Understanding Solar Understanding Solar Energy PolicyEnergy PolicyPart 2Part 2

Prof. Martin J. Pasqualetti & Prof. Ronald J RoedelArizona State University

OutlineOutline1. What is policy, why is it necessary, and

what are its essential elements?2. What are the most useful sources of

information on solar energy policy?3. What are the pillars of solar policy and

who establishes the policies themselves?

4. What are some examples of existing policies?

5. What are the impacts of solar policies?2

Learning ObjectivesLearning Objectives

Learning outcomes: After completing this unit, you should be able to:◦Describe — The role of policy on solar energy

development◦Explain — What policy is, the role of policy,

how policies are developed, existing solar energy policies, the barriers to solar energy policy, the drawbacks to solar energy policy, the future role of solar energy policy

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Conventional Policy Instruments Conventional Policy Instruments for Promoting Solar Energy for Promoting Solar Energy

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Renewable Portfolio Standards (RPS) Renewable Portfolio Standards (RPS) ArizonaArizona

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Renewable Portfolio Standard Policies with Solar / Distributed Generation Provisions.www.dsireusa.org / June

2012.

16 states,+ Washington D.C. have Renewable

Portfolio Standards with Solar and/or

Distribute Generation provisions

16 states,+ Washington D.C. have Renewable

Portfolio Standards with Solar and/or

Distribute Generation provisions

Arizona RES (details)Arizona RES (details)

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• In November 2006, the Arizona Corporation Commission (ACC) adopted final rules to expand the state's Renewable Energy Standard (RES) to 15% by 2025, with 30% of the renewable energy to be derived from distributed energy technologies (~2,000 megawatts). o In June 2007, the state attorney general certified the rule as

constitutional, allowing the new rules to go forward, and they took effect 60 days later.

o Investor-owned utilities and electric power cooperatives serving retail customers in Arizona, with the exception of distribution companies with more than half of their customers outside Arizona, are subject to the standard.

• Utilities subject to the RES must obtain renewable energy credits (RECs**) from eligible renewable resources to meet 15% of their retail electric load by 2025 and thereafter. o Of this percentage, 30% (i.e. 4.5% of total retail sales in 2025) must

come from distributed renewable (DR) resources by 2012 and thereafter.

o One-half of the distributed renewable energy requirement must come from residential applications and the remaining one-half from nonresidential, non-utility applications.

Arizona RES (details)Arizona RES (details)

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The compliance schedule is:

2006: 1.25%2007: 1.50% (5% DR)2008: 1.75% (10% DR)2009: 2.00% (15% DR)2010: 2.50% (20% DR)2011: 3.00% (25% DR)2012: 3.50% (30% DR)2013: 4.00% (30% DR)2014: 4.50% (30% DR)2015: 5.00% (30% DR)2016: 6.00% (30% DR)2017: 7.00% (30% DR)2018: 8.00% (30% DR)2019: 9.00% (30% DR)2020: 10.00% (30% DR)2021: 11.00% (30% DR)2022: 12.00% (30% DR)2023: 13.00% (30% DR)2024: 14.00% (30% DR)2025: 15.00% (30% DR)

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Net MeteringNet Metering

Financial arrangement between a utility and small power producers which allows the customer-generated electricity to be sold back to the utility at the full retail value

Not all policies are created equal Many caveats and fine details can make

a net metering policy heavily favor the utility

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Net Metering.www.dsireusa.org / July 2012.

43 states, + Washington DC

& 4 territories,have adopted a net

metering policy.

43 states, + Washington DC

& 4 territories,have adopted a net

metering policy.Note: Numbers indicate individual system capacity limit in kilowatts. Some limits vary by customer type, technology and/or application. Other limits might also apply. This map generally does not address statutory changes until administrative rules have been adopted to implement such changes.

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Being Considered:FEED-IN TARIFFS

(state or city, at present)

• Feed-in tariffs (FITs) are the most widely used policy in the world for accelerating renewable energy (RE) deployment, accounting for a greater share of RE development than either tax incentives or renewable portfolio standard (RPS) policies (REN21 2009).

• In total, FITs are responsible for approximately 75% of global PV and 45% of global wind deployment (Deutsche Bank 2010)

Feed In Tariff StatusFeed In Tariff Status

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Feed-In Tariffs (2)Feed-In Tariffs (2)

Provide guaranteed contracts for a premium $/kWh payment for a fixed period of time

German and Spanish feed-in tariffs have led to a boom in PV installations

Gainesville Regional Utilities started the first true feed-in tariff in America on March 1, 2009 --- $0.32/kWh for 20 years

HI, OR, and VT have feed-in tariffs (of sorts)Many other states are studying themFederal regulation makes a state-run feed-in tariff

challenging

FITs offer Simpler PricingFITs offer Simpler Pricing

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3rd-Party Solar PV Power Purchase Agreements (PPAs).www.dsireusa.org / June 2012.

At Least 21 states,

+ Washington DC and Puerto

Rico,Authorize or Allow 3rd-Party

Solar PV Purchase Power Agreements.

