Transcript FLORIDA’S EFFORTS TO DEVELOP A RENEWABLE PORTFOLIO STANDARD

FLORIDA’S EFFORTS TO
DEVELOP A RENEWABLE
PORTFOLIO STANDARD
Florida Department of Environmental Protection
Central District 13th Annual Power
Generation Conference
Michael G. Cooke
Ruden McClosky
July 30, 2009
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A Renewable Portfolio Standard is a
requirement that utilities generate, or
obtain, a percentage of electricity
using some form of “renewable”
energy.
“Renewable” energy generally
considered to be energy derived from
natural resources which can be
replenished [e.g. solar, wind,
geothermal, ocean current] but also –
waste heat, biomass, WTE
2
“Actually, I’ve always thought
that we [The Grateful Dead]
were like a public works,
really a utility as much
as anything else.”
Jerry Garcia
3
“Tipper and Al came to a show that
last time we were in Washington.
They’re nice people, a nice family.
We made every effort not
to frighten them.”
Jerry Garcia
4
Per U.S. DOE, as of May 2009, 29 states and
the District of Columbia have RPS policies
(mandatory) in place.
*Five states, North Dakota, South Dakota, Utah, Virginia, and Vermont, have
set voluntary goals for adopting renewable energy instead of portfolio standards
with binding targets.
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The American Clean Energy and Security
Act of 2009, which is a leading climate
change bill in Congress (passed by the
U.S. House of Representatives on
6/26/09), includes an RPS Provision.
American Clean Energy and Security Act
of 2009
(aggregate of renewable energy and electricity savings)
6%
9.5%
13%
16.5%
20%
by
by
by
by
by
2012
2014
2016
2018
2020
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Stuff that’s hidden and murky and
ambiguous is scary because you
don’t know what it does.
Jerry Garcia
7
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What are the advantages and
disadvantages of renewable energy
technologies?
8
“Our audience is like people who like licorice. Not everybody
likes licorice, but the people who like licorice really like
licorice.”
Jerry Garcia
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Some Advantages of Renewable
Energy
• Energy independence
• New technologies promote economic
growth
• Distributed generation
• Limited or no emissions of GHGs
• Some proven technologies (vs. carbon
sequestration technology)
9
“It’s pretty clear now that what looked like it might have been some kind
of counterculture is, in reality, just the plain old chaos of undifferentiated
weirdness.”
Jerry Garcia

Some Disadvantages of Renewable
Energy
• Certain forms of renewable energy are
intermittent – not useful for baseload
generation (therefore duplicative)
• Greater expense
• Distributed generation
• And …
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• Siting Issues
I’m goin’ where the wind don’t blow so strange
maybe off on some high cold mountain chain.
Jerry Garcia
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North Carolina – 12.5% RPS by 2021 for IOUs; 10% RPS
by 2018 for munis and coops.
Many wind resources in NC are concentrated along
mountain ridge crests in west and along the coastline in the
east – e.g. Outer Banks.
North Carolina Mountain Ridge Protection Act of 1983 –
protects many mountain ridges from development.
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If climate change policies are
implemented, development of
alternative energy technologies with
low GHG emissions will be needed.
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13
“Somebody has to do something, . . .
it’s just incredibly pathetic that
it has to be us.”
Jerry Garcia
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Major Federal and Florida Renewable
Energy Policy Initiatives
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Public Utilities Regulatory Policy Act of
1978 (PURPA).
Implementation of PURPA in Florida,
Section 366.051, F.S.
Florida Renewable Energy Generation,
Sections 366.91 and -.92, F.S.
Governor’s Executive Order 07-127
The 2008 Florida Energy Bill, HB 7135
(Chapter Law 2008-227): RPS Provisions
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KEEPING COSTS LOW: A Recurring
Theme of Federal and Florida
Renewable Energy Policies to Date.
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“Truth is something you stumble into
when you think you’re going
someplace else.”
Jerry Garcia
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PURPA &
Implementation of PURPA
in Florida
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Public Utilities Regulatory Policy Act of
1978 (PURPA), an overview

In 1978, Congress passed the Public
Utilities Regulatory Policy Act
(PURPA) with the purpose of
encouraging the development of
more efficient energy generation
from industrial waste heat and
renewables.
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Public Utilities Regulatory Policy Act of
1978 (PURPA), an overview
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PURPA requires utilities to purchase
power from established non-utility
Qualified Facilities (QFs).
QFs are small power producers and
cogenerators who sell power to
utilities.
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Public Utilities Regulatory Policy
Act of 1978 (PURPA), an overview
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at “avoided cost”
“Avoided cost” means the cost the
utility would have incurred by
producing the power itself or
purchasing from another supplier.
Federal Energy Regulatory
Commission’s (FERC’s) directed
states to implement PURPA.
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Implementation of PURPA in Florida,
Section 366.051, F.S.
Section 366.051, F.S., requires utilities to
purchase power from QFs and renewable
energy generators within their service
territories at the “full avoided cost.”
