United States Energy Market
Content
Overview of Renewable Energy Incentive Programs
31/01/2011 Rev 4 Draft
United States Energy Market
Overview of Renewable Energy Incentive Programs
This document is intended to give an overview of the opportunities for renewable energy generation and investment in the United States energy market. The document has a slight focus towards Biomass Energy generation. This document is a work in progress. As information becomes available for incentive programs in other states it will be added to the relevant section within. This document contains forecasts of financial returns on some incentive programs. These figures can only be used as a guide and are only a calculation of the gross return.
Mike Sutherland
[email protected] +39 320 7950837
Gabrielle Gabrielloni
[email protected] Mike Sutherland | [email protected] | Page 1 of 14 +39 335 5423122
Overview of Renewable Energy Incentive Programs
UNITED STATES ENERGY MARKET
OVERVIEW OF RENEWABLE ENERGY INCENTIVE PROGRAMS
EXECUTIVE SUMMARY
The United States has one of the most talked about energy markets today. With the Kyoto protocols now in effect and the European markets starting to slow down, many businesses are now turning to the US renewable market. Unfortunately, the US has been slow to respond and, as yet, has not shown the growth that Europe has seen. This is in large part due to the fractured nature of the energy legislation, with little input coming at the federal level, leaving each state to implement independent policies. President Obama is in support of stronger clean energy goals, as demonstrated in his recent State of the Union address where he set a goal of sourcing 80% of US electricity needs from clean energy by 2030. However, until the federal legislative gap is plugged, it remains the job of progressive states to implement the policies to allow them to reach that goal. California already has clearly defined programs available for all renewable energy generation technologies. The feed-in tariff program allows smaller systems, up to 1.5MW to sell directly to the Utility. Larger plants have always had the opportunity to sign a Power Purchase agreement with a utility at a price negotiated on a contract by contract basis. New legislation has now opened up a middle ground for generators up to 20MW to participate in an auction where contracts are bid, with the price set by the seller. Other states, such as Texas, Arizona, New York, Colorado are also strongly pursuing renewable energy. Texas is rich in biomass resource as is much of the Eastern side of the United States. Colorado and New York and Arizona are all talking big on Solar programs. Currently, many of the programs that are in place seem to be more inwardly focused with incentives coming from tax breaks rather than feed-in tariffs. Feed-in tariffs have been implemented in some states, with incentives climbing as high as $0.60/kWh, putting them on the same playing field as those seen in Germany; however they are usually capped in some way as to render them ineffective. Despite, the various shortcomings, companies from within and outside the US seem to be rushing to get a piece of the US market.
Mike Sutherland | [email protected] | Page 2 of 14
Overview of Renewable Energy Incentive Programs
CONTENTS
Executive Summary ................................................................................................................................................ 2 Contents ................................................................................................................................................................. 3 1 1.1 1.2 1.3 1.4 California ................................................................................................................................................... 4 Feed-in tariff .............................................................................................................................................. 6 RPS Projects ............................................................................................................................................... 8 Renewable Auction Mechanism (Pending) ................................................................................................ 9 Small Generator Incentive Program (SGIP) ............................................................................................. 10 Glossary ...................................................................................................................................... 11 Energy comissions ...................................................................................................................... 13 Energy Utility Companies ........................................................................................................... 14
Appendix A. Appendix B. Appendix C.
Mike Sutherland | [email protected] | Page 3 of 14
Overview of Renewable Energy Incentive Programs
1
CALIFORNIA
California is arguably the most proactive state when it comes to renewable incentive programs. This state has had a long history as a leader in clean energy and solar in particular, but has been surpassed in recent times by the more aggressive incentive schemes seen in Germany, Spain and Italy. The recently elected governor, Jerry Brown, was at the forefront of California’s golden years and has promised to bring California back to her former glory. Fortunately he is able to carry on the momentum built through his predecessor, Governor Schwarzenegger’s already successful campaigns. California has aggressive goals to reach 33% renewable energy by 2020 with 20% of renewable energy coming from Biomass. The graph below shows the relative percentage of renewable generation along with predicted future values, as reported by the CPUC.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2005 2010 2015 2020 Biomass Biogas Geothermal Small Hydro Solar Wind
Figure 1 Percentage of RPS Generation (Source: CPUC website http://j.mp/RPS_resource_mix )
Mike Sutherland | [email protected] | Page 4 of 14
Overview of Renewable Energy Incentive Programs
California has introduced a number of incentive programs to encourage participation in renewable generation which have mainly been focused in the 1-20MW. Larger installations are covered under the negotiable RPS Power Purchase agreements. A Comparison of the Various Renewable Programs can be seen below.
