Course on Regulation and Sustainable Energy in Developing Countries - Session 5

2,469 views
2,384 views

Published on

This session focuses on Renewable Portfolio System / Quota System and the creation of Green Certificates market. What quota of renewable energy can achieve in a country? How to design tradable green certificates and create a market liquid enough for investors? Are green certificates a viable option for countries with small generation capacity? This session analyses several existing green certificates markets (USA, India,...).

Chad Laurent, Esq. is a Senior Consultant and MCG's General Counsel specializing in renewable energy law and policy, sustainable business strategies, and renewable energy project development. He currently manages MCG's work with the U.S. Dept. of Energy providing technical assistance and training for the SunShot Solar Outreach Partnership where he presents at national conferences on the topic of creating solar energy opportunities within local communities. Mr. Laurent has provided legal analysis of Indonesia's Geothermal feed-in tariff policy, contributed to the drafting of a renewable energy law drafter's guide for the United Nations Environment Programme, and to a study on the legal ability of U.S. states to set feed-in tariff rates for the National Renewable Energy Laboratory. In addition, Mr. Laurent has consulted to the World Bank, DB Climate Change Advisors, the Mass. Dept. of Energy Resources, and the SEMI PV Group among other clients. Prior to attending law school, he was the Manager of Renewable Energy Programs for the Massachusetts Energy Consumers' Alliance. While in law school, Chad worked in the Massachusetts Executive Office of Energy and Environmental Affairs and interned in the Massachusetts Attorney General's Office in the Energy and Telecommunications Division. Chad's professional experience also includes work with the Environmental Defense Fund and the Rocky Mountain Institute. He holds a Juris Doctor (J.D.) from Suffolk University Law School where he was a Rappaport Honors Fellow in Law and Public Policy, and a Bachelors of Science (B.S.) from the University of Michigan in Environmental Policy & Behavior and Natural Resource Ecology & Management. He is admitted to the Massachusetts Bar.

Published in: Technology, Business
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
2,469
On SlideShare
0
From Embeds
0
Number of Embeds
411
Actions
Shares
0
Downloads
226
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

