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Customer Perspective on Green Tariffs


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Presentation by Lori Bird, World Resources Institute
EUCI Conference "Utility Green Tariffs A – Z: Keys to Structuring Long-Term Renewable Contracts Directly with Utilities"
Denver, Colorado
September 13, 2019

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Customer Perspective on Green Tariffs

  1. 1. Lori Bird, World Resources Institute EUCI Green Tariffs Conference, Denver, September 13, 2019 CUSTOMER PERSPECTIVE ON GREEN TARIFFS
  2. 2. CUSTOMER DRIVERS FOR RENEWABLES Why do customers participate in green tariffs? • Meet GHG reduction goals • Meet renewable energy goals • Procure clean energy for facilities at scale • Potentially save on energy costs • Obtain fuel price stability benefits • Drive new and local renewable energy projects • Community benefits: reduced pollution, health benefits, water savings, fuel security
  3. 3. WHY DID GREEN TARIFFS EMERGE? • First programs initiated in 2013 • Customers wanted greater share of benefits from renewables – Fuel price stability – Access to large volume of renewables – Cost savings • Customers interested in large purchases – Large scale purchases should yield savings • Green tariffs have grown steadily over time; many programs expanded capacity as well
  4. 4. GROWTH IN GREEN TARIFF PROCUREMENT Source: WRI and REBA ~2.5 GW of green tariff transactions contracted
  5. 5. UTILITY GREEN TARIFFS EXPANDING Source: WRI and REBA • 30 utilities offer programs in 18 states • 7 new programs • Several other programs under development New Green Tariff Programs Green tariff(s) utilized Green tariff(s) but no deal(s) Considering green tariff One-on-one RE deal(s) Electricity retail choice No directaccess to RE LEGEND Georgia Georgia Power Customer Renewable Supply Procurement Approved Kentucky LG&E Schedule 69 Approved Michigan DTE Large Customer Voluntary Green Pricing Program (LCVGP), Rider 19 Approved Missouri KCP&L- MO, GMO Renewable Energy Rider, Schedule RER (40, 139) Approved South Carolina Duke Energy Green Source Advantage, Rider GSA Proposal at PUC Virginia Dominion Power Rate Schedule MBR, Large General Service Proposal at PUC Wisconsin We Energies Dedicated Renewable Energy Resource Pilot Approved
  6. 6. CUSTOMER INTERESTS AND NEEDS Large customers typically want: • Cost savings from renewables over time • Large volume of energy • New renewable energy projects • Cost certainty/fixed costs of renewables (e.g., no fuel cost variability) • Moderate term contracts • Contracting flexibility • Local renewable energy projects
  7. 7. CITIES VS. CORPORATE NEEDS/ISSUES Cities • Often focused on existing loads • Concern over costs; budget limitations and impacts of any rate increases on the community • Want local renewables in community • Want new renewables • Limitations in contracting ability challenges and procurement practices Corporations • Often can enroll new loads (e.g., new data center) • Want cost savings over time • Need large volume of energy • Want new renewables • Difficulty in long term contracting • May not own facilities
  8. 8. CUSTOMER CHALLENGES • Customer eligibility limitations • Price premium and overall lack of savings in some cases; uncertainty of cost savings • Limited supply of renewables (e.g. program caps or limited RE capacity available) • Limited timeframe to enroll • Challenge in understanding the impact of the tariff on customer costs • Contractual provisions • Penalties, limitations on account transferability • Changing loads over time
  9. 9. KEY STICKING POINTS: WHY HAVEN’T CUSTOMERS ENROLLED IN SOME PROGRAMS Reason for lack of subscription • High premium, or unattractive package offer to balance premium; no cost savings • Lack of fixed price benefit • Limited enrollment or challenging enrollment process • Doesn’t meet the needs of diverse set of customers • Program design does not meet customer goals / preferences • Limited set of customers provided input on tariff • High application costs Several programs have not been utilized by customers to date Green tariff(s) utilized Green tariff(s) but no deal(s) Considering green tariff One-on-one RE deal(s) Electricity retail choice No directaccess to RE LEGEND
  10. 10. WHAT ARE COMMON COMMISSION CONCERNS? Commission Concerns • Cost shifting to other customers • Stranded assets • Uncertainty about whether there is “public benefit” / impact to others • Regulatory restrictions (e.g. definitions of voluntary renewable energy programs) • Unreasonable costs / not prudent Several programs have not been approved by commissions
  11. 11. CITY PARTICIPATION IN GREEN TARIFFS Key elements that enabled the purchase: • Fuel cost savings • New renewables Bellevue Washington – Puget Sound Green Direct The city of Bellevue entered into Puget Sound Energy’s Green Direct program (Schedule No. 139) under a 20-year contract to supply 70 percent of the city’s municipal load with new wind and solar. Starting in 2019, the city’s Fire, Parks, and Finance and Asset Management departments plan to purchase 10.3 million kilowatt-hours (kWh) of renewable energy through the program, while the city’s Utility Department agreed to purchase 3.2 million kWh starting in 2021. With a fixed energy charge and credit structure, the city anticipates paying a premium for the first 10 years of participation and then to break even, followed by savings in future years. The city will use savings from a municipal energy conservation program to pay for the initial premium (City of Bellevue 2019). Other local government purchasers: Anacortes, Bellingham, Issaquah, Kirkland, Lacey, Langley, Mercer Island, Olympia, Snoqualmie, & Tumwater
