FLORIDA’S EFFORTS TO DEVELOP A RENEWABLE PORTFOLIO STANDARD Florida Department of Environmental Protection Central District 13 th Annual Power Generation

FLORIDA’S EFFORTS TO DEVELOP A RENEWABLE PORTFOLIO STANDARD

Florida Department of Environmental ProtectionCentral District 13th Annual Power

Generation Conference

Michael G. CookeRuden McClosky

July 30, 2009

22

A Renewable Portfolio Standard is a A Renewable Portfolio Standard is a requirement that utilities generate, or requirement that utilities generate, or obtain, a percentage of electricity obtain, a percentage of electricity using some form of “renewable” using some form of “renewable” energy.energy.

““Renewable” energy generally Renewable” energy generally considered to be energy derived from considered to be energy derived from natural resources which can be natural resources which can be replenished [e.g. solar, wind, replenished [e.g. solar, wind, geothermal, ocean current] but also –geothermal, ocean current] but also –waste heat, biomass, WTEwaste heat, biomass, WTE

33

““Actually, I’ve always thought Actually, I’ve always thought

that we [The Grateful Dead] that we [The Grateful Dead]

were like a public works, were like a public works,

really a utility as much really a utility as much

as anything else.”as anything else.”

Jerry GarciaJerry Garcia

44

““Tipper and Al came to a show that Tipper and Al came to a show that last time we were in Washington. last time we were in Washington. They’re nice people, a nice family. They’re nice people, a nice family.

We made every effort not We made every effort not

to frighten them.”to frighten them.”


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*Five states, North Dakota, South Dakota, Utah, Virginia, and Vermont, have set voluntary goals for adopting renewable energy instead of portfolio standards

with binding targets.

Per U.S. DOE, as of May 2009, 29 states and Per U.S. DOE, as of May 2009, 29 states and

the District of Columbia have RPS policies the District of Columbia have RPS policies (mandatory) in place.(mandatory) in place.

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The American Clean Energy and Security The American Clean Energy and Security Act of 2009, which is a leading climate Act of 2009, which is a leading climate change bill in Congress (passed by the change bill in Congress (passed by the U.S. House of Representatives on 6/26/09), U.S. House of Representatives on 6/26/09), includes an RPS Provision.includes an RPS Provision.

American Clean Energy and Security Act of American Clean Energy and Security Act of 20092009

(aggregate of renewable energy and electricity savings)(aggregate of renewable energy and electricity savings)

6% 6% by 2012by 20129.5% 9.5% by 2014by 201413%13% by 2016by 201616.5% 16.5% by 2018by 201820%20% by 2020by 2020

77

Stuff that’s hidden and murky and Stuff that’s hidden and murky and ambiguous is scary because you ambiguous is scary because you

don’t know what it does.don’t know what it does.

Jerry Garcia Jerry Garcia

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What are the advantages and What are the advantages and disadvantages of renewable energy disadvantages of renewable energy technologies?technologies?

99

““Our audience is like people who like licorice. Not everybody Our audience is like people who like licorice. Not everybody likes licorice, but the people who like licorice really like likes licorice, but the people who like licorice really like licorice.” licorice.” Jerry Garcia Jerry Garcia

Some Advantages of Renewable Some Advantages of Renewable EnergyEnergy• Energy independenceEnergy independence• New technologies promote economic New technologies promote economic

growthgrowth• Distributed generationDistributed generation• Limited or no emissions of GHGsLimited or no emissions of GHGs• Some proven technologies (vs. carbon Some proven technologies (vs. carbon

sequestration technology)sequestration technology)

1010

““It’s pretty clear now that what looked like it might have been some kind It’s pretty clear now that what looked like it might have been some kind of counterculture is, in reality, just the plain old chaos of of counterculture is, in reality, just the plain old chaos of undifferentiated weirdness.” Jerry Garciaundifferentiated weirdness.” Jerry Garcia

Some Disadvantages of Renewable Some Disadvantages of Renewable Energy Energy • Certain forms of renewable energy are Certain forms of renewable energy are

intermittent – not useful for baseload intermittent – not useful for baseload generation (therefore duplicative)generation (therefore duplicative)

• Greater expenseGreater expense• Distributed generationDistributed generation• And …And …

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• Siting IssuesSiting Issues

I’m goin’ where the wind don’t blow so strange I’m goin’ where the wind don’t blow so strange maybe off on some high cold mountain chain. maybe off on some high cold mountain chain.