At Least 21 states,

+ Washington DC and Puerto

Rico,Authorize or Allow 3rd-Party

Solar PV Purchase Power Agreements.

Note: This map is intended to serve as an unofficial guide; it does not constitute legal advice. Seek qualified legal expertise before making binding financial decisions related to a 3rd-party PPA. See following slides for additional important information and authority references.

The PACE initiativeThe PACE initiative

http://en.wikipedia.org/wiki/PACE_Financing

http://www.pacelegislation.com

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Property Assessed Clean Energy (PACE)..www.dsireusa.org / May 2012.

28 states, + Washington DC, authorize PACE (27 states have passed legislation and HI

permits it based on existing law).

28 states, + Washington DC, authorize PACE (27 states have passed legislation and HI

permits it based on existing law).

*The Federal Housing Financing Agency (FHFA) issued a statement in July 2010 concerning the senior lien status associated with most PACE programs. In response to the FHFA statement, most local PACE programs have been suspended until further clarification is provided.  

PACE Financing (1)PACE Financing (1)Property Assessed Clean Energy (PACE) financing

is a type of financing that is an alternative to a loan.◦ This financing method may be used to encourage the

installation of renewable energy and energy efficiency technologies by helping customers overcome the financial barrier associated with high up-front equipment costs.

Some states are also allowing water conservation and other improvements to be financed using this mechanism. ◦ This financing mechanism is similar in some regards to a

loan program. While it does not reduce the upfront price tag of solar systems, it can help make purchases more affordable by spreading the cost of the system over time.

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PACE Financing (2)PACE Financing (2) PACE financing effectively allows property owners to borrow

money from a local government to pay for renewable energy and/or energy-efficiency improvements. The amount borrowed is typically repaid via a special assessment on property taxes, or another locally-collected tax or bill, such as utility bills, or water or sewer bills.

In addition to reducing the upfront costs of renewable energy and/or energy efficiency improvements, PACE financing allows the cost of home improvements to be linked to the property.

This approach has a number of appealing features, including: long-term, fixed-cost financing; loans that are tied to the tax capacity of the property rather than to the owner’s credit standing; a repayment obligation that legally transfers along with the sale of the property; and a potential ability to deduct the repayment obligation from federal taxable income, as part of the local property tax deduction

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2013 AZ Legislature Bill of Note2013 AZ Legislature Bill of Note

HB 2584 Formation of Renewable Energy and Energy Conservation Districts Allows any municipality to form a renewable energy

district to promote installation of photovoltaic systems (or efficiency measures or water saving systems). This is a variation of property assessed clean energy (PACE) enabling legislation

Sponsored by two new Representativeso Ethan Orr, Republican, LD 9o Andrew Sherwood, Democrat, LD 26

Did not get out of House Committee on Energy, Environment, and Natural Resources

10/23/13 PSM SEEC Program F’13

Third-Party Ownership OptionsThird-Party Ownership Options

Customer makes lease/electricity

payment to system owner

Utility purchases RECs from system owner

Utility credits customer for net excess generation

Customer purchases traditional electricity

from utility

Customer supplied with solar electricity by

system owner

System owner transfers REC to utility

• Lower, predictable energy costs

• Might be packaged together with an energy service performance contract (ESPC)

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What are RECs?

• Renewable Energy Creditso Also called Tradable Renewable Certificates (TRCs)

or "green tags"o Created when a renewable energy facility generates

electricityo Each unique certificate represents all of the

environmental attributes or benefits of a specific quantity of renewable generation

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What are RECs?

http://en.wikipedia.org/wiki/Renewable_Energy_Certificate_(United_States)

Additional Information Regarding 3Additional Information Regarding 3rdrd-Party -Party Solar PPAsSolar PPAs

Authorization for 3rd-party solar PV PPAs usually lies in the definition of a “utility” in state statutes, regulations or case law; in state regulatory commission decisions or orders; and/or in rules and guidelines for state incentive programs.

And, even though a state may have authorized the use of 3rd party solar PV PPAs, it does not mean that these arrangements are allowed statewide in every jurisdiction. For example, municipal utilities may not allow 3rd party solar PV PPAs in their territories even though they are allowed/in use in that particular state’s investor-owned utility (IOU) territories.

Part FivePart Five

What are the impacts of solar policies?

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Growth of Wind and Solar in Growth of Wind and Solar in GermanyGermany

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Source: LBNL Environmental Energy Technologies Division / Energy Analysis Department

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Ca

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NJ

AZ

NM

NV

NC

CO

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Largest RPS Markets for Solar in Near-Term: NJ, AZ, NM, NV, NC, CO

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•2011 - solar installations grew by 333%

•3rd in U.S.

•2012 estimates Arizona may rank 2nd

Source: Solar Energy Industries Association

•Since 2010,12 companies have located or expanded

•1,937+ in jobs

•$1.049 billion of capital investment

Source: Arizona Commerce Authority