Florida Public Service Commission Renewable Portfolio Standards Workshop

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Florida Public Service CommissionRenewable
Portfolio Standards Workshop
Remarks On Behalf Of City of TampaSolid Waste
Authority of Palm Beach CountyFlorida Industrial
Cogeneration Association July 26, 2007 Rich
Zambo

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Current Policies And Rules

• Many of the Commissions 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
• PURPAs 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 utilitys avoided cost
• Utilities are required to sell electricity to QFs
  at non-discriminatory prices

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Floridas 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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. . . Floridas 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 Floridas
  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 Outsideof 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?