North Carolina – 12.5% RPS by 2021 for IOUs; 10% RPS by North Carolina – 12.5% RPS by 2021 for IOUs; 10% RPS by 2018 for munis and coops.2018 for munis and coops.

Many wind resources in NC are concentrated along Many wind resources in NC are concentrated along mountain ridge crests in west and along the coastline in the mountain ridge crests in west and along the coastline in the east – e.g. Outer Banks.east – e.g. Outer Banks.

North Carolina Mountain Ridge Protection Act of 1983 – North Carolina Mountain Ridge Protection Act of 1983 – protects many mountain ridges from development.protects many mountain ridges from development.

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If climate change policies are If climate change policies are implemented, development of implemented, development of alternative energy technologies with alternative energy technologies with low GHG emissions will be needed.low GHG emissions will be needed.

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““Somebody has to do something, . . . Somebody has to do something, . . .

it’s just incredibly pathetic that it’s just incredibly pathetic that

it has to be us.”it has to be us.”


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Public Utilities Regulatory Policy Act of 1978 (PURPA).

Implementation of PURPA in Florida,Section 366.051, F.S.

Florida Renewable Energy Generation, Sections 366.91 and -.92, F.S.

Governor’s Executive Order 07-127 The 2008 Florida Energy Bill, HB 7135

(Chapter Law 2008-227): RPS Provisions

Major Federal and Florida Renewable Energy Policy Initiatives

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KEEPING COSTS LOW: A Recurring KEEPING COSTS LOW: A Recurring Theme of Federal and Florida Theme of Federal and Florida Renewable Energy Policies to Date.Renewable Energy Policies to Date.

1717

““Truth is something you stumble into Truth is something you stumble into when you think you’re going when you think you’re going

someplace else.”someplace else.”


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PURPA & Implementation of PURPA

in Florida

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Public Utilities Regulatory Policy Act of 1978 (PURPA), an overview

In 1978, Congress passed the Public Utilities Regulatory Policy Act (PURPA) with the purpose of encouraging the development of more efficient energy generation from industrial waste heat and renewables.

2020

Public Utilities Regulatory Policy Act of 1978 (PURPA), an overview

PURPA requires utilities to purchase power from established non-utility Qualified Facilities (QFs).

QFs are small power producers and cogenerators who sell power to utilities.

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Public Utilities Regulatory Policy Public Utilities Regulatory Policy Act of 1978 (PURPA), an overviewAct of 1978 (PURPA), an overview

at “avoided cost”at “avoided cost” ““Avoided cost” means the cost the Avoided cost” means the cost the

utility would have incurred by utility would have incurred by producing the power itself or producing the power itself or purchasing from another supplier.purchasing from another supplier.

Federal Energy Regulatory Federal Energy Regulatory Commission’s (FERC’s) directed Commission’s (FERC’s) directed states to implement PURPA.states to implement PURPA.

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Implementation of PURPA in Florida, Section 366.051, F.S.

Section 366.051, F.S., requires utilities to purchase power from QFs and renewable energy generators within their service territories at the “full avoided cost.”

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Implementation of PURPA in Florida, Section 366.051, F.S.

The “avoided cost payment” is divided into two categories: Capacity and Energy.• “Capacity – The size of the customer base that has been

calculated, as well as how much money it would cost to build a power plant to meet that demand. Once this is determined, the payment is fixed. In order to get the full payment, however, the generator must be operating when needed, especially during peak times. If not, penalties are enforced.”

