Washington State Policy Roadmap


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Senior Capstone project that outlines Washington energy policy recommendations

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Washington State Policy Roadmap

  1. 1. Washington State Energy Policy RoadmapWashington State Energy Policy Roadmap:Purpose of this document: The Policy Roadmap will provide a long-term perspective for Distributed Generation (DG) andCombined Heat and Power (CHP) policies, with detailed actions and milestones for implementing thosepolicies. The Roadmap will identify current and future policy issues for Washington State based on aPathway to a projected DG and CHP Vision.Understanding the desired end-state for DG and CHP will provide context and a long-term perspectivefor policy makers, regulators, legislators, and industry stakeholders. Therefore, the Roadmap will look atpolicy initiatives aimed at achieving the Vision Statement.The Vision Statement on page four and the policy recommendations highlighted in boxes are intendedto achieve a brighter future for Washington State by encouraging private investment in renewableenergy resources, stimulating the economic growth of this state and enhancing the continueddiversification of its energy portfolio. Copyright 2011 – Cascade Power Group, LLC
  2. 2. Washington State Energy Policy RoadmapTable of ContentsIntroduction .................................................................................................................................................. 1 Key Terms .................................................................................................................................................. 3 Vision Statement................................................................................................................................... 4Current State of Power Generation in Washington .................................................................................... 5 Hydroelectric Generation.......................................................................................................................... 6 Initiative I-937: Washingtons Renewable Portfolio Standards ........................................................... 8 Decoupling ....................................................................................................................................... 9Net Metering: A Key Issue......................................................................................................................... 10 California Case Study ............................................................................................................................ 12 New Jersey Case Study....................................................................................................................... 14 Grid Interconnection ...................................................................................................................... 15 Washington’s Current Challenge for Net Metering................................................................. 16 Energy Storage – A Solution of the Future ....................................................................... 17 Net Metering Policy Recommendations .................................................................... 18Supporting CHP, WHR and DE .................................................................................................................... 19 The Clean Energy Standard Offer Program ........................................................................................... 21 Output Based Air Emissions Standards ............................................................................................. 23 Denmark Case Study .................................................................................................................. 24 Roadblocks to Achieving the Vision Statement...................................................................................... 26 Summary of Policy Recommendations................................................................................................... 27 Conclusion .............................................................................................................................................. 28 Copyright 2011 – Cascade Power Group, LLC
  3. 3. Washington State Energy Policy RoadmapKey Terms:Combined Heat and Power (CHP): a system that employs heat from power generation and applies ittoward useful work, typically heating. Also known as "cogeneration", CHP.....Customer-generator: a customer of an electrical utility who also generates some portion of his or herpower onsite, e.g. via a solar or small wind installation, and uses a net metered system.Distributed Generation (DG): localized electricity production that is on-site or close to a load center andis interconnected to the utility distribution system. This definition includes such technologies asphotovoltaics; small wind; small biomass; small combined heat, and power (CHP)/ small cogeneration;small combined cooling, heat, and power (CCHP); and smaller DG systems. Small is less than 20 MW.District Energy (DE): the centralized recovery, storage, and/or generation of thermal energy at a centralplant or plant(s) and distribution of that energy to customers through a pipeline, or connected networkof pipelines.Interconnection: the physical connection of a generating facility to the electric system so that paralleloperation may occur.Kilowatt-hour (kWh): the standard unit of electricity or power consumption equal to 1000 watts overone hour, and equivalent to about 3412 British thermal units (Btu).Net metering: measuring the difference between the electricity supplied by an electric utility and theelectricity generated by a customer-generator’s system over a billing period.Qualified Facility (QF): a generating facility of 80 MW or less whose primary energy source is renewable(hydro, wind or solar), biomass, waste, or geothermal resources, or a generating facility thatsequentially produces electricity and another form of useful thermal energy (such as heat or steam) in away that is more efficient than the separate production of both forms of energy.Renewable Energy Credit (REC): a credit issued by a government agency or third-party to a generator ofrenewable energy and can in turn be traded and sold on the open market, providing an incentive tocompanies that produce renewable energy.Thermal energy: the heat energy transported by a medium such as water or steam.Waste Heat Recovery (WHR): the recovery of heat discharged as a byproduct of one process to providethermal energy utilized by a second process. Copyright 2011 – Cascade Power Group, LLC
