FLORIDA PUBLIC SERVICE COMMISSON
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FLORIDA PUBLIC SERVICE COMMISSON WORKSHOP ON RENEWABLE PORTFOLIO STANDARDS JULY 26, 2007 BY E. LEON JACOBS, JR. WILLIAMS & JACOBS. Renewable Portfolio Standards (RPS)

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FLORIDA PUBLIC SERVICE COMMISSON

WORKSHOP ON

RENEWABLE PORTFOLIO STANDARDS

JULY 26, 2007

BY E. LEON JACOBS, JR.

WILLIAMS & JACOBS


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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


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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


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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


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Renewable Portfolio Standards (RPS)

  • Essential measure of success –

    expanded development and contribution of renewables (preference on instate resources) at low-cost;

    achieved through full (or at least substantial) compliance with RPS


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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


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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


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Principal Enforcement Methods

■ Monetary penalties

automatic if obligations not met within reporting period

■ “Make-up” or Regulatory penalties less preferred


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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


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Principal Compliance Methods for Retail Sellers

  • Tradable Renewable Energy Credits

    accountableattributes, 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


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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


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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


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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


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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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