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Copyright © 2009 Holland & Knight LLP All Rights Reserved
Presented by Tommy Boroughsa Partner with the law firm of Holland & Knight LLP
February 18, 2010
State of the Union for Florida’s RPS Policy
Requirement that Power-Generating Utilities Produce More Energy From Renewable Energy Sources.
Renewable Portfolio Standard (“RPS”)
Traditional RPS Policy
Establishes a Minimum Level of Electricity Sales that Must Come from Renewable Generation by a Specific Date.
Definition of Renewable Energy
"Renewable Energy" means Electrical Energy Produced From a Method that Uses One or More of the Following Fuels or Energy Sources: Biomass, Solar Energy, Geothermal Energy, Wind Energy, Ocean Energy, and Hydroelectric Power.
Definition of Biomass
"Biomass" Includes the Following Power Sources: Combustible Residues or Gases from Forest Products Manufacturing, Waste, Byproducts, or Products from Agricultural and Orchard Crops, Waste or Co-Products, Products form Livestock and Poultry Operations, Waste or Byproducts from and Food Processing, Urban Wood Waste, Municipal Solid Waste, Municipal Liquid Waste Treatment Operations, and Landfill Gas.
Reasons for RPS Approach
Reducing Carbon Emissions from Electric Utility Sector by Switching a Percentage of Electric Generation from Fossil Fuels to Renewable Sources.
Reducing dependence upon foreign fossil fuel sources.
Why an RPS is Specially Important to FloridaFlorida has vast potential for renewable energy: Florida could be the "Saudi Arabia" of
Biomass.• Opportunity fuels: Timber Waste, Agricultural
Waste, Lawn Clippings, Land Fill Waste, Animal Waste, Food Processing Waste
• Grow Crops (Florida has the Land, Climate and the Rainfall)
Solar Gulfstream Offshore Wind
Recommendation #40 by Florida Energy Commission – Establish Generation Scenarios for a Renewable Portfolio Standard
It is recommended that the Florida Legislature direct the Florida Public Service Commission to utilize the ranking established in Ranking of Electric Generation and Greenhouse Gas Emission Goals to select generation scenarios to develop a Renewable Portfolio Standard (RPS) that will appropriately promote the use and development of renewable energy resources and technologies in Florida. Following development of the RPS by the PSC, the FEC should review the resulting RPS for possible further recommendations regarding goals and the scope of the rates.
Section 366.92 F.S. – Florida Renewable Energy Policy in HB 7135 (2008)
The Commission shall adopt rules for a renewable portfolio standard requiring each provider to supply renewable energy to its customers directly, by procuring, or through renewable energy credits. In developing the RPS rule, the Commission shall consult the Department of Environmental Protection and the Florida Energy and Climate Commission. The rule shall not be implemented until ratified by the Legislature. The commission shall present a draft rule for legislative consideration by February 1, 2009.
December 31, 2008 Docket of FPSC
Navigant Consulting concluded that: Under the unfavorable scenario for renewable
development, which includes a 1 percent rate cap, renewable energy in Florida could be 5 percent of IOU retail sales by 2020
Under the mid-favorable scenario for renewable development, which includes a 2 percent rate cap, renewable energy in Florida could be 11 percent of IOU retail sales by 2020; and
Under the most favorable scenario for renewable development, which includes a 5 percent rate cap, renewable energy in Florida could be 24 percent of IOU retail sales by 2020
December 31, 2008 Docket of FPSC
Initial RPS – Section 25-17.400(3) – The draft rule establishes the following percentages of the prior year's retail sales for each IOU to be provided by Florida renewable energy resources:
1. By January 1, 2017: 6 percent
2. By January 1, 2025: 10 percent
3. By January 1, 2033: 15 percent
4. By January 1, 2041: 20 percent
January 9, 2009 Action of the FPSC
The FPSC recommends an aggressive RPS that requires each IOU to achieve 20 percent renewable energy by 2020. This aggressive standard is intended to protect existing renewables, and spur new renewable developers to enter the Florida market by establishing a long-term dedicated market for renewable energy in the state.
