Analysis of the use of Multipliers as a substitute for Set-Asides

1
Analysis of the use of Multipliers as a
substitute for Set-Asides

• December 6, 2007
• Presentation at FPSC Staff Workshop on RPS
• Bob McGee, Marketing Services Manager
• Gulf Power Company

2
Overview

• Caveats
• Terminology
• Assumptions
• Analysis
• Conclusions

3
Caveats

• Proposing only the use of multipliers as a
  substitute for set-asides, carve-outs and tiers
• Analysis requires the use of certain assumptions
  to make calculations
• Those assumptions are for illustrative purposes
  only

4
Terminology

• Set-asides
• Carve-outs
• Tiers
• Market-driven
• Multipliers

5
Assumptions

• RPS exists in Florida
• RPS compliers are required to purchase renewables
  at costs above avoided cost
• Some form of renewable, such as PV, is favored or
  is to be encouraged more than other renewables

6
Assumptions

• RPS structure
• 20 of Retail Sales
• Retail Sales projections from FRCC
• Exponential phase-in of 20 RPS mandate in 13yrs
• The Multiplier in effect at the commercial
  operation date of a PV generator is applicable
  for the life of that generator

7
Assumptions

• Cost curve for Photovoltaics (PV)
• from FSEC
• presentation to FPSC 1/19/07
• Cost of non-PV alternatives
• 5/kWh growing to 8/kWh
• Average PV generating capacity in Florida
• 4kWh/day/installed kW of PV
• from FSEC and verified

8
Analysis

• On Spreadsheet

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A
B
C
A/C
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14
E
D
F
D x E
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E
D
F
A
B
C
A/C
D x E
16
B
E
F
17
B
E
F
18
B
E
F
G
? F/BG -1
19
B
E
F
G
G/E
? F/BG -1
20
B
E
F
G
G/E
G/1.46
? F/BG -1
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K
L
B
E
K/1.46
H
J
L/E
J/B
KnonPV
E x H
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K
L
B
E
K/1.46
H
J
L/E
J/B
KnonPV
E x H
D x 0.1
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K
L
B
E
K/1.46
H
J
L/E
J/B
KnonPV
D x 0.1
E x H
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B
E
H
J
E x H
D x 0.1
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K
B
E
H
J
E x H
D x 0.1
? J/BK -1
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K
L
B
E
H
J
K non-PV
E x H
D x 0.1
? J/BK -1
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K
L
B
E
H
J
L/E
E x H
D x 0.1
K non-PV
? J/BK -1
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K
L
B
E
K/1.46
H
J
L/E
E x H
D x 0.1
K non-PV
? J/BK -1
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Conclusions

• Multipliers and Set-asides both place emphasis on
  a particular type of renewable generation
• Multipliers make no guarantee that kWh of a
  particular type will be generated

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Conclusions

• Multiplier method offers highest incentive in
  early years. Set-aside method sets highest
  mandate in last years.
• Multiplier offers an incentive to choose PV
  without removing market pressure to keep PV costs
  low
• Multiplier phases out logically and automatically
  in accordance with cost projections

32
Conclusions

• Multipliers can make RPS complier indifferent to
  higher actual cost of PV
• Multipliers can bring cost of RPS compliance
  using PV down to the cost of RPS compliance using
  other renewable sources

33
Conclusions

• But Multipliers must be set high enough to be
  effective
• Experience in other states indicates that
  multipliers of 2x or 3x are inadequate
• Failure of Multipliers in other states is not due
  to the mechanism itself, but due to the
  inadequate level at which the mechanism is set

34
Conclusions

• Even if all RPS requirements are met with PV
  using multipliers, a substantial portion of the
  original RPS target will be met
• Within the context of the overall mandate of an
  RPS, Multipliers allow market forces to work for
  the benefit of customers

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Questions?