renewables 101: overview of market, elements,...

Renewables 101: Overview of

Market, Elements, Concepts

Richard A. Kanoff

Co-Chair, Energy and Utility Practice Groups

McLane, Graf, Raulerson & Middleton, P.A.

Environmental Business Council of New England

Energy Environment Economy

EBC—Introduction to

Renewable Energy in

New Hampshire

Richard A. Kanoff

781-904-2685 | [email protected]

September 24, 2013

Renewable Energy--

Market, Elements, Concepts Defined as Solar Thermal Electric, Photovoltaics, Wind,

Biomass, Hydroelectric, Geothermal Electric, Fuel Cells,

Municipal Solid Waste, CHP/Cogeneration, Anaerobic

Digestion, Small Hydroelectric, Fuel Cells using Renewable

Fuels, Other Distributed Generation Technologies—includes

clean technology (clean tech) companies

Market for Renewable Energy

Concepts

Solar Power

$34.8 Billion Industry

Wind Power


Biofuels


Total


Solar Power


Wind Power


Biofuels


Total


300% Projected Growth



2008 2018


Markower J, Pernick R & Wilder C. Clean Edge, Inc. Special Report: Clean Energy Trends 2009 (March 2009)

Projected Growth in the Marketplace

All Industries Solar Wind Biofuels

Demand

Resources Transportation

•Energy Prices

•Energy Security

•Energy

Independence

•State RPS

•Corporate Support

•Climate Change

Concerns

•Carbon-

Constrained World

•Consumer

Imperatives

•Tax Credits,

Capital Grants,

Feed-In Tariffs,

Subsidies, Targets

and Mandates

•Technological

Improvements

•Economy

Expansion

•PV Cost

Reduction

•Favorable

Demand/Supply

Conditions

•Large Scale

Project

Development

•Zero-Carbon

Advantages

•RPS Mandates

•Public/Investor

Awareness

•Short Project

Development

Cycle

•Government

Policies

•Energy Prices

•Less Price

Volatility

•Stringent

Emissions

Controls

•Support for

Agricultural

Sector

•Reduction in

Market

Clearing

Prices for

Energy

•Quick

Deployment

•Air Pollutant

Reduction

•Cost-Effective

Technology

•Consumer

Acceptance

DR

IVE

RS

Industry Drivers

Critical Concepts Renewable Energy

Regulatory realities—

Key terms (RECs, MWS, MWHs)

Subject to specific rules, regulations and requirements—

state and federal

Targeted Incentives

Renewable Energy Certificates

(“RECs”)

= All of the renewable attributes associated with

one megawatt hour of energy produced by an eligible

renewable energy generating facility in a specified

vintage year or quarter.

Two Options:

o Sell RECs/SRECs in the REC market; or

o Retire the RECs and apply them towards lowering your carbon footprint.

REC

Energy

RECs

Renewable Energy Certificates

(REC) continued

State RPS

Requirements

Electric Utilities

And Suppliers

REC Market Renewable

Energy

Projects

Regulations

Specific Zoning/Local

Siting

Interconnection/RTO-ISO

FERC

DPU/PSCs

Legislatures

We assist clients in understanding these rules and regulations

and in navigating agency requirements

Elements for Success

Regulatory, contractual, and legal certainty

(RISK)

Strong, long term power offtaker (PPA)

Strong and reliable equipment suppliers and

plant constructors (Contracts)

Proven technology

Adequate economics

Strong sponsorship and management

Off takers (who buys the power)

Power Purchase Agreements – selling energy direct

Typically, utilities are offtakers – supportive regulatory

regimes

Driven by RPS

Feed-in-Tariffs (VT)

Institutions – universities, governments, hospitals

Companies –Walmart, big box stores (e.g., rooftop PV on

facilities)

Net Metering Agreements are similar structures

Offtake Agreements/PPAs

Offtake Agreement/Power Purchase Agreement (PPA)/Net Metering

Agreement:

Long-term agreement for the sale and purchase of power between a

third party (usually a utility, a municipality or a private party) and a

project company.

Project company agrees to make available up to a certain amount of

electric generation capacity (adjusted for outages) by an agreed date for

an agreed period of time; Purchaser agrees to pay for both capacity

made available to it and for energy dispatched by it.