Open to all renewable resources Open to solar facilities Open to wind and biogas Facilities over 1.5 MW in total system size Facilities under 1.5 MW in system size Financial Incentives Available Renewable Energy Credits transfer to utilities per contract terms Renewable Energy Credits retained by system owner Customers able to use "net metering" tariffs
Feed-In Tariffs X X X
California Solar Initiative
Self-Generation Incentive Program
Renewable Portfolio Standard Program X X X X
X X Rebates only for first 1 MW of generation X X Solar Only X X Rebates only for first 1 MW of generation X X Wind/Biogas Only
X
X ***
X
X See D.07-01-018 X
X See D.05-05-011 X
*** = Renewable Energy Credits transfer to the utilities only for the energy sold to the utilities. If some energy is used onsite under the Net Sales approach, the applicable Renewable Energy Credits stay with the system owner.
Mike Sutherland | [email protected] | Page 5 of 14
Overview of Renewable Energy Incentive Programs
1.1
FEED-IN TARIFF
Up to 1.5MW for SCE, PG&E and SDG&E. Up to 1.0MW for other IOUs 500MW ( See http://j.mp/fit-alloc ) PG&E (E-SRG:72MW, E-PWF:104MW) Biomass, solar, wind, geothermal, biogas, hydro, renewable fuel cells Non-negotiable, Based on MPR for the year the project comes online. SCE, PG&E, SDG&E and PacifiCorp use TOD. All others use annual average rate. http://j.mp/feed-in-tariffs
Project Size Program Cap Remaining Allocation Applicable Technologies Price Website
Participating Utilities Contract Term Preclusions
SCE, PG&E, SDG&E, PacifiCorp, Sierra Pacific Power Company (Sierra), Bear Valley Electric Service Division (Bear Valley) of Golden State Water Company, and Mountain Utilities (MU) 10, 15 or 20 years Unable to participate in any other Incentive program (SGIP, Net metering, California Solar Initiative) Full buy/sell is the export of all the electric generation. The excess sales option first offsets load and then exports and excess generation to the utility. SCE, PGE&E and SDG&E offer choice. All other IOUs offer buy/sell and may also offer excess sales. FERC-approved small-generator interconnection if connecting to the transmission grid. Commissioned-approved Rule 21 if interconnecting to the distribution grid.
Generation
Interconnection
These feed-in tariffs differ from the similarly named "feed-in tariffs" in Germany and Spain which include an incentive in the feed-in tariff price. The price in California is based on the value of electrical generation, but is not intended to embed a subsidy or rebate in the price offering.
Adopted 2009 Market Price Referents (Nominal - dollars/kWh)
Contract Start Date 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 10-Year 0.08448 0.08843 0.09208 0.09543 0.09872 0.10168 0.10488 0.10834 0.11204 0.11598 0.12018 0.12465 15-Year 0.09066 0.09465 0.09852 0.10223 0.10593 0.10944 0.11313 0.11695 0.12090 0.12499 0.12922 0.13359 20-Year 0.09674 0.10098 0.10507 0.10898 0.11286 0.11647 0.12020 0.12404 0.12800 0.13209 0.13630 0.14064 25-Year 0.10020 0.10442 0.10852 0.11245 0.11636 0.12002 0.12378 0.12766 0.13165 0.13575 0.13994 0.14424
Table 1 Adopted 2009 Market Price Referents ($/kWh)
Mike Sutherland | [email protected] | Page 6 of 14
Overview of Renewable Energy Incentive Programs
To calculate the price paid for renewable power, the metered energy is multiplied by the applicable MPR (see Table 1). The MPR table that is used is determined by the date of signing with the Utility. The date within the MPR table is the date the plant starts generating electricity. The result is then multiplied by the applicable TOD adjustment factor. These are specific to each Utility and are calculated as the energy is metered. A(t) = kWh of energy distributed onto the utility grid at time “t” B = MPR fixed at time of actual commercial operation C(t) = TOD adjustment factor for time “t” The price paid in $/kWh (Pt) for any given kWh produced and sold to the utility at time “t” would be calculated by the formula:
Pt At B Ct
Example 1: Feed-in Tariff Calculation
A 1.5MW Biomass Plant signs a 20 year contract with a Utility in 2010. The Plant will be connected to the grid in 2011. The base rate of $0.10098/kWh will be taken from the 2009 MPR table. If the plant runs for 8000 hours in a given year and outputs 1300kW net onto the grid, the annual return is around $1,050,192. Note: the TOD has not been taken into consideration so the actual return will differ from this value. When we calculate the average TOD (for PG&E) over the entire year we get around 1.01. This figure may differ for different Utilities.
