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Increasing the Use of Clean Energy Supply in Florida Removing Key Barriers and Creating New Opportunities

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Title: Increasing the Use of Clean Energy Supply in Florida Removing Key Barriers and Creating New Opportunities


1
Increasing the Use of Clean Energy Supplyin
FloridaRemoving Key Barriers and Creating New
Opportunities
  • Ted Bronson
  • Power Equipment Associates, for US Environmental
    Protection Agency
  • Florida PSC Renewable Energy Workshop
  • January 19, 2007

2
Overview of Presentation
Introduction
Standardized Interconnection Rules
Utility Rates
Renewable Portfolio Standards
Contact Information
3
What is Clean Energy?
  • Clean energy includes demand- and supply-side
    resources that deliver clean, reliable, and
    low-cost ways to meet energy demand and reduce
    peak electricity system loads. Clean energy
    resources include
  • Energy Efficiency reduces demand for energy and
    peak electricity system loads. Common energy
    efficiency measures include hundreds of
    technologies and processes for practically all
    end uses across all sectors of the economy.
  • Renewable Energy is partially or entirely
    generated from non-fossil energy sources.
    Renewable energy definitions vary by state, but
    usually include solar, wind, geothermal, biomass,
    biogas, and low-impact hydroelectric power.
  • Combined Heat Power, also known as
    cogeneration, is a clean, efficient approach to
    generating electric and thermal energy from a
    single fuel source. Inherently an energy
    efficiency measure.

4
Clean Energy Benefits
  • Clean energy can reduce electricity demand and
    meet load growth to help address many state
    energy challenges

Primary Clean Energy Benefits
Reduce energy demand
Meet load growth with fewer environmental consequences
State Energy Challenges
Electricity demand continues to rise
Electricity transmission systems are overburdened
Many base-load plants are aging
Volatile natural gas prices and financial risk as well as high energy prices
Reducing emissions to improve air quality and comply with clean air rules.
Additional Clean Energy Benefits
Reduced energy-related air emissions
Increased power reliability
Increased fuel diversity
Efficient use of natural resources
Increased state economic development
5
State Approaches to EncourageClean Energy
Five state approaches with significant potential
to increase clean energy supply.
State Approaches to Encourage Clean Energy Supply
Renewable Portfolio Standard (RPS) Establish requirements for electric utilities and other retail electric providers to serve a specified minimum percentage (or absolute amount) of customer load with eligible sources of renewable electricity.
Standardized Interconnection Rules Establish clear application processes and technical requirements that apply to utilities within the state which reduce uncertainty and prevent time delays that clean distributed generation systems can encounter in obtaining approval for grid connection.
Public Benefit Funds (PBF) for State Clean Energy Programs Are a pool of resources used by states to invest in clean energy supply projects and are typically created by levying a small fee on customers electricity rates.
Utility Rates Electric and natural gas rates, set by Public Utility Commissions, can be designed to support clean distributed generation projects and avoid unintended barriers, while also providing appropriate cost recovery for utility services on which consumers depend.
Output Based Environmental Regulations (OBR) Establish emissions limits per unit of productive energy output of a process (i.e., electricity, thermal energy, or shaft power), with the goal of encouraging the use of efficient fuel conversion (through CHP) and renewable energy as air pollution control measures.
6
Introduction
Standardized Interconnection Rules
Utility Standby Rates
Renewable Portfolio Standards
Contact Information
7
Standard Interconnection Encourages Clean Energy
  • Policy Objective Establish clear and uniform
    application processes and technical requirements
    for connecting distributed generation (DG)
    systems to the electrical grid.
  • Policy Advantages These rules are an important
    mechanism for improving the market condition for
    clean DG by
  • Ensuring that the costs of interconnection are
    the same throughout the state and are
    commensurate with the nature, size, and scope of
    the DG project.
  • Helping DG project developers accurately predict
    the time and costs involved in the application
    process and the technical requirements for
    interconnection.
  • Ensuring that the project interconnection meets
    the safety and reliability needs of both the
    energy end-user and the utility.

8
States With Standard Interconnection Rules
  • As of December 2006, 18 states have adopted
    standard interconnection rules 14 more are in
    the process.

