Renewables 101: Overview of
Market, Elements, Concepts
Richard A. Kanoff
Co-Chair, Energy and Utility Practice Groups
McLane, Graf, Raulerson & Middleton, P.A.
Environmental Business Council of New England
Energy Environment Economy
EBC—Introduction to
Renewable Energy in
New Hampshire
Richard A. Kanoff
781-904-2685 | [email protected]
September 24, 2013
Renewable Energy--
Market, Elements, Concepts Defined as Solar Thermal Electric, Photovoltaics, Wind,
Biomass, Hydroelectric, Geothermal Electric, Fuel Cells,
Municipal Solid Waste, CHP/Cogeneration, Anaerobic
Digestion, Small Hydroelectric, Fuel Cells using Renewable
Fuels, Other Distributed Generation Technologies—includes
clean technology (clean tech) companies
Market for Renewable Energy
Concepts
Solar Power
$34.8 Billion Industry
Wind Power
$51.4 Billion Industry
Biofuels
$29.6 Billion Industry
Total
$115.9 Billion Industry
Solar Power
$105.4 Billion Industry
Wind Power
$139.1 Billion Industry
Biofuels
$80.6 Billion Industry
Total
$325.1 Billion Industry
300% Projected Growth
270% Projected Growth
280% Projected Growth
2008 2018
270% Projected Growth
Markower J, Pernick R & Wilder C. Clean Edge, Inc. Special Report: Clean Energy Trends 2009 (March 2009)
Projected Growth in the Marketplace
All Industries Solar Wind Biofuels
Demand
Resources Transportation
•Energy Prices
•Energy Security
•Energy
Independence
•State RPS
•Corporate Support
•Climate Change
Concerns
•Carbon-
Constrained World
•Consumer
Imperatives
•Tax Credits,
Capital Grants,
Feed-In Tariffs,
Subsidies, Targets
and Mandates
•Technological
Improvements
•Economy
Expansion
•PV Cost
Reduction
•Favorable
Demand/Supply
Conditions
•Large Scale
Project
Development
•Zero-Carbon
Advantages
•RPS Mandates
•Public/Investor
Awareness
•Short Project
Development
Cycle
•Government
Policies
•Energy Prices
•Less Price
Volatility
•Stringent
Emissions
Controls
•Support for
Agricultural
Sector
•Reduction in
Market
Clearing
Prices for
Energy
•Quick
Deployment
•Air Pollutant
Reduction
•Cost-Effective
Technology
•Consumer
Acceptance
DR
IVE
RS
Industry Drivers
Critical Concepts Renewable Energy
Regulatory realities—
Key terms (RECs, MWS, MWHs)
Subject to specific rules, regulations and requirements—
state and federal
Targeted Incentives
Renewable Energy Certificates
(“RECs”)
= All of the renewable attributes associated with
one megawatt hour of energy produced by an eligible
renewable energy generating facility in a specified
vintage year or quarter.
Two Options:
o Sell RECs/SRECs in the REC market; or
o Retire the RECs and apply them towards lowering your carbon footprint.
REC
Energy
RECs
Renewable Energy Certificates
(REC) continued
State RPS
Requirements
Electric Utilities
And Suppliers
REC Market Renewable
Energy
Projects
Regulations
Specific Zoning/Local
Siting
Interconnection/RTO-ISO
FERC
DPU/PSCs
Legislatures
We assist clients in understanding these rules and regulations
and in navigating agency requirements
Elements for Success
Regulatory, contractual, and legal certainty
(RISK)
Strong, long term power offtaker (PPA)
Strong and reliable equipment suppliers and
plant constructors (Contracts)
Proven technology
Adequate economics
Strong sponsorship and management
Off takers (who buys the power)
Power Purchase Agreements – selling energy direct
Typically, utilities are offtakers – supportive regulatory
regimes
Driven by RPS
Feed-in-Tariffs (VT)
Institutions – universities, governments, hospitals
Companies –Walmart, big box stores (e.g., rooftop PV on
facilities)
Net Metering Agreements are similar structures
Offtake Agreements/PPAs
Offtake Agreement/Power Purchase Agreement (PPA)/Net Metering
Agreement:
Long-term agreement for the sale and purchase of power between a
third party (usually a utility, a municipality or a private party) and a
project company.
