS
• Diverse Electricity and REC Market – sufficiently liquid REC market – large number of market actors exist
• Stable and Long term target– 10 years ahead (preferably 15 or more years), – long-term REC contracting options
• Reasonable targets– targets must be set taking into account current and future supply-demand
conditions– Reasonable cost considerations
• Differentiated technology support – Tiers or different REC prices for more expensive technologies
Source: van der Linden, Nico, et al. “Review of International Experience with Renewable EnergyObligation Support Mechanisms.” ECN-C—05-025, May 2005. http://eetd.lbl.gov/ea/ems/reports/57666.pdf.
www.mc-group.com
BEST PRACTICES/RECOMMENDATIONS
• Utility is the compliance entity – electricity suppliers/utilities, (administrative cost implications).
• Flexibility – banking and borrowing of RECs
– recommended to limit borrowing to three months and banking to a maximum of 25% of the obligation.
• Penalty revenues – Revenues used for further research and development or additional
subsidies for the least competitive renewable technologies or energy efficiency
Source: van der Linden, Nico, et al. “Review of International Experience with Renewable EnergyObligation Support Mechanisms.” ECN-C—05-025, May 2005. http://eetd.lbl.gov/ea/ems/reports/57666.pdf.
www.mc-group.com
BEST PRACTICES/RECOMMENDATIONS
• Harmonization – eligibility for the obligation system be in
line with the EU Renewables Directive.
• Government commitment – Strong and long-term political commitment
• clearly defined monitoring and verification rules
• adequate enforcement rules in case of non-compliance
Source: van der Linden, Nico, et al. “Review of International Experience with Renewable EnergyObligation Support Mechanisms.” ECN-C—05-025, May 2005. http://eetd.lbl.gov/ea/ems/reports/57666.pdf.
www.mc-group.com
IMPLICATIONS FOR DEVELOPING COUNTRIES
Source: MCG research; REN21 (2011)
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DEVELOPING COUNTRY TARGETS
• There are many developing countries with renewable energy
targets.
• Few if any with Renewable Energy Certificate markets
• Few if any cross-border trading or regional targets
• REC concept started in and is tailored to deregulated
electricity markets
Source: MCG research
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IMPLICATIONS FOR SMALL MARKETS
• Not unlike US States
• Original 1996 model of the RPS no longer used in the US.
• Most RPS and quota markets moving towards different or
supplemental policies.– Feed-in Tariffs
– Auctions
– Technology specific targets
• Few global examples of cross-border trading– New England (US) and Quebec Canada
Source: MCG research
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US EXPERIENCE
• 29 States and Washington DC and Puerto Rico have an
RPS requirement.
• 8 States have non-binding renewable energy goals.
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RPS Policies
Renewable portfolio standard
Renewable portfolio goal
www.dsireusa.org / January 2012
Solar water heating eligible *† Extra credit for solar or customer-sited renewables
Includes non-renewable alternative resources
WA: 15% x 2020*
CA: 33% x 2020
NV: 25% x 2025*
AZ: 15% x 2025
NM: 20% x 2020(IOUs)
10% x 2020 (co-ops)
HI: 40% x 2030
Minimum solar or customer-sited requirement
TX: 5,880 MW x 2015
UT: 20% by 2025*
CO: 30% by 2020 (IOUs)10% by 2020 (co-ops & large
munis)*
MT: 15% x 2015 ND: 10% x
2015
SD: 10% x 2015
IA: 105 MW
MN: 25% x 2025
(Xcel: 30% x 2020)
MO: 15% x 2021
WI: Varies by utility;
~10% x 2015 statewide
MI: 10% & 1,100 MW x 2015*
OH: 25% x 2025†
ME: 30% x 2000
New RE: 10% x 2017
NH: 23.8% x 2025MA: 22.1% x 2020
New RE: 15% x 2020(+1% annually thereafter)
RI: 16% x 2020CT: 27% x 2020
NY: 29% x 2015
NJ: 20.38% RE x 2021+ 5,316 GWh solar x
2026
PA: ~18% x 2021†
MD: 20% x 2022
DE: 25% x 2026*
DC: 20% x 2020
NC: 12.5% x 2021(IOUs)
10% x 2018 (co-ops & munis)
VT: (1) RE meets any increase in retail sales x
2012;(2) 20% RE & CHP x 2017
KS: 20% x 2020
OR: 25% x 2025 (large utilities)*
5% - 10% x 2025 (smaller utilities)
IL: 25% x 2025
OK: 15% x 2015
PR: 20% x 2035
WV: 25% x 2025*†VA: 15% x 2025*
DC
IN: 15% x 2025†
US EXPERIENCE
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IN THE US THE RPS HAS SUPPORTED WIND POWER
DEVELOPMENT
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com
RPS Policies w ith Solar/ DG Provisions
Renewable portfolio standard with solar / distributed generation (DG) provision
Renewable portfolio goal with solar / DG provision
www.dsireusa.org / January 2012
Solar water heating counts toward solar / DG provision
WA: double credit for DG
NV: 1.5% solar x 2025;2.4 - 2.45 multiplier for PV
UT: 2.4 multiplierfor solar-electric
AZ: 4.5% DG x 2025
NM: 4% solar-electric x 2020 0.6% DG x 2020
TX: double credit for non-wind(non-wind goal: 500 MW)
CO: 3.0% DG x 20201.5% customer-sited x 2020
MO: 0.3% solar-electric x 2021
MI: triple credit for solar-electric
OH: 0.5% solar-electric x 2025
NC: 0.2% solarx 2018 MD: 2% solar x 2022
DC: 2.5% solar x 2023
NY: 0.4092% customer-sited x 2015
DE: 3.5% PV x 2026;triple credit for PV
NH: 0.3% solar-electric x 2014
NJ: 5,316 GWh solar-electric x 2026
PA: 0.5% PV x 2021
MA: 400 MW PV x 2020OR: 20 MW solar PV x 2020;
double credit for PV
IL: 1.5% PV x 20250.25% DG by 2025 WV: various
multipliers
16 states + DC have an RPS with solar/DG
provisions
DC
†
†
Delaware allows certain fuel cell systems to qualify for the PV carve-out
Source:
www.mc-group.com
US TRENDS
• Increased stringency of RPS targets
• Expanded use of resource-specific set-asides, especially for
solar
• Expanded applicability of RPS policies to publicly owned
utilities
• Some leniency given to publicly owned utilities in meeting RPS
targets and obligations
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com
INDIA
• 15% by 2020
• RECs, Feed-in tariffs, grants,
• Authorizes tradable RECs, not technology specific
• RECs designed to encourage renewable development in areas with higher
potential without limiting development to the purchase obligation in
those regions.
• Generator can choose to either receive a preferential tariff rate, or use the
RECs where the commodity energy is purchased at the weighted average
power purchase cost of the distribution utility.
Sources: Renewable Energy Certificate Registry of India, REN21, Indian Power Sector
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SOME OTHER EXAMPLES?
• China– 15% by 2020, 17% Wind by 2050
– No tradable RECs
– Feed-in tariffs, grants, loan guarantees
• UK– RPS with tradable RECs implemented in 2002
– Yearly changes and a feed-in tariff was adopted on top of RECs for small generation
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QUESTIONS?THANK YOU
Presenter:Chad Laurent, Esq.
Senior Consultant
Contact:T: +1 617.209.1986