Karin Corfee | Feed-in Tariff Case Studies


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Karin Corfee | Feed-in Tariff Case Studies

  1. 1. Feed-in Tariff Case Studies Institute for Analysis of Solar Energy Kickoff Symposium “Solar Energy: A Solution to Energy and Environmental Problems?” Karin Corfee April 24th, 2009 Experience you can trust.
  2. 2. Agenda • KEMA Overview • Case Studies recent projects on Feed-in Tariffs – California – Hawaii
  3. 3. KEMA Services Cover the Entire Energy Value Chain • Consulting Services • Customers in 70 countries • Technical and Operational • 1,700 employees, 50 offices in 20 Services countries • Testing and Certification • Incorporated in 1927 www.kema.com
  4. 4. What’s Happening in California?
  5. 5. California – Two State Agencies Evaluating Feed-in Tariffs • California Energy Commission (CEC) – Feed-in Tariff Docket (CEC Docket # 03-RPS-1078) • California Public Utilities Commission – CPUC Feed-in Tariff OIR (08-08-009)
  6. 6. California Energy Commission (CEC) Activities on Feed-In Tariffs • CEC Docket # 03-RPS-1078 – 2 recent reports on the topic of Feed-In Tariffs • Exploring Feed-in Tariffs for California: Feed-in Tariff Design Issues and Options – Publication No. CEC-2008-003 • California Feed-in Tariff Design and Policy Options – Publication No. CEC-2008-009D – KEMA supported development of both of these reports with support from Sustainable Energy Advantage, Wilson Rickerson and Exeter Associates – Both reports can be found on CEC website • http://www.energy.ca.gov/portfolio/documents
  7. 7. CA Feed-in Tariff Goals, Objectives & Policy Drivers CEC staff and Renewable Energy Goals: e.g. Committee identified ‘Policy Drivers’ -reduce GHG for feed-in tariffs: Objectives: e.g. -Reduce fossil • High priority: -20% RE by 2010 fuel use Quantity of renewable energy -33% RE by 2020 - manage Financial security ratepayer cost • Medium priority & risk Diversity ‘A’ = Diverse mix of -Etc. technology & operational characteristics Sustainable renewable Subject to constraints… • Available transmission energy • Siting/permitting Price stabilization • Feasible build-out time Lower priority • Cost-effectiveness Diversity ‘B’ = other policy • Environmental/resource objectives (e.g. biomass) sustainability 7
  8. 8. Key Benefits and Features of FITs Identified • Guaranteed price • Guaranteed buyer • Long-term guaranteed revenue stream • Generally, unbounded market regardless of completion date • Minimizes transaction costs • Minimizes complexity of responding to solicitations • Few buyers with irregular shopping schedules (timing of market) • Reduces buyer credit or financing concerns • Generally, guaranteed interconnection
  9. 9. Feed-in Tariff Issues and Options Source: Exploring Feed-in Tariffs for California: Feed-in Tariff Design and Implementation Issues and Options (referred to herein as the Issues & Options Report, KEMA 9
  10. 10. Feed-in Tariff Design Issues and Options (2) Source: Exploring Feed-in Tariffs for California: Feed-in Tariff Design and Implementation Issues and Options (referred to herein as the Issues & Options Report, KEMA 10
  11. 11. FIT Design and Policy Options for CA #1 #2 #3 Full-Market, unlimited size, > 20 MW, undifferentiated Differentiated Cost-based CREZ-Only, differentiated cost-based w/ value-based 3-yr pilot in 1 utility > 1.5 MW competitive benchmark, conditional triggered All All All Resource Type New + repowering New New, separate price for Vintage repowering No limit > 20 >1.5 Size If RPS<20% contracted by 2010, Now (available for 3-year automatically in 2010-11 Timing start in 2012-13 duration) (so projects developed with transmission) Full Market Pilot (limited time, 1 utility) CREZ-Only Scope Cost-based Cost-based with initial Value Based (time & peak Setting the Price differentiated auction without differentiated with CO2 & other adders) MPR to set competitive benchmark for subsequent tariff Long-term Long-term Long-term Contract Duration Not Applicable Differentiation by technology & Wind by size, geothermal, Tariff size biomass by size, solar by technology Differentiation Uncapped Capped at RPS targets; caps on Capped at CREZ 11 Limits more expensive technologies Transmission limit
  12. 12. FIT Design and Policy Options for CA #4 #5 #6 Solar > net metering pilot Sustainable biomass > 1.5 Full market < 20 MW cost- MW only, cost-based in 1 utility, cost-based based differentiated by technology & size with competitive benchmark Solar Biomass (sustainable) All Resource Type New New Vintage New, separate price for repowering > Net metering threshold >1.5 <20 Size Now Now Now Timing Pilot within one utility Full Market Full Market Scope Cost-based Setting the Price Cost-Based w/ Competitive Cost-based, calculated to benchmark consider sustainable yield of local biomass sources Long-term Short- or Medium Term Long-term Contract Duration By size, type By fuel and size Tariff Differentiation Differentiation by technology & size Uncapped Uncapped Limits Capacity limit will be 12 established for the sponsoring utility.
