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PART 2

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PART 4

PART 3

Part 4: Private Procurement,Public Benefit: Integrating

Corporate Renewable EnergyPurchases with Utility Resource

Planning

December 2016

D. Manning, J. Cook, J. Culkin, C. Edmonds,K . H. Hoffer, J. Lyng, and T. P lant

TableofContentsIntroduction................................................................................................................................................................2

HowIsCorporatePurchasingDoneToday?.................................................................................................4

IsthereaBetterWay?.............................................................................................................................................6

LessonsfromutilityDemand-SideManagementprograms..............................................................6

WhyConsiderCorporateRenewableEnergyGoalsDuringtheUtilityPlanningProcess?.......7

ThreePathwaystoPlanforCorporateRenewablePurchases..............................................................8

Pathway1:RegulatoryApproach.............................................................................................................9

IntegratedResourcePlans..................................................................................................................9

Pathway2:LegislativeApproach...........................................................................................................12

Pathway3:ExecutiveAgencyApproach.............................................................................................13

StateEnergyOffice..............................................................................................................................13

StateEconomicDevelopmentAuthority....................................................................................14

Conclusion.................................................................................................................................................................14

AboutThisPaperSeries

Sincethelate1990s,stateRenewablePortfolioStandards(RPS)andEnergyEfficiencyResourceStandards(EERS)havebeenthelargestdriversoftherenewableenergyandenergyefficiencysectors.Statetargetdatesarequicklyapproaching,however.By2026,29RPSand11EERSpolicieswillneedtobeextended,orreplaced,inordertomaintainmarketcertainty.Inthispaperseries,theCenterfortheNewEnergyEconomyanalyzesenergyefficiencypolicies(Parts1and2)andrenewableenergypolicies(Parts3and4).Parts1and3discusstheprospectsforextendingandenhancingEERSandRPSpoliciesandParts2and4proposeinnovativeoptionsthatcouldworkwithorwithoutanEERSorRPS.

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IntroductionWithagrowinglistofmajorcompaniescommittedtomeetingtheirelectricityneedswithrenewablesources,corporatedemandforcleanenergygoesaboveandbeyondwhatisofferedinanystate.Fortheselargecorporations,investinginalong-termresourcethatgivesthemstableratherthanfluctuatingenergycostscanbeanattractivefinancialriskmitigationstrategyaswellaascorporateresponsibilitycommitment.Thesecompaniesaresomeofthelargestconsumersofelectricityinthecountry,andtheirenergychoiceshaveadirectimpactonutilityresourceneeds.Thispaperexaminesopportunitiestomakeiteasierforstates,utilities,andrenewableenergydeveloperstoaccommodatecorporaterenewableenergyprocurement.

In2015,renewableenergymadeup13%ofelectricitygeneratedintheUnitedStates,withleadingstatesIowa,SouthDakota,andKansasgettingatleastone-fifthoftheirelectricityfromwindandsolar.1Contrastthatwiththe100%renewableenergygoalsthat33U.S.-based,mostlyFortune500companieshavecommittedto(seeTable1)anditbecomesclearthatcorporateambitionscannotbemetthroughcurrentlyavailableresources.Intotal,83internationalcompanieshavecommittedto100%renewableenergyaspartoftheRE100initiative.2

Corporationsaremovingaheadontheirown.Inthepastfouryears,renewableenergycontractsfornearlysixgigawatts(GW)ofcapacityhavebeenannounced.3Microsoftrecentlycommittedtopurchasing237megawatts(MW)ofwindpowerinKansasandWyoming,asoneexample.4By2020,itisestimatedthatthetop50corporatebuyersofsolarandwindpowerintheUnitedStateswilladdmorethan17GWofrenewableenergy.5

Aslargecorporatebuyersinvestinfulfillingtheircorporaterenewableenergygoals,statepolicyandutilityplanningmustalsoevolvetotakeadvantageofthistrend,ratherthanbechallengedbyit.Thispaperchartsthreepathwaystocapitalizeontheleadershipofthesecorporatecitizensbyconsideringcorporaterenewableenergygoalsinstateenergy

1SeeU.S.EnergyInformationAdministration,HowmuchU.S.energyconsumptionandelectricitygenerationcomesfromrenewableenergysources?lastupdatedApr.2016,http://www.eia.gov/tools/faqs/faq.cfm?id=92&t=4;in2014,Iowa,SouthDakota,andKansasgot28%,21%,and20%oftheirelectricityfromwindandsolarenergy,respectively;U.S.EnergyInformationAdministration,TableC9.ElectricPowerSectorConsumptionEstimates,2014,http://www.eia.gov/state/seds/data.cfm?incfile=/state/seds/sep_sum/html/sum_btu_eu.html&sid=US.2RE100,“TheWorld’sMostInfluentialCompanies,Committedto100%RenewablePower,”RE100,2016,http://there100.org/re100.3TheBusinessRenewablesCenter(BRC),“BRCDealTracker,”TheBusinessRenewablesCenter,2016,http://www.businessrenewables.org/corporate-transactions/.4MicrosoftNewsCenter,“MicrosoftAnnouncesLargestWindEnergyPurchasetoDate,”Microsoft,lastmodifiedNovember14,2016,https://news.microsoft.com/2016/11/14/microsoft-announces-largest-wind-energy-purchase-to-date/#sm.00000lt3r2okg5f6wszfryxi093f2.5ChrisMartin,“MicrosoftSignsBiggestWind-powerDealforWyomingDataCenter,”BloombergNewEnergyFinance,November14,2016,http://www.bloomberg.com/news/articles/2016-11-14/microsoft-signs-biggest-wind-power-deal-for-wyoming-data-center.