  4. 4. Washington State Energy Policy RoadmapWashington State Policy Vision Statement2012• Interconnection and permitting issues have been streamlined for renewable energy, CHP/District Energy and waste heat-based energy systems.• Output-based air emissions standards are implemented and enforced to encourage energy efficiency and the use of CHP and waste heat recovery.• The Net Metering facility capacity cap has been dissolved and capacity is limited by annual facility consumption rate, with the aggregate cap is unnecessary but remaining at 5% and virtual net metering deploys to and is limited to the facilities that it supplies.2015• A CESOP policy has been enacted, large cogeneration has increased its position as an important resource to Washington, and these facilities can readily participate in the wholesale power market.• A budget is established in a clean energy fund to support R&D in energy storage.• All institutional and technological barriers to DG have been removed and all permitting is efficient and environmentally responsible.2020• Net Metering and CESOP have expanded customer and utility owned DG and CHP, that they are integral to procurement, transmission and distribution planning and operations.• Large and small CHP is utilized in combination with all non-transport combustion engines and uses District Energy systems to redistribute heating and cooling, so most stand-alone boilers and furnaces are no longer used.• Energy storage policy frameworks are in place, anticipating a viable energy storage technology.2050• DG makes up 70% of energy consumption with 30% obtained through ecologically responsible hydroelectricity and nuclear energy.• Energy storage is integrated into Washington’s energy infrastructure and provides reliable clean energy and is managed by the state-regulated utility companies.• The Renewables Portfolio Standard (RPS) mandates were satisfied, and there is no new RPS mandate. Regulated incentive programs have been phased out, and no new incentives are being put in place due to grid-parity for most renewable energy systems. Copyright 2011 – Cascade Power Group, LLC
  5. 5. Washington State Energy Policy RoadmapCurrent State of Power Generation in Washington2007 Electricity Generation and Consumption by Fuel: Hydro 73%, Coal 8%, Nuclear 8%, Natural Gas8%, Biomass 0.75%, Wind 2%, Waste 0.43%, Landfill Gases (and other biogas) 0.09%, Petroleum 0.04%.More than two-thirds of the electricity generated and consumed in Washington in 2007 was producedfrom hydroelectric dams. Coal, natural gas, and nuclear were the primary energy sources for theremainder. Wind accounted for 2% of the electricity generated in Washington and total non-hydrorenewable sources (including wind) accounted for a little more than 3 percent.Electricity generated from non-hydro renewable sources has been growing. Winds share has grownfrom essentially zero in 2000 to 2 percent in 2007, and the total share for biomass, wind, waste, andlandfill gas was 3.3 percent of the total generation. In 2007 power plants in Washington generated 21percent more electricity than was consumed in the state. The diagram above, from the 2011Washington State Energy Report, identifies waste heat from electric power generation as making up 145trillion of 537 trillion BTU produced in 2007. That is almost half again more than the total amount ofelectric power that Washington State exports to other regions (100 trillion BTU).WA State Dept. of Commerce – Energy Strategy Update:http://www.commerce.wa.gov/DesktopModules/CTEDPublications/CTEDPublicationsView.aspx?tabID=0&ItemID=9107&MId=863&wversion=Staging Copyright 2011 – Cascade Power Group, LLC
  6. 6. Washington State Energy Policy RoadmapLarge Hydroelectric Generation in Washington:From the 2007 Washington State energy generation and consumption numbers above, we can see thathydro is overwhelmingly the primary source of the state’s electricity generation. This could raise thequestion: why should we invest in energy forms likesolar and wind when hydro makes up such a largeproportion of our electricity and is classified as arenewable according to the EPA? The answer comesback to environmental impacts and carbon emissionsassociated with hydro, which I will discuss below.Environmental Impacts:Hydroelectric dams can block fish passage tospawning grounds or to the ocean, although somemore environmentally conscious hydro plants havemeasures in place to help reduce this impact. Thediversion of water can impact stream flow, or even cause a river channel to dry out, degrading bothaquatic and riparian habitats. Hydroelectric plants can also have an impact on water quality by loweringthe amount of dissolved oxygen. In the reservoir, sediments and nutrients can be trapped fromdispersing naturally downriver, while the lack of surface water flow can cause undesirable growth andthe spread of algae and aquatic weeds. The Low Impact Hydropower Institute (LIHI) created a voluntarycertification program whereby facilities are classified as low impact after passing a series of tests. In2007, less than 30 facilities in the U.S. had earned the classification.Carbon Emissions from Hydro facilities:A large amount of carbon stored in trees and other plants is released when the reservoir is initiallyflooded and the plants rot. Then, after this initial decay, plant matter settling on the reservoirs bottomdecomposes without oxygen, resulting in a build-up of dissolved methane. This potent greenhouse gas,is released into the atmosphere when water passes through the dams turbines. In effect, man-madereservoirs convert carbon dioxide in the atmosphere that is absorbed by vegetation into methane. In thedry season plants colonize the banks of the reservoir only to be engulfed when the water level rises lateron. For shallow-shelving reservoirs these "drawdown" regions can account for thousands of squaremiles. Seasonal changes in water depth, as well as peak power demand, mean there is a continuoussupply of decaying material due to changing water levels.Claiming that hydro projects are net producers of greenhouse gases is not new. , But in the past decadethe issue has been gaining more political recognition. In the 2006 IPCC discussions, the NationalGreenhouse Gas Inventory Program, which calculates each countrys carbon budget, included emissionsfrom artificially flooded regions, for the purpose of incorporating the impacts of hydroelectric dams intothe greenhouse gas calculations. Copyright 2011 – Cascade Power Group, LLC
  7. 7. Washington State Energy Policy Roadmap Bonneville Power Administration is the largest supplier of hydroelectric power to Washington State and the Pacific Northwest region. Not only do the above issues apply to the BPA-run hydroelectric systems on the Columbia and Snake rivers, but these dams also affect threatened and endangered species unique to this region. Salmon and steelhead runs in the Columbia Basin have decreased from an estimated 11 to 16 million fish a year in pre-colonial times to around 2million today. Three stocks of salmon that populate the Columbia River Basin have been listed asthreatened or endangered species, and habitat damage and overfishing are the main causes. Efforts topreserve these listed stocks have already caused changes in operation of the dams on the Columbia andSnake Rivers, but some ecologists are not convinced that these changes are enough to restore Salmonand Steelhead populations.EPA: http://www.epa.gov/cleanenergy/energy-and-you/affect/hydro.htmlNew Scientist – Environment: http://www.newscientist.com/article/dn7046EIA: http://tonto.eia.doe.gov/ftproot/features/hydro.pdfPearce, Fred. Rotten Business. New Scientist: Aug. 28 1999. Pg 2121 Copyright 2011 – Cascade Power Group, LLC