  13. 13. CA IOU Contracted Capacity for Renewable Generation IOU Contracted Capacity - Contracts IOU Contracted Capacity - MW Source: Energy Commission’s Database of Investor-Owned Utilities’ Contracts for Renewable Generation, Contracts Signed Towards Meeting the California RPS Targets webpage, updated January 18, 2009, http://www.energy.ca.gov/portfolio/contracts_database.html.
  14. 14. Recommendation of CEC Staff • Establish feed-in tariff initially for projects up to 20 MW – Cost-based, must take tariff offering long-term contracts – Open to all RPS-eligible resource types – For new projects (separate tariff could be explored for repowering) – No waiting – Technology- and size-differentiated • Consider recommended feed-in tariff as a potential bridge to broader scale implementation of feed-in tariffs for – Projects > 20 MW, Projects in CREZs • As greater experience is gained with smaller project feed-in tariffs • As transmission and other barriers are addressed • If conditions merit expansion 14
  15. 15. CPUC Feed-in Tariff Activities • CPUC approved Feed-in Tariffs in February 2008 (Phase I) – Originally authorized by AB 1969 (Yee, 2006) for generators < 1.5 MW owned by public water and wastewater facilities • Facilitates a streamlined interconnection process – Expanded to include “all customers” of the 3 IOUs – Statewide cumulative capacity up to 498 MW – Two contract choices depending upon customer choice • Full scale production • Excess sales (after on-site usage) • CPUC R.08-08-009 is currently considering Phase II – Expansion of installation size cap between 1.5 and 20 MW – Expansion of FIT to 3rd party ownership of RPS eligible facilities – Counting excess sales toward program limits – Does not include modification of tariff structure Source: CPUC
  16. 16. CA Small Renewable Energy Generation Tariffs - Price • Rate is currently determined 15 year Annual Average by Market Price Referent ($/MWh) (MPR) with Time of Delivery (TOD) adjustments IOU MPR Solar – Reference point of MPR is Estimate* set by law as a new PG&E $0.09 $0.11 Combined Cycle gas plant SCE $0.09 $0.13 – In AB 1969, the MPR (and annual #) is adjusted for SDG&E $0.09 $0.11 season and time of delivery * Solar produces largely on peak so receives a slightly higher average rate Source: CPUC
  17. 17. CPUC • SCE – Currently offers standard offer contracts for biomass projects up to 20 MW • Price set at MPR • 3 contracts offered (<1 MW, 1-5 MW, 5-20 MW) – 5-20 MW contracts include performance and development security requirements – SCE proposes in its RPS procurement plan to expand standard offer contracts to all renewable technologies • Two contracts will be offered: 1.5 -5 MW and 5-20 MW • PG&E – Proposing a Feed-in Tariff Pilot Program for Feed-in Tariffs • Streamlined the contracting process for RE generators of all sizes • CPUC “pre-approved contract • Price at or below MPR
  18. 18. Note the CPUC Energy Division Staff Proposal project size cut-off
  19. 19. Hawaii
  20. 20. Hawaiian Clean Energy Initiative Agreement (HCEI) • Energy Agreement among the State of Hawaii, Division of Consumer Advocacy (CA) and the Hawaiian Electric Companies (HECO Companies) • FIT Components to HCEI Agreement – PUC to determine the best design for FITs • March 2009 – PUC to adopt a set of FITs and prices • July 2009 – Utility PPA of RE made using the PUC approved FIT would be approved for rate recovery – Utility purchases of RE under the FIT would be counted towards the RPS