UPDATE: A new ruling is in progress to expand the Feed-in Tariff program up to 3MW with a program cap of 750MW.
Mike Sutherland | [email protected] | Page 7 of 14
Overview of Renewable Energy Incentive Programs
1.2
RPS PROJECTS
No limit 33% RPS Energy goals by 2020 Biomass, Biogas, Hydro, Solar, Wind, Project Based, Negotiable with Utility http://j.mp/hFKLYH
Project Size Program Cap Applicable Technologies Price Website
RPS projects are negotiated directly with the Utility and contract prices are generally not disclosed. The examples below have been taken from actual contracts but are now 3-4 years old. The markets rates will have shifted slightly since then but they give a good guide as to the structure and approximate feed-in price paid. RPS projects are often above the market rate as the Utilities must meet certain quotas to fulfill their annual RPS goals. All RPS projects must be approved through the CPUC and the process for obtaining project approval can be quite lengthy.
Example 2 Biomass
A 49MW Biomass Plant signed a 10 year contract with SDG&E in 2008. The contract stated an expected output of 364,854 MWh with a guaranteed output of 300,468 MWh per year. The contract price each month is calculated using the applicable Energy Price + the applicable Capacity price. The Energy price is dependent on the year of generation and the Capacity price is dependent on the year and month of generation. For the month of January, 2008, the Energy Price was $40.200/MWh, the Annual Capacity Value was $268.00/KW-yr and the TOU Factor was 0.05912. The total contract price for this month was $1,539,791. We can work out the yearly returns and the total return over the 10 year contract. The yearly return decreases gradually over the duration of the contract with an average yearly figure of $20,257,126. The total return of the 10 year contract is $202,571,269. These values have all been calculated using the “Guaranteed output” of the plant. If the “Expected output” is used the total return is just over $240m. Note: These values can only be used as a guide as the price is negotiated on a contract by contract basis.
Example 3 Wind
A Wind farm was installed in 2007 with a total capacity of 223.6MW. The contract guaranteed 85MW (38.01%) capacity available to the Utility, PG&E with a guaranteed delivery of 265 GWh per year. The contract was for 15 years at a fixed contract price of $58.50/MWh up to 120% of the contract quantity. Above this the Utility will purchase the remaining energy at 75% of the contract price ($43.86/MWh). The Utility is not obliged to pay for any delivered energy that exceeds 85MW. Using the minimum values we get a minimum annual return of $15,502,500. The total return after the 15 years is $232,537,500
Mike Sutherland | [email protected] | Page 8 of 14
Overview of Renewable Energy Incentive Programs
1.3
RENEWABLE AUCTION MECHANISM (PENDING)
Up to 20MW 1000MW Unconfirmed Set by bidder. Auctioned to least cost bidder. http://j.mp/cpuc-ram
Project Size Program Cap Applicable Technologies Price Website
Participating Utilities Frequency of Auctions Contract Term Generation
SCE, PG&E, SDG&E Twice yearly by each Utility Undisclosed Full buy/sell is the export of all the electric generation. The excess sales option first offsets load and then exports and excess generation to the utility. SCE, PGE&E and SDG&E offer choice. All other IOUs offer buy/sell and may also offer excess sales.
The RAM model has only just been approved recently. The first auction is due to commence in the first quarter of 2011. As the contract price is set by the seller with the lowest bid and the full quota for the Utility holding the auction must be met, the possibility of above market rate prices exists.
Mike Sutherland | [email protected] | Page 9 of 14
Overview of Renewable Energy Incentive Programs
1.4
SMALL GENERATOR INCENTIVE PROGRAM (SGIP)
Up to 3MW but 100% incentive is only for first 1MW. 50% for 2 MW and rd 25% for 3 MW. Yearly budget allocation Wind, Renewable Fuel Cells, Advanced Energy Storage, non-renewable Fuel Cells One time Rebate http://j.mp/f7Liu8 PG&E, SCE, SoCalGas, or SDG&E
nd
Project Size Program Cap Applicable Technologies Price Website Participating Utilities
The SGIP program is intended for commercial or residential application where the customer intends to generate all or part of their energy consumption. The generated electricity is not sold to the Utility.