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resourceplanning.Byplanningforthefuturewithcorporaterenewableenergytargetsinmind,utilitiesandregulatorscanmeettheneedsoftheirentirecustomerbasewhileopeningoptionsforcompaniestopursuethesegoalsinawaythatbestfitstheirindividualneeds.

Companywith

100%Renewable

EnergyTarget

TargetDate InterimTarget ProgressToward

100%Goal

Biogen 2014 - 100%Microsoft 2014 - 100%Steelcase 2014 - 100%VoyaFinancial 2015 - 100%Interface 2020 - 84%Autodesk 2020 - 40%Coca-Cola 2020 - 10%GoldmanSachs 2020 - 14%WellsFargo 2020 100%viaRECsby2017 -Vmware 2020 - -BankofAmerica 2020 - -Bloomberg 2025 35%by2020 21%VF 2025 - -Nike 2025 - -Rackspace 2026 - -AbbVie 2035 50%by2025 -Adobe 2035 - 30%Mars 2040 - 6%JohnsonandJohnson 2050 35%by2020 3%GeneralMotors 2050 - -AmazonWebServices

TBA 50%by2017 40%

Apple TBA - 93%AvonProducts TBA - -Equinix TBA 50%by2017 -Facebook TBA 50%by2018 35%hp TBA 40%by2020 -IFF TBA - -Google TBA TripleREby2025 -ProcterandGamble Salesforce TBA - 43%Starbucks TBA - 59%Walmart TBA 7,000GWhRE/yrby2020 26%Workday TBA - 100%offsetbyRECs

Table1.LargeU.S.Companieswitha100%RenewableEnergyGoal

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HowIsCorporatePurchasingDoneToday?

Therecurrentlyisnoclearandconsistentpathwayforcompaniestopurchaserenewableenergy,particularlyinstateswithtraditionallyregulatedelectricitymarkets.Inafewcases,stateshavefoundwaystoaccommodatesomelevelofinvestment,thoughtherehavebeenmanychallengesandnonereallyprovidesareplicablemodel.Inextremecases,utilitiesmayexperiencecustomergriddefectionifthecorporatedesiretoprocurerenewableenergyisnotaddressed.Thefollowingexamplesdemonstratetherangeofoutcomesacrossdifferentstates.

Nevada:OnOctober1,2016,twocasinoowners—MGMResortsandWynnResorts—chosetoleavetheNVEnergyutilitysystemciting,inpart,thedesiretoincreaserenewablepurchases.6MGMandWynncomprisenearly6%ofNVEnergy’stotalsales.7Thecasinoswillbechargedexitfeestotaling$102million,inadditiontosixyearsofrecurringfees,fortheflexibilitytobuypowerontheopenmarket.8

ItisalsoworthnotingthatseveralNevadacasinosandtechnologycompanieslikeSwitchandTeslasupportedQuestion3onthestateballotthisNovembertoderegulatetheNevadamarket.Voterspassedthemeasurewithawidemargin,althoughitmustpassonthe2018ballotandwillalsorequirelegislativeactiontobecomelaw.9Whileitistooearlytotellifthiselectionresultisabarometeroflong-termpublicwill,theoverwhelmingvoteofsupportinNevadamayindicatethatotherstatescouldfaceasimilarchallenge.

Utah:StatessuchasUtahhaveattemptedtomeetcorporatedemandforrenewableenergywithoutdisruptingtherelationshipbetweenregulatedutilitiesandcorporatecustomers.A2012bill,SB12,allowedcustomerspurchasingatleast2MWofgridcapacitytobuypowerfromarenewableenergyfacility.10IntheregulatorydocketopenedbyUtah’sPublicServiceCommission(PSC)todevelopthetariff,therewasdisagreementoverhowtostructurethedemandcharge.RockyMountainPower(RMP)andtheUtahAssociationofEnergyUserssubmittedcompetingproposals,andthePSCultimatelyselectedRMP’sapproach.11However,thistariffdoesnothaveanyparticipantstodate,despiteearly6DanielRothberg,“MGMResorts,WynntoStopPurchasingNVEnergyPowerSaturday,”LasVegasSun,September30,2016,https://lasvegassun.com/news/2016/sep/30/mgm-resorts-wynn-stop-purchasing-nv-energy-power/.7MarkChediakandNoahBuhayar,“WarrenBuffett’sDiceyPowerPlay,”BloombergBusiness,June10,2016,http://www.bloomberg.com/news/articles/2016-06-10/buffett-s-power-play-pits-las-vegas-casinos-against-energy-unit.8DanielRothberg,“MGMResorts,WynntoStopPurchasingNVEnergyPowerSaturday,”LasVegasSun,September30,2016,https://lasvegassun.com/news/2016/sep/30/mgm-resorts-wynn-stop-purchasing-nv-energy-power/.9NevadaSecretaryofState,“SilverStateElectionNightResults2016,”silverstateelection.com,lastmodifiedNovember15,2016,http://silverstateelection.com/ballot-questions/.10“EnergyAmendments,”SenateBill12,StateofUtahGeneralSession,2012,http://le.utah.gov/~2012/bills/sbillint/sb0012s01.pdf.11SeeUtahPSCDocketNumber14-035-T02,ReportandOrder,issuedMarch20,2015,http://psc.utah.gov/utilities/electric/elecindx/2014/documents/26466414035T02rao.pdf,at14.

