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The Promise of Wind Power Is Aggressive Policy Enough ?

The Promise of Wind Power Is Aggressive Policy Enough ?. John Saintcross NYSERDA Cornell Wind Symposium June 2009. Outline. Overview of New York’s Energy and Environmental Policies and Goals Evolving Federal Policies Policy Valuation

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The Promise of Wind Power Is Aggressive Policy Enough ?

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  1. The Promise of Wind Power Is Aggressive Policy Enough ? John Saintcross NYSERDA Cornell Wind Symposium June 2009

  2. Outline • Overview of New York’s Energy and Environmental Policies and Goals • Evolving Federal Policies • Policy Valuation • Lingering Challenges Cohocton Wind Farm

  3. New York State Energy Research & Development Authority • Mission: identify solutions to State’s energy challenges in ways that benefit the State’s economy and environment • Broad definition of “energy challenges” • Renewable Portfolio Standard Program • Energy Efficiency Programs • Emissions Trading Schemes (RGGI) • R&D • By 2010 our funding will be over • $350 million per year

  4. Major NY Energy/Environmental Initiatives • Renewable Portfolio Standard – Increase supply of renewable energy to 25% by 2013. $740 million committed • potential increase to 30% by 2015 • Energy Efficiency Portfolio Standard – Reduce electricity consumption 15% below projected levels in 2015. Approximately $175 million per year • Regional Greenhouse Gas Initiative (RGGI) –reduce emissions from affected resources 10% by 2019 Auctioning allowances to raise over $ 100 million annually • NYSERDA Research and Development – Approximately $20 million per year (basic product development)

  5. Renewable Portfolio Standard Goal: 25% of the power consumed in the state to come from renewable sources by 2013 From the 2003 baseline of ~ 19.3% NY RPS was adopted in 2004 as a policy goal to: Stimulate economic development Improve the environment Pursue energy independence Spier Falls Hydro

  6. NY RPS Targets • Incremental 2013 requirement satisfied as follows: • Main Tier (NYSERDA)……………………………( 9.8 GWh ) • Customer-Sited Tier (NYSERDA)…………….. ( .2 GWH ) • Voluntary Green Retailing …………………….( 1.8 GWh ) • State Agency Purchases…………………………… (3 GWh ) Total……………………………………..(12.1 GWh) Enough New Renewable Electricity to supply almost 2 million homes! Lyonsdale Biomass Plant

  7. Unique RPS Design Features • Public Service Commission is responsible for program policy and regulations • NYSERDA acts as central administrator of the NY RPS under a two-tiered approach • Customer Tier, behind the meter applications such as solar and small wind • Main Tier, large generators that sell power to the wholesale grid for use by all customers • Utilities are not subject to compliance Browns Falls Hydro

  8. RPS Main Tier Features Eligibility: Projects or new fuel use after Jan. 2003, in-state and out-of-state Wind, biomass and other bio-fuels, hydroelectric upgrades NYSERDA purchases renewable energy attributes (aka RECs) only Energy must be delivered to NYISO under specific requirements Offer fixed-price REC contracts of up to 10 years Prices are set competitively via Request for Proposals (“RFPs”)

  9. RPS Program Economic Benefits • Estimated direct investment in New York: $2 billion • Total expected economic benefits are estimated to exceed $4 billion*: • short/long-term jobs • fuel acquisition/control/rights • purchases of local goods/services • host community payments/taxes • Estimated $ 6 of benefit for every $ 1 spent *Over 20 year project life and include roll-over/multiplier effects and energy price suppression benefits Maple Ridge Wind Farm

  10. Main Tier Results Total New capacity(at end 2009) - approaching 1,400 MW Total available MWh annually - more than 3.5 million Facilities involved 1 - 30 projects/28 in New York Resource type 1 - 15 hydro/4 biomass/11 wind New capacity under contract - 1,164 MW RECs under contract annually - approx. 2.9 million About 1,300 MW of wind installed in New York…over 8,000 MW in pipeline … February 2009 milestone….1,000 at time of system peak 1includes two maintenance resources

  11. Cumulative RPS Program Outcomes Weighted average REC price - $ 17/MWh % of 2009 program target achieved - approx. 63 % % of 2013 program goal achieved - approx. 30 % Total funds committed 1 - $ 637 million About $110 million in funding available for new resources Noble Clinton Windpark 1Excludes administration and fees

  12. Regional Greenhouse Gas Initiative (RGGI) • 10 states • Cap and reduce carbon emissions • Focus on power sector • 25% of NYS’s GHG emissions • First mandatory market-based CO2 reduction program in the US

  13. RGGI Goals • Reduce CO2 emissions from the power sector (10% by 2018) • Provide consumers with benefits • Support a green economy • Encourage investments in low- or non-carbon emitting technologies • Advancing clean energy technologies • Provide a template for a national program to reduce greenhouse gases Steel Winds Wind Farm

