Presentation on theme: "NET METERING & FEED IN TARIFF REVIEW IURC Technical Conference"— Presentation transcript:
1NET METERING & FEED IN TARIFF REVIEW IURC Technical Conference Cause No.43922September 21, 2010
2AgendaHigh Level Overview of NIPSCO Proposal and Interaction Between Net Metering and Feed-In TariffExample Customer “Decision Tree” to DemonstrateNet Metering Proposal (generally following proposed tariff language)OverviewDiscussion of Questions re Net Metering Proposal (e.g. eligible technologies, facility size, facility ownership, meter aggregation, system cap)Interaction and Consistency with Draft Commission RuleFeed-In Tariff Proposal (generally following proposed tariff language)Discussion of Questions/Issues re Feed-In Tariff Proposal (e.g. eligible technologies, facility size, facility ownership, pricing, system cap)Any Other Related Matters (e.g. interconnection, etc.)Next StepsOverview of NIPSCO Proposal and Interacction Between Net Metering and Feed-In TariffII. Net Metering Proposal (generally following proposed tariff language)A. Discussion of Questions re Net Metering Proposal (e.g. eligible technologies, facility size, facility ownership, meter aggregation, system cap)III. Feed-In Tariff Proposal (generally following proposed tariff languageA. Discussion of Questions/Issues re Feed-In Tariff Proposal (e.g. eligible technologies, facility size, facility ownership, pricing, system cap)IV. Other Related Matters (e.g. interconnection, etc.)V. Next Steps.
3Policy Overview Feed-in Tariff Net Metering Renewable initiativeIncreasing customer interestTechnological advancements (both application and cost) and federal initiatives through tax creditsGather information about how and when customers use these programsExperimental rates under a three pilot programThis effort is consistent with the Hoosier Homegrown Energy PolicyNet MeteringPermanent change that is supportive of the renewable initiativeComplimentary to the feed in tariffNo sunset on the effectiveness of expansion to net meteringPart of NIPSCO’s Mission to invest in clean, modern and affordable energy solutions
4Policy Overview (cont.) Encourage job and economic growthIncrease diversity of energy supply systemNIPSCO filed a request to enhance the current Net Metering tariff and provide a Feed-in tariff for its customers on July 16, 2010Based on customer requestsHigher project limits and expansion of availability beyond residential and K-12 customer for Net MeteringAdding Feed-in tariff for larger projectsFeed-in tariffs can be implemented alongside net meteringIPL has the only Feed-in tariff in Indiana at this pointCustomers who are building environmental homes are increasing the use of renewable energy technologies in their designs.Existing building owners are looking at renewable energy as a way to be cleaner and reduce their energy bills.Commercial buildings that have a sustainability goal are looking for a better return on their investments and the current avoided costs do not satisfy their economic needs given the expense of installing renewable technologies.Cities and Towns are looking at renewable sources as a means to lower their bills and clean up the environment as well as demonstration value for its citizens.The legislator has considered and encouraged the utilities to expand the coverage for net metering in the state of Indiana.And finally we have heard from our customers that they are interested in renewable and what to be paid the retail for their power fed to the grid.
5Customer FeedbackApproached by a customer looking to install a solar farm in Porter CountyTold by the solar project developer that a long term contract is essentialLimited window due to the expiration of a federal tax creditA developer responding to school’s request to install wind power in Elkhart CountyIndicated that fixed-price and long-term contract are desirableUse of feed-in tariff affords multiple locations for projectApproached by a large agricultural business for pricing to support a bio-gas to electricity project in White CountyI am one of several owners of a 130 acre farm on the I80/I94 interstate. We are approximately 3 miles south of Lake Michigan and directly south of the Dunes where there are several thousand homes. I approached BP Solar about a solar farm to generate electricity for the homes in the dunes beach area. They are interested, especially since they have a big refinery in Whiting. Diane said that you could help me. The BP Solar project developer told me that a long term contract is essential for them. I need someone to see how the various pieces can be brought together. BP wants a long term contract, there is a strong movement in Indiana to create more alternative fuel sources, and NIPSCO is making a strong effort with the tarriff application. The site make generate 10 megawatts or more, depending upon equipment - this is not my expertise. The 30% tax credit is expiring soon, so there is a limited window. The site would be directly visible on the busiest section of interstate in the country, so there would be some PR value to NIPSCO and BP. There are potentially many positives. BP Solar has been very active in New Jersey, California and Nevada because of direct state support. The State of Indiana said that the rates are attractive enough. I have no way of judging that. Could you give some sense of what level of commitment - pricing and years - would be posible from NIPSCO? Am I correct that it would be easier and more efficient to have one larger solar provider? Does this help you get to your goal easier than if you do not have to staff a department to deal with all the individuals who will not be satisfied with web site information? Clearly I hope the one big user is cheaper argument prevails because I can sell or rent our farm. I look forward to hearing your thoughts.
