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Public Policy Drivers and Other Trends in Renewable Energy

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Public Policy Drivers and Other Trends in Renewable Energy IPED Managing Your Energy Portfolio in a Greener World Presented by: Mon-Fen Hong La Capra Associates, Inc. – PowerPoint PPT presentation

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Title: Public Policy Drivers and Other Trends in Renewable Energy


1
Public Policy Drivers and Other Trends in
Renewable Energy
IPED Managing Your Energy Portfolio in a Greener
World
Presented by Mon-Fen Hong La Capra Associates,
Inc.
Presented to
January 19, 2007
2
Todays Discussion
  • Renewable Energy Portfolio Requirements
  • Emerging Emissions Considerations
  • Increasing Renewable Resources in Utility
    Resource Portfolios
  • Utility Ownership of Renewable Projects
  • Conclusions

3
State Renewable Energy Requirements are Increasing
4
RPS Key Points
  • Every state RPS is different
  • Rising energy costs and available local resources
    motivate RPS
  • Map is already out-of-date (Washington state just
    passed RPS by vote)
  • Many states exempt or limit applicability for
    municipalities, co-ops and public power agencies
  • Growing push for federal RPS

5
Greater Attention to Emissions Some Examples
  • Rating agencies looking at company carbon risk
  • California reduce CO2 25 by 2020
  • RGGI (seven northeast states) reduce CO2 10 by
    2019
  • Increasing expectation of federal action

Seven Participating States of RGGI (Regional
Greenhouse Gas Initiative)
6
Until Recently Utilities Hesitant with Renewable
Energy
  • Before 2005, very few large non-hydro renewable
    energy projects owned by utilities
  • Mid-American Energy 360 MW of wind-power
    projects in Iowa
  • 50 MW wood plant in Vermont
  • 2 geothermal plants (Utah and CA)
  • Utilities regarded renewables as outside
    mainstream and perhaps not a reliable resource

7
Now Renewables Significant Part of Resource Plans
  • Integrated resource plans find renewables are
    cost effective option
  • Lawrence Berkeley National Lab Western utility
    plans show 8,000 MW of new renewable energy
    projects by 2014
  • See http//eetd.lbl.gov/ea/ems/re-pubs.html
  • Very high percentage from wind

8
Utility Ownership of Wind Projects A New Trend?
  • Last 18 months have seen a dramatic shift
  • Utilities complete or announce start of over 600
    MW of wind projects
  • Puget Sound Energy
  • Oklahoma Gas Electric
  • Kansas City Power Light
  • Capital cost of almost 1 billion
  • Also note PSNH has converted 50 MW coal plant
    to biomass

Public Service of New Hampshire
9
Is the Trend Accelerating?
  • Utilities announce acquisition of development
    rights to over 1,100 MW of wind projects having a
    capital cost of almost 2 billion
  • Wisconsin Power Light
  • Wisconsin Electric
  • Portland General Electric
  • Mid-American

10
Issues for Customers
  • Potentially big rate base addition
  • More than 50 of wind project cash-flow value
    derives from tax benefits
  • How best to structure transaction for
    non-taxable utilities?
  • CREBs financing for smaller projects?
  • Utilities have little experience with renewables

11
Opportunities for Customers
  • Utilities involvement may be a significant step
    to development of relatively new but promising
    resource
  • Long-term value of no fuel-cost resource
  • Price suppression
  • Emission-free or reduced emissions risk

12
So . . .
QUESTION Ownership vs. PPA ? What is best
for customers? ANSWER As always, it
depends! Details count.
13
A Representative Cost Profile
14
Development and Operating Risks of Ownership
  • Development risk
  • Construction cost overruns (capital at risk)
  • Actual wind performance
  • Cost of capital and other costs can increase over
    time
  • Ability to use taxes/AMT issues (if applicable)
  • Unscheduled maintenance/longevity of equipment
  • Incentive to run efficiently

15
Some Conclusions
  • Growing national trend in RPS and other
    emissions-related policies
  • Utilities seeing that addition of wind and other
    renewables to the resource mix can be beneficial
  • Whether such additions should be by means of
    power purchase agreement (PPA) or ownership must
    be carefully considered

16
End of Presentation ? ? ?
Thanks!
Mon-Fen Hong La Capra Associates Twenty
Winthrop Square Boston, MA 02110 617-557-9100,
ext. 22 mhong_at_lacapra.com
Contact Information
? ?
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