• “Energy – The amount of fuel and maintenance that would be required to operate a plant. Based on kilowatt hours produced by the renewable energy generator and sold to the utility, this payment fluctuates because of changes in fuel prices.”

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RENEWABLE ENERGY RENEWABLE ENERGY GENERATION – 2005, GENERATION – 2005, 2006 & 2008 FLORIDA 2006 & 2008 FLORIDA

ENERGY BILLSENERGY BILLS

2525

Florida Renewable Energy Florida Renewable Energy Generation, Section 366.91, F.S.Generation, Section 366.91, F.S.

In 2005, the Legislature created Section 366.91, In 2005, the Legislature created Section 366.91, F.S., to promote the development of renewable F.S., to promote the development of renewable energy resources in Florida energy resources in Florida

Legislative goals – Legislative goals – • help diversify fuel types and decrease Florida’s help diversify fuel types and decrease Florida’s

growing dependency on natural gas for electric growing dependency on natural gas for electric production, production,

• minimize the volatility of fuel costs, minimize the volatility of fuel costs, • encourage investment within the state, encourage investment within the state, • improve environmental conditions, and improve environmental conditions, and • make Florida a leader in new innovative make Florida a leader in new innovative

technologies.technologies.

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““Renewable energy” is defined as Renewable energy” is defined as “electrical energy produced from a “electrical energy produced from a method that uses one or more of the method that uses one or more of the following fuels or energy sources: following fuels or energy sources: hydrogen produced from sources other hydrogen produced from sources other than fossil fuels, biomass, solar energy, than fossil fuels, biomass, solar energy, geothermal energy, wind energy, ocean geothermal energy, wind energy, ocean energy, and hydroelectric power . . . and energy, and hydroelectric power . . . and waste heat, from sulfuric acid waste heat, from sulfuric acid manufacturing operations.”manufacturing operations.”

Section 366.91(2)(d), F.S.Section 366.91(2)(d), F.S.

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Renewable Energy Contracts - This statute Renewable Energy Contracts - This statute requires public utilities to continuously requires public utilities to continuously offer renewable energy contracts to offer renewable energy contracts to generators of renewable energy; the term generators of renewable energy; the term of the renewable energy contract must be of the renewable energy contract must be at least 10 years, with prudent and at least 10 years, with prudent and reasonable costs associated with the reasonable costs associated with the contract being recoverable from the contract being recoverable from the ratepayers through the appropriate ratepayers through the appropriate recovery clause. Section 366.91(3), F.S.recovery clause. Section 366.91(3), F.S.

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RPS Goals - In 2006, the Florida RPS Goals - In 2006, the Florida legislature added Section 366.92, legislature added Section 366.92, F.S., authorizing FPSC to establish F.S., authorizing FPSC to establish appropriate “goals” for renewable appropriate “goals” for renewable energy generation in the state.energy generation in the state.

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July 2007July 2007Office of the Governor, Executive Order Office of the Governor, Executive Order

(Number 07-127)(Number 07-127)

NOW, THEREFORE, I CHARLIE CRIST, asNOW, THEREFORE, I CHARLIE CRIST, asGovernor of Florida, . . . request the FloridaGovernor of Florida, . . . request the FloridaPublic Service Commission to take thePublic Service Commission to take thefollowing actions for the electric utilityfollowing actions for the electric utilitysector in order to open the market to clean,sector in order to open the market to clean,renewable energy technologies, thusrenewable energy technologies, thusavoiding future greenhouse gas emissions:avoiding future greenhouse gas emissions:

• Not later than September 1, 2007, initiate Not later than September 1, 2007, initiate rulemaking to require that utilities produce at rulemaking to require that utilities produce at least 20 % of their electricity from renewable least 20 % of their electricity from renewable sources (Renewable Portfolio Standard) with a sources (Renewable Portfolio Standard) with a strong focus on solar and wind energy.strong focus on solar and wind energy.