Project company agrees to make available up to a certain amount of
electric generation capacity (adjusted for outages) by an agreed date for
an agreed period of time; Purchaser agrees to pay for both capacity
made available to it and for energy dispatched by it.
PPA guarantees a market and predictable revenue stream and cost
basis for the power to be produced by the project (thereby allowing
some of the project to be financed on a project basis with affordable
payment terms).
Contracts
Procurement Agreements
Required equipment
Construction Agreement
Primary construction services agreement
Engineering Services Agreement
Design and engineering
Operation and Maintenance Agreements
Responsibility for operating and maintaining the facility
Interconnection Agreement
Connection to the grid—standard forms and checklists
Bottom Line: Adequate
Economics
Economic system: revenues, subsidies (incl. tax benefits),
capital and operating costs, equipment life, inherent risks,
capital structure and market returns.
Economics need to support risk-adjusted market returns to
attract all categories of capital
Financial Incentives –
State--MA Renewable Energy Portfolio Standard (RPS): MA RPS requires
retail suppliers licensed in Massachusetts to buy RECs; Licensed
suppliers must hold RPS-eligible RECs equivalent to a fixed
percentage of the electricity that they sell to consumers each year.
Renewable Energy Certificates (RECs): Tradable environmental
commodities in the United States which represent proof that 1 MW-
hour of electricity was generated from an eligible renewable energy
resource (also known as green tags, Renewable Energy Credits or
Tradable Renewable Certificates).
MassEfficiency: $2 million state revolving loan fund meant to cover
the start-up costs of large-scale energy efficiency programs.
Financial Incentives –
State -- MA continued
Facilities: Solar Thermal Electric, Photovoltaics, Wind, Biomass, Hydroelectric,
Geothermal Electric, Fuel Cells, Municipal Solid Waste, CHP/Cogeneration,
Anaerobic Digestion, Small Hydroelectric, Fuel Cells using Renewable Fuels, Other
Distributed Generation Technologies
Sectors: Commercial, Industrial, Residential, Nonprofit, Schools, Local Government,
State Government, Fed. Government, Agricultural, Institutional
Capacity Limit:/Aggregate Limits: Net metering allowed in MA up to 2 MWs for non-
governmental; aggregate cap increased to 3% of utility peak load
Capacity/Aggregate Limits: Net metering for municipality or governmental uses up to
10 MWs; aggregate cap increased to 3% of utility peak load
Excess Generation: Varies by customer class; Host Customer credited/paid close to
retail for each Kwh supplied in excess of demand
RECs: Customer owns RECs
System of Assurance: recently enacted “queue” to ensure that projects will receive
net metering services when interconnect.
Net Metering-- 220 CMR 18.00
Financial Incentives –
State -- MA continued
• Qualifying solar facilities (officially known as “Solar Carve-Out Renewable Generation
Units” in the regulations) must be 6 MW or less, and must have become operational
after December 31, 2007.
• The DOER will issue the Statement of Qualification (SQ) and once issued, the
developer has four years to put the generation facility into operation. The regulations
allow DOER to grant extensions, however the petitioner must submit a new SQ
application. No SQ will be issued for Solar Carve-Out projects until all applicable
permits are secured.
• A unit with an SQ is eligible to participate in the Solar Credit Auction for 40 quarters
(10 years). DOER expects to modify (shorten) the ten year period no later than July
19, 2013.
• On June 7, 2013 the Massachusetts Department of Energy Resources (DOER)
highlighted proposed changes to its RPS Class I and RPS Solar Carve-Out
programs. New regulations pending.
SRECS--225 CMR 14.00
Massachusetts Commonwealth Solar
Rebate Programs
Solar Rebate Program Administered by the Massachusetts
Clean Energy Center
Funding: 1.5 Million funds available in 1st quarter of 2013
Eligible Technology: Solar PV only
Project Eligibility Requirements: Commercial and residential
solar lease systems 15 kW or smaller (rebate capped at 5
kW), all residential systems regardless of size (rebate capped
at 5 kW); customers of investor owned utilities or Municipal
Light Plants that have opted into the Massachusetts
Renewable Energy Trust are eligible.