  8. 8. Washington State Energy Policy RoadmapInitiative I-937: Washingtons Renewable Portfolio Standards: On Election Day, Nov. 7, 2006,Washington State voters passed Initiative I-937. This initiative imposes targets for the states utilitiesthat refer to energy conservation and use of eligible renewable resources. Eligible resources under theinitiative are wind, solar, ocean or tidal wave power, geothermal, landfill gas, gas from sewagetreatment facilities, biodiesel fuel that is not derived from crops raised on land cleared from old growthor first-growth forests, and biomass energy based on animal waste or solid organic fuels from wood,forest, field residues, or dedicated energy crops. Both public and private utilities are required to secure15 percent of their power supply from non-hydro renewable resources by 2020. The utilities must alsoset and meet energy conservation targets starting in 2010. Interim targets are included in the initiative.• 3% of a utility’s load by January 1, 2012, and each year thereafter through 2015;• 9% of its load by January 1, 2016, and each year thereafter through 2019;• At least 15% of its load by January 1, 2020, and each year thereafter.• If a utility has no load growth over three years, it is considered in compliance if it has spent at least 1 percent of its revenue requirement on renewables.Seventeen of Washington’s 62 electrical utilities currently qualify, and they account for about 80 percentof the state’s electricity market. I-937 sets energy conservation as a first priority in reducing the state’scarbon footprint, placing economically viable technologies such as CHP and waste heat recovery as thefirst that we should be investing in.“Summary of Initiative 937 to the People: Concerning energy resource use by certain electric utilities.WA State Senate Committee Services (Aug. 25 2006):http://www.leg.wa.gov/Senate/Committees/Documents/Initiatives/2006/I937Summary.pdf Copyright 2011 – Cascade Power Group, LLC
  9. 9. Washington State Energy Policy RoadmapDecoupling: In recent times decoupling has become an important issue to consider in Washington Statepolicy making. It refers to the disassociation of a utilitys profits from its sales of energy. A stategovernment will allow a utility to achieve a certain target revenue when the utility helps its customersupgrade to more efficient appliances so they will actually use less power. The utility might be allowed tocharge a flat monthly fee or raise its rates in order to guarantee the target revenue.This makes the utility indifferent to selling less energy and improves the ability of energy efficiency andDG to operate within the utility framework. The overall goal, therefore, is to remove both the incentiveto increase electricity sales and the disincentive to run effective energy efficiency programs or invest inother activities that may reduce load. Decision-making then refocuses on making least-cost investmentsto increase efficiency and reduce throughput. The result is a better alignment of shareholder andcustomer interests to provide for more economically and environmentally efficient resource decisions.During a January 14, 2011 Joint Washington State Senate EWE and House TEC meeting, Puget SoundEnergy (PSE) and Avista Corporation supported decoupling in Washington State, probably due to therequirement for utilities to meet conservation goals. They expressed the opinion that conservation isincentivized by the rate-payers under the decoupling mechanism even when conservation budgetsalready come from rate-payers. Initiative 937 requires utilities to practice conservation first. Under thecurrent system, there is negative incentive for customers to conserve energy because the cost of theirbill per kWh rises if and when they do so. Increasing unrecovered fixed costs due to energy efficiencyneeds to end in order to ensure fair rates and good incentives in customer-utility relations.The second point made by Avista, and seconded by PSE, is that the rate-making process lags behind theoperating projections of utility companies and is also creating a disincentive against rapid conservationactions. Energy efficiency data increases in the test year are applied 14 months later, at a time whenefficiency has continued to increase. This means that the actual drop in sales due to energy efficiency isnot accounted for in the rate-making estimate for that following year. This means that utility costrecovery is insufficient when they conserve under this current scenario of lagging projections. Policy recommendations:  Decouple publically owned utility companies in Washington State  Count the forecasted efficiency in the cost recovery during the rate-making processNational Renewable Energy Laboratory: http://www.nrel.gov/docs/fy10osti/46606.pdfCommittee Meeting documents- House TEC Committee 01/14/2011:http://apps.leg.wa.gov/cmd/default.aspx Copyright 2011 – Cascade Power Group, LLC
  10. 10. Washington State Energy Policy RoadmapNet Metering: A Key IssueNet Metering is a widely used policy mechanism in the United States. It applies to situations whereutility customers also generate some of their own power, for example through a renewable source like asolar array. If the power supplied by the electric utility exceeds the electricity generated by thecustomer-generator and fed back to the electric utility during the billing period, the customer-generatoris billed only for the net electricity supplied by the electric utility. If electricity generated by thecustomer-generator exceeds the electricity supplied by the electric utility, the customer-generator is: (1)billed for the appropriate customer charges for that billing period; and (2) credited for the excesskilowatt-hours generated during the billing period, with the kilowatt-hour (kWh) credit appearing on thebill for the following billing period. On April 30 of each calendar year, any remaining unused kWh creditaccumulated during the previous year is granted back to the electric utility, without any compensationto the customer-generator.The size of a qualifying facility is regulated in two ways: first, an overall cap may be placed on how largea facility may be to qualify for net metering. A second option is to limit the facility capacity to theaverage annual use of the customer’s premises or the average annual usage of all the buildings that thefacility supplies. Under Washington’s current policy, each net metering system is limited to 100 kilowatts(kW) capacity. Qualifying technologies include Solar Thermal Electric, Photovoltaics, Wind,Hydroelectric, Fuel Cells, CHP/Cogeneration, and Small Hydroelectric.Net Metering in Washington StateCumulative Generating Capacity of Net Metering Systems - Electric utilities must make net meteringavailable to eligible customer-generators on a first-come, first-served basis until the cumulativegenerating capacity of net metering systems equals 0.25 percent of the utilitys peak demand during1996. On January 1, 2014, the cumulative generating capacity available to net metering systemsincreases to 0.5 percent of the utilitys peak demand during 1996.If required by the electric utility in order to provide meter aggregation, the customer-generator mustpurchase a production meter and necessary software. In calculating the bill of a customer-generator,kWh credits earned by a net metering system during the billing period first must be used to offsetelectricity supplied by the electric utility. Furthermore, any Renewable Energy Credits earned by thecustomer generator are granted to the utility company and so are any unused credits from the previousyear. Copyright 2011 – Cascade Power Group, LLC