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2008 Florida Energy Bill, HB 7135 2008 Florida Energy Bill, HB 7135 (Chapter Law 2008-227)(Chapter Law 2008-227)

On May 28, 2008, Governor Crist On May 28, 2008, Governor Crist signed the 2008 Florida Energy Bill signed the 2008 Florida Energy Bill into law. This comprehensive energy into law. This comprehensive energy package was designed to increase package was designed to increase energy efficiency, develop renewable energy efficiency, develop renewable energy technologies, and decrease energy technologies, and decrease carbon emissions in Florida.carbon emissions in Florida.

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2008 Florida Energy Bill, HB 71352008 Florida Energy Bill, HB 7135(Chapter Law 2008-227)(Chapter Law 2008-227)

Specifically, as noted in 266.92, F.S., (re: RPS goals) Specifically, as noted in 266.92, F.S., (re: RPS goals) that it was the intent of the Legislature to:that it was the intent of the Legislature to:• Promote the development of renewable energyPromote the development of renewable energy• Protect the economic viability of Florida’s existing Protect the economic viability of Florida’s existing

renewable energy facilities (yet may provide added renewable energy facilities (yet may provide added weight to solar pv and wind)weight to solar pv and wind)

• Diversify the types of fuel used to generate electricity in Diversify the types of fuel used to generate electricity in FloridaFlorida

• Lessen Florida’s dependence on natural gas and fuel oilLessen Florida’s dependence on natural gas and fuel oil• Minimize fuel volatility Minimize fuel volatility • Encourage investment in the stateEncourage investment in the state• Improve environmental conditionsImprove environmental conditions• And – at the same time – minimize costs of power supply And – at the same time – minimize costs of power supply

to electric utilities and their customersto electric utilities and their customers

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I’m shopping around for something I’m shopping around for something

to do that no one will like.to do that no one will like.


3333

2008 Florida Energy Bill, HB 7135 (Chapter Law 2008-227)

It required the Commission to develop rules to establish a Renewable Portfolio Standard (RPS) and Renewable Energy Credit (REC) trading system to encourage the development of supply-side renewable generation.

It reserved to the legislature the right to ratify these rules.

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Renewable Portfolio Standard Renewable Portfolio Standard (RPS) Rulemaking, Section (RPS) Rulemaking, Section

366.92, F.S.366.92, F.S.

Per statute, the RPS rule would Per statute, the RPS rule would require investor owned utilities (i.e., require investor owned utilities (i.e., FP&L, Progress Energy, TECO, Gulf FP&L, Progress Energy, TECO, Gulf Power, etc.) to supply renewable Power, etc.) to supply renewable energy to its customers directly or by energy to its customers directly or by procuring renewable energy through procuring renewable energy through acquiring Renewable Energy Credits acquiring Renewable Energy Credits (RECs).(RECs).

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Renewable Portfolio Standard (RPS) Rulemaking, Section 366.92, F.S.

In developing the RPS rule, the Commission was directed to evaluate the current and forecasted levelized cost in cents per kilowatt hour and current and forecasted installed capacity in kilowatts for each renewable energy generation method through 2020; the Commission was required to consult with DEP and the FECC.

The Commission was directed to present a “draft” rule to the Legislature by February 1, 2009.

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FLORIDAFLORIDARENEWABLE PORTFOLIO

STANDARD

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2008 Florida Energy Bill RPS 2008 Florida Energy Bill RPS Rulemaking TimelineRulemaking Timeline

The PSC held first RPS rulemaking The PSC held first RPS rulemaking workshop in July 2008.workshop in July 2008.

October 2008: a staff draft RPS rule was October 2008: a staff draft RPS rule was reviewed by PSC.reviewed by PSC.

December 2008: a further proceeding was December 2008: a further proceeding was held to consider the draft RPS rule.held to consider the draft RPS rule.