Base Incentive Levels for Eligible Technologies
Incentive Levels Eligible Technologies Incentives Offered ($/Watt) $1.50/W 30kW Renewable fuel cells Non-Renewable fuel cells Coupled with eligible self generation technology and four hour discharge period at rated capacity $4.50/W $2.50/W None 5 MW 1 MW 5 MW 1 MW Minimum System Size Maximum System Size Maximum Incentive Size
Level 2 Renewable Level 3 NonRenewable
Wind Turbines
Advanced Energy Storage
$2.00/W
None
5 MW
1 MW
Table 2 Base Incentive Levels for Eligible Technologies
Mike Sutherland | [email protected] | Page 10 of 14
Overview of Renewable Energy Incentive Programs
APPENDIX A. GLOSSARY
AMF
Above-MPR funds http://j.mp/mpr_info AMFs are allocated to RPS contracts where the price exceeds the MPR, provided certain conditions (Refer to Public Utilities Code § 399.15(d)
IOU
Investor Owned Utility http://j.mp/calif-IOU See
MPR
Market Price Referent http://j.mp/mpr_info The MPR represents the market price of electricity. The CPUC determined that the MPR is best reflected by the long-term ownership, operating, and fixed-price fuel costs for a new 500 MW natural gas-fired combined cycle gas turbine (CCGT). The baseload proxy CCGT is adjusted to account for the value of different products by applying the utilities time-of-delivery factors to the Commission adopted MPR value. It is used as a benchmark to assess the above-market costs of RPS contracts The MPR establishes the basis for the use of above-MPR funds (AMFs) which are awarded by the Commission pursuant to Senate Bill 1036 (Statutes 2007, ch. 685). or the SB 1036 section). The MPR can serve as a limit on the procurement obligations of retail sellers under the RPS program. If a utility exhausts its AMFs it is relieved of its obligation to enter into RPS contracts that exceed the MPR. However, a utility may voluntarily enter into contracts above the MPR and the Commission is authorized to approve such contracts. In all cases, RPS procurement costs - above and below the MPR - may be approved by the Commission and are recovered through rates. 2. The MPR establishes the price for California’s small renewable generator feed-in tariff program. (Refer to Refer to Public Utilities Code § 399.20 or the feed-in tariff section) The utilities’ next RPS solicitation is expected in Q1 2011 and the MPR will be updated at that time
RPS
Renewable Portfolio Standard http://j.mp/fa4cnv A regulation that requires the increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal
Mike Sutherland | [email protected] | Page 11 of 14
Overview of Renewable Energy Incentive Programs
TOD
Time of Delivery http://j.mp/fit-price Energy produced during utility peak hours commands a higher price reflecting the higher cost of generation during those hours. Conversely, energy produced during off-peak hours is less valuable to the utility and the tariff is varied accordingly
Mike Sutherland | [email protected] | Page 12 of 14
Overview of Renewable Energy Incentive Programs
APPENDIX B. ENERGY COMISSIONS 1.4.1 CALIFORNIA PUBLIC UTILITIES COMMISSION
Short Name Location Website CPUC California http://www.cpuc.ca.gov
The CPUC regulates privately owned electric, natural gas, telecommunications, water, railroad, rail transit, and passenger transportation companies. Regulate utility services, stimulate innovation, and promote competitive markets, where possible.
1.4.2 CALIFORNIA ENERGY COMMISSION
Short Name Location Website CEC California http://www.energy.ca.gov
The California Energy Commission is the state's primary energy policy and planning agency. Handles licensing for thermal power plants 50 megawatts or larger. Provides incentives for small wind and fuel cell electricity systems; and provides incentives for solar electricity systems in new home construction.
Mike Sutherland | [email protected] | Page 13 of 14
Overview of Renewable Energy Incentive Programs
APPENDIX C. ENERGY UTILITY COMPANIES 1.4.3 SOUTHERN CALIFORNIA EDISON
Short Name Location Website SCE California
1.4.4 PACIFIC GAS & ELECTRIC
Short Name Location Website PG&E California
1.4.5 SAN DIEGO GAS & ELECTRIC
Short Name Location Website SDG&E California
1.4.6 PACIFICORP
Short Name Location Website
California
1.4.7 SIERRA PACIFIC POWER COMPANY
Short Name Location Website
California
1.4.8 BEAR VALLEY ELECTRIC SERVICES
Short Name Location Website BVES California
1.4.9 MOUNTAIN UTILITIES
Short Name Location Website MU California
Mike Sutherland | [email protected] | Page 14 of 14
31/01/2011 Rev 4 Draft
United States Energy Market
Overview of Renewable Energy Incentive Programs
This document is intended to give an overview of the opportunities for renewable energy generation and investment in the United States energy market. The document has a slight focus towards Biomass Energy generation. This document is a work in progress. As information becomes available for incentive programs in other states it will be added to the relevant section within. This document contains forecasts of financial returns on some incentive programs. These figures can only be used as a guide and are only a calculation of the gross return.