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Implementation of PURPA in Florida,
Section 366.051, F.S.
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The “avoided cost payment” is divided into two categories:
Capacity and Energy.
• “Capacity – The size of the customer base that has been
calculated, as well as how much money it would cost to
build a power plant to meet that demand. Once this is
determined, the payment is fixed. In order to get the full
payment, however, the generator must be operating
when needed, especially during peak times. If not,
penalties are enforced.”
• “Energy – The amount of fuel and maintenance that
would be required to operate a plant. Based on kilowatt
hours produced by the renewable energy generator and
sold to the utility, this payment fluctuates because of
changes in fuel prices.”
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RENEWABLE ENERGY
GENERATION – 2005,
2006 & 2008 FLORIDA
ENERGY BILLS
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Florida Renewable Energy
Generation, Section 366.91, F.S.
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In 2005, the Legislature created Section 366.91,
F.S., to promote the development of renewable
energy resources in Florida
Legislative goals –
• help diversify fuel types and decrease Florida’s
growing dependency on natural gas for electric
production,
• minimize the volatility of fuel costs,
• encourage investment within the state,
• improve environmental conditions, and
• make Florida a leader in new innovative
technologies.
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Florida Renewable Energy
Generation, Section 366.91, F.S.
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“Renewable energy” is defined as
“electrical energy produced from a method
that uses one or more of the following
fuels or energy sources: hydrogen
produced from sources other than fossil
fuels, biomass, solar energy, geothermal
energy, wind energy, ocean energy, and
hydroelectric power . . . and waste heat,
from sulfuric acid manufacturing
operations.”
Section 366.91(2)(d), F.S.
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Florida Renewable Energy
Generation, Section 366.91, F.S.
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Renewable Energy Contracts - This statute
requires public utilities to continuously
offer renewable energy contracts to
generators of renewable energy; the term
of the renewable energy contract must be
at least 10 years, with prudent and
reasonable costs associated with the
contract being recoverable from the
ratepayers through the appropriate
recovery clause. Section 366.91(3), F.S.
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Florida Renewable Energy
Generation, Section 366.92, F.S.
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RPS Goals - In 2006, the Florida
legislature added Section 366.92,
F.S., authorizing FPSC to establish
appropriate “goals” for renewable
energy generation in the state.
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July 2007
Office of the Governor, Executive Order
(Number 07-127)
NOW, THEREFORE, I CHARLIE CRIST, as
Governor of Florida, . . . request the Florida
Public Service Commission to take the
following actions for the electric utility
sector in order to open the market to clean,
renewable energy technologies, thus
avoiding future greenhouse gas emissions:
• Not later than September 1, 2007, initiate
rulemaking to require that utilities produce at
least 20 % of their electricity from renewable
sources (Renewable Portfolio Standard) with a
strong focus on solar and wind energy.
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2008 Florida Energy Bill, HB 7135
(Chapter Law 2008-227)
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On May 28, 2008, Governor Crist
signed the 2008 Florida Energy Bill
into law. This comprehensive energy
package was designed to increase
energy efficiency, develop renewable
energy technologies, and decrease
carbon emissions in Florida.
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2008 Florida Energy Bill, HB 7135
(Chapter Law 2008-227)
Specifically, as noted in 266.92, F.S., (re: RPS
goals) that it was the intent of the Legislature to:
• Promote the development of renewable energy
• Protect the economic viability of Florida’s existing
renewable energy facilities (yet may provide added
weight to solar pv and wind)
• Diversify the types of fuel used to generate electricity in
Florida
• Lessen Florida’s dependence on natural gas and fuel oil
• Minimize fuel volatility
• Encourage investment in the state
• Improve environmental conditions
• And – at the same time – minimize costs of power
supply to electric utilities and their customers
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I’m shopping around for something
to do that no one will like.
Jerry Garcia
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2008 Florida Energy Bill, HB 7135
(Chapter Law 2008-227)
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It required the Commission to
develop rules to establish a
Renewable Portfolio Standard (RPS)
and Renewable Energy Credit (REC)
trading system to encourage the
development of supply-side
renewable generation.
It reserved to the legislature the
right to ratify these rules.
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Renewable Portfolio Standard
(RPS) Rulemaking, Section
366.92, F.S.
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Per statute, the RPS rule would
require investor owned utilities (i.e.,
FP&L, Progress Energy, TECO, Gulf
Power, etc.) to supply renewable
energy to its customers directly or by
procuring renewable energy through
acquiring Renewable Energy Credits
(RECs).
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Renewable Portfolio Standard (RPS)
Rulemaking, Section 366.92, F.S.
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In developing the RPS rule, the
Commission was directed to evaluate the
current and forecasted levelized cost in
cents per kilowatt hour and current and
forecasted installed capacity in kilowatts
for each renewable energy generation
method through 2020; the Commission
was required to consult with DEP and the
FECC.
The Commission was directed to present a
“draft” rule to the Legislature by February
1, 2009.