January 2009: PSC voted on draft.January 2009: PSC voted on draft. February 1, 2009: The RPS draft rule was February 1, 2009: The RPS draft rule was

submitted to the Legislature.submitted to the Legislature.

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Summary of Draft RPS Rule as submitted to Florida Legislature

RPS Percentage and Timing• 7 percent by 1/1/2013• 12 percent by 1/1/2016• 18 percent by 1/1/2019• 20 percent by 1/1/2021

Eligible resources – only Florida renewable energy resources as defined in Section 366.92(2), F.S. are eligible [366.92(2), F.S., cross-references § 377.803, F.S., to wit: hydrogen, biomass, solar energy, geothermal energy, wind energy, ocean energy, waste heat or hydroelectric power.]

Compliance mechanism – each IOU must produce renewable energy percentage or purchase sufficient RECs

Rate Cap – incremental compliance costs above avoided cost limited to 2 percent

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Frequency of Review – FPSC to review Frequency of Review – FPSC to review impacts at least every three yearsimpacts at least every three years

Mandatory Standards – IOUs must comply Mandatory Standards – IOUs must comply or face penalties of up to 50 basis points or face penalties of up to 50 basis points on authorized return on equity. Provisions on authorized return on equity. Provisions for excused noncompliance (insufficient for excused noncompliance (insufficient supply of Florida renewable energy or supply of Florida renewable energy or prohibitive costs) included in rule.prohibitive costs) included in rule.

Encouragement of Solar/Wind – Carve out Encouragement of Solar/Wind – Carve out of minimum of 25 percent of RPS must be of minimum of 25 percent of RPS must be provided by solar and wind. 75 percent of provided by solar and wind. 75 percent of rate cap dedicated to Solar/Wind. rate cap dedicated to Solar/Wind.

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Florida Renewable Energy Florida Renewable Energy Potential AssessmentPotential Assessment

Navigant Consulting was engaged to Navigant Consulting was engaged to provide assessment of technical and provide assessment of technical and economic potential for renewables in economic potential for renewables in Florida through 2020. Florida through 2020.

Navigant Consulting’s estimates of Navigant Consulting’s estimates of achievable renewables start with a achievable renewables start with a base of 4.4 percent of existing base of 4.4 percent of existing renewables. renewables.

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To project future renewable energy development, To project future renewable energy development, Navigant Consulting identified key drivers that Navigant Consulting identified key drivers that could impact the renewable energy market. could impact the renewable energy market.

The most significant of these drivers are: The most significant of these drivers are: • (1) fossil fuel prices, (1) fossil fuel prices, • (2) cost of carbon under greenhouse gas emissions (2) cost of carbon under greenhouse gas emissions

policies, policies, • (3) federal and state renewable energy tax credits and (3) federal and state renewable energy tax credits and

other incentives, other incentives, • (4) the availability and cost of debt and equity, and (4) the availability and cost of debt and equity, and • (5) the rate cap established for the purchase of RECs. (5) the rate cap established for the purchase of RECs.

4242


Navigant Consulting then created three scenarios for potential Navigant Consulting then created three scenarios for potential renewable energy development in which the five key drivers renewable energy development in which the five key drivers were used. These scenarios are summarized as:were used. These scenarios are summarized as:

• Unfavorable – low fossil fuel prices, 1 percent rate cap, Unfavorable – low fossil fuel prices, 1 percent rate cap, no extension of current government renewable no extension of current government renewable incentives per current policies, tight financial markets, incentives per current policies, tight financial markets, and carbon pricing of $10/ton by 2020;and carbon pricing of $10/ton by 2020;

• Mid-favorable – mid range fossil fuel prices, 2 percent Mid-favorable – mid range fossil fuel prices, 2 percent rate cap, partial extension of government renewable rate cap, partial extension of government renewable incentives, moderate financial markets, and carbon incentives, moderate financial markets, and carbon pricing of $30/ton by 2020; andpricing of $30/ton by 2020; and

• Favorable - high fossil fuel prices, 5 percent rate cap, Favorable - high fossil fuel prices, 5 percent rate cap, government renewable incentives extended through government renewable incentives extended through 2020, widely available debt and equity, carbon pricing of 2020, widely available debt and equity, carbon pricing of $50/ton by 2020.$50/ton by 2020.