  12. 12. CITY PARTICIPATION IN GREEN TARIFFS (2) Key elements that enabled the purchase: • Volume of renewables • Ability to offset the premium with other programs Minneapolis, MN and Xcel Renewable Connect In 2017, it joined Xcel Energy’s Renewable*Connect program under a 10-year contract that allows the city to source 17.8 million kWh from a blend of local solar and wind resources to match system average on- and off-peak demand. Although the program has a ~$0.008/kWh premium over standard retail electricity rates, the city increased its Community Solar Garden subscriptions, reaping cost savings that ultimately offset the cost of participating in Renewable*Connect. The RECs stay with the utility, so they do not count toward the city’s goal. But the contract structure allows the city to save money from the outset and potentially more over time. Xcel Energy has requested that the Minnesota Public Utilities Commission allow the city to obtain an additional 50 million kWh each year through the program under a five-year contract. That change would directly tie 70 percent of the city’s electricity consumption to renewable energy sources. (City of Minneapolis, 2017a, 2017b; Rotatori and Bonugli 2018)
  13. 13. KEY PROVISIONS FOR CUSTOMERS • Program Size / Period of Availability – the program may be limited in MWs; enrollment period is typically limited • Customer Cost Structure – depending on the structure, customers may receive a credit that keep costs around the same or potentially lower than their standard fuel cost • Renewable Capacity Limits – RE resources often limited in size; location and whether from new or existing resources are concern Examples of Program Size / Period of Availability • MI, Consumers: Enrollment is open for 3 years on a first come, first serve basis • VA, Schedule RG: Capped at 50 customers • WI, WeEnergies: 150 MW for existing customers
  14. 14. KEY PROVISIONS FOR CUSTOMERS • Customer Eligibility Limitations – limits on the total amount of renewable energy customers can procure • Aggregation of Customer Facility Demand – customers may be permitted to aggregate accounts to reach minimum thresholds for participation • Resource Selection – customers may provide input into which renewables are procured or be able to review Customer Limitations / Eligibility CO, Renewable*Connect:At the time of the customer’s initial subscription, renewal, or transfer, the maximum participationlevel is the lower of: • 100% of their previous year’s usage; or • 10% of the total capacity of Renewable*Connect.
  15. 15. KEY PROVISIONS FOR CUSTOMERS • Contract Length Commitment – some programs may offer several contract lengths (e.g. month-to-month to 30-year contracts), with the price varying with each • Termination Fees – customers may be charged for withdrawing before contracted time • ResourceAdditions – if new resources are procured for capacity additions, adjustments may affect the energy charge Contract Length Commitment CO, Renewable*Connect: Charge • Month-to-month contract = $0.0440 • 5-year term = $0.04157 (rounding to $0.042) • 10-year term = $0.04077 (rounding to $0.041) MN, Renewable*Connect: Resource costs: • Month-to-month & single event = based on a 10 year partially levelized cost for the resources • 5- & 10-year contract: based on wind and solar PPAs or the actual delivered costs
  16. 16. KEY PROVISIONS FOR CUSTOMERS • Administrative Costs – fees for managing the program may vary depending on the number of accounts utilizing the program, size of resource subscribed • REC Management Fees – in the instance the utility is not responsible for the RECs (e.g. with market-based rate models) there may be costs associated with the management or retiring of RECs Administrative Costs GA, C&I REDI: Initial fee: $0.00005 per kWh applied over contract term Ongoing: • Subscription level 50 MW or less: $0.001 per kWh • Subscription level 50 MW or greater: $0.0005 per kWh VA, Schedule RG: $2,000 application fee
  17. 17. WHAT MAKES FOR EFFECTIVE PROGRAM DESIGN? • Sufficient supply of renewables to meet customer demand • Fair pricing • Benefits shared with customers • New, local renewables • Equitable enrollment process (e.g., customers have sufficient opportunity to enroll) • Reasonable contract length • Fair tariff terms • Transparent program
  18. 18. ENGAGING CUSTOMERS IN GREEN TARIFF DESIGN • Obtain input from range of interested customers • Seek input from municipalities and corporates • Understand which terms are deal breakers • Address provisions that prohibit cities or certain types of customers from participating • Form partnerships early on in the process • Regular engagement
  19. 19. • Green tariffs have been a useful mechanism to expand customer access to renewables in regulated markets • Incorporating customer needs in the design of programs is essential • Providing customers with the inherent benefits of renewables is important • Consider ways to meet customer demand • Manage enrollment processes to enable equitable participation • Regular engagement with customers CONCLUSIONS
  20. 20. THANK YOU