renewables overview prez aug 2011 final - ora.ca.gov · changes in the solar pv industry were ......
TRANSCRIPT
August 2011
Implementing Renewables in California
2
Overview of Presentation
1. History of Renewables Legislation2. Challenges to implementing RPS3. Findings from DRA’s Green Rush Report4. Findings from DRA’s Solar Paradox Report 5. Conclusions and Recommendations
3
Renewable Portfolio Standard (RPS)
Required increasing Renewables by 1% per year Goal of achieving 20% by 2017 Required comparison to market price of energy Required above market costs to be paid through
above market fund Allowed for limiting procurement if prices were
too high
SB 1078 (Simitian 2002)
4
RPS Accelerated
Soon after SB 1078 chaptered, SCE reported Renewable contracts totaling 17% of their portfolio
2004 IEPR recommended accelerating Renewable goal to 20% by 2010
SB 107 maintained most provisions in SB 1078 Allowed for limiting procurement if prices were
too high
SB 107 (Simitian 2006)
5
Adopted Ratepayer Protections through Limits on Total Costs
Required consideration of indirect system costs Required comparison to market price of
comparable products Required above market costs to be paid through
Renewable trust fund Reaffirmed limiting procurement if prices are too
high
SB 1036 (Perata 2007)
6
33% RPS by 2020
Long-term goal of competitive & self sustaining supply of Renewables
Requires reporting on total cost of program each year
No penalty if all reasonable action taken to achieve goal
Requires CPUC to establish a cost limitation for each IOU
Limits procurement to resources that can be procured without exceeding de minimis rate increases
SBx1 2 (Simitian 2011)
7
Historical Renewable Energy Production to 2007 and Renewable Energy needed to meet
20% by 2010 and 33% by 2020
0
20000
40000
60000
80000
100000
120000
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Year
Gig
awat
t Hou
rs
Renewable Resources2.6% Average Historical Growth from 1997 to 2007
6.5% Annual Growth Required from 2010 to 2020 to Reach 33% by 2020
Source: CEC Net System Power / 2008 CEC Demand Forecast
Historical Renewable Development
8
RPS Implementation Challenges
Market Price Referent (MPR) doesn’t reflect total cost of implementing program
Accelerating Renewables affects market prices
Pressure to meet goal increases costs:Sub-optimal mix of resources and cost shifting
Stresses resource development
9
Acceleration to 2010 RPS Goal Increased Wind and Solar Bids
0
20
40
60
80
100
120
140
2002 2003 2004 2005 2006 2007
Year
Ave
rage
Pric
e ($
/MW
H)
Solar/PV Wind
10
RPS Not Achieving Hedge Against Natural Gas Prices
RPS contracts tied to natural gas prices Market based program decouples cost
from price Natural gas prices must be extremely high
to achieve any savings GHG emission prices must be high to
break even
11
Findings from DRA Green Rush Report
0
10000000
20000000
30000000
40000000
50000000
60000000
70000000
80000000
90000000
100000000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Ener
gy (M
Wh)
/ ye
ar
Online Generation Expiring Generation Contracted GenerationPending Approval Under Negotiation Annual RPS Target
Source: California Public Utilities Commission, 2nd Quarter 2010
2020 33% RPS Target
2010 20% RPS Target
Given contracts currently pending approval or under negotiation, California is in the ballpark of meeting 33% RPS by 2014 – six years ahead of schedule.
Utilities on-track to meet 33% by 2020
12
END OF FLEXIBLE COMPLIANCE
All IOUs RPS Procurement Pipelineby number of milestones reached
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GW
h
Nomilestonesachieved1 milestoneachieved
2 milestonesachieved
3 milestonesachieved
All milestonesachieved
33% RES
20% RPS
Risk Profile of Executed RPS Contracts
Data from the August 2010 Compliance Reports and Project Development Status Reports (PDSRs) filed by PG&E, SCE, and SDG&E.
