us virgin island energy workshop policies to promote renewable energy & energy efficiency sarah...
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US Virgin Island Energy Workshop
Policies to Promote Renewable Energy & Energy EfficiencySarah Busche & Eric LantzFebruary 16, 2010
FEBRUARY 16 – 18, 2010 GOLDEN, COLORADO
USVI Workshop, Feb. 16-18, 2010
Outline
Introduction Policy to facilitate a clean energy transition NREL’s policy analysis capabilitiesRenewable Energy Policy Policies & best practices Persistent policy problems Emerging policy approachesEnergy Efficiency Policy Common policy best practices Decoupling overviewOther Policy Related Considerations Transportation policy considerations Carbon & REC MarketsQ & A
INTRODUCTION
USVI Workshop, Feb. 16-18, 2010
Policy: A Mechanism For Facilitating A Clean Energy Future
Building a foundation for the transition to clean energy Drive technological advancements & technology adoption Mandate action Incentivize decision making to align with USVI goals Aid in financing Attracting green industries, green jobs
Process for determining appropriate policies Identify clean energy goals Identify barriers to achieving those goals Identify which can be addressed through policy initiatives Analyze the costs and benefits of various policy options Implement appropriate policies
USVI Workshop, Feb. 16-18, 2010
NREL’s Policy Support Capabilities
Identify best practices & policy design considerations Market & barrier analysis Track state and local policy activity – innovative policies Policy analysis, such as potential impacts on
Ratepayers Utilities State/Territory Energy reduction/RE generation Environment Jobs & economic development
BAU Case I Case II Case III
Energy Use - RE/EE Scenarios
ResidentialIndustrialCommercial
Renewable Energy Policy
USVI Workshop, Feb. 16-18, 2010
Renewable Portfolio Standards
Design Basics Requirement of LSE to provide a specific percentage of their electricity from
qualified renewable energy resources Usually includes penalties for non-compliance Often met through the development of a REC market May include a resource specific set-aside, a Tiered REC system, or REC multiplier for preferred
technology/resources
USVI Workshop, Feb. 16-18, 2010
Renewable Portfolio Standards (RPS)
Design Variables Target, Timeframe, Exemptions Technology eligibility Treatment of out of state/territory
generators Compliance Filing & Enforcement Bundled or unbundled RECs Compliance flexibility/waivers Compliance cost recovery Contracting requirements (gov’t
procurement, long-term contracts, credit protection)
Role of state funding
USVI Workshop, Feb. 16-18, 2010
Renewable Portfolio Studies
Challenges Funding authorizations Transmission Siting constraints contract failures incentives /market uncertainty Costs (and integration costs) Managing compliance
Conclusions Policy design details matter RPS do not operate in isolation
Impacts 60% of non-hydro RE deployment since 1998 (94% Wind) Solar/technology set asides increase diversity but create challenges Compliance in 2007 was estimated at 91%
USVI Workshop, Feb. 16-18, 2010
Net-metering & Interconnection
Critical to maximize the value of customer sited generation
Common Limitations Eligibility only for specific
customer classes Size restrictions Discriminatory fees or
disproportionate standby charges
Excessive redundancy Excessive application review Supplemental insurance Lack of promotion
Best Practices Customer ownership of RECs Leverage vetted industry
standards Use straightforward and
transparent policies Standardize approvals Provide a clear path to dispute
resolution
USVI Workshop, Feb. 16-18, 2010
Rebates
Status and Impacts More than 38 states (as well as the
USVI) Market impact and success is mixed
New Jersey: 62 MW of solar PV in 8 years
New Jersey: One biomass power installation per year
USVI Workshop, Feb. 16-18, 2010
Rebates
Design Considerations Potential for explosive growth Rebates become very expensive when
successful. Scale rebates down at specific
installation targets
Address non-cost related barriers Target technologies with
foreseeable cost reductions at scale Design rebate amounts for specific
market conditions Provide consistent funding Reevaluate and adjust as needed Fund more than just freeriders
USVI Workshop, Feb. 16-18, 2010
Public Financing Programs
Status and Impacts More than 125 financing programs Public financing may offer:
long-term loans fixed rate loans relatively low transaction costs increased leniency
Loan programs serve a relatively narrow function Not associated with large RE capacity
installations But, fundamental to widespread
deployment
USVI Workshop, Feb. 16-18, 2010
Public & Utility Financing Programs
Design Considerations Standardized eligibility criteria can streamline processing requirements Providing services that identify and quantify the value of specific
improvements can eliminate consumer education barriers Increased loan security provides the best lending rates and terms Technology specific terms allow loans to be structured so that a given
improvement can pay for itself High volume allows for increased dispersion of fixed overhead costs Leveraging private sector specialization (underwriting and/or energy
audits) can reduce government burden Provisions for rapid scaling support broad-based growth
USVI Workshop, Feb. 16-18, 2010
Persistent Problems & New Approaches
Challenges Scale Cost Implementation Transmission Resource Diversity
Emerging Approaches SREC markets and SREC financing Property Accessed Clean Energy
Financing European style FIT
USVI Workshop, Feb. 16-18, 2010
New Jersey’s Solar REC Market & PSE&G SREC Financing
SRECs must be acquired by utilities from solar electric power generation.