Course on Regulation and Sustainable Energy in Developing Countries - Session 5

  1. 1. RENEWABLE PORTFOLIO, GREEN CERTIFICATES AND OTHER POLICIES FOR DEVELOPING COUNTRIES WEBINAR 9 FEBRUARY 2012 Chad Laurent Senior Consultant - MCGs General Counsel Course on Regulation and Sustainable Energy in Developing Countries – Session 5 www.leonardo-energy.org/course-regulation-and-sustainable-energy- developing-countrieswww.mc-group.com
  2. 2. WHAT IS A RPS? • A Renewable Portfolio Standard (RPS) or Renewable Energy Standard (RES) or Quota System requires a percent of energy sales (MWh) or installed capacity (MW) to come from renewable resources. – There is often a target (e.g. 20% renewables by 2020) – There frequently is an incremental percentage increase over time. – Usual the utility or load serving entity is required to meet the RPS and comply with the percentage requirements.Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010www.mc-group.com
  3. 3. WHAT IS A RPS? • Publicly owned utilities can be exempted from the RPS, or given more lenient requirements • Various customer rate-class exemptions have also been offered (low-income ratepayers or commercial ratepayers).Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010www.mc-group.com
  4. 4. WHAT IS A REC? • Renewable energy certificates or credits (RECs, tradable RECs, TRECs, etc.) are often the mechanism used to quantify and verify RPS compliance. • Utilities may comply either by owning generation or purchasing RECs from independent power producers. – Some RPS policies create a separate agency which serves as the purchaser of all RECs (e.g. New York State, Illinois, USA) • An alternative compliance payment (ACP) is often set to account for shortfalls or to act as a penalty payment.Sources: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010; B. Grace, Sustainable Energy Advantage 2011. www.mc-group.com
  5. 5. WHAT IS A REC? • A REC is a tradable certificate, typically in electronic form • Represents 1MWh of generation from a specific plant • Carries type, location, timing, and emissions data • Can represent environmental “attributes” • RECs may be “bundled” with electricity or “unbundled” • REC can represent the “gap” REC Renewable Electricity Commodity Electricitywww.mc-group.com
  6. 6. WHY RECS?• Relatively simple, less costly verification• Low potential for fraud or double counting• Relatively low transaction costs of trading RECs• Potential price visibility• Buyers can procure just as many RECs as they need• Settlement over time rather than at the time the electricity is produced• Can avoid transmission constraint issueswww.mc-group.com
  7. 7. REC MARKETS AND PRICES • REC prices can vary widely. • Prices in Massachusetts between $15/MWh for Class I and $525/MWh for SRECs.Compliance market (primary tier) REC prices, January 2008 to December 2011Sources: Spectron Group (2012).www.mc-group.com
  8. 8. WIDE VARIABILITY IN DESIGN • Structure (who purchases RECs) • Standard levels (1% of load, 20% of load) • Resource eligibility (“traditional renewbles,” solar hot water, fuel cells) • Treatment of existing plants (“new” renewables only or separate REC classes for existing generator that would have otherwise qualified) • Tiers and bands (for “new” vs “old” plants, or for “cleaner” vs. “dirtier” renewables) • Methods to enforce • Cost caps • Contracting requirements • Role of Government funding mechanismsSource: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010www.mc-group.com
  9. 9. WIDE VARIABILITY IN DESIGN • Start and end dates • Application of standards (requirements for run-of-river hydro or sustainable biomass) • Enforcement/penalties (just the ACP or actual fines) • Flexibility mechanisms (purchasing future RECs or applying RECs across generation years) • Renewable energy credit (REC) trading mechanism (in-state only vs. out- of-state and tracking systems) • Voluntary MarketSource: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010www.mc-group.com
  10. 10. POTENTIAL DESIGN ISSUES • Too Narrow Applicability – If applied un-equally to suppliers will limit the impact of the RPS, Poorly • Balanced Supply-Demand Condition – Enough time to comply and build generation – If too low then no certainty for project development • Insufficient Duration and Stability of Targets – Standards must be durable and stable – Energy projects need long-term contracts in order to be financedSource: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010www.mc-group.com
  11. 11. ADDITIONAL DESIGN ISSUES • Insufficient Enforcement – Non-compliance, policy failure • Lack of Contracting Standards and Cost Recovery Mechanisms – Consider long-term contract standards for utilities • Imputed debt obligations • Undue Design Complexity – Complex policies that require considerable and detailed regulatory oversight may be unwieldySource: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010www.mc-group.com
  12. 12. EFFECTIVE DESIGN CRITERIA • Strong political support and regulatory commitment (longevity) • Clear and renewable energy eligibility rules • Predictable long-term targets (certainty) • Standards that are achievable given permitting challenges (transparency) • Credible and automatic enforcement – penalties should exceed cost of compliance (transparency) • REC purchase requirements tied to a credit-worthy entity and allow long-term contracts (certainty)Sources: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010, MCG Research, DBCCA www.mc-group.com
  13. 13. BEST PRACTICES/RECOMMENDATIONS • Diverse Electricity and REC Market – sufficiently liquid REC market – large number of market actors exist • Stable and Long term target – 10 years ahead (preferably 15 or more years), – long-term REC contracting options • Reasonable targets – targets must be set taking into account current and future supply-demand conditions – Reasonable cost considerations • Differentiated technology support – Tiers or different REC prices for more expensive technologiesSource: van der Linden, Nico, et al. “Review of International Experience with Renewable EnergyObligation Support Mechanisms.” ECN-C—05-025, May 2005. http://eetd.lbl.gov/ea/ems/reports/57666.pdf.www.mc-group.com