Mike Sutherland
[email protected] +39 320 7950837
Gabrielle Gabrielloni
[email protected] Mike Sutherland | [email protected] | Page 1 of 14 +39 335 5423122
Overview of Renewable Energy Incentive Programs
UNITED STATES ENERGY MARKET
OVERVIEW OF RENEWABLE ENERGY INCENTIVE PROGRAMS
EXECUTIVE SUMMARY
The United States has one of the most talked about energy markets today. With the Kyoto protocols now in effect and the European markets starting to slow down, many businesses are now turning to the US renewable market. Unfortunately, the US has been slow to respond and, as yet, has not shown the growth that Europe has seen. This is in large part due to the fractured nature of the energy legislation, with little input coming at the federal level, leaving each state to implement independent policies. President Obama is in support of stronger clean energy goals, as demonstrated in his recent State of the Union address where he set a goal of sourcing 80% of US electricity needs from clean energy by 2030. However, until the federal legislative gap is plugged, it remains the job of progressive states to implement the policies to allow them to reach that goal. California already has clearly defined programs available for all renewable energy generation technologies. The feed-in tariff program allows smaller systems, up to 1.5MW to sell directly to the Utility. Larger plants have always had the opportunity to sign a Power Purchase agreement with a utility at a price negotiated on a contract by contract basis. New legislation has now opened up a middle ground for generators up to 20MW to participate in an auction where contracts are bid, with the price set by the seller. Other states, such as Texas, Arizona, New York, Colorado are also strongly pursuing renewable energy. Texas is rich in biomass resource as is much of the Eastern side of the United States. Colorado and New York and Arizona are all talking big on Solar programs. Currently, many of the programs that are in place seem to be more inwardly focused with incentives coming from tax breaks rather than feed-in tariffs. Feed-in tariffs have been implemented in some states, with incentives climbing as high as $0.60/kWh, putting them on the same playing field as those seen in Germany; however they are usually capped in some way as to render them ineffective. Despite, the various shortcomings, companies from within and outside the US seem to be rushing to get a piece of the US market.
Mike Sutherland | [email protected] | Page 2 of 14
Overview of Renewable Energy Incentive Programs
CONTENTS
Executive Summary ................................................................................................................................................ 2 Contents ................................................................................................................................................................. 3 1 1.1 1.2 1.3 1.4 California ................................................................................................................................................... 4 Feed-in tariff .............................................................................................................................................. 6 RPS Projects ............................................................................................................................................... 8 Renewable Auction Mechanism (Pending) ................................................................................................ 9 Small Generator Incentive Program (SGIP) ............................................................................................. 10 Glossary ...................................................................................................................................... 11 Energy comissions ...................................................................................................................... 13 Energy Utility Companies ........................................................................................................... 14
Appendix A. Appendix B. Appendix C.
Mike Sutherland | [email protected] | Page 3 of 14
Overview of Renewable Energy Incentive Programs
1
CALIFORNIA
California is arguably the most proactive state when it comes to renewable incentive programs. This state has had a long history as a leader in clean energy and solar in particular, but has been surpassed in recent times by the more aggressive incentive schemes seen in Germany, Spain and Italy. The recently elected governor, Jerry Brown, was at the forefront of California’s golden years and has promised to bring California back to her former glory. Fortunately he is able to carry on the momentum built through his predecessor, Governor Schwarzenegger’s already successful campaigns. California has aggressive goals to reach 33% renewable energy by 2020 with 20% of renewable energy coming from Biomass. The graph below shows the relative percentage of renewable generation along with predicted future values, as reported by the CPUC.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2005 2010 2015 2020 Biomass Biogas Geothermal Small Hydro Solar Wind
Figure 1 Percentage of RPS Generation (Source: CPUC website http://j.mp/RPS_resource_mix )
Mike Sutherland | [email protected] | Page 4 of 14
Overview of Renewable Energy Incentive Programs
California has introduced a number of incentive programs to encourage participation in renewable generation which have mainly been focused in the 1-20MW. Larger installations are covered under the negotiable RPS Power Purchase agreements. A Comparison of the Various Renewable Programs can be seen below.