January 9, 2009 Action of the FPSC
RPS Percentage and Timing – Section 25-17.400(3), Florida Administrative Code (F.A.C.), of the draft rule establishes the following standards of the prior year's retail sales for each IOU to be provided by Florida renewable energy resources:
1. 7 percent by January 1, 2013
2. 12 percent by January 1, 2016
3. 18 percent by January 1, 2019
4. 20 percent by January 1, 2021
Components of the FPSC's Draft RPS Rule
General Concept - Compliance through RECs. Requires IOUs to generate through self-build renewables, or to purchase sufficient RECs from other utilities or non-utility renewable generators to meet RPS requirements. Establishes REC market to facilitate short-term spot market and long-term negotiated contracts for RECs from all in-state renewable facilities (unless subject to FEECA).
Rate Cap – Charges to utility customers are initially capped at an amount equal to 2 percent of the utility's annual retail revenues. The rule provides the FPSC with the flexibility to review and modify the rate cap, if appropriate, annually in the cost recovery proceeding or in a proceeding initiated on is own motion.
Components of the FPSC's Draft RPS Rule
Components of the FPSC’s Draft RPS Rule
Frequency of Review – RPS reviewed at least once every 3 years.
Mandatory Standards or Aspirational Goals – Mandatory, due to the presence of penalties that would be assessed to the utility's stockholders. However, non-compliance may be excused due to lack of sufficient renewable energy credits or prohibitive cost (i.e. costs over 2 percent rate cap).
Rewards and Penalties – Penalty of up to 50 basis points for unexcused non-compliance to be assessed to the utility's stockholders. No specified rewards.
Components of the FPSC's Draft RPS Rule
Solar and Wind Carve-Out - Carve-out for solar and wind, such that 25 percent of RPS requirements, must be met with these resources. Also, 3/4 of 2 percent rate cap (1.5 percent) funding is allocated to solar and wind resources. The rule provides the FPSC with the flexibility to review and modify the allocation of the rate cap annually, if appropriate.
Components of the FPSC's Draft RPS Rule
Cost Recovery – Establishes a dedicated cost recovery clause for all costs associated with renewables. The incremental cost of compliance with the RPS would appear separately on customer bills.
2009 Legislative Proposal – Bill No. SB 1154
Proposed Florida Clean Portfolio Standard (CPS) for Investor-Owned Utilities
General Concept – For Investor-Owned Utilities Only, 20% of sales by the end of 2020 must be from renewable energy and/or clean energy [i.e., new nuclear energy, or IGCC with carbon capture and sequestration (CCS)], with up to 25% of the percentage goal in each year allowed from new nuclear and or IGCC with CCS.
2009 Legislative Proposal – Bill No. SB 1154
Proposed Florida Clean Portfolio Standard (CPS) for Investor-Owned Utilities
CPS Percentage and timing of Goals:
7% by 2013 (for 2012)
12% by 2016 (for 2015)
18% by 2019 (for 2018)
20% by 2021 (for 2020)
2009 Legislative Proposal – Bill No. SB 1154
Essentially, the deadline is December 31 for the year preceding the deadline (e.g. for 2013, the goal is 7% on 12/31/2012).
Rate Cap – 2% of retail electricity sales above avoided cost (power supply costs of "the generation source it (the utility) would have otherwise built or the energy or capacity, or both, it would have purchased from another source").
2009 Legislative Proposal – Bill No. SB 1154
Proposed Florida Clean Portfolio Standard (CPS) for Investor-Owned Utilities
Mandatory vs. Aspirational - Mandatory for IOUs. However, non-compliance may be excused due to lack of sufficient clean resources available or prohibitive cost (i.e., costs exceed 2% rate cap).
2009 Legislative Proposal – Bill No. SB 1154
Spending Limits – Up to 1% of CPS costs may come from Class I clean energy resources (solar and wind).
Up to 1% of CPS costs may come from Class II clean energy resources (other renewables).
No expenses from Class III clean energy resources (new nuclear and/or IGCC with CCS) may be used for CPS compliance