  14. RGGI Reduction Requirements • Compliance started in 2009 • Stabilize CO2 emissions at current levels through 2014 • Cap reduces each year to a total of 10% by 2019

  15. Allocation of Allowances by State 2009 RGGI Allowance Allocations (tons) Total tons = 188,076,976

  16. RGGI Allocation Method: Auction • The states prefer auctions rather than free allocation • 92% of the allowances will be auctioned • 8% for strategic set-asides • Quarterly auctions with open participation • Power plant owners, environmental organizations, brokers, investment house, etc. • Free allocation models have tended to increase electricity rates • Auction proceeds will be used by the states for: • Renewable energy, energy efficiency, and carbon abatement technologies

  17. RGGI Futures Prices on the Chicago Climate Futures Exchange Allowance Price ($ per Ton)

  18. Pending Federal Energy and Environmental Initiatives • American Clean Energy and Security Act 2009 • Increase renewable energy content from 6% of retail electric sales in 2012 to 25% in 2025 • Establishes cap and trade program -reduce greenhouse gas emissions beginning in 2012 (83% of 2005 emissions by 2050). EPA to administer auction of allowances. •   State cap and trade programs are preempted beginning in 2012. RGGI allowances issued before 2012 can be exchanged for federal allowances.

  19. What does all this policy action mean? • It depends on one’s perspective… • If you are concerned with economic development in New York….be prepared for less wind to be installed here under a federal program • If you are concerned with ratepayer costs, then a federal program would likely lower the price paid for wind • If you are concerned with climate change, you might be indifferent to location of wind resources…if you are interested more in local environmental benefits, then a federal RPS might not be as desirable. • If you were counting on RGGI auction proceeds to drive additional investment in wind in New York, you would need to concern yourself on how EPA distributes federal cap & trade program revenues and what qualifies for support.

  20. It could mean little change near term… • Marginal NY carbon emission rate: approx 1,000 lbs/MWh • Impact on wholesale energy prices(revenues to non-carbon emitting resources) from carbon cap & trade… At allowance cost of: 4$ /ton________________________ increase of $2.0 /MWh $10/ton________________________increase of $5.0 /MWh $20/ton________________________increase of $ 10.0 /MWh $40/ton________________________increase of $20.0 /MWh

  21. Carbon Valuation and Wind Cost Effectiveness • Current RGGI driven revenues do not appear sufficient in near-term to drive investment in “ in-region” renewable energy • New York wind investment demands a higher premium • less attractive wind resources • constrained deliverability • aggressive environmental permitting requirements • In absence of a far more stringent RGGI carbon cap, other policy drivers remain necessary in near term (RPS) • Price tag will be higher

  22. Carbon Valuation under Federal Program - a Better Proposition ? • Nearly 2 dozen analyses of future carbon reduction programs have been conducted and analyzed. Expected levelized (2007$)prices range widely… • about $ 15/ton low end to $ 45/ton at the high end. 1 • If marginal carbon emission rates in the US trend higher than New York, valuation under a federal cap & trade regime is likely higher than under RGGI. • Probably a better proposition over long term-depending on how aggressive the cap is… 1 Synapse 2008 CO2 Price Forecasts, July 2008

  23. Policy Outlook: Promising But is it Sufficient ? Increased deployment of wind energy faces further challenges…not insurmountable …but real nonetheless. Technology Infrastructure Market

  24. Technology Challenge • Turbine performance must improve • capacity factors not stellar… • gear boxes/drive train problems • sub-optimal operational/maintenance practices Hard to convince the public that the technology is mature when machine failures are so noticeable…and warranties seemingly short .

  25. Infrastructure/Reliability Challenge • Energy production must be deliverable • delivery to load centers is hampered by limited transmission • Integration with bulk power system planning must become more sophisticated • Forecasting must become real-time, centralized and coordinated with operations • Wider-area/regional balancing must be considered • Projects will likely be subjected to economic and scheduling commitments

  26. Market Design/Implementation Challenges • Markets must evolve to manage wind… • provide clear signals on desirable project behaviors • dispatch, scheduling and pricing • reward good siting (resource expectations) • pricing /contracts must penalize poor forecasting and performance • reward good siting (location on grid) • zonal cost allocation of transmission improvements

  27. Role of NYSERDA NYSERDA will continue to centrally implement the RPS program, as long as so asked and allowed, in an agnostic, impartial manner. NYSERDA will however, in its long standing tradition, continue to explore collaboration with others to address gaps in knowledge and other challenges, some mentioned earlier, to see that wind energy delivers on its promise of clean and affordable energy .

  28. For More Information Contact Information: John Saintcross New York State Energy Research and Development Authority Email: js1@nyserda.org Phone: 518-862-1090 ext. 3384 Informational Websites: www.rggi.org www.nyserda.org

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