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corporatesupportforSB12,mostnotablyfromeBay.Thestructureofthedemandchargemayhavediscouragedcorporateparticipationbyprovidinglittleornocreditforcapacityprovidedfromcertainrenewableenergyresources,anoutcomethatcouldhavebeenavoidedwithgreatercorporateengagementinprogramdesign.12

NorthCarolina:AnotherexampleoftheimpactofpolicydesignisNorthCarolina’sGreenSourceRider.GoogleagreedtobethefirstcompanytoenrollinDukeEnergy’sprogramtosupplyitsexpandeddatacenterinthecityofLenoir.Undertheprogram,DukeEnergyandGoogleagreedtocoverthefullcostsoftheprojectsuchthatnoadditionalcostswouldbeincurredbynon-participatingratepayers.13Whiletheprogramiscappedat1,000,000MWhannually,Googleplanstouseonlyasmallfractionofthat.Theprogramisonlyavailablefornewload,andparticipationhasbeenrelativelylowdueinparttothedesignoftheriderandthelimitationthatallprojectsmustbenegotiatedthroughtheutility.14

NewMexico:Stateshaveasignificantopportunitytoattractinvestmentiftheyareresponsivetocorporategoals,asthecompetitionforanewFacebookdatacentershows.InJuly2016,theNewMexicoPublicRegulationCommissionopenedadockettoapproveapowerpurchaseagreement(PPA)toenablethePublicServiceCompanyofNewMexicotosellrenewableenergytosupplytheprospectivedatacenter.15Thecommission’sAccountingBureauChiefnotedthatthePPAwouldpromote“economicdevelopmentandrenewableenergyresourcedevelopment.”16

12SeeWorldResourcesInstituteandWorldWildlifeFund,CorporateRenewableStrategyMap,http://buyersprinciples.org/corporate-re-strategy-map/;seealso,WorldResourcesInstitute,EmergingGreenTariffsinU.S.RegulatedElectricityMarkets:RockyMountainPower—Utah,http://buyersprinciples.org/wp-content/uploads/15_IB_GreenTarrif_Rocky_Mountain_Power-1.pdf.13Theprogramhasanumberofeligibilitycriteria:Theprojectmustbenewloadatabillingmeter,customersmustbeservedunderadesignatedrateschedule,enrollmentiscappedat1,000,000MWh/year,andDukeretiresRECsonbehalfofthecustomer.Thefeesarea$2,000applicationfee,a$500/monthadministrationfee,anda$.20/MWhRECretirementfee.Formoreinformation,seeWorldResourcesInstitute,EmergingGreenTariffsinU.S.RegulatedElectricityMarkets:NorthCarolina—DukeEnergy,,http://buyersprinciples.org/wp-content/uploads/Emerging-Green-Tariffs-September-16-North-Carolina-Duke.pdf.14GaryDemasi,“CreatingNewPathwaysforBuyingRenewableEnergy,”GoogleGreenBlog,November24,2015,https://googlegreenblog.blogspot.in/2015/11/buying-renewable-energy.html.15SeeNewMexicoPublicRegulationCommission,Docket16-00191-UT,,(finalorderAug.17,2016),http://powersuite.aee.net/dockets/nm-16-00191-ut?docket_search_id=164369.16JoeCardillo,“RacetoLureFacebookDataCenterHeatingUp,”AlbuquerqueBusinessFirst,onTheBusinessJournals,August4,2016,http://www.bizjournals.com/albuquerque/news/2016/08/04/race-to-lure-facebook-data-center-heating-up.html.

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IsthereaBetterWay?

Asthelistofcompaniesseekingrenewableenergygrows,thereisanopportunitytoimproveuponthemixedresultsexperiencedtodate.Specifically,consideringcorporaterenewableenergycommitmentsduringtheresourceplanningprocesswouldgiveutilitiesandpublicutilitycommissionerstheinformationneededtomeettheneedsofallcustomerswhilealsoensuringthatcorporatecustomerswithrenewableenergytargetscanfollowthroughonthesecommitments.Thisapproachwouldcomplementthemandateofregulatedutilitiestoprovidelow-costelectricitytoallratepayers,andwouldalsoreduceuncertaintyforcompanies.Importantly,therewouldbenoneedtolimitcompaniestoanyparticularprogramormechanismtopurchaserenewableenergy,socompanieswouldbeallowedtomeettheirgoalsinawaythatfitstheirindividualneeds.Whilenostateshaveyettakenaforward-lookingapproachtoplanningaroundcorporaterenewableenergytargets,theexperienceunderutilitydemand-sidemanagementprogramsprovidesacloseanalogueandausefulmodel.

