Transcript FPSC Docket No. 060555-EI

Florida Public Service Commission
Renewable Portfolio Standards Workshop
Remarks On Behalf
Of
City of Tampa
Solid Waste Authority of Palm Beach County
Florida Industrial Cogeneration Association
July 26, 2007
Rich Zambo
Current Policies And Rules

Many of the Commission’s current policies and rules
affecting renewable energy are largely a product of
Federal Law - the Public Utilities Regulatory Policies
Act (“PURPA”) - enacted nearly 3 decades ago, in
1978, as part of the National Energy Act.

Those policies and rules reflect certain assumptions
regarding risk, reliability, pricing and performance –
some of which history has shown need to be revisited.
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Public Utilities Regulatory Policies Act
(PURPA)
 PURPA was enacted in 1978 as part of the National
Energy Act
 PURPA’s primary objectives were two-fold:


Reduce National dependence on imported fuels
Reduce the need for utility investment in new plant
 PURPA accomplished this by creating for the first time a
class of non-utility generators called “qualifying facilities”
or “QFs” – many of which are also “renewable energy
producers” under Florida law
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Qualifying Facilities - QFs
PURPA created two types of non-utility generators:

Small Power Producers use non-traditional “alternative”
energy resources such as biomass, solar, waste heat,
geothermal, wind, municipal solid waste, landfill gas, etc. what we today would call “renewable energy” resources

Cogenerators use traditional fuels but in a very efficient
manner by sequentially producing both electricity and useful
thermal energy from a single fuel source – what we today
might call “combined heat and power” or CHP
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PURPA Eliminated Regulatory
and Institutional Barriers To QFs
 Utilities are required to electrically interconnect with QFs
 QFs are exempt from utility regulation
 Utilities are required to purchase electricity from QFs at
the utility’s avoided cost
 Utilities are required to sell electricity to QFs at nondiscriminatory prices
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Florida’s PURPA Experience . . .
♦ When the Commission implemented PURPA in the early
1980s, Florida had a serious fuel diversity problem – a
heavy dependence on oil for electric production. In
response, the Commission established rules and policy that
based avoided costs for QFs on a statewide avoided coal
unit, as that best fit the operating characteristics of the
majority of QFs and provided uniformity across Florida.
♦ That policy was very successful during the time it was in
effect – from about 1983 through about 1990 – a time
period in which the vast majority of the existing QF
capacity was developed in Florida
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. . . Florida’s PURPA Experience
♦ About 1990, the Commission abandoned the statewide
avoided coal plant policy, opting for a “next planned
generating unit for each individual utility” approach.
♦ As a result of the change in policy, the capacity payments
available to QFs and – correspondingly – the amount of QF
capacity developed in Florida since that time has dropped
precipitously.
♦ The Commission has recently adopted new rules intended to
improve the climate for renewable energy. However, there
are important issues still to be addressed
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From PURPA to Renewable Energy and
Renewable Portfolio Standards
The Commission should take note of and apply the
experience gained and the lessons learned over the past
25 years in dealing with QF issues. This will expedite
the identification and implementation of policies and
rules that will realize the benefits associated with the
unique attributes of renewable energy facilities and
encompass the diverse technologies employed
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What is Renewable Energy?
♦ Depends on perspective and objective
 Resources
can vary significantly by region
 Resource can vary significantly by state
 Resources can be indigenous to states/regions
♦ Definitions should reflect these variations
 Should
include only Florida indigenous resources
 Should include, but not be limited to those resource
identified in Sections 366.91 and 366.92, F.S.
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Geography, Geology, Topography

The vast majority of Florida fuel needs are imported
from significant distances

Little of Florida electricity needs are imported from
bordering states

Florida has unique renewable energy characteristics
Geothermal, hydro and wind resources not significant
 Solar, solid waste, landfill gas, waste heat, biomass,
agricultural and forest product residues, ocean energy
and similar such resources are significant
 Other technologies that will develop in a fertile environment