  11. 11. Washington State Energy Policy RoadmapSummary of near-term changes:Through the Washington State House of Representatives: Technology, Energy & CommunicationsCommittee of 2011, HB 1049 - Concerning net metering of electricity was read as a substitute bill forcurrent Net Metering legislation. The bill was sponsored by Representatives McCoy, Frockt, Morris andMoeller. The bill was passed by the House TEC Committee and is now pending decision by the HouseRules Committee.The bill increases the allowable electrical generating capacity of a net metering system to fivemegawatts, and raises the aggregate generating capacity available to net metering systems in 2014from 0.5% to 5% of the utilitys peak demand during 1996. It also allows electric utility customers toparticipate in virtual net metering. It also specifies that renewable energy credits produced from a netmetering system remain the property of the customer-generator.Electricity Generating Cap on Net Metering Systems: The maximum electric generating capacity of a netmetering system is no more than five megawatts. For electric utilities that are full requirementscustomers of the Bonneville Power Administration, a net metering system must either an electricalgenerating capacity of no more than 199 kW and be metered by one meter; or an electrical generatingcapacity of up to five megawatts and be metered by multiple meters with no meter measuring morethan 199 kW.Requiring Virtual Net Metering: Electric utilities are required to provide virtual net metering to theircustomer-generators. Multiple customers may receive fractional net-metering credits from theproduction meter of a single net metering system, so long as the customers and meters are within thesame electric distribution system. Excess kWh credits earned by the virtual net metering system, duringthe same billing period, must be credited by the electric utility to remaining meters in proportion to thespecified fraction for each customer-generator.Renewable Energy Credits: All Renewable Energy Credits (RECs) produced from the generation ofelectricity from a net metering system belong to the customer-generator. For RECs generated throughvirtual net metering, the aggregator allocates assigned fractions of the RECs to customer-generators.Bill Analysis: http://apps.leg.wa.gov/documents/billdocs/2011-12/Pdf/Bill%20Reports/House/1049%20HBA%20TEC%2011.pdf Copyright 2011 – Cascade Power Group, LLC
  12. 12. Washington State Energy Policy RoadmapCalifornia Case StudyCalifornia leads the nation in solar energy, accounting for more than65% of the all the solar installed in the U.S. and net metering has beenabsolutely fundamental to that success. The realization of this meanscontinued green job growth, further energy bill savings, and progress inthe fight against climate change. The following is a list of leading "solarstates" for 2009, in terms of per capita installed capacity, measured byWatts (DC) per person:  20.8 California  20.2 New Jersey  14.6 Colorado  13.8 Arizona  11.8 FloridaEven with its large population, California continues to have the most capacity per person, with NewJersey closely following.Existing law requires California’s major electric utilities to make net metering available to customersuntil the total aggregate capacity of the program exceeds 5% of the utility’s peak demand. California’snet metering program serves more than 50,000 homes, schools and businesses. The recent legislationdoubling the net metering program capacity to 5% ensures that residents of California continue to havefair access to this renewables program for the near term.Because solar produces reliable power during peak hours when it is needed most, related investmenthelps lower costs for all ratepayers. Net metering has no direct impact on the state’s budget and allowsgovernment agencies and schools an incentive to install solar. California public agencies have alreadyinstalled over 51 MW of capacity, saving taxpayers more than $270 million in avoided utility payments.The policy supports photovoltaics, wind, fuel cells, and biogas from manure or as a byproduct of theanaerobic digestion of biosolids and animal waste. The system capacity limit is set at 1 MW, while theaggregate capacity Limit is 5% of utility’s peak demand. Any exported energy from the customer-generator is credited to customer’s next monthly bill at retail rate. After a 12 month period, thecustomer-generator may opt to have any unused credits roll over indefinitely, or to have the utility payfor any them at a nonretail rate. The customer generator also owns the RECs that are generated fromtheir clean energy facility. Copyright 2011 – Cascade Power Group, LLC
  13. 13. Washington State Energy Policy RoadmapTake-away message from the California case:  Raising the QF cap and requiring annual credit payout or rollover is beneficial for private sector investment.  Raising aggregate capacity limit per utility creates confidence in California’s renewable energy market.  Ensuring that RECs stay with the customer generator further rewards private investment in renewable energy.These gestures creates confidence in the reliability of net metering legislation supporting DG, this growsconfidence in the large investment it takes to personally deploy renewable energy technologies.Source: http://www.renewableenergyworld.com/rea/news/article/2010/02/california-legislature-raises-solar-net-metering-capFreeing the Grid: pg. 43: http://www.newenergychoices.org/uploads/FreeingTheGrid2010.pdf Copyright 2011 – Cascade Power Group, LLC
  14. 14. Washington State Energy Policy RoadmapNew Jersey Case Study:New Jersey has received a grade of "A" on their Net Metering Policy since2007; from the 2010 “Freeing the Grid” published by the Network for NewEnergy Choices in collaboration with other industry authorities. In oneyear, the state doubled the installed solar PV capacity from 1000 systemsin 2006 to 2000 systems installed in 2007. This was all set in motion due to the governor’s ambitiousgoals for reduction of GHG emissions: 1990 level emissions by 2020, 80% below 2006 levels by 2050.Under New Jersey’s Net Metering law, eligible renewable technologies are applicable in all sectors andinclude solar thermal electric, photovoltaics, landfill gas, wind, biomass, geothermal electric, anaerobicdigestion, tidal energy, wave energy, and fuel cells using renewable fuels. The system Capacity Limitmust be sized not to exceed the customer’s electricity consumption during the previous year. There isalso no aggregate capacity limit but the commission may prescribe a limit of 2.5% of peak demand oncethat limit is reached. Net excess generation is credited to customer’s next bill at retail rate and excess isreconciled at the end of annual period at avoided cost. The customer generator also owns the RECsgenerated from their QF.New Jersey bypassed burdensome and complex requirements for self-generation and took an aggressivepath to encourage private investment in renewable energy. It is important to note that the program’ssuccess owed much to the successful collaboration with the state’s utilities. This is what hasdifferentiated New Jersey’s efforts from those in other states, the close collaboration between the stateand the utilities. The most critical step toward successful collaboration is to align their incentives withthose of the state. This is another reason that decoupling and effective rate-making strategies forutilities are important focal points for state energy policy.Jeanne Fox, commissioner for the Board of Public Utilities in New Jersey, provides an estimatesuggesting that, under the Net Metering law, solar investment in combination with state and federalbenefits will take only 5 years to pay for itself. This is quite significant considering that the average life ofthe current solar PV technologies is estimated at around 20 years.Take-away message from the New Jersey case:  A facility-based cap on QF capacity size promotes private sector investment and reduces the need for an aggregate net metering cap per utility.  