States with Standard Interconnection Rules
Source EPA Standardized Interconnection Rules An
Effective Policy to Encourage Distributed
Generation. http//www.epa.gov/chp/pdf/interconnec
tion_fs_123006.pdf
9
Key Features of Standard Interconnection Rules
Standard interconnection rules address the
application process and specify technical
requirements for interconnecting DG systems
Key design feature
Application Process Includes all phases of the application process May specify application forms, timelines, fees, dispute resolution process, insurance requirements and interconnection agreements (contractual documents)
Technical Interconnection Requirements Includes technical protocols and standards that govern how generators must interconnect with the electrical grid Standard may conform to industry or national standards (such as IEEE 1547 and UL 1741) May specify type of permissible technology and system size, electrical grid attributes at point of interconnect, and equipment and protocols required at point of interconnect
10
Elements of Successful Implementation
A number of best practices have emerged for
effective implementation of standard interconnect
rules.
Elements of Successful Implementation
Utility regulatory Commission leadership! Work collaboratively with interested stakeholder to develop clear, concise interconnection rules that are applicable to all potential DG technologies. Consider using existing rules and models as templates, including the National Association of Regulatory Utility Commissioners1, MidAtlantic Distributed Resources Initiative2, and rules of other states (Oregon). Address all components of the interconnection process, including issues related to both the application process and technical requirements. Consider making the application process and related fees commensurate with generator size. Create a streamlined process for small and simpler systems that are certified compliant to IEEE 1547 and UL Standard 1741. Develop standards that cover the scope of the desired DG technologies, generator types, sizes, and distribution system types. After adopting a standard, monitor effectiveness and update as needed based on rule effectiveness.
  1. http//www.naruc.org/associations/1773/files/dgiai
    p_oct03.pdf
  2. http//www.energetics.com/madri/pdfs/inter_modelsm
    allgen.pdf

11
Leading State Examples
  • The Oregon PUC is in the process of developing
    uniform interconnection technical standards,
    procedures and agreements. They began the process
    in 2006 with the MADRI model rule and have
    initiated a stakeholder process to move forward.
    Currently, a draft Standard Small Generator Rule
    is open for comment.  There have been several key
    improvements to the MADRI model rule "field
    certification", non-inverter based Level 2 fast
    tracking up to 2 MW, and an increase of Level 1
    to up to 25 kW. See http//www.puc.state.or.us/P
    UC/admin_rules/intercon.shtml
  • New York was one of the first states to issue
    standard interconnection requirements for DG
    systems. Enacted in 1999, the initial
    requirements were limited to DG systems rated up
    to 300 kW connected to radial distribution
    systems. New York modified these interconnection
    requirements to include interconnection to radial
    and secondary network distribution systems for DG
    with capacities up to 2 MW. See
    http//www.dps.state.ny.us/distgen.htm.
  • In November 1999, the Texas Public Utility
    Commission adopted substantive rules that apply
    to interconnecting generation facilities up to 10
    MW. This ruling applies to both radial and
    secondary network systems. The rules require that
    Texas utilities evaluate applications based on
    pre-specified screening criteria, including
    equipment size and the relative size of the DG
    system to feeder load. These rules are intended
    to streamline the interconnection process for
    applicants. Texas s interconnection standards
    can be found in the Distributed Generation
    Interconnection Manual, available at
    http//www.puc.state.tx.us/electric/business/dg/dg
    manual.pdf

12
EPA Interconnection Resources
  • EPA Clean Energy-Environment Guide to Action
  • Chapter 5.4 Interconnection Standards
  • http//www.epa.gov/cleanenergy/stateandlocal/guide
    toaction.htm
  • EPA Fact Sheet Standardized Interconnection
    Rules An Effective Policy to Encourage
    Distributed Generation
  • http//www.epa.gov/chp/state_resources/interconnec
    tion.htm
  • Survey of Interconnection Rules. Prepared by the
    Regulatory Assistance Project for EPA
  • http//www.epa.gov/chp/pdf/survey_interconnection_
    rules121806.pdf