  14. 14. BEST PRACTICES/RECOMMENDATIONS • Utility is the compliance entity – electricity suppliers/utilities, (administrative cost implications). • Flexibility – banking and borrowing of RECs – recommended to limit borrowing to three months and banking to a maximum of 25% of the obligation. • Penalty revenues – Revenues used for further research and development or additional subsidies for the least competitive renewable technologies or energy efficiencySource: van der Linden, Nico, et al. “Review of International Experience with Renewable EnergyObligation Support Mechanisms.” ECN-C—05-025, May 2005. http://eetd.lbl.gov/ea/ems/reports/57666.pdf.www.mc-group.com
  15. 15. BEST PRACTICES/RECOMMENDATIONS • Harmonization – eligibility for the obligation system be in line with the EU Renewables Directive. • Government commitment – Strong and long-term political commitment • clearly defined monitoring and verification rules • adequate enforcement rules in case of non- complianceSource: van der Linden, Nico, et al. “Review of International Experience with Renewable EnergyObligation Support Mechanisms.” ECN-C—05-025, May 2005. http://eetd.lbl.gov/ea/ems/reports/57666.pdf.www.mc-group.com
  16. 16. IMPLICATIONS FOR DEVELOPING COUNTRIESSource: MCG research; REN21 (2011)www.mc-group.com
  17. 17. DEVELOPING COUNTRY TARGETS • There are many developing countries with renewable energy targets. • Few if any with Renewable Energy Certificate markets • Few if any cross-border trading or regional targets • REC concept started in and is tailored to deregulated electricity marketsSource: MCG researchwww.mc-group.com
  18. 18. IMPLICATIONS FOR SMALL MARKETS • Not unlike US States • Original 1996 model of the RPS no longer used in the US. • Most RPS and quota markets moving towards different or supplemental policies. – Feed-in Tariffs – Auctions – Technology specific targets • Few global examples of cross-border trading – New England (US) and Quebec CanadaSource: MCG researchwww.mc-group.com
  19. 19. US EXPERIENCE • 29 States and Washington DC and Puerto Rico have an RPS requirement. • 8 States have non-binding renewable energy goals.www.mc-group.com
  20. 20. US EXPERIENCE RP S P olicies www.dsireusa.org / January ME: 30% x WA: 15% x 2012 VT: (1) RE meets any 2000 MN: 25% x increase in retail sales x 2020* MT: 15% x 2012; NH: 23.8% New RE: 10% x x 2025 2017 2015 (Xcel: 30% x 2020) MI: 10% & (2) 20% RE & CHP x 2017 1,100 2025 MA: 22.1% x 2020 OR: 25% x 2025 (large ND: 10% x utilities)* 2015 MW x 2015* New RE: 15% x 2020 (+1% annually thereafter) 5% - 10% x 2025 (smaller utilities) SD: 10% x WI: Varies by RI: 16% x 2015 utility; NY: 29% x CO: 30% by 2020 (IOUs) 2015 2020 CT: 27% x NV: 25% x ~10% x 2015 OH: 25% x IA: 105 2025* 10% by 2020 (co-ops & large statewide 2025† 2020 PA: ~18% x munis)* MW IL: 25% x 2021† WV: 25% x NJ: 20.38% RE x 2021 2025 IN: 15% x 2025† CA: 33% x UT: 20% by KS: 20% x 2020 VA: 15% x † 2025* 2025* + 5,316 GWh solar x 2020 2025* 2026 MO: 15% x MD: 20% x AZ: 15% x 2025 OK: 15% x 2015 2021 NC: 12.5% x 2021 2022 DE: 25% x (IOUs) 2026* NM: 20% x 2020 10% x 2018 (co-ops & munis) DC (IOUs) DC: 20% x 10% x 2020 (co-ops) 2020 TX: 5,880 MW x PR: 20% x 2035 2015 HI: 40% x 2030 Renewable portfolio standard Minimum solar or customer-sited requirement Renewable portfolio goal Solar water heating eligible * † Extra credit for solar or customer-sited renewables Includes non-renewable alternative resourceswww.mc-group.com
  21. 21. IN THE US THE RPS HAS SUPPORTED WIND POWER DEVELOPMENTSource: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010www.mc-group.com
  22. 22. RP S P olicies w ith Solar/ DG P rovisions Source: www.dsireusa.org / January 2012WA: double credit for DG NH: 0.3% solar- electric x 2014 OR: 20 MW solar PV x 2020; MI: triple credit for solar- double credit for PV MA: 400 MW PV x 2020 electric NY: 0.4092% customer- sited x 2015 OH: 0.5% solar- CO: 3.0% DG x 2020 NJ: 5,316 GWh solar-NV: 1.5% solar x 2025; electric x 2025 1.5% customer-sited x 2020 electric x 20262.4 - 2.45 multiplier for PV IL: 1.5% PV x 2025 0.25% DG by 2025 W V: various PA: 0.5% PV x 2021 UT: 2.4 m ultiplier m ultipliers DE: 3.5% PV x 2026; for solar-electric MO: 0.3% solar- triple credit for PV † AZ: 4.5% DG x 2025 electric x 2021 NC: 0.2% solar x 2018 MD: 2% solar x 2022 NM: 4% solar-electric x 2020 DC DC: 2.5% solar x 2023 0.6% DG x 2020 TX: double credit for non-wind (non-wind goal: 500 MW) 16 states + Renewable portfolio standard with solar / distributed generation (DG) provision DC have an RPS with solar/DG Renewable portfolio goal with solar / DG provision Delaware allows certain fuel cell systems to provisions Solar water heating counts toward solar / DG provision † qualify for the PV carve-outwww.mc-group.com
  23. 23. US TRENDS • Increased stringency of RPS targets • Expanded use of resource-specific set-asides, especially for solar • Expanded applicability of RPS policies to publicly owned utilities • Some leniency given to publicly owned utilities in meeting RPS targets and obligationsSource: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United StatesWiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010www.mc-group.com
  24. 24. INDIA • 15% by 2020 • RECs, Feed-in tariffs, grants, • Authorizes tradable RECs, not technology specific • RECs designed to encourage renewable development in areas with higher potential without limiting development to the purchase obligation in those regions. • Generator can choose to either receive a preferential tariff rate, or use the RECs where the commodity energy is purchased at the weighted average power purchase cost of the distribution utility.Sources: Renewable Energy Certificate Registry of India, REN21, Indian Power Sectorwww.mc-group.com
  25. 25. SOME OTHER EXAMPLES? • China – 15% by 2020, 17% Wind by 2050 – No tradable RECs – Feed-in tariffs, grants, loan guarantees • UK – RPS with tradable RECs implemented in 2002 – Yearly changes and a feed-in tariff was adopted on top of RECs for small generationwww.mc-group.com
  26. 26. QUESTIONS? THANK YOUPresenter: Contact:Chad Laurent, Esq. T: +1 617.209.1986Senior Consultant chad.laurent@mc-group.comwww.mc-group.com

×