Recipients of the Commonwealth Solar II rebate are also
eligible to earn Solar Renewable Energy Certificates
Financial Incentives –
State -- MA continued
Legislation: Green Communities Act, Green Jobs Act of 2008,
Global Warming Solutions Act of 2007, An Act Relative to
Competitively Priced Electricity in the Commonwealth of 2012
Massachusetts Clean Technology Center
State of Connecticut:
ZREC/LREC Program
Public Act No. 11-80 requires CL&P and UI to purchase renewable energy
credits (“RECs”) under 15-year contracts
~$1 billion in contract commitments over a 6-year period
Provides projects with predictable, financeable, 15-year revenue
streams
CL&P and UI will purchase Class I RECs from projects that have:
Zero Emissions (ZRECs), or
Low Emissions (LRECs)
New expanding programs allow for larger projects and virtual net metering
ZREC/LREC Program Is A
Budget Based Program This Program is based on expanding an annual budget and not procuring an
amount of capacity (MW)
LRECS ZRECs
$4M/Yr for 15 Yr contracts = $60M $8M/Yr for 15 contracts = $120M
5 Procurement Yrs = 60M x 5 = $300M 6 Procurement Yrs = $120M x 6 = $720M
Combined Total Program Budget for LRECs and ZRECs = $1.02B
Approximate 80/20% budget split between CL&P and UI
CL&P ~80% = $816M
UI ~20% = $240M
ZREC budget divided evenly between the three size groups
Source: CL&P & UI
ZREC/LREC Program Eligibility
General Project Eligibility Criteria
Must be located behind contracting utility distribution meter
Must not have received funding/grants from Clean Energy
Finance Investment Authority, or its predecessor the CT
Clean Energy Fund (other than low cost financing)
Projects must be in service on, or after, July 1, 2011
EDCs will only contract for projects within their respective
service territories
ZREC/LREC Program Eligibility continued
LRECs
No larger than 2,000 kW
Must have low emissions
<0.07 lbs/MWh NOx; <0.10 lbs/MWh CO; 0.02 lb/MWh
VOCs, 1 grain per 100 standard cubic feet
May include fuel cells and other low emissions Class I
resources, as well as all zero emission Class I resources
ZRECs
No Larger than 1,000 kW
Must have zero emissions
May include solar, hydro and wind
Bid Evaluation, Ranking and
Selection
1. Valid bid proposals are ranked by REC price,
with the lowest bid REC price ranked first Projects using CT manufactured, researched or developed technologies
are granted a 5% discount to their bid REC price for evaluation purposes
only (assuming the 5% discount is approved by PURA)
2. The Maximum Annual REC Payment for each
project is calculated: The contracted bid price, multiplied by the proposal’s Maximum Annual
Quantity of RECs
3. Using the Maximum Annual REC Payment,
projects are selected until the annual REC
Program budget is met
New Hampshire No specific enhanced incentives for solar comparable to CT
or MA
MA--$0.15-0.28.5+per kwh (market and auction)
CT-- $0.10-0.18 per kwh (by declining bid)
NH--$0.05 per kwh by statute
Programs for grants, local property tax abatement, rebates for
systems 100kw or less, small residential, water heating, net
metering up to 1 MW—generally scale and limited $
State Panelists Experts to Discuss
What’s Coming
Outlook
Continue growth expected
Projects under development with cash grant, ITC and PTC
incentives will continue in 2013
Federal Climate Change Initiatives will spur increased
activity
Will see increased acquisition activity in the region
MA/CT will continue to grow; opportunity in NH
ITC for solar expires end of 2016
QUESTIONS?
Richard Kanoff, co-chair of McLane’s Energy Practice Groups, focuses on energy, renewable and
clean technology law and regulatory policy and litigation. He has advised numerous emerging and
established public companies in energy markets including clean coal and other fossil fuel-related
generation, bio-fuels, biomass, energy and demand management, smart grid, solar, wind, fuel
cells and other distributed generation technologies. Mr. Kanoff assists clients in managing
complex legal issues associated with developing, financing, permitting and operating energy
facilities, with electrical interconnection and ISO policies, and with evolving renewable
energy/climate change regulations.
McLane, Graf, Raulerson & Middleton
Professional Association
300 TradeCenter, Suite 7000
Woburn, MA 01801
(781) 904-2685 Direct Dial
(781) 904-2701 Fax
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