13
Introduction
Standardized Interconnection Rules
Utility Standby Rates
Renewable Portfolio Standards
Contact Information
14
Utility Rates and Clean Energy (1 of 2)
Electric utilities may have rate structures that
create barriers to the development of clean
distributed generation.
Utility Rate Issues Related to Clean Energy
Exit Fees Exit (or stranded asset recovery) fees are charged by utilities to departing loads to recover the fixed costs of capital assets without shifting these cost to other customers.
Standby Rates Distributed clean energy facilities usually need to have standby power accessible. Utilities assess these rates based on the costs of providing intermittent service (i.e., the capability to provide grid power when needed).
Buyback Rates Utilities often buyback electricity from distributed clean energy projects. The rate for the power can be a critical component of project economics.
15
Utility Rates and Clean Energy (2 of 2)
States are employing strategies to avoid undue
barriers and reap the benefits of clean DG while
providing utilities with appropriate cost
recovery.
Rate Strategies to Encourage DG Clean Energy
Exit Fee Exemptions Some states have adopted exit fee exemptions for existing loads that leave a utilitys distribution system that are replaced with clean DG. (e.g. IL, MA, NY)
Standby Rates Some states are exploring approaches to standby rates that may more accurately reflect utility cost of providing standby service. (e.g. OR, CA, NY)
Buyback Rates Some states have net-metering regulation that provide small generators a guaranteed purchase price for excess generation.
Decoupling States are evaluating new rate designs to decouple utility profits from sales volume removing a utility disincentive to support DG.
Rate Calculation States are attempting to ensure that rates accurately reflect the costs and benefits of clean DG.
Quantifying DG Benefits States may wish to explore ways to ensure that the benefits of clean DG can accrue to the electricity grid.
Natural Gas Rates Some states have established favorable natural gas rates for CHP facilities. (e.g. CT, CA, NY)
16
Elements of Successful Implementation
Best practices have emerged based on state
experiences.
Elements of Successful Design Implementation
Ensure that state PUC commissioners and staff have current and accurate information regarding the rate issues for clean DG and their potential benefits for the electric system. Open a PUC docket to explore actual costs and system benefits of onsite clean energy supply and appropriateness of related rates. Establish a working group of interested stakeholders to consider design issues and develop recommendations for revised rates. Identify if existing or pending Renewable/Energy Efficiency Portfolio Standards or other policies, which might be significant drivers to new onsite clean DG, generate a need for rate evaluations. Whenever new rates are adopted, monitor utility compliance, pace of new clean energy installations, and impact on rate payers.
17
Leading State Examples
  • California and New York have established revised
    standby rate structures that ensure fair and
    reasonable treatment of clean DG. Other states
    have adopted exit fee exemptions for existing
    loads that leave a utility's distribution system.
    Illinois, Massachusetts, and New York allow
    certain levels of exemption from these fees for
    loads that are replaced by clean DG, specifically
    CHP and renewables.
  • In 2004, the Oregon Public Utilities Commission
    approved a settlement regarding Portland General
    Electric Companys tariffs for partial
    requirements customers. The load served by the
    on-site generation is treated in the same manner
    as any other load on the system, which under
    Oregon rules is obligated to have (or contract
    for) its share of contingency reserves. The
    on-site generation is, in effect, both
    contributing to and deriving benefits from the
    systems overall reserve margin. Under the new
    rates, the partial requirements customer must pay
    or contract for contingency reserves equal to 7.0
    percent (3.5 percent each for spinning and
    supplemental reserves) of the reserve capacity
    (i.e., either the nameplate capacity of the
    on-site unit or the amount of load it does not
    want to lose in case of an unscheduled outage if
    the customer is able to shed load at the time its
    unit goes down, then it will be able to reduce
    the amount of contingency reserves it must
    carry). A similar pricing package has been
    adopted by PacifiCorp.
  • Three states have established special gas rates
    for electric generators, including CHP projects.
    California has special gas tariffs for all
    electric generators. In 2003, the New York PSC
    ordered natural gas companies to create a rate
    class specifically for DG users and certify that
    they had removed rate-related barriers to DG. In
    2005, the Connecticut Energy Independence Act
    included a provision that the natural gas
    delivery charges for customer-sited DG be waived
    and those costs recovered by the electric
    distribution company.

18
EPA Rates Resources
  • EPA Clean Energy-Environment Guide to Action
  • Chapter 6.3 Emerging Approaches Removing
    Unintended Utility Rate Barriers to Distributed
    Generation
  • Chapter 6.2 - Utility Incentives for Demand-Side
    Resources
  • http//www.epa.gov/cleanenergy/stateandlocal/guide
    toaction.htm
  • EPA Fact Sheet Utility Rates - Designing Rates
    to Level the Playing Field for Clean Energy
    Supply
  • http//www.epa.gov/chp/state_resources/utility.htm
  • National Action Plan for Energy Efficiency1
  • Chapter 2 - Utility Ratemaking Revenue
    Requirements
  • http//www.epa.gov/cleanenergy/actionplan/report.h
    tm

1. Facilitated by EPA and DOE
19
Introduction
Standardized Interconnection Rules
Utility Rates
Renewable Portfolio Standard
Contact Information
20
Renewable Portfolio Standards (RPS) and Clean
Energy
  • Policy Objective RPS requirements create market
    demand for clean energy supply by mandating that
    utilities and electricity providers serve load
    with a minimum requirement of clean energy.
  • Policy Advantages
  • Due to market-based approach, has potential to
    achieve policy objectives efficiently and at
    relatively modest cost (ratepayer impacts
    generally range from less than 1 increases to
    0.5 savings).
  • Spreads compliance costs among all customers.
  • Functions in both regulated and unregulated state
    electricity markets.
  • Provides a clear and long-term target for clean
    energy generation that can increase investors
    and developers confidence in the prospects for
    renewable energy.1

1. Provided the state sends strong signals that
this is a policy that will last.
21
States With RPS Requirements (1 of 2)
  • As of December 2006, RPS requirements have been
    established in 21 states plus the District of
    Columbia. Five of these states include CHP or
    waste heat recovery as an eligible resource..