LessonsfromutilityDemand-SideManagementprograms

Utilitydemand-sidemanagement(DSM)programsmayprovidesomeperspectiveforhowcorporaterenewableenergygoalscouldbefactoredintoutilityplanningprocesses.MostlargerutilityDSMprogramshaveprogrammanagerswhoareresponsiblefordeliveringacertainamountofannualsavingsfromaspecificprogram(e.g.,10GWh/yearfromindustrialefficiency).Thesemanagersareinfrequentcommunicationwithlargeindustrialandcommercialcustomersregardingwhatlevelofsavingstheymaybeabletorecoverinagivenyear.Manyoftheselargecustomersmayalsohaveaseparate“keyaccountrepresentative”attheutility—apersonresponsibleforfieldinganyconcernsrangingfromquestionsaboutbillingtodiscussionsaboutwhichDSMprogramswouldprovidethegreatestbenefit.ThekeyaccountrepresentativesandDSMprogrammanagersarguablyknowlargecustomersintheirserviceterritorybetterthananyone.Thesamekeyaccountrepresentativesandprogrammanagerscouldarguablyperformasimilarfunctionindocumentingtheambitionsoflargecorporatecustomerstoinstallorbuyrenewableenergy,andsystematicallyreportthatinformationtotheutilityresourceplanners.

InananalysisofindustrialenergyefficiencyprogramsinthesouthwesternUnitedStates,theSouthwestEnergyEfficiencyProjectnotesthatsomeutilitieshaveconductedboth“technical”and“economic”energyefficiencymarketpotentialstudiesintheindustrialsector,whichhelpidentifyavailablesavingsopportunities.17Buildingonthisexample,aPUCcouldinstructutilitiestoconductsimilarstudiesamongcorporationswithrenewableenergytargets.

Self-directedenergyefficiencyprogramsalsoprovideamodelforgivingindividualindustrialcustomersflexibilitytoachievetheirowngoals.Industrialcustomersretainsignificantcontrolofprogramimplementation,whilethesavingstheyobtainbytheirself-17NeilKolwey,“SouthwestUtilityIndustrialEnergyEfficiencyPrograms:HighlightsandBestPractices,”TheSouthwestEnergyEfficiencyProject,June2012,http://www.swenergy.org/data/sites/1/media/documents/publications/documents/Southwest_Industrial_EE_%20Programs.pdf.

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directedprogramareaggregatedintoawiderportfolioofsavingsbytheutility.Asimilarprocesscouldbeappliedtorenewableenergyprocurementbyindustrialcustomers.18ItisworthnotingthatDSMprogramsaretypicallyoverseenthrougharegulatoryproceedingseparatefrom,andtypicallyjustpriorto,autilityIRP.Inkeepingwiththisexample,aPUCcouldrequestaCorporateRenewableEnergyGoaldocketaheadofanIRPtoinformthelevelofnewresources,eithercustomer-sitedorutility-sited,thatareneeded.Similartoself-directedenergyefficiencyprograms,companiesinterestedinpurchasingrenewableenergycouldstillbegivenfullflexibilitytomeettheirgoalsaccordingtotheirindividualneeds.

WhyConsiderCorporateRenewableEnergyGoalsDuringthe

UtilityPlanningProcess?

Theburdenofprooftochangeaprocess,especiallyautilityregulatoryprocess,canbesignificant.Butfactoringcorporaterenewableenergytargetsinstateresourceandinfrastructureplanningwillbenefitawiderangeofstakeholders,includingcorporatebuyers,electricutilities,renewableenergydevelopers,utilitiescommissioners,consumeradvocates,legislators,Governor’soffices,andeconomicdevelopmentagencies.Eachstakeholderhasuniqueresponsibilities,andtheprocessimprovementsinthispaperwillbenefitthemall.

Wenotethefollowingreasonswhystatedecisionmakersshouldtakeactiononthisissue:

1. MinimizerisktocorporatepurchasersandotherratepayersThoughtfulstateplanningforcorporaterenewableenergyprocurementcanminimizerisksforcorporations,utilities,andratepayers,bettermatchingautility’sloadwiththegenerationmixdesiredbytheratepayers.Inaddition,amoreintegratedplanningprocesswouldinformthedevelopmentofutilitycorporatepurchasingprograms,whichoftenimposehighratesandfees.Inanefforttoavoidanyundueimpactonnon-participatingratepayers,thesecostsareoftensetconservativelysuchthatcorporatepurchasersare,somewouldargue,unfairlyover-chargedfortheirparticipation,therebydampeningdemand.

2. SpureconomicdevelopmentAtransparentandforward-lookingplanningprocessforcorporaterenewableenergyprocurementwillspureconomicdevelopmentbygivingbothrenewableenergydevelopersandcompaniesseekingtopurchaserenewableenergyaclearpictureoftheopportunitiesinthestate.Renewabledevelopmentalsogeneratesnewsalestaxrevenue,jobs,localpropertytaxrevenue,anddiversifiesthestate’seconomy.

3. DeferratepayerinvestmentsUtilitieswillbenefitalso.Privatecapitaldeployedtodeveloprenewableenergyassetscandefertheneedforutilitiestobuildorbuynewgenerationthemselves.Byreducingtheneed18AmericanCouncilforanEnergy-EfficientEconomy,“OverviewofLarge-CustomerSelf-DirectOptionsforEnergyEfficiencyPrograms,”AmericanCouncilforanEnergy-EfficientEconomy,August2015,http://aceee.org/sites/default/files/self-direct.pdf.

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forutilitiestorelyonexistingornewemittingresources,theseprojectswouldalsoindirectlyhelputilitiesandstatestocomplywithstateandfederalenvironmentalregulations,evenwhentheenvironmentalattributesareretiredbythecorporatepurchaser.