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Florida Renewable Energy
♦ Sections 366.91, 366.92, and 377.803, F.S.
together define renewable energy to include:
♦ urban wood waste, municipal solid waste, landfill gas,
waste heat from sulfuric acid manufacturing operations,
hydrogen produced from sources other than fossil fuels,
biomass, solar energy, geothermal energy, wind energy,
ocean energy, waste heat, hydroelectric power, municipal
waste treatment operations, combustible residues or gases
from forest products manufacturing, agricultural and
orchard crops, waste products from livestock and poultry
operations and food processing
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Attributes of Renewable Energy Facilities
Many renewable energy facilities are typically:
♦ Dissimilar to utility plants in that their design, permitting and
construction cycle can be significantly shorter
♦ Dissimilar to utility plants in that the fuel source is not subject to
the types of price fluctuations or supply interruptions typically
associated with traditional fuels
♦ Dissimilar to utility plants in that they are either carbon neutral or
produce no significant greenhouse gas emissions
♦ Similar to utility base load coal plants in that they operate at high
capacity factors and can displace natural gas and oil generation
thereby reducing average energy costs and reducing emissions
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Establishing a Renewable Portfolio Standard . . .
♦ The Commission should not be too concerned at this
point with the potential magnitude of renewable energy
that may develop. Rather, the Commission should focus
on prices and policies that accurately represent the value
of renewable energy and then allow the markets to work.
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. . . Establishing a Renewable Portfolio Standard
♦ Similarly the Commission should not be too concerned
with the risk that prices for renewable energy might exceed
avoided cost. The risks are much higher if we fail to
encourage renewable energy.
♦ A case in point concerns two recent utility natural gas fueled
power plant additions approved by Commission. In less than
four years of operation, actual fuel costs have been some $450
million more than the projected fuel costs used to justify the
plants. This increase in costs – over 40% more than projected is passed on to the customers and not absorbed by the utility.
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. . . Establishing a Renewable Portfolio Standard
♦ The Commission should establish an appropriate goal, on a
percentage basis, for the amount of renewable energy to be
included in Florida’s electric generation fuel mix
♦ The Governor has indicated 20% which would be the minimum
and would also seem to be a reasonable starting point
♦ RPS should be established as a percentage of the electrical
energy sold at retail within Florida and measured in kWh or
mWh on a twelve month rolling average basis
♦ RPS should be phased-in requiring for example 10% by 2010,
then increasing in 2% increments until 20% of electricity sold at
retail in Florida must be produced by renewable energy by 2020
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Renewable Energy From Outside
of Florida – Tradable Credits
♦ Any tradable renewable energy credit system that would allow
a utility to meet its RPS should be limited to those renewable
energy resources located in Florida, and those out of state
resources from which the electricity associated with such
credit is actually delivered into Florida
♦ Out of state renewable energy resources should only apply
toward an RPS if the electricity from such resources is
actually delivered into Florida to offset electrical generation,
associated fuel use and environmental emissions within
Florida
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Avoided Cost Pricing
Avoided cost payments for renewable energy
facilities should be based on an avoided unit which
most closely resembles operational, fuel diversity
and price stability characteristics of the types of
renewable energy facilities, i.e.
♦ a base load solid fueled plant for larger capital intensive
base load renewable facilities
♦ a peaking gas or liquid fuel plant for smaller, non-base
load renewable facilities
♦ other depending on technology
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Contract Issues
Pricing is a very important element in promoting
renewable energy and the Commission should assure
that full avoided cost payments include all costs that
would otherwise be incurred by the utility and/or its
customers. But, it is also important that the contract
terms and conditions be fair and reasonable and not
serve as a disincentive to renewable energy.
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Some Issues Still To Be Addressed
 Why are “average” energy prices often significantly higher than
“avoided” as-available energy prices over the same time period?
 Why are “buy- through” prices often significantly higher than
“avoided” as-available energy prices over the same time period?
 Why are Florida utility non-regulated affiliates making substantial
investments in electric generation by renewable energy in other
states but not in Florida?
 Why is it acceptable for customers to bear all the risk of utility fuel
choices but unacceptable to bear any risk from renewable energy
facilities?
 Why do the terms and conditions of the “standard” offer contracts
differ from one utility to another?
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