PPA guarantees a market and predictable revenue stream and cost

basis for the power to be produced by the project (thereby allowing

some of the project to be financed on a project basis with affordable

payment terms).

Contracts

Procurement Agreements

Required equipment

Construction Agreement

Primary construction services agreement

Engineering Services Agreement

Design and engineering

Operation and Maintenance Agreements

Responsibility for operating and maintaining the facility

Interconnection Agreement

Connection to the grid—standard forms and checklists

Bottom Line: Adequate

Economics

Economic system: revenues, subsidies (incl. tax benefits),

capital and operating costs, equipment life, inherent risks,

capital structure and market returns.

Economics need to support risk-adjusted market returns to

attract all categories of capital

Financial Incentives –

State--MA Renewable Energy Portfolio Standard (RPS): MA RPS requires

retail suppliers licensed in Massachusetts to buy RECs; Licensed

suppliers must hold RPS-eligible RECs equivalent to a fixed

percentage of the electricity that they sell to consumers each year.

Renewable Energy Certificates (RECs): Tradable environmental

commodities in the United States which represent proof that 1 MW-

hour of electricity was generated from an eligible renewable energy

resource (also known as green tags, Renewable Energy Credits or

Tradable Renewable Certificates).

MassEfficiency: $2 million state revolving loan fund meant to cover

the start-up costs of large-scale energy efficiency programs.


State -- MA continued

Facilities: Solar Thermal Electric, Photovoltaics, Wind, Biomass, Hydroelectric,

Geothermal Electric, Fuel Cells, Municipal Solid Waste, CHP/Cogeneration,

Anaerobic Digestion, Small Hydroelectric, Fuel Cells using Renewable Fuels, Other

Distributed Generation Technologies

Sectors: Commercial, Industrial, Residential, Nonprofit, Schools, Local Government,

State Government, Fed. Government, Agricultural, Institutional

Capacity Limit:/Aggregate Limits: Net metering allowed in MA up to 2 MWs for non-

governmental; aggregate cap increased to 3% of utility peak load

Capacity/Aggregate Limits: Net metering for municipality or governmental uses up to

10 MWs; aggregate cap increased to 3% of utility peak load

Excess Generation: Varies by customer class; Host Customer credited/paid close to

retail for each Kwh supplied in excess of demand

RECs: Customer owns RECs

System of Assurance: recently enacted “queue” to ensure that projects will receive

net metering services when interconnect.

Net Metering-- 220 CMR 18.00



• Qualifying solar facilities (officially known as “Solar Carve-Out Renewable Generation

Units” in the regulations) must be 6 MW or less, and must have become operational

after December 31, 2007.

• The DOER will issue the Statement of Qualification (SQ) and once issued, the

developer has four years to put the generation facility into operation. The regulations

allow DOER to grant extensions, however the petitioner must submit a new SQ

application. No SQ will be issued for Solar Carve-Out projects until all applicable

permits are secured.

• A unit with an SQ is eligible to participate in the Solar Credit Auction for 40 quarters

(10 years). DOER expects to modify (shorten) the ten year period no later than July

19, 2013.

• On June 7, 2013 the Massachusetts Department of Energy Resources (DOER)

highlighted proposed changes to its RPS Class I and RPS Solar Carve-Out

programs. New regulations pending.

SRECS--225 CMR 14.00

Massachusetts Commonwealth Solar

Rebate Programs

Solar Rebate Program Administered by the Massachusetts

Clean Energy Center

Funding: 1.5 Million funds available in 1st quarter of 2013

Eligible Technology: Solar PV only

Project Eligibility Requirements: Commercial and residential

solar lease systems 15 kW or smaller (rebate capped at 5

kW), all residential systems regardless of size (rebate capped

at 5 kW); customers of investor owned utilities or Municipal

Light Plants that have opted into the Massachusetts

Renewable Energy Trust are eligible.