4. AlignprivatesectorambitionswithpublicpolicyobjectivesGovernors’offices,theirstaff,andstatelegislaturesareincreasinglytaskedwithbalancingtheirenvironmentalresources,publichealth,andeconomiccompetitiveness.Byencouragingstateagenciesandutilitiestoworkwithcorporatebuyers,decisionmakerscanpromoteeconomicgrowthwhileensuringaffordablerates.Likeotherpublic/privatepartnerships,streamliningrenewableprocurementcanmakestatesmorecompetitiveinattractingnewbusinesses,especiallyasthelistofcompaniesdemandingrenewableenergycontinuestogrow.

ThreePathwaystoPlanforCorporateRenewablePurchases

ThemostdirectapproachtoimplementthistypeofprocesschangeisverylikelythroughaPublicUtilitiesCommission,butitcouldalsobeginwithexecutiveorlegislativeaction.Inthepagesthatfollow,wediscussallthreepathways:aregulatory,alegislativeandanexecutiveagencyapproach(seeFigure1).Theultimategoalshouldbetoinstitutionalizeaprocessbywhichmajorcorporaterenewableenergyinvestmentsandgoalsaretakenintoaccountinfutureassessmentsofpublicnecessityfornewgenerationresources.

Itisworthnotingthatpolicymakersalonganyofthesethreepathwayscanpursueotheractionstofacilitatecorporaterenewableenergypurchasing,suchasestablishinga

Figure1.PathwaystoIntegratingCorporateGoalsWithUtilityResourcePlanning

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renewableenergytarifforpassinglawsorregulationstoenableonsiterenewableenergygeneration.19Whilespecificpurchasingmechanismsarebeyondthescopeofthispaper,theycangohand-in-handwithaprocesstobetterintegratecorporatecommitmentsintotheutilityresourceplanningprocess.Infact,theprocessdescribedheremayhelpidentifyopportunitiestodevelopnewtariffsorprogramstofacilitatetheactualtransactionsthatcompanieswillpursuetomeettheirgoals.

Pathway1:RegulatoryApproach

StatePublicUtilitiesCommissions(PUCs),ortheirequivalent,generallyhavetheorganicauthoritytoconsidercorporaterenewableenergygoalsduringtheresourceplanningprocess.Furthermore,mostPUCsundergosomeformofperiodicresourceplanningsuchasanIntegratedResourcePlan(IRP).Inotherwords,newauthorityandnewplanningprocessesaregenerallynotrequiredinordertobringcorporaterenewableenergytargetsintotheplanningfold.

IntegratedResourcePlans

IntegratedResourcePlanningisaprocessbywhichutilitiescreatelong-termplans,typicallylookingout20years,whichareupdatedregularlyeverytwotofouryears(seeFigure2).Tomeetforecasteddemandwithsomeestablishedreservemargin,utilitiesneedtoplanforacombinationofsupply-anddemand-sideresourcesthatminimizefuturecostsandrisks.20IRPsprovidethemeansbywhichutilities,regulators,andthepublicanalyzeanincreasinglycomplexfuturethatrequirestheconsiderationofshort-termcosts,long-termregulatoryobjectives,possiblefuelandsupplyinterruptions,andchangesinloadforecastsandpeak-loadrequirements.21

TheimplementationandenforcementofIRPsvariesbystate.Therearedifferencesinplanninghorizons,frequencyofupdates,resourcesandfutureregulatorychangestobeconsidered,andstakeholderinvolvementinthedevelopmentandreviewofanIRP.WhilePUCauthorityinsomestatesislimitedtoreviewingandacknowledgingtheplan,commissionsinotherstateshavediscretiontoacceptorrejecttheplan.22

19AdvancedEnergyEconomyInstitute(AEEInstitute)commissionedMeisterConsultantsGrouptoidentifyandassesspolicyoptionstoexpandcorporateaccesstoadvancedenergy,includingutilityrenewableenergytariffs,utility“sleeved”PPAs,directaccesstariffs,onsitethird-partyownership,andsharedrenewableenergyprojects.SeeMeisterConsultantsGroup,“OpportunitiestoIncreaseCorporateAccesstoAdvancedEnergy:ANationalBrief,”August2016,https://www.aee.net/articles/report-top-11-states-for-corp-access-to-renewables-policies-to-meet-sustainability-goals.20RachelWilsonandBruceBiewald,“BestPracticesinElectricUtilityIntegratedResourcePlanning:ExamplesofStateRegulationsandRecentUtilityPlans,”SynapseEnergyEconomicsfortheRegulatoryAssistanceProject,June2013,http://www.synapse-energy.com/Downloads/SynapseReport.2013-06.RAP.Best-Practices-in-IRP.13-038.pdf.21InaraScott,“TeachinganOldDogNewTricks:AdaptingPublicUtilityCommissionstoMeetTwenty-FirstCenturyClimateChallenges,”HarvardEnvironmentalLawReview38,no.2(2014):371.22RachelWilsonandBruceBiewald,“BestPracticesinElectricUtilityIntegratedResourcePlanning:ExamplesofStateRegulationsandRecentUtilityPlans,”SynapseEnergyEconomicsfortheRegulatory

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SomestateIRPrequirementsareinlegislation,otherscodifiedinstateadministrativecodeorrules,andsomethroughacombination.Asof2016,32statesrequireutilitiestosubmitanIRP.23Manyoftheserequirements,whichweredevelopedduringthelate1980sandearly1990s,wererepealedorsetasideinthe1990sand2000sduringtheperiodofelectricutilityrestructuring.Today,somestateshaveupdatedtheirIRPrequirementsandotherseitheruseanalternativelong-termplanningprocessordonotactuallyrequirelong-termplansfromutilities(Figure2).24Ofthestatesthathaveupdatedtheirrequirements,somestatessuchasColoradoandOregonrequireutilityplanstoconsiderresourcesthathavenotbeentraditionallyconsidered.25

