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Volume 7, No. 1 Winter 1998
Renewables In The Mix - Green Markets And Renewables PolicyAs green marketing moves beyond customer surveys and makes a run for the open market, debate continues as to whether green marketing is, or is not, in the public interest. Since much of the current supply of renewable energy was developed for all customers, is it fair to now allow a utility to sell it for a premium? And if it is sold at a premium, what is being sold to everyone else, and at what rate? Will the rate charged to everyone else be reduced to reflect the absence of the renewable component? Green energy sales across state borders similarly raise a question as to whether green exports leave a state short of the renewables it presumably wanted as a matter of state policy. Or does the host state still retain benefits in the form of a cleaner environment in the locale of the plants? Fortunately, in the case of renewables, past policy and new markets are not only compatible, but can be successfully married. Market choice can accelerate renewables policy. Wind turbines prompted by premium pricing are going up where none stood before, and there are more renewables in the works, thanks to the greening of product offerings for the market. Given the market push for green products, framing the issue as a choice between green markets or green policy misses the chance to leverage the two. For instance, separating out "old renewables for the public" from "new renewables for the market" condemns the existing supply to market obsolescence, while the new market starves for supply. Coordinated policy can preserve existing renewable levels while at the same time supporting vital green markets. Take as one example, the tailored use of a renewables portfolio standard. A portfolio standard could be used to define the type, amount and timing of the baseline renewable energy to be included in all sales, and therefore paid in all rates, even as green markets open demand for the same supply. With tradable credits, existing renewables can supply either the minimum requirements of traditional suppliers or new demand from green marketers. The price established by this combined market will more efficiently regulate the construction of new supply, without the artificial distinction of old versus new. The timing or ramping of a portfolio standard could even allow existing sources to feed green markets, subject to the addition of new supply on practical construction schedules. As the standard kicks in, the additional supply comes on line. The result could be healthy markets plus new construction, rather than stagnated markets and no construction. Other policies, like the renewables surcharge adopted in California and other states, can be similarly structured. Green markets, reflecting public preferences, are the force behind renewable policy. Renewables policy needs to use the force.
R. Brent Alderfer - Chairman
State Activities
California In the interim, residential and small commercial ratepayers will receive a 10 percent electricity rate reduction, and utility rates will be frozen; the ongoing consumer education program about electric industry change will continue; and utilities can proceed to arrange for the sale of generation plants, however, final transfer of the plants can take place only when the market is open to competition.
The ability of customers to choose and sign-up for a new energy provider will continue during the delay, except that the new energy providers will not be able to provide service until direct access begins. The Competition Transition Charge (CTC) paid by all customers will continue to be recovered in bundled rates, however, calculation of the specific CTC amount is delayed until operation of the PX because it is determined by the market price of electricity established in the PX.
Colorado Included in the Governor's plan are steps to: provide technical support for potential users of renewable energy; promote green power purchases; encourage the adoption of net metering programs by utilities; facilitate homeowner access to financing for renewable energy technologies; and support renewable energy education.
Separately, Governor Romer issued a "1,000 by 2000" challenge to Coloradans to install 1,000 rooftop solar systems by the year 2000. The challenge supports President Clinton's "Million Solar Roofs" initiative (SREN, Winter 1997). To kick off the challenge, an 800-Watt photovoltaic system was installed at the governor's residence.
Illinois The technology-related surcharge will average 5 cents per month for residential customers; 50 cents per month for nonresidential gas customers under 10 megawatts, and $37.50 per month for all other nonresidential customers. The surcharge is expected to raise $9.6 million annually, of which 50% will go toward renewables and the other half to clean coal technology assistance. Renewables are defined as wind, solar thermal, photovoltaics, dedicated crops for biomass, hydropower without new dams or "significant expansion" of dams, and "other alternative sources of environmentally preferable energy." The law explicitly excludes waste-to-energy, tires, and waste wood from the renewables definition.
The Illinois Department of Commerce and Community Affairs will administer the Renewable Energy Resources Program, providing grants, loans, and other incentives to encourage development and use of renewable energy resources.
Iowa In a January hearing, net metering proponents argued that net metering is a billing and metering practice that is within the state's authority over the retail practice of utilities and that at no point under a net billing arrangement does a utility actually purchase any power at above avoided cost.
As the IUB deliberates, a bill has been introduced in the Iowa legislature that would require utilities to enter into net metering agreements with eligible customers.
Maine
Specifically, the PUC is seeking information on issues such as: how the portfolio obligation should be defined and how compliance should be measured and verified; the design and implementation of a credit-trading system; whether or not pumped hydro should be included as a renewable resource; and the consequences for noncompliance.
Maryland
Massachusetts A Renewable Energy Trust Fund will be established with a mandatory charge of 0.75 mills/kWh in 1998, one mill/kWh in 1999 and 1.25 mills/kWh in 2000, before decreasing back to 1 mill/kWh in 2001, 0.75 mills/kWh in 2002, and to a fixed 0.5 mills/kWh thereafter. The fund is expected to generate approximately $200 million to support renewables over the first five years and $20-$25 million annually thereafter. The Massachusetts Technology Park Corpor-ation will oversee the fund, assisted by the Massachusetts Division of Energy Resources (DOER) and an advisory committee. The DOER will set the terms of the RPS for all retail electric suppliers. The RPS would re-quire an additional 1% of consumption from new renewable energy facilities by the end of 2003 (over the 6% to 7% today), and would increase by 0.5% per year of retail end-use consumption until the end of 2009, and an additional 1% per year thereafter.