Government collaboration with state utilities furthers progress.  Supporting solar deployment through state incentives, coupled with net metering creates renewable energy that acts as peak shave during afternoon peak demand.Freeing the Grid: http://www.newenergychoices.org/uploads/FreeingTheGrid2010.pdfRenewable Energy Choices:http://www.newenergychoices.org/index.php?blog_entry_id=120&page=fullstory&rd=pages&sd=dfJeanne Fox: Commissioner -http://www.mitenergyconference.com/2010/files/EnergyConfPresentations/Workshops/SolarWorkshop/SolarWkshp-Fox-5Mar10.pdf Copyright 2011 – Cascade Power Group, LLC
  15. 15. Washington State Energy Policy RoadmapIssues associate with net metering:Grid Interconnection: An interconnection standard includes the technical requirements and the legalprocedures by which a customer-sited generator interfaces with the electricity grid. Generally, the utilitycompany must study and approve a proposed DG system within a framework established by the state’spublic utilities commission. Utility companies traditionally have determined which systems may connectto the grid and under what circumstances. This arrangement presents a conflict of interest that canresult in significant barriers to private sector investment. For example, a utility company might apply acomplicated set of procedures which are better suited to a 1,000 MW nuclear power plant than to a 2kW residential photovoltaic system, or impose steep fees, redundant safety requirements and otherobstacles.According to the Federal Energy Regulatory Commission (FERC), interconnection standards should beless stringent for small, simple systems and more stringent as system sizes increase. However, standardsshould also permit systems that are sized to meet even large on-site loads, such as CHP or WHR. Officeparks, government buildings or college campuses can potentially accommodate installations of 2 MW ormore just to serve a portion of their load. Increasingly, forward thinking states are providing this optionthrough net metering and interconnection policies.FERC is an independent agency that regulates the interstate transmission of electricity, natural gas, andoil. FERC establishes standards for interconnection and encourages state development of a timeline foreach step of the application process, for each type of generator. For a device like a rooftop PV system,where physical installation may take just two working days, paperwork and permits represent the singlelargest obstacle to quick installation. There is room for improvement in this area, and some states havedecided to streamline the process.Interconnection application fees, along with other fees, can create challenges, especially if these feesare unknown at the onset of project development. Reasonable fee levels have been established in theFERC procedures and have been subject to an extensive compromise and negotiation process.Freeing the Grid: http://www.newenergychoices.org/uploads/FreeingTheGrid2010.pdf Copyright 2011 – Cascade Power Group, LLC
  16. 16. Washington State Energy Policy RoadmapWashington’s Current Challenge for Net Metering: At the January 12th 2011 work session titled “UtilityPerspectives on changing electricity market conditions in Washington,” held by the House Technology,Energy and Communications and Senate Environment, Water and Energy Committees, utility companylobbyists presented a dilemma facing renewable energy deployment in this state. They explained thatthe existing interconnected wind power is injected into the grid whenever there is sufficient wind andthat this results in unpredictable variability such that hydroelectricity facilities fall into “negative prices.”This is depicted in the graph below and occurs when a hydro dam reaches its lowest generation capacitydue to low demand and essentially starts paying for the energy to be exported because it is operating atsuch a low efficiency. Note how the graph shows negative pricing in negative numbers along the rightmargin and how periods of negative pricing correspond closely with elevated wind generation. Thegraph shows the power drawn from the grid (Net Load in MW) at each point in time over the statedinterval (hours on the X axis). Washington State Legislature: Committee Meeting Documents - http://apps.leg.wa.gov/cmd/default.aspx?cid=TECThis suggests that renewable energies cannot be used only to meet peak loads, since they willfundamentally contribute to base load generation unpredictably unless energy storage exists to providecontrol over the supply of power from renewable technologies. There is also evidence that the cyclingup and down of conventional coal- or gas-fired generators to compensate for erratic winds is inefficient.These generators are designed for continuous operation, so intermittently powering them on and off Copyright 2011 – Cascade Power Group, LLC
  17. 17. Washington State Energy Policy Roadmapincreases both fuel consumption and carbon emissions. It is even suggested that this effectively cancelsout any projected carbon emissions reductions, but these issues have yet to be scientifically resolved.A View from the Right: http://aviewfromtheright.com/2010/09/05/wind-energy-just-a-bunch-of-hot-air/Energy Storage – A Solution of the Future: The perspectives given by the utility companies inWashington State have described an inherent problem with renewable energy and its role. Demand forelectricity fluctuates throughout the day, peaking around 4-5pm as everyone arrives home from work.Renewable energy deploys whenever the elements allow, making it unreliable in meeting demandlevels. Developing technology to store electrical energy so it can be available to meet demand wheneverneeded would represent a major breakthrough for renewable energy deployment and electricitydistribution. Electricity storage technology can manage the amount of power required to supplycustomers at times when need is greatest, which is during peak load. Storage would also help makerenewable energy, whose power output cannot be controlled by grid operators, smooth and deployable.From this, we may gather that the only large-scale solution for the variability of renewables is energystorage on a significant scale, well beyond what batteries can provide. Currently, energy storagetechnology is not market-ready, but the USDOE is investing in R&D through organizations such as thePacific Northwest National Laboratory to develop the science behind these concepts.In sum, the advantages of large-scale energy storage include:  Improved power quality and the reliable delivery of electricity to customers;  Improved stability and reliability of transmission and distribution systems;  Decreased costs for “peak-power” generation and delivery systems;  Increased use of existing equipment, thereby deferring or eliminating costly upgrades;  Improved availability and increased market value of distributed generation sources.Pacific Northwest National Laboratory: http://efrc.pnl.gov/challenges/US Dept. of Energy website: http://www.oe.energy.gov/storage.htm Copyright 2011 – Cascade Power Group, LLC