Recipients of the Commonwealth Solar II rebate are also

eligible to earn Solar Renewable Energy Certificates



Legislation: Green Communities Act, Green Jobs Act of 2008,

Global Warming Solutions Act of 2007, An Act Relative to

Competitively Priced Electricity in the Commonwealth of 2012

Massachusetts Clean Technology Center

State of Connecticut:

ZREC/LREC Program

Public Act No. 11-80 requires CL&P and UI to purchase renewable energy

credits (“RECs”) under 15-year contracts

~$1 billion in contract commitments over a 6-year period

Provides projects with predictable, financeable, 15-year revenue

streams

CL&P and UI will purchase Class I RECs from projects that have:

Zero Emissions (ZRECs), or

Low Emissions (LRECs)

New expanding programs allow for larger projects and virtual net metering

http://www.50states.com/connecti.htm

ZREC/LREC Program Is A

Budget Based Program This Program is based on expanding an annual budget and not procuring an

amount of capacity (MW)

LRECS ZRECs

$4M/Yr for 15 Yr contracts = $60M $8M/Yr for 15 contracts = $120M

5 Procurement Yrs = 60M x 5 = $300M 6 Procurement Yrs = $120M x 6 = $720M

Combined Total Program Budget for LRECs and ZRECs = $1.02B

Approximate 80/20% budget split between CL&P and UI

CL&P ~80% = $816M

UI ~20% = $240M

ZREC budget divided evenly between the three size groups

Source: CL&P & UI

ZREC/LREC Program Eligibility

General Project Eligibility Criteria

Must be located behind contracting utility distribution meter

Must not have received funding/grants from Clean Energy

Finance Investment Authority, or its predecessor the CT

Clean Energy Fund (other than low cost financing)

Projects must be in service on, or after, July 1, 2011

EDCs will only contract for projects within their respective

service territories

ZREC/LREC Program Eligibility continued

LRECs

No larger than 2,000 kW

Must have low emissions

<0.07 lbs/MWh NOx; <0.10 lbs/MWh CO; 0.02 lb/MWh

VOCs, 1 grain per 100 standard cubic feet

May include fuel cells and other low emissions Class I

resources, as well as all zero emission Class I resources

ZRECs

No Larger than 1,000 kW

Must have zero emissions

May include solar, hydro and wind

Bid Evaluation, Ranking and

Selection

1. Valid bid proposals are ranked by REC price,

with the lowest bid REC price ranked first Projects using CT manufactured, researched or developed technologies

are granted a 5% discount to their bid REC price for evaluation purposes

only (assuming the 5% discount is approved by PURA)

2. The Maximum Annual REC Payment for each

project is calculated: The contracted bid price, multiplied by the proposal’s Maximum Annual

Quantity of RECs

3. Using the Maximum Annual REC Payment,

projects are selected until the annual REC

Program budget is met

New Hampshire No specific enhanced incentives for solar comparable to CT

or MA

MA--$0.15-0.28.5+per kwh (market and auction)

CT-- $0.10-0.18 per kwh (by declining bid)

NH--$0.05 per kwh by statute

Programs for grants, local property tax abatement, rebates for

systems 100kw or less, small residential, water heating, net

metering up to 1 MW—generally scale and limited $

State Panelists Experts to Discuss

What’s Coming

Outlook

Continue growth expected

Projects under development with cash grant, ITC and PTC

incentives will continue in 2013

Federal Climate Change Initiatives will spur increased

activity

Will see increased acquisition activity in the region

MA/CT will continue to grow; opportunity in NH

ITC for solar expires end of 2016

QUESTIONS?

Richard Kanoff, co-chair of McLane’s Energy Practice Groups, focuses on energy, renewable and

clean technology law and regulatory policy and litigation. He has advised numerous emerging and

established public companies in energy markets including clean coal and other fossil fuel-related

generation, bio-fuels, biomass, energy and demand management, smart grid, solar, wind, fuel

cells and other distributed generation technologies. Mr. Kanoff assists clients in managing

complex legal issues associated with developing, financing, permitting and operating energy

facilities, with electrical interconnection and ISO policies, and with evolving renewable

energy/climate change regulations.

McLane, Graf, Raulerson & Middleton

Professional Association

300 TradeCenter, Suite 7000

Woburn, MA 01801

(781) 904-2685 Direct Dial

(781) 904-2701 Fax

[email protected]

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