mitchell rothman [email protected] tel: 416 534-4152 a continental renewable portfolio...

Mitchell [email protected]

Tel: 416 534-4152

A Continental Renewable Portfolio Standard: A Better Way?

USAEEWashington, DC

October 11, 2011

mailto:[email protected]

Prevalence and Rationale for RPS Current RPS practice

United States Canada

Savings from eliminating constraints in RPS What might a continental RPS look like?

Presentation Outline

Power Advisory LLC 2011All Rights Reserved 2

An RPS sets a minimum for electricity from renewable resources

Primary rationale for an RPS is concern over environmental impact of electricity generation, particularly global warming effects. But often a secondary objective is to increase local

economic activity. Building the generation facilities Manufacturing the equipment to be used.

Another objective is to reduce price volatility by introducing fixed-price supply.

Rationale for RPS


An RPS sets a minimum for electricity from renewable resources

Most jurisdictions in North America have some form of RPS

RPS key design features: % of demand from renewables Who must meet the % requirement? What renewables qualify?What technologies/renewable resources? In what geographic locations?

Prevalence and Rationale for RPS


Most North American jurisdictions have some form of RPS. Chart shows states; several Canadian provinces have RPS-like provisions.

Prevalence of RPS


Source: DSIRE

RPS require installation of about 77,000 MW of new renewable capacity by 2025. Over the same period, total installed capacity in the

United States is forecast to grow by 36,300 MW. Total renewable capacity in the United States in 2010

was 123,000 MW, of which 77,000 was conventional hydro and 42,000 was wind.

So RPS requirements not only drive growth in generation capacity from renewable resources, but also drive generation capacity growth as a whole.

Importance of RPS


Most RPS programs allow the responsible entity (typically, a load or load-serving entity) to meet the RPS requirement by purchasing Renewable Energy Credits (RECs). As opposed to requiring that they contract directly for

delivery of renewable power The RPS program defines what resources can create

RECs. Some require that the renewable electricity be

generated locally. Others allow the renewable electricity to be generated

elsewhere and delivered in the jurisdiction imposing the RPS.

RPS Mechanisms


Eligible resources vary dramatically from state to state


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California O O O O O O O O OConnecticut O O III III O O O O O II O OIllinois O O O O O OMaine O II O O O O II O OMaryland O O O O O O O II O OMassachusetts O O O O O O O II O OMichigan O O O O O O O O OMinnesota O O O O OMontana O O O O O ONew Hampshire O O O O O O ONew Jersey O O II O O O O O ONew York O O O O O O O ONevada O O O O O O O O ONorth Dakota O O O O O OOhio O O O O O O O OOregon O O O O O O O O OPennsylvania O O O O O O O ORhode Island O O O O O O O OWashington O O O O O O O O OWisconsin O O O O O O O OVermont O O O O O O O O O

(1) Including landfill gas(2) Using renewable energy(3) Most RPS limit capacity rating for hydroelectric projects.

Lack of consistent eligibility requirements frustrates development of broader REC market.

Which would reduce RPS compliance costs and facilitate renewable project development.

Only two Canadian provinces have RPS programs like those in the United States: New Brunswick and Nova Scotia

Others have various policies to promote generation from renewables Ontario has set a goal in terms of fraction of electricity supply from

renewables and has instituted a a feed-in-tariff to procure it. It has also purchased renewables directly through an RFP.

Québec, Manitoba and British Columbia generate almost all of their electricity from large-scale hydroelectric resources and have also procured renewables. Québec has used RFPs for capacity; BC has used RFPs for energy.

Manitoba and Saskatchewan have ordered their provincially-owned utilities to purchase power under contract from renewables, mainly wind.

All of these require that the renewables be generated in-province. Alberta has no government policies requiring electricity supply from

renewables.

RPS in Canada


Potential Impacts of Relaxing Renewable Portfolio Constraints on Canada-US Electricity Trade

Study compared the cost of meeting US RPS requirements under current rules versus under a North American harmonized RPS.

The harmonized RPS can be expected to increase trade in renewable electricity.