  18. 18. Washington State Energy Policy RoadmapNet Metering Policy Recommendations:Short term - pass HB 1049 regarding the net metering of electricity to accomplish:  5MW QF facility cap.  Raise the aggregate renewable energy capacity per utility to 5% in 2014.  Allow Virtual Net Metering.  Ensure that RECs remain with the customer generator.Long term:  Replace QF facility cap with limitations based on size of the facility and annual usage levels.  Eliminate aggregate cap on renewable energy capacity per utility.  Allow that Virtual net metering must deploy to surrounding facilities first and be limited to the annual usage of those facilities in order to protect grid reliability.  At the time when energy storage is widely deployed, revise Net Metering policy to couple with energy storage and revert back to QF capacities cap unlimited by facility usage.Interconnection:  Prohibit requirements for redundant external disconnect switch  Prohibit requirements for additional insurancePreparing for Energy Storage:• Reshuffle a portion of green technology R&D funding in the State to support research into energy storage technologies• Establish policy frameworks in anticipation of this technology. These frameworks should address questions like: o Who is responsible for energy storage, the producers of DG or the utility companies? o Is storage small and distributed or large and centralized? o Will WA State subsidize energy storage deployment when it is viable and if so, where will this budget come from? Copyright 2011 – Cascade Power Group, LLC
  19. 19. Washington State Energy Policy RoadmapSupporting Combined Heat & Power, Waste Heat Recovery and District EnergyCombined heat and power (CHP): A typical U.S. power plant is roughly 35% efficient. The other 65% ofthe starting energy content in the fuel is lost mainly to waste heat that’s vented into the atmosphere.Most plants cannot recycle this heat because they’re located remotely, far from consumers, and heatcannot travel far before insulation costs become high. This kind of energy production comes from so-called ‘central-station thermal power generation plants’ and is the dominant way of making electricity inthe U.S.CHP, also called cogeneration, provides an efficient, clean, and reliable approach by generatingelectricity and heat energy from a single fuel source and at the same site. CHP plants generate energyon-site at manufacturing facilities and other large industry and this enables these plants to recycle theirwaste heat into clean electricity and useful steam. This steam can then be used to warm nearbybuildings or to assist with various industrial processes.Instead of throwing away two-thirds of the energy, CHP plants utilize two-thirds or more of the energythey have at their disposal. “By installing a CHP system designed to meet the thermal and electrical baseloads of a facility,” the EPA says, “CHP can greatly increase the facility’s operational efficiency anddecrease energy costs.”Waste heat recovery (WHR): Waste heat recovery is related to combined heat and power. Like CHP, itturns excess heat into clean electricity and useful steam. The difference is that it captures the wasteheat a manufacturer is already emitting rather than producing all of the energy in-house.A waste heat recovery boiler contains a series of fluid-filled tubes placed throughout the area whereheat is released. When high-temperature heat meets those tubes, a vapor (traditionally steam) isproduced, which in turn powers a turbine that creates electricity. This process is similar to that of otherfired boilers, but in this case, waste heat replaces a traditional flame as the initial source of energy. Nofossil fuels are used in this process. Metals, glass, pulp and paper, silicon and other production plantsare typical locations where waste heat recovery can be effective.The potential for energy recycling: Widespread use of energy recycling could cut U.S. greenhouse gaspollution by an estimated 20%. As of 2005, about 42% of U.S. emissions came from the production ofelectricity and 27% from the production of heat. Achieving greater efficiency in these areas is thuscrucial to curbing climate change, and the first priority according to Initiative-937.A 2007 U.S. Department of Energy study found untapped potential for 135,000 MW of combined heatand power in the U.S. Meanwhile, a Lawrence Berkley National Laboratory study identified another64,000 megawatts that could be obtained from industrial waste energy recycling, not counting CHP.Together, these two forms of energy recycling could provide 40 percent of total U.S. electricity needs. Copyright 2011 – Cascade Power Group, LLC
  20. 20. Washington State Energy Policy RoadmapDuring their work session, the Senate EWE committee was presented with this graph on 01/25/11 called“Complying with federal air quality standards.” Committee Meeting Documents (01/25/11): http://apps.leg.wa.gov/cmd/default.aspxThis slide identifies home heating devises as making up the great majority of fine particulates airpollution in Tacoma. These devices could be replaced by district heating systems and large and smallcogeneration in both industrial and commercial sectors in Tacoma if the policy incentives were there todo so. It is also relevant to mention that the costs to US society from medical complications that occurdue to air pollution are rising. This implies that it is not only more efficient to deploy district energysystems, but a public health measure that would reduce air pollution and the social costs associatedwith it.EPA on CHP: http://www.epa.gov/chp/Source: Tanjima Pervin, Ulf-G Gerdtham and Carl H Lyttkens. Cost Effectiveness and Resource Allocation- Societal costs of air pollution-related health hazards: A review of methods and results:http://www.resource-allocation.com/content/6/1/19 Copyright 2011 – Cascade Power Group, LLC
