renewable technologies rps programs©cee-ut, 6 gürcan gülen, ph.d. it has been a wind story so far...

Bureau of Economic Geology, The University of Texas at Austin

Renewable Technologies & RPS programs

© Center for Energy Economics, UT-Austin. No reproduction, distribution or attribution without permission.

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Gürcan Gülen, Ph.D.

CEE Model (cents/kWh)

9.0 7.210.2

12.3

35.1

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Coal Natural gas Nuclear Wind Solar (CSP)

Capital and O&M costs are based on EIA’s Nov 2010 report: http://www.eia.gov/oiaf/beck_plantcosts/index.html

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What Is a Renewables Portfolio Standard?

• A requirement on retail electric providers to supply a minimum percentage or amount of their retail load with eligible sources of renewable energy.

• About 30 jurisdictions in the U.S. have an RPS program; no two are identical. But the following are common:– Penalties for non‐compliance– Renewable energy credit/certificate (REC) trading

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Some of the design differences…• Resource eligibility• Geographic eligibility• Trading of RECs• Renewable purchase targets and timeframes• Entities obligated to meet RPS, and use of exemptions• Treatment of existing renewable projects• Use of credit multipliers for favored technologies• Methods to enforce compliance• Existence and design of cost/rate caps• Compliance flexibility rules, and waivers from compliance• Compliance cost recovery

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It has been a wind story so far

*Renewable additions counted as occurring in an RPS state only if commercial operation began no more than one year before the first compliance year of the host state

Total RPS-Motivated Capacity Additions (1998-2008)

Solar1.5%

Biomass3.3%

Geothermal0.9%

Wind94.3%

Annual RPS-Motivated Capacity Additions

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Nam

epla

te C

apac

ity (M

W) Solar

Geothermal

Biomass

Wind

Source: Galen Barbose, Lawrence Berkeley National Lab, presentation at the IAEE Conference, June 2009.

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Gürcan Gülen, Ph.D.Actual wind installations compared to 20% Wind Report

Source: 2009 Wind Technologies Market Report, Energy Efficiency and Renewable Energy, DOE, August 2010. Main authors are Ryan Wiser and Mark Bolinger from Lawrence Berkeley National Laboratory.

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Biggest obstacles facing renewables

• Transmission– Expensive– Siting resisted by various stakeholders– Questions about cross‐jurisdictional authority

• Cost• Intermittency

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Green Power Superhighways

Source: Green Power Superhighways, a joint publication of AWEA and SEIA, February 2009

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Current grid

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In transmission queue


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Regional differences in transmission queues


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Increasing price of wind


Bundled price of power & RECs; after PTC & grants

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Regional price differences


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Reduced competitiveness in most markets


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REC prices matter in few markets


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Texas added a lot of wind• ~9 GW of new renewables capacity since 2000 –much greater than RPS targets

• Top reasons for rapid expansion– Federal PTC– Availability of high quality wind resources– Competitive market design:

• REC tracking easy due to ERCOT metering for settlement• Ease of transmission siting & interconnection, and cost uplift• Non‐discriminatory access to the grid• Natural gas on the margin

– State’s tax abatement policies implemented by host municipalities.

Source: Lessons Learned from REC Trading in Texas, CEE‐UT, December 2009, http://www.beg.utexas.edu/energyecon/transmission_forum/tf.php

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Mostly away from load centers

Source: PUCT (http://www.puc.state.tx.us/electric/maps/index.cfm)

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Considerations Going Forward• Expansion of transmission

– Negative zonal bidding: ‐(PTC+REC) lowest bid– Cost of CREZ projects– Delays in CREZ development private lines– Priority dispatch not consistent with open access– Capacity conversion factor calculation

• Reliable integration of more wind into the grid and its impact on other fuels

• Diversifying renewables (solar, biomass, etc.)• Federal RPS (could create new markets for excess RECs in Texas)Source: Lessons Learned from REC Trading in Texas, CEE‐UT, December 2009, http://www.beg.utexas.edu/energyecon/transmission_forum/tf.php

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CREZ and transmission lines

Source: PUCT (http://www.puc.state.tx.us/electric/maps/CREZ_Map_Attach_A.pdf)

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Gürcan Gülen, Ph.D.Balancing Market Prices

April 26, 2009

MCPE ($/MWh)

‐40

‐30

‐20

‐10

0

10

20

30

40

1:002:0

03:0

04:0

05:0

06:0

07:0

08:0

09:0

010

:0011

:0012

:0013

:0014

:0015

:0016

:0017

:0018

:0019

:0020

:0021

:0022

:0023

:00

HoustonNorthSouthWest

Negative price intervals (West)

2006 76

2007 338

2008 4894

2009 3069

2010 3477 (as of Oct 31)

For a detailed discussion, see “Wind and Energy Markets: A Case Study of Texas” by Ross Baldick, USAEE Dialogue, Vol 18 No 2, dialogue.usaee.org

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Impact of Wind – Peak Summer ‘09

Source: ERCOT data as presented by PUCT Chairman Smitherman, “Public Priorities and the Role of Competition” (KEMA’s 21st Executive Forum, March 30, 2010).

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Few observations on load profiles

• Wind generation does not match peak load well

• Wind generation does not match seasonal demand well

• Wind is most available during “valleys” opportunity for charging EVs (a convenient way to store electricity)

• But, will consumers charge at night?

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SG funding issues

• ARRA funding shortfalls– In August, $3.4 billion worth of SG projects were at risk of not getting funding since they may not finalize their contracts with DOE, suppliers and utilities and/or filings with regulators by the fiscal year deadline.

– only $8 billion out of $35 billion appropriated was spent by the Sep 31 deadline (although $33 billion has been awarded).

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Issues with SG projects• PUCs review cost implications more closely (e.g., BG&E case)

• Some consumers took utilities to court for cost increases (e.g., PG&E)

• Xcel Energy’s Smart Grid City ended up with higher costs than predicted

• Installed meters not standard within grids; do not communicate with all in‐house devices

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Which SG applications?• To fully realize SG benefits from small consumers, need– Standards in smart meters and in‐home devices (seamless communication)

– Making it easier for consumers (phone apps?)– Time differentiated pricing

• Without these, we should probably leave small consumers alone (for now) and focus on T&D applications of SG.

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In closing• It will be difficult to build more wind until

– CREZ lines are built– Credit market (economic) conditions improve– Reliability and other generators’ concerns are addressed

• PTC will remain necessary, especially in a low natural gas price environment

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In closing• It will be difficult to build non‐wind alternatives without additional incentives/mandates– All such bills failed at the 2009 TX legislature mostly due to high cost concerns

– Many other states has solar and/or DG set‐asides

renewable technologies rps programs©cee-ut, 6 gürcan gülen, ph.d. it has been a wind story so far...

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