13
Renewable Contracts Above MPR
PG&E 77% $123.46
SCE 41% $92.27
SDGE 47% $100.57
All 59% $104.08
IOU Share of Contracts above Applicable MPR
Average Applicable MPR(Levelized $/MWh post-TOD)
Findings from Green Rush Report
See DRA’s Green Rush Report on the web
14
AMFs to 2010 for RPS‐Eligible Contracts
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
Billions
$773,106,060 $6,007,377,760
AMFs allocated AMFs incurred to date
Data from August 2010 AMF Calculators. Figures in nominal dollars. Does not include $2 Billion in above market bi‐lateral contracts
15
Multiple Programs Created a Renewable Jungle
IOU Renewable Solicitations
IOU bi-lateral Contracts
Utility Owned Generation (UOG)
California Solar Initiative (CSI)
Feed-In-Tariffs (FIT)
Combined Heat and Power (CHP) / Qualifying Facilities (QFs)
Renewable Auction Mechanism (RAM)
Self Generation Incentive Program (SGIP)
Emerging Renewables Program (ERP)
Tradable Renewable Energy Credits (TRECs)
Net Energy Metering (NEM)
National Solar Homes Program (NHSP)
Solar Photovoltaic Program (SPVP)
16
RPS Programs by Technology and Size
SPVPBilateralBilateral
RFO PPAUOG
SPVPBilateral
RFO PPAUOG
Greater than 20 MW
RAMRAMSPVPRAM
1‐20 MW
FITRAM
SGIPFITRAMSPVPFIT
RAM
1‐3 MW
NEMNEMERPSGIP
ERPNEM
CSINHSP
Less than 1 MW
OtherWindSolar PV
17
Avoided and Marginal Energy Cost Benchmarks
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
SCE Marginal Cost PG&E Average EnergyCost
RPS Market PriceReferent (2009)
Solar PV Levelized Cost(low)
Solar PV Levelized Cost(high)
CPUC Approved Utility‐Owned Solar PV
$/kW
h
(Levelized $/KWh)
18
Findings from Solar Paradox Report
The purpose of the Solar Paradox Report was to determine how changes in the solar PV industry were impacting California ratepayers
In 2008, the wholesale prices for solar PV modules and materialsdropped significantly worldwide as a result of increased production coinciding with a sharp reduction in demand
In 2010, DRA conducted an analysis of the declining costs of solar PV materials and modules in California for the time period 2007 – 2010
Declining CSI Prices and Rising IOU Bid Prices
See DRA’s Solar Paradox Report on the web
19
DRA’s Paradox Analysis
Using the average installed cost of a CSI system ranging from 1 – 100 kW:Comparing the price changes to bid prices for utility-scale
solar PV projects (>10 MW) short-listed by the IOUs in their annual RPS RFO
DRA’s analysis found that:Retail solar PV prices in the CSI program have decreased
Utility-scale solar PV bid prices have actually increased
20
Smaller System CSI Prices are Declining
Analysis of CSI price trends revealed that the average price of a CSI system began to decline in Q1 2009 and has continued downward
Prices for systems < 10 kW decreased by 18.8% from a peak in October 2008
21
Larger System CSI Prices are Declining Even More CSI price declines are more dramatic in larger systems which could
be the result of economies of scale Prices for systems between 10 – 100 kW declined by 22.3% from a
peak in November 2008
22
Cost Impacts of CSI on Ratepayers for Each kWh Produced
CSI participating customers provided: Levelized incentive of $0.04/kWh Transmission and distribution system capacity Avoided cost of energy consumed:
Baseline electricity customer: $0.13 / kWh Top tier electricity customer: $0.40+ / kWh
CSI non-participating ratepayer costs: Levelized incentive of $0.04 / kWh Transmission and distribution capacity provided Uncollected revenue ($0.13 - $0.40+ / kWh)
CSI system savings: Avoided cost of marginal replacement energy Avoided cost of Renewable energy Reduced transmission and distribution system load
23
Conclusions
Solar PV installations in the CSI program are appropriately reflecting the declining prices occurring in the solar industry
Prior to the Solar Paradox Report, IOU bid prices did not reflect these market transformations: This could be attributable to the difficulty Renewable developers are
having with securing financing for their projects This could also be the result of the CPUC’s disinclination to reject solar
PV contracts that are uncompetitive in price
CSI is an effective mechanism for transforming the Solar PV market and excess CSI generation can be cost-effective for non-CSI participant ratepayers
24
Conclusions
20% by 2010 (2013) and 33% by 2020 Renewable goals are likely tobe achieved
Some Renewable programs are achieving the long-term goal of developing a competitive & self-sustaining supply of Renewables
Cost protections in original RPS legislation have not been achieved
MPR and above market fund has not been implemented in ways that limit overall costs as originally envisioned by SB 1078
Cost of achieving RPS goals is not reflected in current rates
25
Recommendations
Completely decouple Renewables from natural gas prices
Periodically assess cost of RPS compared with achieving Renewable and GHG goals by other measures
Integrate cost of RPS with other programs to ensure lowest overall system costs
Assess costs and effectiveness of various RPS programs to determine what is working and what is not
26
Recommendations
Reject higher-priced contracts: Approving high-priced contracts sends a signal to developers that the CPUC
does not consider cost containment for RPS Establish an annual volume weighted average contract price limit for each utility
in a given year Require an application instead of an advice letter for contracts that exceed above
market costs of $100 million
Use CSI program design as a model for the RPS program: The CPUC should use the CSI program design as a model for achieving 33%
RPS by approving lower cost projects over time to encourage the market to pass on savings to ratepayers
Establish an overall rate impact for meeting CSI goals and achieving RPS program goals
