Voluntary Green Power Programs and Renewable Portfolio Standards: Cooperative Competition Yields Better Results

Presented By Jay McCall

October 21, 2010

Environmental Markets

Environmental markets provide a flexible market-based mechanism for reducing greenhouse gas emissions and encouraging renewable energy development.

U.S. acid rain program !   Market-based program for reducing sulfur dioxide emissions. !   Achieved 100 percent compliance, at 20-30% of the estimated cost !   "Probably the greatest green success story of the past decade." The Economist

EU Emissions Trading Scheme/Kyoto Protocol !   Reduced greenhouse gas emissions by 2 to 5 percent vs. BAU according to

scientists from MIT and the International Energy Agency !   Carbon savings of 120 million to 300 million metric tons

U.S. Renewable Energy Certificate (RECs) markets !   Helped grow U.S. wind and solar capacity by 600% since 2002

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About 3Degrees

Services

!   Environmental Market Services

!   Utility Partnership Services

!   Green Power and Carbon Balancing Services

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3Degrees is an environmental commodities sales, trading and advisory firm, enabling its partners to utilize environmental markets to build value for their stakeholders.

Products

!   Renewable Energy Certificates

!   Carbon Offsets

Segments

!   Utilities & Load-Serving Entities

!   Project Developers & Owners

!   Businesses, Governments, & Non-Profits

!   LEED® Green Building Professionals

3Degrees’ Utility Partners

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Renewable Portfolio Standards: 31 and growing

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Utility Green Pricing Programs and RPS: Not Mutually Exclusive

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Green Power Marketing in Competitive Electricity Markets also coexist with RPS

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Competition between RPS and Green Power Programs

No double claims !   Environmental claims by voluntary purchasers retire the associated RECs

!   Nearly all states prohibit the use of RECs retired in the voluntary market for compliance with their RPS

Overlapping geographic boundaries !   Most RPS have a state or regional sourcing requirement

!   Green Power Programs (GPPs) typically more flexible but often incorporate local resources

Technology and Online Date preferences !   GPPs usually emphasize most marketable renewable technologies, such

as wind and solar, along with newer projects, all at a premium price

!   RPS may have separate targets for distinct classifications or tiers of technologies/fuels and online dates, but priority is least-cost compliance

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“New” Renewable Demand from RPS and Green Power Programs

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2008 2009 2010 2011 2012 2013 2014 2015

Thou

sand

s M

Whs

California West Midwest Texas

Mid Atlantic New York New England Southeast

Hawaii Heartland Florida Alaska

Green Power Programs

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Source: “Voluntary Green Power Market Forecast through 2015,” NREL, May 2010 and “An Examination of the Regional Supply and Demand Balance for Renewable Electricity in the United States through 2015,” NREL, March 2009

Pacific Northwest: Head Start on RPS with Utility Green Pricing Programs

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!   Over 40 GPPs in OR and WA, most of which pre-date their state RPS

!   3 of the Top 10 largest Utility Green Pricing Programs (PacifiCorp, Puget Sound Energy & Portland General Electric)

!   These 3 programs demand the equivalent full output of ten 50 MW wind farms per year*

!   Accelerated PNW renewable development ahead of RPS targets – one of largest wind developers in PNW cited voluntary market as its primary buyer in early 2000s**

*At 35% capacity factor **Formerly PPM Energy, now Iberdrola Renewables, http://apps3.eere.energy.gov/greenpower/conference/10gpmc05/stambler.pdf

GPPs Smooth RPS Imbalances and Promote Economies of Scale

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2010 2011 2012 2013 2014 2015

Thou

sand

s M

Whs

RPS Compliance Demand Green Power Program Demand

"New" Renewable Generation + 0% Planned "New" Renewable Generation + 5% Planned

"New" Renewable Generation + 15% Planned

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Source: “Voluntary Green Power Market Forecast through 2015,” NREL, May 2010 and “An Examination of the Regional Supply and Demand Balance for Renewable Electricity in the United States through 2015,” NREL, March 2009 and 3Degrees Group, Inc.

Qualitative GPP Contributions Toward Cost Effective Compliance

Satisfy additional consumer and stakeholder renewable demand !   RPS sets baseline, higher consumer preference expressed with GPP

!   Those consumers help bear some of the cost of bringing new renewable projects online

Stable demand signal for project developers, owners, and financiers !   Greater security with higher long-term demand and two separate markets

!   Green Power Programs typically less subject to regulatory change

!   GPP education and marketing improves public opinion of renewable energy

Reliable demand for RECs in excess of RPS compliance needs !   Provides utilities additional spot flexibility for excess RECs

!   Important for merchant facilities that sell RECs on spot market

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GPPs Accelerate Economies of Scale, a More Efficient Market

Green Power Programs are long-term, effective supporters of renewable development

!   Pacific Northwest well ahead of where it would be with only RPS

!   Silicon Valley Power, City of Palo Alto Utilities, and Roseville Electric customers supporting local and CA-wide Distributed Generation (DG) solar while DG future uncertain in CA RPS

!   Ameren customers supported first wind farms in MO before the RPS passed by ballot initiative

!   Education and awareness builds public support for renewable energy

GPPs can prepare market participants years in advance of first RPS years

Sum of GPP and RPS demand allows for improved economies of scale to accelerate construction of larger, more diverse renewable energy supply

Cooperative competition results in a more mature renewable energy market, yielding a more cost-effective achievement of RPS goals

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