Certainly,therearenumberofissuesthatmustbeaddressedbyPUCstosatisfythefinancialconcernsthatutilitiesmayhavewithregardtocorporateprocurementofrenewableenergy.Byintegratingthemechanismforaddressingtheseconcernsintotheestablishedsystemofresourceplanning,thePUCcancraftanIRPthatwillworkforcustomers,renewableenergydevelopers,andutilitiesandtheirinvestors.AssistanceProject,June2013,http://www.synapse-energy.com/Downloads/SynapseReport.2013-06.RAP.Best-Practices-in-IRP.13-038.pdf.

InaraScott,“TeachinganOldDogNewTricks:AdaptingPublicUtilityCommissionstoMeetTwenty-FirstCenturyClimateChallenges,”HarvardEnvironmentalLawReview38,no.2(2014):371.23AsdirectedbySenateBill350,enactedin2015,California’sPublicUtilitiesCommissionisdevelopinganIRPrule.See:http://www.cpuc.ca.gov/ltpp/.24RachelWilsonandBruceBiewald,“BestPracticesinElectricUtilityIntegratedResourcePlanning:ExamplesofStateRegulationsandRecentUtilityPlans,”SynapseEnergyEconomicsfortheRegulatoryAssistanceProject,June2013,http://www.synapse-energy.com/Downloads/SynapseReport.2013-06.RAP.Best-Practices-in-IRP.13-038.pdf.25Ibid.

Figure2.IntegratedResourceandLong-TermPlanning,byState

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Someofthechallengesthatcanberesolvedthroughanintegratedplanningprocessinclude:

• HowdoesthePUCpreventspreadingcoststotheremainingratebasewhenlargecorporatecustomerspursuenewrenewableenergyprojectsandnolongerrelyonexistingutilityresources?Bytakingintoaccountcorporaterenewableenergycommitments,statescanbetterplanforchangesincustomerneedsovertimetoreducetheriskofstrandedassets(assetsthathavebeenpurchasedbytheratebasebutarenolongerneededpriortobeingfullypaidfor).Atthesametime,PUCscanalsocalculatereasonablefeesforcustomersthatarenolongerrelyingonutilityassetstoavoidimpactsontheremainingratebase.

• Howdoestheutilityearnmoneywhileallowingcustomerstopursuetheirownrenewableenergygoals?PUCsmaywanttoconsideratariffoncorporaterenewableenergypurchasestoaccountfortheutility’searningsonrevenuebasedontheirmanagementofresourcesandgridinfrastructureinvestments.Along-termplanningprocesscanbeusedtosetareasonableratethataccuratelychargescorporatecustomersfortheservicesprovidedbytheutility.

• IfcorporatepurchaserschoosetoaccessrenewableenergythroughaPPAsignedbytheirregulatedutility,whatwouldhappenintheeventthecompanyleavesthestate,issoldorfails?WhiletheseprinciplescanbeincludedinthePPAcontractsapprovedbythePUC,addressingthisriskthroughalong-termplanningprocesswouldhelpidentifymeanstomitigatethepotentialimpactonnon-participatingratepayers.

• Howdoestheutilitymanagethecostsassociatedwithalargecustomerdepartingfromtheutilitysystem?ThisisoneofthecriticalrolesofthePUCandisoneofthemostimportantreasonsthisprocessshouldbeintegratedwithintheresourceplanningprocess.Theseconditionswillbedifferentineachstatedependingupontheirratesofpopulationandloadgrowth,theirresourcemix,thestateoftransmissioncapacity,aswellastheexistenceofanenergyimbalancemarket.

• HowdoesthePUCrespecttheconfidentialityneedsofcompaniesduringtheirnegotiationprocess?Companiesbuildingnewloadoftenkeepplansconfidentialinanefforttonegotiatesuperiorrates.PUCsmustbeabletoprovideaconfidentialvenueandcompromiseonwhatisdisclosed.

Byaddressingthesechallenges,theintegratedplanningprocesswouldminimizemanyoftherisksandaddressupfronttheprimarychallengesthathavemadecorporaterenewableenergyprocurementsodifficultintraditionallyregulatedstates.

Inmoststates,thisprocesswillalreadyfallwithinPUCauthority,evenundertherathernarrowinterpretationofthatauthorityasaneconomicmandatetoensuretheprovisionoflow-costandreliableelectricity.WhilemeetingcustomerdemandforcleanerenergydoesnotrequirethePUCtohaveamandatetoconsiderenvironmentalconcerns,itmaybe

12

helpfultonotethatPUCauthoritycanalsobeinterpretedmorebroadlytoincludeenvironmentalconcerns.Thisistrueforstateswherestatutemakesthelinkbetweeneconomicandenvironmentalissuesclear,andthisbroaderauthorityisimplicitinPUCauthoritytoaddressfacilitysiting,emissionsregulations,resourceplanning,andthegeneralchargetoservethepublicgood.26Instateswhereauthoritytoconsiderenvironmentalissuesisprovided,andinstateswhereauthorityexistsbutwhereutilitiescommissionshavenottraditionallyconsideredenvironmentalconcerns,resourceplanningprocessesmayprovidethebestavenueforintegratingenvironmentalandeconomicconcerns.27

Pathway2:LegislativeApproachWhileincorporatingcompanyrenewableenergyprocurementgoalsintoanIRPplanningprocesswillultimatelyfalltotheutilitiescommissiontoimplement,statelegislaturesandexecutivebranchofficescanplayacrucialroleininitiatingthisprocess.Inparticular,whilestateutilityregulatorsplaybothquasi-judicialandquasi-policyroles,somePUCsleanmoreheavilyonthejudicialsideanddefertostatelegislaturestoprovideclearpolicyguidancetothecommission.Infact,mostregulatorsderivetheirauthorityfromstatestatutesandmanylooktolegislatorstoprovidethemwithexplicitauthoritywhenitcomestoimplementingnewpolicyinitiatives.