Open to all renewable resources Open to solar facilities Open to wind and biogas Facilities over 1.5 MW in total system size Facilities under 1.5 MW in system size Financial Incentives Available Renewable Energy Credits transfer to utilities per contract terms Renewable Energy Credits retained by system owner Customers able to use "net metering" tariffs
Feed-In Tariffs X X X
California Solar Initiative
Self-Generation Incentive Program
Renewable Portfolio Standard Program X X X X
X X Rebates only for first 1 MW of generation X X Solar Only X X Rebates only for first 1 MW of generation X X Wind/Biogas Only
X
X ***
X
X See D.07-01-018 X
X See D.05-05-011 X
*** = Renewable Energy Credits transfer to the utilities only for the energy sold to the utilities. If some energy is used onsite under the Net Sales approach, the applicable Renewable Energy Credits stay with the system owner.
Mike Sutherland | [email protected] | Page 5 of 14
Overview of Renewable Energy Incentive Programs
1.1
FEED-IN TARIFF
Up to 1.5MW for SCE, PG&E and SDG&E. Up to 1.0MW for other IOUs 500MW ( See http://j.mp/fit-alloc ) PG&E (E-SRG:72MW, E-PWF:104MW) Biomass, solar, wind, geothermal, biogas, hydro, renewable fuel cells Non-negotiable, Based on MPR for the year the project comes online. SCE, PG&E, SDG&E and PacifiCorp use TOD. All others use annual average rate. http://j.mp/feed-in-tariffs
Project Size Program Cap Remaining Allocation Applicable Technologies Price Website
Participating Utilities Contract Term Preclusions
SCE, PG&E, SDG&E, PacifiCorp, Sierra Pacific Power Company (Sierra), Bear Valley Electric Service Division (Bear Valley) of Golden State Water Company, and Mountain Utilities (MU) 10, 15 or 20 years Unable to participate in any other Incentive program (SGIP, Net metering, California Solar Initiative) Full buy/sell is the export of all the electric generation. The excess sales option first offsets load and then exports and excess generation to the utility. SCE, PGE&E and SDG&E offer choice. All other IOUs offer buy/sell and may also offer excess sales. FERC-approved small-generator interconnection if connecting to the transmission grid. Commissioned-approved Rule 21 if interconnecting to the distribution grid.
Generation
Interconnection
These feed-in tariffs differ from the similarly named "feed-in tariffs" in Germany and Spain which include an incentive in the feed-in tariff price. The price in California is based on the value of electrical generation, but is not intended to embed a subsidy or rebate in the price offering.
Adopted 2009 Market Price Referents (Nominal - dollars/kWh)
Contract Start Date 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 10-Year 0.08448 0.08843 0.09208 0.09543 0.09872 0.10168 0.10488 0.10834 0.11204 0.11598 0.12018 0.12465 15-Year 0.09066 0.09465 0.09852 0.10223 0.10593 0.10944 0.11313 0.11695 0.12090 0.12499 0.12922 0.13359 20-Year 0.09674 0.10098 0.10507 0.10898 0.11286 0.11647 0.12020 0.12404 0.12800 0.13209 0.13630 0.14064 25-Year 0.10020 0.10442 0.10852 0.11245 0.11636 0.12002 0.12378 0.12766 0.13165 0.13575 0.13994 0.14424
Table 1 Adopted 2009 Market Price Referents ($/kWh)
Mike Sutherland | [email protected] | Page 6 of 14
Overview of Renewable Energy Incentive Programs
To calculate the price paid for renewable power, the metered energy is multiplied by the applicable MPR (see Table 1). The MPR table that is used is determined by the date of signing with the Utility. The date within the MPR table is the date the plant starts generating electricity. The result is then multiplied by the applicable TOD adjustment factor. These are specific to each Utility and are calculated as the energy is metered. A(t) = kWh of energy distributed onto the utility grid at time “t” B = MPR fixed at time of actual commercial operation C(t) = TOD adjustment factor for time “t” The price paid in $/kWh (Pt) for any given kWh produced and sold to the utility at time “t” would be calculated by the formula:
Pt At B Ct
Example 1: Feed-in Tariff Calculation
A 1.5MW Biomass Plant signs a 20 year contract with a Utility in 2010. The Plant will be connected to the grid in 2011. The base rate of $0.10098/kWh will be taken from the 2009 MPR table. If the plant runs for 8000 hours in a given year and outputs 1300kW net onto the grid, the annual return is around $1,050,192. Note: the TOD has not been taken into consideration so the actual return will differ from this value. When we calculate the average TOD (for PG&E) over the entire year we get around 1.01. This figure may differ for different Utilities.