Because SRECs are market based, prices vary in accord with supply
PSE&G now finances solar systems and allows customers to service their loan with SRECs. Customers lock in a 10 year SREC
floor price Customers are credited additional
amounts when SREC prices exceed the floor price
PSE&G retains first priority rights to purchase SRECs for 10 years
After exhausting rebate funds the state has transitioned to an SREC market to meet its RPS obligations
USVI Workshop, Feb. 16-18, 2010
Property Accessed Clean Energy (PACE) Financing
Local government finances clean energy investments and relies on the tax capacity of the property to secure the loan. Government issues bonds Property owners opt-in A special tax lien is placed
on the property Repayment occurs via property tax
payments General approach:
Is used widely for local infrastructure projects
Offers more secure loans Allows for the transfer of the loan to
a new property owner
USVI Workshop, Feb. 16-18, 2010
Potential Drawbacks to PACE programs
Enthusiasm for PACE style programs abounds, 18 states have passed legislation authorizing these programs, 14 more are actively pursuing legislation but:
Mortgage lenders are uncomfortable as the secondary lien holder
Will transfers of the special lien actually occur?
PV may not meet the “savings to investment principle.”
Implications for a city or state’s credit rating?
It is not clear that PACE offers significant advantages over alternative financing innovations (i.e., solar lease or third party PPA)
USVI Workshop, Feb. 16-18, 2010
Feed-in Tariffs (FIT)
European style FITs are also beginning to emerge in the U.S. FIT provides a guaranteed production payment to RE power producers
Fixed price payments or Fixed premium payments FIT policies are:
differentiated by technology include a purchase and interconnection guarantee designed to ensure moderate profitability for RE generation and provide
investor certainty compatible with RPS
Challenges include Capital investment Setting and adjusting the payment level as markets evolve Payment price differentiation Cost
Modern FIT are not to be confused with PURPA
Energy Efficiency Policy
The First Renewable
USVI Workshop, Feb. 16-18, 2010
Lead By Example (LBE)
Other LBE Opportunities Government procurement
strategies Green affordable housing LEED Requirements for new
buildings
Improving EE in public buildings Demonstrate cost effectiveness & feasibility Set a goal for energy reduction based on BAU
scenario Track energy use, evaluate & report Guide available at:
http://www.epa.gov/cleanenergy/documents/epa_lbe.pdf
USVI Workshop, Feb. 16-18, 2010
Energy Efficiency Portfolio Standards
Mandates energy providers to meet a portion of their energy demand through energy efficiency
Designed to facilitate investment in untapped technically and economically viable EE
Short term and long term goals, usually defined in terms of a percentage of total sales
Market based trading system Leading states are achieving 0.75-1.25% savings annually
Experiencing reductions in energy use, demand and strain on the grid Ratepayers benefit from
Reduced electricity bills Reduced need to fund capacity additions
USVI Workshop, Feb. 16-18, 2010
Public Benefit Fund (PBF)
Developed to finance EE programs Funds raised through surcharge on ratepayers’ electric/gas bill Consistent funding mechanism Develop measurable targets Usually administered by the utility or a third-party Top two important factors related to a successful PBF
Amount of funding Strong legislative mandate for EE savings
Leading States Annual Energy Savings Annual Spending as a % of Utility Revenues
Vermont 1.8% 3.5%
Connecticut 1.3% 2.1%
Oregon 0.9% 2.2%
California 0.9% 1.9%
Source: Kushler et al 2009
USVI Workshop, Feb. 16-18, 2010
Thinking Outside of the Box
Residential Energy Conservation Ordinances (RECO) Addressing efficiency of the existing building
stock Audit at point-of-sale/lease Ceiling for required EE improvements Stakeholder support – realtors are key!