Asaresult,statelegislaturescanplayacriticalroleingivingdirectiontotheregulatoryprocess.Asrepresentativesofthepublic,legislatorsareabletoconsiderawidevarietyoffactorsthatmaybeperceivedasbeyondthePUC’sauthorityindeterminingwhethersuchaprogramisinthepublicinterest.Thesefactorsmayincludeeconomicvitality,jobcreation,climatemitigation,andenvironmentalpriorities,amongothers.Thelegislature,usingthisauthority,cansetclearprogramparametersforthecommissionthatwillstrengthentheobjectivesoftheprogramandpromoterenewableenergydevelopment.

Forexample,thelegislaturecouldrequireutilitiestoapproachcompaniestodeterminefirmrenewableenergyprocurementcommitmentsonanannualbasis.Thelegislaturecouldalsodirectthecommissiontoopenadockettoinvestigatehowthelistoffirmcommitmentscanbeleveragedtobenefitoverallresourceplanning.Statelegislaturescouldalsorequireutilitiestoincludefirmcorporaterenewableenergygoalswhenevertheyevaluatetheneedfornewgenerationtoensurethatutilitiesareminimizingthefutureriskofstrandedassets.Thelegislaturealsohastheauthoritytoprovideparticipatingcompanieswithincentivestoparticipateintheprogram(taxcreditsorotherfinancialincentives)andtofollowthroughwiththeircommitments.

26MichaelDworkin,DavidFarnsworth,andJasonRich,“TheEnvironmentalDutiesofPublicUtilitiesCommissions,”PaceEnvironmentalLawReview18,no.2(2001):325.And:MichaelDworkin,DavidFarnsworth,JasonRich,andJasonSalmiKlotz,“RevisitingTheEnvironmentalDutiesofPublicUtilityCommissions,”VermontJournalofEnvironmentalLaw7,no.1(2006):1.27InaraScott,“TeachinganOldDogNewTricks:AdaptingPublicUtilityCommissionstoMeetTwenty-FirstCenturyClimateChallenges,”HarvardEnvironmentalLawReview38,no.2(2014):371.

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Additionally,thelegislaturecouldpassabilldirectingthecommissiontosetupataskforcethatincludeslargecorporaterenewableenergybuyers.Thetaskforcecouldbeinstructedtodevelopaproposedprogrambasedonitsresearchanddeliberationsandreportbacktothelegislaturewithrecommendations.

Finally,statelegislatureshaveanexpandedauthoritybeyondthoseentitiestypicallygovernedbythepublicutilitiescommissions,includingmunicipalutilitiesandruralelectriccooperatives.Asaresult,statelegislaturesmaychoosetoestablishtheintegrationofcorporaterenewableenergyprocurementgoalsasamatterofstatewideimportance,28notlimitedtothoseutilitiesgovernedbythestateutilitycommission.

Itwillbeimportantforthelegislaturetoprovideaclearandexplicitdirectivetoensurethatcostsaredistributedfairly,whilealsomakingcorporateparticipationappealing.Suchalegislativedirectivecanprovideaninitialpushtointegratecorporategoalsintoresourceplanning,supportingtheeffortswithstatutoryauthority.

Pathway3:ExecutiveAgencyApproach

Theexecutivebranchcancatalyze,motivate,anddirecteffortstomaximizethevalueofmeetingcorporaterenewableenergygoalsforarangeofpublicpurposesbycoordinatingactionwithinvariousexecutiveoffices.AnyGovernor’sofficecoulddirectstateagencies,suchasaStateEnergyOffice,OfficeofEconomicDevelopment,ortheirequivalent,toundertakeadocumentationexercisetodeterminethescopeofrenewableenergycommitmentamongprivatesectorcompaniesintheirstate.

StateEnergyOffice

BarringactionbyaPUCorastatelegislature,StateEnergyOfficescouldalsoinitiatethisprocessbyissuingaRequestforInformation(RFI)directedatlargeprivatesectorcompanies.Thepurposeofthisexercisewouldbetocollectinformationontheircurrentinvestments,theirgoals,andtheirtimelinesforprocurement.Aformalstateprocessgivesthesegoalsmorevaliditybecauseitputstheresponsibilityontheprivatesectortoconsidertheirfirmcommitmentsonastate-by-statebasis,whichishowourenergysystemisbuiltandfinanced.Fromhere,theofficecouldthensubmitthisinformationtoaPUCforconsiderationinthenextIRP.