6Project Facts A 50 kW wind machine costs around $365,000 installed For solar applications, Indiana there are 35 systems in the database with an average cost of $/W installedIllinois: 8 systems with an average cost of 7.94 $/W installedMichigan: 7 systems with an average cost of 9.67 $/W installedOhio: 166 systems at an average cost of $/W installedMissouri: 5 systems at an average cost of 7.26 $/W installedAvg. of all 5 – 9.87 $/W installed7-10 $/W installed is probably the range for the Midwest, though other factors for your area such as labor costs and numbers of installers could change thatIn the cases of Ohio and Indiana, the majority of systems are from 2008 and backIllinois and Missouri (the lower $/W) have the majority of their systems from 2009 – 2010
7Customer Decision Model Proposed Net Metering and Feed-In TariffsCost and ComplexityNet MeteringFeed-In$$$Net Metering OnlyNet Metering and Feed-InFeed-In Only$$$kW kW kW MW MWEase of InstallationLow CostResidential/ Small CommercialEngineered SystemTechnical InterconnectLarge Commercial/ Light IndustrialComplex Engineered SystemWind FarmsSolar FarmsLarge Farming OperationsFor Illustration Only
9Net MeteringCustomers owning qualifying renewable generators are billed only for their net energy consumption over a given billing periodObtain a credit for future billing periods if production exceeds consumptionProvides a direct, inexpensive, and easily administered mechanism for encouraging the customer installation of small scale renewable energy facilities on their buildings
10NIPSCO Proposal Highlights All Customers eligibleParticipation level increased to 100 kW (from 10 kW)Wind, Solar and Hydroelectricity generation qualifyThe state proposalA renewable energy resource as defined in ICHydrogenOther emerging renewable energy technologies the commission determines appropriateNo changes to interconnection policy
11NIPSCO Proposal Highlights (cont.) Aggregate amount increased to 6 MW (was 1 MW previously)State proposes an optional limit of (1%) of the most recent summer peak load of the utility, with at least fifty percent (50%) of the capacity reserved solely for participation by residential customersMetering requirements remain unchangedAllows all customers to roll over credits from month to monthState proposes to limit customers with capacity up to 200 kW rollover credits from month to month
12Customer Benefits Expanded to all customer groups Allows for the customer to “spin the meter backward” and be credited for feed back at retail valueFits in with the “Green” Building movementSupports the growth of the renewable energy equipment sales and service industryMoves the renewable energy option for our customers beyond the test period and allows for mainstream useGives our customers another option for conserving energyQuote from a customer blog.Net-Metering: With Net-Metering, surplus electricity generated by your renewable energy system will be credited back to your utility account. So if your solar system makes more electricity than you are using, the "meter spins backwards". You are not actually "selling" electricity, since in most states the utility will not reimburse you for excess electricity. But, if your utility offers "Net-Metering" you may be able to get credit for electricity provided back to the grid during peak periods. Combined with TOU metering, Net-Metering can result in multiplied savings since your electricity account may be gaining electricity credits during the time of peak utility rates -- Think of a hot, sunny summer day ... your solar system is producing power, spinning your electric meter backwards, and supplying the grid with electricity to run other people's air conditioners -- you're "spinning back" cost at peak rates! That's the savings power of Net-metering, combined with TOU rates.
19Feed-in Tariff Encourages new renewable energy development Long term financial incentive to customers who generate renewable electricityStandardized and streamlined process to do so, easing the entry of new systemsContract term up to 10 years obligates NIPSCO to purchase eligibility renewable energyNIPSCO’s feed-in tariff is its first comprehensive purchase rate schedule for renewable electricity productionIt offers stable prices under long-term contracts for energy generated from renewable sources, including:BiomassBiogasLandfill gasWindSolar photovoltaic (PV)
20Feed-in Tariff (cont.) Attributes Rates developed using a standard Discounted Cash flow modelCapped at 1% of project peak system demand – 30 MWNo Single technology can exceed 50% of the 30 MW capCould use up to 100 kW of renewable generation against own energy loadNIPSCO will retain all environmental attributesContracts subject to IURC approvalOne year from contract signing to put project into service
21Purchase Rate Schedule As Filed July 16, 2010 Discounted Cash Flow Model ApproachSolar = $0.26/kwhWind 0-100kw = $0.17/kwhWind 100-2MW = $0.10/kwhBiomass = $0.07kwh + $6.58/kwLong Term Contract 10 yearsContracts subject to IURC approvalOne year from contract signing to put project into service
23Discounted Cash Flow Model Assumptions 20-year DCF model2% Inflation RateIncludes 30% investment tax creditEffective Tax rate 40.53%Accelerated depreciationPrices set to achieve approximate zero net present value at year 20Assumptions were used for capital, operating and maintenance expenses, capacity availability, and installed project sizePositive cash flows range from year 10-13
24Project model Size Considerations Net metering option available at 100 kWEconomies of scaleFootprint of the project (land required)Simple to sophisticated operating requirementsConstruction Expertise- Home owner to Professional developersCustomer applications and load considerations
25FEED-IN TARIFF PROPOSAL Discounted Cash Flow Modeling Review of Spreadsheets