Non-Financial Incentives Density bonus Special zoning Expedited permitting
USVI Workshop, Feb. 16-18, 2010
Innovative Policies – Hawaiian example
Solar Hot Water Heating All new single-family homes required to have SWH 40% residential energy demand in HI 25% of single-family homes
Net Zero Energy Ready requirements Residential new construction Future target date – a line in the sand Mandates efficiency improvements Readies the house for RE
PV Ready Requirements Structurally capable of supporting PV Design elements & minimal equipment installation
USVI Workshop, Feb. 16-18, 2010
Decoupling Overview
Traditional regulatory mechanisms incentivize increased sales for utilities – “throughput incentive” Throughput incentive is considered the biggest barrier to utility investment in
energy efficiency Decoupling breaks this incentive by “delinking” a utility’s revenues from the
amount of energy it sells Types of decoupling:
Full Partial Limited
USVI Workshop, Feb. 16-18, 2010
Decoupling Basics
The Utility recovers the amount of revenue determined to be fair and reasonable by regulators & Customers pay a fair amount for services rendered (electricity, distribution, etc) Automatic/semi-automatic price adjustments Does not alter the traditional rate case process – can reduce the frequency of rate cases Reduces the financial risk for the utility Does not decouple a customer’s bill from their consumption 23 States have implemented some type of a decoupling policy, 6 states considering it
Other Policy Related Considerations
USVI Workshop, Feb. 16-18, 2010
Transportation
Vehicle fleet transition Electric vehicles Hybrids Flex fueled
Financial incentives Vehicle purchase Charging infrastructure
Financial disincentivesGovernment fleets/rental fleets/etc
USVI Workshop, Feb. 16-18, 2010
Carbon and REC Markets
Fundamentals: Carbon markets are specific to GHG emissions RECs are defined by legislation or certification
Compliance Markets -- $5/MWh to $55/MWh Voluntary Markets -- $1/MWh to $10/MWh
Opportunities in Carbon:* Voluntary Markets - $705 million market, $7.34/ton CO2e EU ETS - $95 billion --- limited to Kyoto signatories Kyoto CDM - $22 billion --- limited to developing nations RGGI - $254 million --- small potential in offset market WCI - Not yet active --- role of offsets TBD Others - Various initiatives are underway; concrete opportunities
have not yet been identified* Subject to change with new policy
USVI Workshop, Feb. 16-18, 2010
Much more information on-line…
Net Metering: http://www.nrel.gov/docs/fy10osti/46670.pdf
Decoupling Brief: http://www.nrel.gov/docs/fy10osti/46606.pdf
RE Rebates: http://www.nrel.gov/docs/fy09osti/45039.pdf
FITs in the US: http://www.nrel.gov/docs/fy09osti/45551.pdf
State Level FITs: http://www.nrel.gov/docs/fy10osti/47408.pdf
RPS: http://www.nrel.gov/docs/fy08osti/43512.pdf
US REC & Voluntary carbon marketshttp://www.nrel.gov/docs/fy09osti/46581.pdfhttp://ecosystemmarketplace.com/documents/cms_documents/StateOfTheVoluntaryCarbonMarkets_2009.pdf http://assets.panda.org/downloads/vcm_report_final.pdf
Emerging carbon markets: http://www.nrel.gov/docs/fy07osti/41076.pdf