UPDATE: A new ruling is in progress to expand the Feed-in Tariff program up to 3MW with a program cap of 750MW.
Mike Sutherland | [email protected] | Page 7 of 14
Overview of Renewable Energy Incentive Programs
1.2
RPS PROJECTS
No limit 33% RPS Energy goals by 2020 Biomass, Biogas, Hydro, Solar, Wind, Project Based, Negotiable with Utility http://j.mp/hFKLYH
Project Size Program Cap Applicable Technologies Price Website
RPS projects are negotiated directly with the Utility and contract prices are generally not disclosed. The examples below have been taken from actual contracts but are now 3-4 years old. The markets rates will have shifted slightly since then but they give a good guide as to the structure and approximate feed-in price paid. RPS projects are often above the market rate as the Utilities must meet certain quotas to fulfill their annual RPS goals. All RPS projects must be approved through the CPUC and the process for obtaining project approval can be quite lengthy.
Example 2 Biomass
A 49MW Biomass Plant signed a 10 year contract with SDG&E in 2008. The contract stated an expected output of 364,854 MWh with a guaranteed output of 300,468 MWh per year. The contract price each month is calculated using the applicable Energy Price + the applicable Capacity price. The Energy price is dependent on the year of generation and the Capacity price is dependent on the year and month of generation. For the month of January, 2008, the Energy Price was $40.200/MWh, the Annual Capacity Value was $268.00/KW-yr and the TOU Factor was 0.05912. The total contract price for this month was $1,539,791. We can work out the yearly returns and the total return over the 10 year contract. The yearly return decreases gradually over the duration of the contract with an average yearly figure of $20,257,126. The total return of the 10 year contract is $202,571,269. These values have all been calculated using the “Guaranteed output” of the plant. If the “Expected output” is used the total return is just over $240m. Note: These values can only be used as a guide as the price is negotiated on a contract by contract basis.
Example 3 Wind
A Wind farm was installed in 2007 with a total capacity of 223.6MW. The contract guaranteed 85MW (38.01%) capacity available to the Utility, PG&E with a guaranteed delivery of 265 GWh per year. The contract was for 15 years at a fixed contract price of $58.50/MWh up to 120% of the contract quantity. Above this the Utility will purchase the remaining energy at 75% of the contract price ($43.86/MWh). The Utility is not obliged to pay for any delivered energy that exceeds 85MW. Using the minimum values we get a minimum annual return of $15,502,500. The total return after the 15 years is $232,537,500
Mike Sutherland | [email protected] | Page 8 of 14
Overview of Renewable Energy Incentive Programs
1.3
RENEWABLE AUCTION MECHANISM (PENDING)
Up to 20MW 1000MW Unconfirmed Set by bidder. Auctioned to least cost bidder. http://j.mp/cpuc-ram
Project Size Program Cap Applicable Technologies Price Website
Participating Utilities Frequency of Auctions Contract Term Generation
SCE, PG&E, SDG&E Twice yearly by each Utility Undisclosed Full buy/sell is the export of all the electric generation. The excess sales option first offsets load and then exports and excess generation to the utility. SCE, PGE&E and SDG&E offer choice. All other IOUs offer buy/sell and may also offer excess sales.
The RAM model has only just been approved recently. The first auction is due to commence in the first quarter of 2011. As the contract price is set by the seller with the lowest bid and the full quota for the Utility holding the auction must be met, the possibility of above market rate prices exists.
Mike Sutherland | [email protected] | Page 9 of 14
Overview of Renewable Energy Incentive Programs
1.4
SMALL GENERATOR INCENTIVE PROGRAM (SGIP)
Up to 3MW but 100% incentive is only for first 1MW. 50% for 2 MW and rd 25% for 3 MW. Yearly budget allocation Wind, Renewable Fuel Cells, Advanced Energy Storage, non-renewable Fuel Cells One time Rebate http://j.mp/f7Liu8 PG&E, SCE, SoCalGas, or SDG&E
nd
Project Size Program Cap Applicable Technologies Price Website Participating Utilities
The SGIP program is intended for commercial or residential application where the customer intends to generate all or part of their energy consumption. The generated electricity is not sold to the Utility.