  21. 21. Washington State Energy Policy RoadmapThe Clean Energy Standard Offer Program (CESOP): The Clean Energy Standard Offer Program is aregulatory approach designed to provide clean energy at a discount and to incentivize private sectorinvestment in the electric grid, while still protecting utility companies. The CESOP is structured toaccelerate the deployment of any generation technology that significantly reduces greenhouse gasemissions and saves 15% relative to the cost of delivered electricity from the best fossil fueled centralgeneration plant.Overview: Distribution utilities offer qualifying clean-energy plants long-term contracts for power at85% of the delivered cost from the best electric-only power plant. Qualifying clean-energy plants mustbe at least 60-percent annual fossil efficient or be non-carbon-emitting power plants such as renewablesor nuclear. Distribution utilities keep retail customers, fund interconnection facilities to qualified clean-energy plants, and earn returns on up-front investment. Qualified CESOP plants will not be considered amajor modification to industrial processes under the Clean Air Act, thus removing any threat of losing anoperating permit.Important Benefits of CESOP: 1. Induces profitable greenhouse-gas emission reductions. 2. Stimulates private-sector investments in cleaner, cheaper heat and power. 3. Provides benefits to all stakeholders, including the distribution utilities, manufacturers, and all retail customers. 4. Improves U.S. manufacturing competitiveness and preserves and adds industrial jobs.A number of WA state utility companies have expressed the concern that CESOP will interfere with thefederal Public Utility Regulatory Policy Act PURPA regulations. A case was settled in California inOctober/2010 that addressed this specific issue. Their conclusions are as follows:The July 15 order found that the California Public Utilities Commission’s (CPUC) decision to requireCalifornia utilities to offer a certain price to CHP generating facilities of 20 MW or less that meet energyefficiency and environmental compliance requirements would not be preempted by the FPA, PURPA, orCommission regulations, as long as the program meets certain requirements. The CPUC’s AB 1613 feed-in tariff would not be preempted by the FPA, PURPA, or Commission’s regulations as long as: The CHPgenerators from which the CPUC is requiring the Joint Utilities to purchase energy and capacity are QFspursuant to PURPA; and the rate established by the CPUC does not exceed the avoided cost of thepurchasing utility. Copyright 2011 – Cascade Power Group, LLC
  22. 22. Washington State Energy Policy RoadmapCESOP vs. Public Utility Regulatory Policy Act (PURPA) and the Clean Air Act: PURPA offers no benefitto consumers since utilities are required to pay QF’s the full avoided costs of new generation. CESOPprovides a 15% discount for QF power versus best new central generation. PURPA’s avoided costcalculation omits the costs of delivering power. CESOP avoided costs include this cost. CESOP raises thePURPA minimum efficiency requirement from 45 to 60-percent. This is important for encouraging CHPand WHR retrofit. PURPA requires qualified facilities to sell electricity to their host, which reduces thedistribution utility’s sales and can cause rate increases to other utility customers. CESOP plants are notallowed to sell electricity except through the distribution utility. Industrial facilities fear that recyclingtheir waste energy could jeopardize their operating permit under the Clean Air Act. CESOP specifies thatwasted energy recycling plants will not threaten the industry’s operating permit.PURPA provided further encouragement for developers of cogeneration plants. Section 210 requiresutilities to purchase excess electricity generated by QFs and to provide backup power at a reasonablecost. QFs included plants that used renewable resources and/or cogeneration technologies to produceelectricity. PURPA CHP operators must use at least 5% of their thermal output for process or spaceheating (10% for facilities that burn oil or natural gas). In many cases, this forced independent CHPoperators to accept very low rates for their steam production in order to become a qualifying facilityunder PURPA. Another problem is the rate at which utilities purchase a CHP operator’s excess powerproduction.Most states set the price at “avoided cost,” or the cost to the utility of producing that extra power.Utilities with excess power generation capacity are often allowed to have very low avoided costs. Thispractice has created barriers to CHP. Policy recommendations:  Implement a CESOP program with rates that incentivize investment (15% reduction on energy costs)  Dissolve any barriers to CHP or WHR investment due to institutional permitting or interconnection.Source - Recycled Energy Development Website: http://www.recycled-energy.com/main/cesop Copyright 2011 – Cascade Power Group, LLC
  23. 23. Washington State Energy Policy RoadmapOutput-Based Air Emissions Standards:The State of Washington 62nd Legislature 2011 Committee on Environment, Water & Energy areconsidering SENATE BILL 5118, sponsored by Senators Rockefeller, Ranker, Fraser, and Kline.This bill concerns output-based air emission standards, which are used to increase energy efficiency,improve air quality, and reduce greenhouse gas emissions. They require the department of ecology toconsider an output-based air emission standards approach when issuing decisions regarding permits,orders, and regulations.Since 2004 new fossil fueled power plants, or those facilities that increase capacity by 25MW or more,must mitigate 20% of their CO2 emissions over a 30 year period. Three options exist for this: 1. Pay anindependent qualified organization such as Climate Trust; 2. Directly purchase Carbon Credits (1.60/Mtof CO2); 3. Invest in clean energy projects, which, in the mentioned bill, include cogeneration or wasteheat recovery from industrial or commercial sources. Emission standards have typically been input-based (limit the amount of emissions that may be produced per unit of fuel burned), while the output-based method relates CO2 emissions to the productive output of the process (emissions per unit ofproduct). It focuses on more efficient production of electricity and heat. This must be considered inpermitting, orders and regulations.These standards are necessary to ensure that CHP and WHR are recognized by governmental agencies asgreenhouse gas mitigating technologies in a way that input-based standards cannot. Policy recommendation:  Implement output-based air emission standards as a required consideration by the US Dept. of Ecology in all permitting that can potentially require CHP or Waste Heat Recovery in the industrial or commercial sectors.Source from WA State Legislature Website:http://apps.leg.wa.gov/billinfo/summary.aspx?bill=5118&year=2011 Copyright 2011 – Cascade Power Group, LLC
  24. 24. Washington State Energy Policy RoadmapCase Studies in CHP:DENMARKThe widespread use of combined heat and power in Denmark is one of the mostimportant reasons that they have been able to reduce their carbon emissionswhile maintaining fairly consistent fuel consumption.Today, more than half of all electricity produced in Denmark is at CHP plants. Around 1.5 million housesand buildings are heated in this way, making them the largest share of electricity from CHP in theEuropean Union, at 55% of all electricity produced. The CHP plants are localized all over Denmark,ranging in size from small to large and in ownership from municipalities to industries and energycompanies. This diversity in location, scale and ownership has strengthened the overall security ofsupply. The net efficiency ratio of CHP plants in the country has reached 90-98% and alternative fuelsare also being explored, such as the world’s most efficient straw-fired CHP plant.With district energy systems in place, 9 out of 10 families pay less for their heating than the cost ofowning their own oil or natural gas boiler. The use of cleaner, diversified fuels in combination with CHPhas also reduced the carbon footprint of the country significantly, lowering