FLORIDA PUBLIC SERVICE COMMISSON WORKSHOP ON RENEWABLE PORTFOLIO STANDARDS JULY 26, 2007 BY E. LEON JACOBS, JR. WILLIAMS & JACOBS
Renewable Portfolio Standards (RPS) § market driven strategies to produce meaningful increase in contribution of renewable energy resources in state’s energy mix § must also produce an open, competitive renewables market; integral to providing resources at least-cost
Renewable Portfolio Standards (RPS) Cost-reducing Elements § Stable RPS policy which fosters long-term RPS contracts § Flexible timelines and provisions for compliance, to enhance “build vs buy” options § Proliferation of an open, competitive renewables market, motivating retail sellers to bid down costs
Renewable Portfolio Standards (RPS) § RPS best practices are emerging (most states with less than 5 years of experience) § Evidence shows that poorly designed or poorly enforced RPS do little to increase availability of renewable energy resources § Substantial risk that compliance costs can outstrip economic benefits of added renewable energy
Renewable Portfolio Standards (RPS) § Essential measure of success – expanded development and contribution of renewables (preference on instate resources) at lowcost; achieved through full (or at least substantial) compliance with RPS
RPS Design Affects Enforcement and Compliance Objective: Translate renewable goals into real market obligations Design Elements: - Structure, size and application of RPS - Resource eligibility - Administration - Impacts on and from ancillary policies
RPS Design Affects Enforcement and Compliance Particular Concerns over Policy Implementation § Uncertainty in objectives and design of policy § Inappropriate weighting of technologies § Unclear/inadequate enforcement § Inadequate compliance flexibility § Overly lenient compliance flexibility § Inadequate impetus for long-term renewable contracts § Inadequate planning for reliability and transmission
Principal Enforcement Methods ■ Monetary penalties automatic if obligations not met within reporting period ■ “Make-up” or Regulatory penalties less preferred
Principal Enforcement Methods Penalties: - established at levels which substantially exceed cost of full compliance ( suggested 3 -5 x REC price) - must be automatic, clear and specific - should be applied to nonconforming generators and to nonconforming retail sellers - harshest for fraud regarding eligibility or production
Principal Compliance Methods for Retail Sellers § Tradable Renewable Energy Credits accountable attributes, purchased by obligated entities through open market unbundled from underlying power § Contract Path Verification tracking chain of custody in power purchase agreements, along with attributes of the power
Principal Compliance Methods Tradable Renewable Energy Credits - require active, open and competitive trading market must utilize verifiable tracking system allow greatest flexibility and easiest administration introduce a host of new policy and compliance issues most economic with regional scope
Principal Compliance Methods Contract Path Verification - higher verification potential allows focus on strategic needs of state central administrator required; more complex minimizes market power and manipulation concerns preferred when competitive market for RECs is not possible
Compliance Flexibility with clear market conduct to meet goals § Cap on REC Prices § Compliance True-up Period § Credit Banking § Force Majeure Penalty Exceptions § Credit Borrowing
Role for Energy Efficiency ■ Frees up precious state resources by managing load growth through demand side resources ■ ACEEE report indicates significant, sustainable potential ■ Balancing required against newly developed renewables ( EE gets lower percentage of purchase obligation or lower REC price/allocation) ■ Softens cost impacts of RPS ■ Addresses diversity concerns
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