Base Incentive Levels for Eligible Technologies
Incentive Levels Eligible Technologies Incentives Offered ($/Watt) $1.50/W 30kW Renewable fuel cells Non-Renewable fuel cells Coupled with eligible self generation technology and four hour discharge period at rated capacity $4.50/W $2.50/W None 5 MW 1 MW 5 MW 1 MW Minimum System Size Maximum System Size Maximum Incentive Size
Level 2 Renewable Level 3 NonRenewable
Wind Turbines
Advanced Energy Storage
$2.00/W
None
5 MW
1 MW
Table 2 Base Incentive Levels for Eligible Technologies
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Overview of Renewable Energy Incentive Programs
APPENDIX A. GLOSSARY
AMF
Above-MPR funds http://j.mp/mpr_info AMFs are allocated to RPS contracts where the price exceeds the MPR, provided certain conditions (Refer to Public Utilities Code § 399.15(d)
IOU
Investor Owned Utility http://j.mp/calif-IOU See
MPR
Market Price Referent http://j.mp/mpr_info The MPR represents the market price of electricity. The CPUC determined that the MPR is best reflected by the long-term ownership, operating, and fixed-price fuel costs for a new 500 MW natural gas-fired combined cycle gas turbine (CCGT). The baseload proxy CCGT is adjusted to account for the value of different products by applying the utilities time-of-delivery factors to the Commission adopted MPR value. It is used as a benchmark to assess the above-market costs of RPS contracts The MPR establishes the basis for the use of above-MPR funds (AMFs) which are awarded by the Commission pursuant to Senate Bill 1036 (Statutes 2007, ch. 685). or the SB 1036 section). The MPR can serve as a limit on the procurement obligations of retail sellers under the RPS program. If a utility exhausts its AMFs it is relieved of its obligation to enter into RPS contracts that exceed the MPR. However, a utility may voluntarily enter into contracts above the MPR and the Commission is authorized to approve such contracts. In all cases, RPS procurement costs - above and below the MPR - may be approved by the Commission and are recovered through rates. 2. The MPR establishes the price for California’s small renewable generator feed-in tariff program. (Refer to Refer to Public Utilities Code § 399.20 or the feed-in tariff section) The utilities’ next RPS solicitation is expected in Q1 2011 and the MPR will be updated at that time
RPS
Renewable Portfolio Standard http://j.mp/fa4cnv A regulation that requires the increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal
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Overview of Renewable Energy Incentive Programs
TOD
Time of Delivery http://j.mp/fit-price Energy produced during utility peak hours commands a higher price reflecting the higher cost of generation during those hours. Conversely, energy produced during off-peak hours is less valuable to the utility and the tariff is varied accordingly
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Overview of Renewable Energy Incentive Programs
APPENDIX B. ENERGY COMISSIONS 1.4.1 CALIFORNIA PUBLIC UTILITIES COMMISSION
Short Name Location Website CPUC California http://www.cpuc.ca.gov
The CPUC regulates privately owned electric, natural gas, telecommunications, water, railroad, rail transit, and passenger transportation companies. Regulate utility services, stimulate innovation, and promote competitive markets, where possible.
1.4.2 CALIFORNIA ENERGY COMMISSION
Short Name Location Website CEC California http://www.energy.ca.gov
The California Energy Commission is the state's primary energy policy and planning agency. Handles licensing for thermal power plants 50 megawatts or larger. Provides incentives for small wind and fuel cell electricity systems; and provides incentives for solar electricity systems in new home construction.
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Overview of Renewable Energy Incentive Programs
APPENDIX C. ENERGY UTILITY COMPANIES 1.4.3 SOUTHERN CALIFORNIA EDISON
Short Name Location Website SCE California
1.4.4 PACIFIC GAS & ELECTRIC
Short Name Location Website PG&E California
1.4.5 SAN DIEGO GAS & ELECTRIC
Short Name Location Website SDG&E California
1.4.6 PACIFICORP
Short Name Location Website
California
1.4.7 SIERRA PACIFIC POWER COMPANY
Short Name Location Website
California
1.4.8 BEAR VALLEY ELECTRIC SERVICES
Short Name Location Website BVES California
1.4.9 MOUNTAIN UTILITIES
Short Name Location Website MU California
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