CO2 emissions by 8-11million tons per year, which is 20% of the total national emissions from 2004.The first combined heat and power plant in Denmark was built in 1904 and supplied a large hospital withelectricity and heat. By the 1970s, around 30% of homes were heated from CHP district systems. Aftertwo oil crises in the 1970s, expansion of the fuel-efficient combined heat and power system to mediumand small-sized cities created a network of decentralized CHP plants throughout most of country. Thepast hundred years of development has meant that today Denmark has a total of around 670 centralizedand decentralized CHP plants. The largest plants are owned by large energy companies, while thesmaller plants typically are owned by production companies, municipalities or cooperative societies. Inaddition, 10% of all power in Denmark is generated from biomass and organic waste in these CHP plantsCentralized and decentralized CHP plants differ because centralized plants initially produced electricityand were located in large Danish cities, whereas decentralized power plants were originally heat plantslocated in medium-size and smaller cities. Since the 1980s Danish energy production has been subject todecentralization, which means the production of electricity and heat has come to be more fullydistributed throughout the country. The Danish Energy Agency has laid down the general conditions forestablishing and operating district heating systems. These are to ensure fair prices on heating forconsumers and the economy in general. According to Danish legislation, district heating is to be sold at aprice corresponding to the cost of producing and distributing, meaning that heat consumers benefitfrom the low costs. Copyright 2011 – Cascade Power Group, LLC
  25. 25. Washington State Energy Policy RoadmapTake-Away Message from the Denmark Case: • This example proves that decentralized CHP and District Energy systems may be realized with the correct incentives in place. • The incentives need to come from not only the method with which we analyze a plant’s efficiency, but also from an extra monetary incentives and market mechanisms to reduce emissions and conserve energy.Danish Energy Authority Source: http://www.ambottawa.um.dk/NR/rdonlyres/C3F9F1D4-BEA9-4C29-A1FD-1D7CC8617B84/0/combinedheat.pdfMore DEA, Source: http://www.ens.dk/en-us/info/news/factsheet/documents/kraftvarme%20170709.pdf Copyright 2011 – Cascade Power Group, LLC
  26. 26. Washington State Energy Policy RoadmapRoadblocks to Achieving the Vision StatementDisincentives within the energy industry to engage in major improvements or changes in operation formthe largest roadblock to the realization of the policy vision presented here.Specific hurdles include:• The current regulation of utility companies creates resistance to policies that encourage efficiency improvements, energy conservation, transition to renewables and pollution control.• Governing agencies and departments are unmotivated to spearhead institutional improvements or take on additional tasks like more permitting or paperwork.• Poor stakeholder and taxpayer representation at UTC, TEC and EWE committee public hearings means that the most consistent feedback that the committees receive is from full-time utility company lobbyists.• Concerning Net Metering: o Cost recovery for customer generators is not guaranteed if incentives are inadequate or policies are unreliable. o Cost of electricity can increases because of increases in aggregate net metering systems, but this can be offset by decoupling the utility company incentives to favor conservation.• Concerning CHP and WHR: o Inadequate inclusion of CHP and WHR into existing state policy vocabulary, causing roadblocks for such facilities from permitting and interconnection applications. o Monetary incentives are not implemented in policy because I-937 requires efficiency measures to be deployed as a priority, but so far has not encouraged CHP or WHR. Copyright 2011 – Cascade Power Group, LLC
  27. 27. Washington State Energy Policy Roadmap Summary of Policy RecommendationsDecoupling:  Decouple publically owned utility companies in Washington State  Count the forecasted efficiency in the cost recovery during the rate-making processNet Metering:Short term - pass HB 1049 regarding the net metering of electricity to accomplish:  5MW QF facility cap.  Raise the aggregate renewable energy capacity per utility to 5% in 2014.  Allow Virtual Net Metering.  Ensure that RECs remain with the customer generator.Long term:  Replace QF facility cap with limitations based on size of the facility and annual usage levels.  Eliminate aggregate cap on renewable energy capacity per utility.  Allow that Virtual net metering must deploy to surrounding facilities first and be limited to the annual usage of those facilities in order to protect grid reliability.  At the time when energy storage is widely deployed, revise Net Metering policy to couple with energy storage and revert back to QF capacities cap unlimited by facility usage.Interconnection:  Prohibit requirements for redundant external disconnect switch  Prohibit requirements for additional insurancePreparing for Energy Storage:• Reshuffle a portion of green technology R&D funding in the State to support research into energy storage technologies• Establish policy frameworks in anticipation of this technology. These frameworks should address questions like: o Who is responsible for energy storage, the producers of DG or the utility companies? o Is storage small and distributed or large and centralized? o Will WA State subsidize energy storage deployment when it is viable and if so, where will this budget come from?CESOP:  Implement a CESOP program with rates that incentivize investment (15% reduction on energy costs)  Dissolve any barriers to CHP or WHR investment due to institutional permitting or interconnection.Output Based Air Emissions Standards:  Implement output-based air emission standards as a required consideration by the US Dept. of Ecology in all permitting that can potentially require CHP or WasteLLC Recovery in the industrial or Copyright 2011 – Cascade Power Group, Heat commercial sectors.
  28. 28. Washington State Energy Policy RoadmapConclusion: Purposeful policy decisions are needed in Washington to improve the energy situation in thestate. Such improvement should involve private investment in renewable energy sources, stimulatingthe states economic growth, and enhancing the continued diversification, flexibility, and affordability ofenergy produced and consumed. Policies should be sensitive to the context of the energy mix inWashington and the Pacific Northwest, as well as stakeholder perspectives. Emissions measurementtechniques and institutional norms are not infallible. Adaptation requires questioning and improvingupon the status quo. Market mechanism policies such as Net Metering and CESOPs should reflect thecurrent characteristics of the energy industry, while also pressing for improvements through targetedincentives. Washington has a hydro-powered head start on transforming the U.S. energy industry intoan efficient and renewably focused system. By 2050, a carbon neutral power grid in Washington isachievable with smart and proactive policy decisions. Copyright 2011 – Cascade Power Group, LLC