States with RPS Requirements
CHP/waste heat recovery
Source Navigant Consulting, Inc., Database of
State Incentives for Renewable Energy (DSIRE) and
California Energy Commission.
Notes In Minnesota the RPS is mandatory for the
largest utility, Xcel, however, for the rest of
the utilities and service providers it is a good
faith effort. Under a separate agreement, and in
addition to the RPS requirements, Xcel is
required to build or contract for 125 MW of
biomass electricity, and must build or contract
for 1,125 MW of wind by 2010. In addition,
Illinois has established a non-mandatory state
goal for renewable energy. Arizona explicitly
includes renewably fueled CHP systems
22
States With RPS Requirements (2 of 2)
  • States with RPS requirements mandate that between
    1 251 of electricity be generated from
    renewable sources by a specified date.

Note 1. Higher percentages are typically for
states that already have a relatively large
amount of RE, like NY, CA and ME Source Navigant
Consulting, Inc, Database of State Incentives for
Renewable Energy (DSIRE) and California Energy
Commission.
23
Key Features of RPS Design? (1 of 3)
States tailor RPS requirements to fit policy
objectives, electricity market conditions and
renewable potential.
Key features of effective RPS design
Goals and Objectives To produce the best RPS design for the state, it is important to articulate goals and objectives early in the process that serve as a guide for design choices and avoid protracted rule implementation debate.
Applicability RPS requirements are most commonly applied to investor-owned utilities and electric service providers. It is unusual for mandatory RPS requirements to extend to municipal utilities and cooperatives, as these entities are predominately self-regulated.
Eligibility To support RPS goals, issues that states typically have considered include What fuel sources and technologies are eligible? Do existing renewable sources count toward compliance? What geographic areas are eligible (e.g., generation within the state boundary or within a regional power pool)? Are central and customer-sited systems treated differently? (See Table on next slide.)
Compliance Generally three ways that electricity suppliers may comply with the RPS requirements Own a renewable energy facility, Purchase Renewable Energy Certificates, Purchase electricity from a renewable facility inclusive of all renewable attributes.
The overall design of RPS requirements can
influence investor confidence, the ability of
markets to develop, and opportunities for project
developers and investors to recover capital
investments.
24
Key Features of RPS Design? (2 of 3)
Eligibility of technologies varies by state and
depends on whether an energy resource or
technology supports state goals.
25
Key Features of RPS Design? (3 of 3)
Several best practices for RPS design features
have emerged based on state experiences.
Key features in RPS design
Accounting methods (e.g., energy production versus installed capacity requirements RECs or bundled energy only). Time horizons for compliance periods Mandatory or voluntary participation Flexible compliance mechanisms to guard against high prices or the lack of supply of renewable energy Coordination with Federal and State energy policies Cost recovery mechanisms for utilities Enforcement mechanisms for non-compliance Incorporate technology tiers and/or credit multipliers to encourage particular technologies.
26
Elements of Successful Implementation
A number of best practices have emerged for
implementing effective RPS requirements based on
state experiences.
Elements of Successful Implementation
Develop broad support, including top-level support of the Governor and/or legislature and hold action oriented facilitated discussions among key stakeholders. Determine mix and amount of clean energy desired. (Careful analysis and modeling of expected impacts prior to establishing target is key to success.) Establish a long timeline to encourage private investment. Establish cost caps on the price to comply with RPS requirements, high enough to encourage use of a range of eligible technologies but low enough to protect electricity suppliers. Make sure a credible non-compliance mechanism is in place in the form of penalties however, provide flexibility in compliance.
27
Leading State Examples
  • The legislation for Californias RPS requirements
    was enacted in September 2002. Californias RPS
    requirements originally required retail sellers
    of electricity to purchase 20 renewable
    electricity by 2017. Because of perceived
    significant IOU progress towards this goal,
    California accelerated this goal of 20
    renewables to 2010 and set the state's 2020 goal
    at 33.  Retail sellers of electricity are
    required to increase their procurement of
    eligible renewable-energy resources by at least
    2 per year, so that 20 of their retail sales
    are procured from eligible renewable energy
    resources by 2010. http//www.energy.ca.gov/portfo
    lio/index.html
  • The Connecticut RPS was originally promulgated in
    1998 and took effect July 1, 2000, establishing
    requirements for two classes of renewable
    generating resources. In June 2005, Connecticut
    passed An Act Concerning Energy Independence,
    establishing a new RPS Class III that must be
    fulfilled with CHP and electricity savings from
    Conservation and Load Management programs. The
    new standard will require electric suppliers and
    distribution companies to obtain 1 of their
    generation from Class III resources beginning in
    2007 and increasing by 1 per year until leveling
    out at 4 in 2010 and thereafter. The total RPS
    requirement started at 4 in 2004 and will rise
    to and remain at 14 in 2010 and thereafter
    (including the new Class III).
    http//www.cga.ct.gov/2005/ACT/PA/2005PA-00001-R00
    HB-07501SS1-PA.htm.