Furthermore,bypoolingindividualcorporaterenewablegoals,astateenergyofficemaybeabletolowercostsforallparticipantsthroughtherequestforproposal(RFP)process,resultinginthedevelopmentoffewerlargesystemsratherthannumeroussmallsystems.29Thismaybeparticularlyrelevantforsmallercompaniesthatwouldprefertosubscribetoarenewableenergypurchasingprogramratherthannegotiatelargeindividualcontracts.Initsstateclimateorenergyplan,theenergyofficecouldidentifywaystoexplorethe

28Theterm“issueofstatewideimportance”mayberequiredinsome“homerule”statestoexercisestatelegislativesupremacyoverentitiesgivenconstitutionalindependencefromstatestatute.29Formoreinformationsee:JohnSterlingandTedDavidovitch,“UtilityScaleSolar:ThePathtoHighValue,Cost-CompetitiveProjects,TheSmartElectricPowerAssociation,2016,http://www.sepapower.org/media/453731/highvalue-costcompetitive-projects.pdf.

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developmentofnewrenewableopportunities,includingdistributedenergyresourcesandcommunitysolaraggregation.Theestablishmentofasharedrenewableprojectthroughthisprocessmayalsoopenanopportunityforenergyofficestocombinethesharesinrenewableresourceswiththestate’slow-incomeweatherizationprogram—loweringenergycoststhroughefficiencyupgradeswhilealsoloweringriskbyminimizingthecostsassociatedwithfluctuatingfuelcosts.

MostStateEnergyOfficescurrentlyarerequiredtoformallypetitionforparticipationinaregulatoryproceeding.WhilePUCsgenerallygrantpetitionsfromtheirStateEnergyOffices,thepetitionprocesslimitstheabilityofenergyofficestocommentonandtakepartinproceedingsthathavealreadybegun.Instateswheretheenergyofficehasintervenerauthority,ordoesnothavetogothroughapetitionprocess,theagenciesareallowedtocommentonongoingproceedings,therebyincreasingtheirabilitytobeapartofanystageofaproceeding.ThisisimportantbecausethetimingofanRFIandpartystatuswouldneedtohappenaheadofanIRPforStateEnergyOfficesthatdonothaveautomaticintervenorstatus.

StateEconomicDevelopmentAuthority

Iftheabovepathwaysarenotpossible,astateeconomicdevelopmentauthorityoritsequivalentcouldengageinaverysimilarprocesstotheonedescribedabovefortheStateEnergyOffice.Aneconomicdevelopmentofficewouldnecessarilyputamuchgreateremphasisonmetricsgermanetoitsmission:jobcreation,businessattractionandretention,etc.Themotivationforaneconomicdevelopmentofficewouldlikelybetouseinnovativerenewableenergypolicyasameansofattractingnewbusinesses,i.e.,“Cometoourstatebecausewehavetheprocessandpolicesinplacetohelpyourcompanyachieveitscleanenergyorsustainabilitycommitments.”Manystateshaveseenfirst-handhowanRPSoranEERSincreasestheirchancesofattractingacleanenergymanufacturer,installerorlaboratory.Whenincentivedollarsarescarce,anyopportunitytoattractnewcompaniestoastatedeservesconsideration.Armedwithdataonwhichcompaniesaremotivatedtopurchasemorerenewableenergy,aneconomicdevelopmentauthoritywouldmakeastrongcasetoaregulatorybodyoralegislatureforwhycorporatetargetsneedtobeformallyconsideredinthestateenergyplanningprocess.Thismayalsosparkdiscussionandactiononspecificpurchasingoptions,suchasarenewableenergytariff,tofacilitatethesepurchases.

Conclusion

Corporateprocurementofrenewableenergyhasthepotentialtosubstantiallycontributetoastate’seconomyandelectricpowersystemifitisfullyintegratedwithutilityresourceplanning.Largecorporatecustomersbringsignificantcapitaltothetableastheyseektomeettheirrenewablegoals,andwhilethatcapitalwillbydefinitionbeusedtoservethecompany’sprivateinterests,itcandosoinawaythatservesthepublicinterestaswell.Byworkingwithcompaniestoconsidercorporateprocurementplansduringtheresourceplanningprocess,utilitiesandutilitycommissionscanreduceconcernsandremovebarriersassociatedwithcorporateprocurementwhileensuringthatnewcorporate

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renewableenergyprojectscomplementtheneedsofthegridoverall.Thelegislaturecansupportthisprocessthroughcleardirectivestotheutilitiescommission,andtheexecutivebranchcanworktoensurethatthestateonthewholebenefitsfromthefulfillmentofcorporaterenewablegoals.

Ifdevelopedandimplementedcarefullyanddeliberately,programsthatenablecorporateprocurementofrenewableenergycanbenefitawiderangeofstakeholders.Ifastatepositionsitselftoworkwithcorporationspursuingrenewableenergygoals,itcanmakeitselfmorecompetitiveandhelpretainandattractcorporateinvestment.Atthesametime,ratepayersbenefitascorporatecapitalgoestobuildinggeneratingcapacitythatdiversifiesthegridmix,therebysupplementingautility’straditionalplanningprocess.Utilitiesbenefitastheyunlocknewchoicesfortheirbiggestcustomerswhilestillmeetingtheneedsoftheirsmallestcustomers.Finally,corporatepurchasersbenefitfromreducedbarriersandaccesstonewoptionstopurchaserenewableenergyaccordingtotheirindividualneeds.Withwidestakeholderparticipationinprogramdesignanddevelopment,statescanharnessandfullycapitalizeontheexpandingmarketdrivenbycorporaterenewableenergygoals.