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FLORIDA
RENEWABLE PORTFOLIO
STANDARD
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2008 Florida Energy Bill RPS
Rulemaking Timeline
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The PSC held first RPS rulemaking
workshop in July 2008.
October 2008: a staff draft RPS rule was
reviewed by PSC.
December 2008: a further proceeding was
held to consider the draft RPS rule.
January 2009: PSC voted on draft.
February 1, 2009: The RPS draft rule was
submitted to the Legislature.
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Summary of Draft RPS Rule as
submitted to Florida Legislature
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RPS Percentage and Timing
• 7 percent by 1/1/2013
• 12 percent by 1/1/2016
• 18 percent by 1/1/2019
• 20 percent by 1/1/2021
Eligible resources – only Florida renewable energy
resources as defined in Section 366.92(2), F.S. are
eligible [366.92(2), F.S., cross-references § 377.803,
F.S., to wit: hydrogen, biomass, solar energy,
geothermal energy, wind energy, ocean energy, waste
heat or hydroelectric power.]
Compliance mechanism – each IOU must produce
renewable energy percentage or purchase sufficient
RECs
Rate Cap – incremental compliance costs above
avoided cost limited to 2 percent
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Frequency of Review – FPSC to review
impacts at least every three years
Mandatory Standards – IOUs must comply
or face penalties of up to 50 basis points
on authorized return on equity. Provisions
for excused noncompliance (insufficient
supply of Florida renewable energy or
prohibitive costs) included in rule.
Encouragement of Solar/Wind – Carve out
of minimum of 25 percent of RPS must be
provided by solar and wind. 75 percent of
rate cap dedicated to Solar/Wind.
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Florida Renewable Energy
Potential Assessment
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Navigant Consulting was engaged to
provide assessment of technical and
economic potential for renewables in
Florida through 2020.
Navigant Consulting’s estimates of
achievable renewables start with a
base of 4.4 percent of existing
renewables.
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Florida Renewable Energy
Potential Assessment
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To project future renewable energy development,
Navigant Consulting identified key drivers that
could impact the renewable energy market.
The most significant of these drivers are:
• (1) fossil fuel prices,
• (2) cost of carbon under greenhouse gas emissions
policies,
• (3) federal and state renewable energy tax credits and
other incentives,
• (4) the availability and cost of debt and equity, and
• (5) the rate cap established for the purchase of RECs.
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Florida Renewable Energy
Potential Assessment
Navigant Consulting then created three scenarios for potential
renewable energy development in which the five key drivers
were used. These scenarios are summarized as:
• Unfavorable – low fossil fuel prices, 1 percent rate cap,
no extension of current government renewable incentives
per current policies, tight financial markets, and carbon
pricing of $10/ton by 2020;
• Mid-favorable – mid range fossil fuel prices, 2 percent
rate cap, partial extension of government renewable
incentives, moderate financial markets, and carbon
pricing of $30/ton by 2020; and
• Favorable - high fossil fuel prices, 5 percent rate cap,
government renewable incentives extended through
2020, widely available debt and equity, carbon pricing of
$50/ton by 2020.
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Florida Renewable Energy
Potential Assessment
Navigant Consulting concluded that:
• Under the unfavorable scenario for renewable
development, which includes a 1 percent rate cap,
renewable energy in Florida could be 5 percent of IOU
retail sales by 2020;
• Under the mid-favorable scenario for renewable
development, which includes a 2 percent rate cap,
renewable energy in Florida could be 11 percent of IOU
retail sales by 2020; and
• Under the most favorable scenario for renewable
development, which includes a 5 percent rate cap,
renewable energy in Florida could be 24 percent of IOU
retail sales by 2020.
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Florida Renewable Energy
Potential Assessment
Renewable Energy as a Percentage of IOU
Retail Sales
Unfavorable (No RECs)
Unfavorable
Mid-Favorable (No RECs)
Mid-Favorable
Favorable (No RECs)
Favorable
25.00%
Renewable Energy as % of Retail Sales
20.00%
15.00%
10.00%
5.00%
0.00%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
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2008 Florida Energy Act
Legislative Ratification
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Per legislative staff, ratification could
include (but not limited to) the following:
• Incorporating the rules into statue, or
• Directing the agencies to modify the rule; or
• Approving rules, but retaining oversight of any
subsequent amendments
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Source: Florida Senate Committee on
Communications and Public Utilities’
Report, “Legislative Process for Rule
Ratification of Renewable Portfolio
Standard and Cap-and-Trade Regulatory
Reform” (September 2008).
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Ratification Process – 2009
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SB 1154 – drafted by Senator King
• Adopted percentage requirements similar to
FPSC “draft” rule (including 20% by end of
2020)
• Changed the mix of eligible sources to include
nuclear energy and fossil fuel with CCS – Clean
Energy Portfolio Standard
• No more than 25% of the required amount of
clean energy each year could come from
nuclear/fossil fuel with CCS sources
• Passed Florida Senate
• Referred at end of session to Florida House;
did not leave committee in House
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Constantly choosing the lesser of
two evils is still choosing evil.
Jerry Garcia
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