Study’s basic methodology was to compute the cost of the cheapest generation to meet the RPS under two conditions: Existing rules North American RPS.

Study for Natural Resources Canada


Study compared the cost of meeting US RPS requirements under current rules versus under a North American harmonized RPS.

The harmonized RPS can be expected to increase trade in renewable electricity.

Study’s basic methodology was to compute the cost of the cheapest generation to meet the RPS under two conditions: Existing rules North American RPS.

Results included cost savings and resulting electricity trade flows

Study approach


The marginal renewable resource in most jurisdictions is wind.

We therefore computed the cost of meeting the RPS by computing the cost of using wind under the current rules.

Some major jurisdictions – notably New England – accept RECs from other jurisdictions if the power can be delivered to the RPS jurisdictions. New England has relatively few efficient renewable

resources of wind and small hydro. But most New England states restrict the size of

hydro resources that are eligible to create RECs.

Methodology


The most important trade barriers are the requirements for local generation and the restrictions on the size of hydroelectric generation resources.

We also considered the capacity of the transmission system, especially the international system, to accommodate increased trade. Most Canadian provinces are already net exporters of electricity to the

United States. Canada can export renewables to more remote states, like California. It

has strong ties to the Pacific Northwest, which in turn connects to British Columbia. California also has a need for renewable power to meet its RPS.

But there is limited capacity to increase exports on the existing transmission lines, and only one (between Montana and Alberta) is currently under construction.

Trade barriers


Trade has potential for significant savings

Most dramatic savings provided by large hydro Wind cost differences relatively small Hydro cost savings significant

If large hydro participates in New England RPS RPS costs reduced Can$ 196 million in 2030$9.6/MWh decline in RPS costs

Total savings in US of $829 million in New England alone$3.4/MWh decline in RPS costs

Savings realized by all customers; economic benefits from local resource development captured by relatively few parties


Trade could produce significant savings


The table below shows the savings to the US from using renewable resources located in Canada to meet RPS requirements.

RPS costs are reduced by over $800 million in 2030. By then, 9% of the US RPS requirements are satisfied by

Canadian resources.

Most of the savings come from large hydro


Before 2015, most of the gain comes from wind. But except for Atlantic Canada, Canada does not have a significant cost advantage in wind.

Canada has significant advantage in hydro, and potential for additional development.

The table shows only projects that could not be in operation or under construction by 2015, our estimated date for a continental RPS.

This shows over 10,000 MW of hydrolectric projects in Canada that are now under active consideration that could help meet a US RPS.

Design considerations for a continental RPS

Does it replace current state/provincial RPS?If not, then how is it continental?If yes, then it requires federal legislation

Interaction with or replacement of existing or poential new programsGHG initiatives such as RGGI or WCIIncentives such as PTC or WPPICarbon taxes


Elements of a continental RPS

Scope: to which entities does it apply? Harmonization: do all states/provinces have same

RPS? Same resources allowed? Level: % of resource requirement and timing to

reach it. Resources accepted: do they depend on availability,

native or through trade? Geographical restrictions? Are there provisions (ACP?) to mitigate price

impacts? How is achievement of the RPS monitored?


Conclusions: Trade offers opportunities for significant reduction in RPS compliance costs

Focus RPS eligibility on resources thatMeet Environmental objectivesProvide desired long-term price stability

Reductions in RPS compliance costs benefit all electricity customers The available cost savings are meaningful


I look forward to your questions

Mitchell Rothman

Power Advisory LLC

[email protected]

(416) 534-4152

www.poweradvisoryllc.com



http://www.poweradvisoryllc.com/


Existing Canada/US electricity trade


Enabled New Canada/US electricity trade

Introducing Power Advisory

Power Advisory specializes in electricity market analysis and strategy, power procurement, policy development, regulatory and litigation support, resource planning and project feasibility assessment. We have assisted in the development and evaluation of Feed-in Tariffs

and Standard Offers in Florida, Vermont, Ontario and Nova Scotia. Staff have assisted with the development of over 25 power supply RFPs and evaluation of proposals in response to RFPs.

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mitchell rothman [email protected] tel: 416 534-4152 a continental renewable portfolio...

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