28
EPA RPS Resources
  • EPA Clean Energy-Environment Guide to Action
  • Chapter 5.1 Renewable Portfolio Standards
  • http//www.epa.gov/cleanenergy/stateandlocal/guide
    toaction.htm
  • EPA Fact Sheet Renewable Portfolio Standards An
    Effective Policy to Support Clean Energy Supply
  • http//www.epa.gov/chp/state_resources/rps.htm
  • EPA white paper Energy Portfolio Standards and
    the Promotion of Combined Heat and Power
  • Forthcoming

29
EPA CHP Partnership
Voluntary program that seeks to reduce the
environmental impact of power generation by
promoting the use of CHP.
  • Facilitate CHP Project
  • Identification
  • Development
  • Implementation
  • Recognition

www.epa.gov/chp
30
EPA Initiatives
  • Several initiatives focused on assisting state
    policy makers, including utility commissions,
    with promoting clean energy.
  • EPA Utility Commission Assistance
  • EPA Clean Energy-Environment State Partnership
    Program
  • State Energy Efficiency and Renewable Energy
    Projects (EE/RE Projects)
  • National Action Plan for Energy Efficiency

31
Utility Commission Technical Assistance
  • The aim is to assist state utility commissions in
    identifying and evaluating policies and programs
    that promote/support the deployment of clean DG.
  • Focus on state utility commission rules and
    policies that significantly affect the deployment
    of customer-sited clean DG
  • Interconnection standards
  • Standby rates
  • Eligibility requirements of Energy Portfolio
    Standards.

32
Clean Energy-Environment State Partnership Program
  • Voluntary Partnership that supports state efforts
    to increase the use of clean energy
  • States work across their relevant agencies to
    develop and implement a comprehensive strategy
    for using existing and new energy policies and
    programs to promote clean energy sources.
  • State Partners CA, CO, CT, GA, MA, MN, NJ, NM,
    NY, NC, OH, PA, TX and UT.

33
EPA-State Energy Efficiency and Renewable Energy
(EERE) Projects
  • Joint initiative between the EPA, NARUC, and
    individual state utility commissions designed to
    explore approaches that deliver significant
    energy cost savings and other benefits through
    greater use of EE and DG/RE/CHP.
  • The Projects explore a range of approaches, for
    encouraging EE and clean energy resources within
    state utility commission processes based on
    specific state interests.
  • Efforts include
  • Efficiency workshops
  • Rate design
  • Interconnection
  • Resource planning
  • Transmission distribution planning.
  • State Partners AR, CT, DC HI, MN, NJ and NM.

34
National Action Plan for Energy Efficiency
  • The Action Plan presents policy recommendations
    for creating a sustainable, aggressive national
    commitment to energy efficiency through gas and
    electric utilities and partner organizations.
  • The Action Plan was being developed by a
    Leadership Group of more than 50 leading
    organizations representing key stakeholder
    perspectives in setting policy for our
    electricity and natural gas services, including
    senior utility officials, state utility
    regulators, consumer advocates, environmental
    groups, and large end-users.
  • Florida PSC recently endorsed the Action Plan!
  • Facilitated by EPA and DOE.

35
Summary
  • Numerous opportunities for Florida to increase
    use of clean energy!
  • Two key barriers that the PSC can address
    interconnection standards and standby rates.
  • Successful states have found the importance of
    leadership at the PSC.
  • EPA can provide assistance to the PSC.

www.epa.gov/cleanenergy
36
For More Information
  • Katrina Pielli
  • US Environmental Protection Agency
  • Clean Energy Program Manager
  • (202) 343-9610
  • Pielli.Katrina_at_epa.gov
  • www.epa.gov/cleanenergy

Ted Bronson Power Equipment Associates President (
630) 248-8778 TLBronsonPEA_at_aol.com www.peaonline.c
om
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