  21. 21. Hawaiian Public Utilities Commission (PUC) Order • Docket No. 2008-0273 – Investigate the Implementation of Feed-in Tariffs • Order Initiating Investigation – Filed on October 24, 2008 – Required HECO Companies and the Consumer Advocate to file a Joint Proposal on FIT Program Design • HECO Feed-In Tariff Program Plan – Developed by KEMA to support the development of the Joint Proposal • The HECO Companies and the Consumer Advocate filed a Joint Proposal on FITs (HI FIT Proposal) on December 23, 2008
  22. 22. HI FIT Proposal – Key Design Objectives • A FIT is best suited for renewable energy projects that lend themselves to the use of standardized energy payment rates and power purchase contract terms and conditions, and which can be developed and interconnected to the utility grid in a relatively predictable and systematic manner
  23. 23. HI FIT Proposal – Key Elements • Renewable resources initially targeted in the proposed FIT are those that: – Do not require complex environmental and land use permitting. – Do not typically require extensive and lengthy interconnection studies or the need for significant interconnection requirements. – Do not trigger complex financial accounting issues relative to utility power purchase contracts. – Have already been, or are currently in the process of being implemented in Hawaii in commercial application.
  24. 24. FIT Program Eligibility • Proposal is that a subset of renewable electricity technologies and project sizes will be targeted initially Hawaii Oahu Maui Island Lanai Molokai PV Systems ≤ 500 kW ≤ 250 kW ≤ 250 kW ≤ 100 kW ≤ 100 kW CSP Systems ≤ 500 kW ≤ 500 kW ≤ 500 kW ≤ 100 kW ≤ 100 kW In-Line Hydro Systems ≤ 100 kW ≤ 100 kW ≤ 100 kW ≤ 100 kW ≤ 100 kW Wind power systems ≤ 100 kW ≤ 100 kW ≤ 100 kW ≤ 100 kW ≤ 100 kW 24
  25. 25. HI FIT Proposal - Program Eligibility • The FIT Update (Phase II) will examine adding: – Wave energy generating systems – Landfill gas generating systems – Sewage based digester gas generating systems – Biomass, including biomass crops, agricultural and animal wastes, and municipal solid waste – Liquid biofuel-fired systems 25
  26. 26. HI FIT Proposal - Setting the Tariff Rate • Tariffs should be based on cost of generation plus a reasonable profit • The tariff rate should be based on the costs of developing a “typical” project • All costs and operating estimates will be Hawaii specific due to Hawaii’s unique geography that affects cost of generation to the best extent possible • Tariff rates should differentiate between: – Technology type – Project size – Project location 26
  27. 27. HI FIT Program Design Matrix • Hypothetical Values Island “X” Technical Attributes Annual Quantity Target Expanded Voltage/Frequency FIT Rate, Ride Through 2011 Curtailable 2010 ¢/kWh 100 kW <PV≤ Yes Required 8 MW 8 MW 22 250 kW Required … 2 MW 2 MW 18 30 kW ≤ PV ≤ Yes Required 5 MW 5 MW 23 100 kW Required … 2 MW 2 MW 19 Yes … 3 MW 3 MW 24 PV < 30 kW … … 1 MW 1 MW 20 27
  28. 28. HI FIT Proposal - Contract Duration • Contracts would be a standard length depending on the technology – New PV Systems – 20 years – New CSP – 10 years – Additional information is being gathered for in-line hydropower and small scale wind • Following the initial contract term, projects could be allowed to extend, subject to a new FIT rate 28
  29. 29. Interconnection • Interconnection of eligible renewable generation to follow Rule 14.H technical standards • Generators responsible for interconnection costs, consistent with current practices • Reasonable FIT generator interconnection costs will be considered in the development of the tariff rates, as differentiated by technology and size 29
  30. 30. Thank you Karin Corfee, KEMA Inc. Senior Principal Sustainable Market Strategies Tel: 510-891-0446, x4112 karin.corfee@kema.com Please visit our website www.kema.com Experience you can trust.