The restructuring law defines renewables to include photovoltaics, solar thermal electric, wind, ocean thermal, wave energy, tidal energy, fuel cells using renewable fuels, landfill gas, low-emission, advanced biomass power such as gasification, and hydro. Conventional wood waste-fired facilities appear to be excluded unless equipped with advanced conversion technologies. Waste-to-energy and hydro generation will not count towards the RPS standard for new renewable facilities.
Nebraska
New York
The SBC will be funded for a three-year period beginning on June 1, 1998, after which time the PSC will determine whether the charge should be continued. The order establishes that specific utility funding levels will be determined during individual restructuring cases and will be subject to a 1.0 mill/kWh cap. The four restructuring plans approved to date provide for $175 million over the three-year period, and the two plans still outstanding propose another $59 million. The New York State Energy Research and Development Authority has been designated as the third-party administrator for the SBC funds.
Net Metering Order Issued An important aspect of the law allows customers to receive a credit against their bill at the residential rate, if output from their PV system exceeds demand during any monthly billing period. If, at the end of the year, the PV generation exceeds the user's total annual demand, then the utility pays the customer at the avoided-cost rate. The PSC order affirms, at least in part, uniform interconnection standards agreed to by the six utilities. The order also allows customers to select between using one reversible meter, or two unidirectional meters to separately measure energy inflows and outflows. Utilities will also be allowed to require the installation of transformers when necessary to ensure safety and adequacy of service, with written justification upon request.
However, the PSC rejected all utility proposals of insurance, easement, and indemnification as burdensome and unnecessary. Utility requirements will be limited to customer demonstration of at least $100,000 in liability coverage through homeowner insurance policies. The PSC also ordered the utilities to offer five-year contracts to net metering customers, with annual renewal provisions and cancellation by either party upon 30 days notice.
Wisconsin
On renewables, the PSC proposes a funding level of $5 million per year to help "bring renewable energy costs down and to stimulate demand for renewable resources." The PSC proposes that the effort be concentrated on developing customer-sited renewable energy applications and small-scale, customer-sited renewable generation technologies.
Other Activities
Green Power Trade Group Formed
The REA will work to support policies and regulations that establish fair market structures for environmentally preferable power sources and foster the use of accurate environmental claims in the promotion of differentiated power products.
NAAG Announces Disclosure Effort
TVA Revs Up While BPA Backpedals
While TVA prepares for its first marketing foray into renewables, a management commit-tee formed to carry out a cost review of the Bonneville Power Administration (BPA) has recommended that BPA reduce its planned expenditures for renewable resource projects, with no new projects beyond those currently committed. The objective of the cost review was to help BPA reduce the price of its electricity and attract customers after 2001, when 90% of its existing power sales contracts expire.
Enron to Build California Wind Power Plant
|
| State | Mechanism* | Disclosure Requirement |
|
Arizona+ |
RPS — solar portfolio requirement. Beginning in 1999, all participating electricity suppliers must obtain at least one-half of 1% of power sold competitively from a photovoltaic or solar thermal source. The solar requirement increases to 1% in 2002. |
No |
|
California |
SBC — $540 million over four years to fund a mix of production incentives, project financing support, and customer rebates for renewables. |
Yes |
|
Illinois |
SBC — 5.04/month surcharge on residential customers for 10 years for renewables development fund; expected to raise $5 million per year. |
Yes |
|
Maine |
RPS — 30% of retail sales to be provided by renewable resources, including hydro, fuel cells, and municipal solid waste (MSW) in conjunction with recycling. Also, voluntary fund for renewables R&D. |
Yes |
|
Massachusetts |
RPS — 1% of electricity sales from new renewables starting in 2003, rising by an additional 0.5% per year through 2009, and increasing to 1% each year thereafter. SBC — 0.0754/kWh from all customers, beginning in 1998, to support the development and promotion of renewable energy projects. The charge increases to 0.14/kWh in 1999 and 0.1254/kWh in 2000, and decreases to 0.14/kWh in 2001 and 0.0754/kWh in 2002, and to 0.054/kWh each year thereafter. |
Yes |
|
Montana |
SBC — 2.4% of 1995 utility revenues for energy conservation, renewables, and low-income energy assistance. |
Yes |
|
Nevada |
RPS — 0.2% of total consumption, rising to 1% by 2010, to be obtained from in-state renewable resources (half of which must come from solar power). |
Yes |
|
New Hampshire |
None |
No** |
|
Oklahoma |
None |
No |
|
Pennsylvania |
None |
Yes |
|
Rhode Island |
SBC — 0.234/kWh for a minimum of five years to fund renewables and demand-side management programs. |
Yes |
*RPS = renewables portfolio standard; SBC = system benefits charge.
+Adopted by the Arizona Corporation Commission, a constitutionally created regulatory body.
**Under consideration
This newsletter is prepared for the NARUC Subcommittee on Renewable Energy to promote information sharing on state-level renewable electric activities. It is sponsored by the Office of Utility Technologies of the U.S. Department of Energy.
Comments can be directed to Blair Swezey at (303) 384-7455 or Blair_Swezey@nrel.gov. The newsletter is also available via the internet at:
The Subcommittee Chairman is the Honorable R. Brent Alderfer, Commissioner, Colorado Public Utilities Commission - (303) 894-2000 x303
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