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Navigant Consulting concluded that:Navigant Consulting concluded that:

• Under the Under the unfavorable scenariounfavorable scenario for renewable for renewable development, which includes a 1 percent rate cap, development, which includes a 1 percent rate cap, renewable energy in Florida could be renewable energy in Florida could be 5 percent5 percent of IOU of IOU retail sales by 2020;retail sales by 2020;

• Under the Under the mid-favorable scenariomid-favorable scenario for renewable for renewable development, which includes a 2 percent rate cap, development, which includes a 2 percent rate cap, renewable energy in Florida could be renewable energy in Florida could be 11 percent11 percent of IOU of IOU retail sales by 2020; andretail sales by 2020; and

• Under the Under the most favorable scenariomost favorable scenario for renewable for renewable development, which includes a 5 percent rate cap, development, which includes a 5 percent rate cap, renewable energy in Florida could be renewable energy in Florida could be 24 percent24 percent of IOU of IOU retail sales by 2020.retail sales by 2020.

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0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Re

new

ab

le E

ne

rgy

as

% o

f R

eta

il S

ale

s

Unfavorable (No RECs) Mid-Favorable (No RECs) Favorable (No RECs)

Unfavorable Mid-Favorable Favorable

Renewable Energy as a Percentage of IOU Retail Sales

4545

2008 Florida Energy Act 2008 Florida Energy Act Legislative RatificationLegislative Ratification

Per legislative staff, ratification could Per legislative staff, ratification could include (but not limited to) the following:include (but not limited to) the following:• Incorporating the rules into statue, or Incorporating the rules into statue, or • Directing the agencies to modify the rule; or Directing the agencies to modify the rule; or • Approving rules, but retaining oversight of any Approving rules, but retaining oversight of any

subsequent amendmentssubsequent amendments Source: Florida Senate Committee on Source: Florida Senate Committee on

Communications and Public Utilities’ Communications and Public Utilities’ Report, “Legislative Process for Rule Report, “Legislative Process for Rule Ratification of Renewable Portfolio Ratification of Renewable Portfolio Standard and Cap-and-Trade Regulatory Standard and Cap-and-Trade Regulatory Reform” (September 2008).Reform” (September 2008).

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Ratification Process – 2009Ratification Process – 2009

SB 1154 – drafted by Senator KingSB 1154 – drafted by Senator King• Adopted percentage requirements similar to Adopted percentage requirements similar to

FPSC “draft” rule (including 20% by end of FPSC “draft” rule (including 20% by end of 2020)2020)

• Changed the mix of eligible sources to include Changed the mix of eligible sources to include nuclear energy and fossil fuel with CCS – Clean nuclear energy and fossil fuel with CCS – Clean Energy Portfolio StandardEnergy Portfolio Standard

• No more than 25% of the required amount of No more than 25% of the required amount of clean energy each year could come from clean energy each year could come from nuclear/fossil fuel with CCS sourcesnuclear/fossil fuel with CCS sources

• Passed Florida SenatePassed Florida Senate• Referred at end of session to Florida House; did Referred at end of session to Florida House; did

not leave committee in Housenot leave committee in House

4747

Constantly choosing the lesser of Constantly choosing the lesser of

two evils is still choosing evil.two evils is still choosing evil.


Documents

FLORIDA’S EFFORTS TO DEVELOP A RENEWABLE PORTFOLIO STANDARD Florida Department of Environmental Protection Central District 13 th Annual Power Generation