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1 Analysis of the use of Multipliers as a substitute for Set-Asides December 6, 2007 Presentation at FPSC Staff Workshop on RPS Bob McGee, Marketing Services Manager Gulf Power Company

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2 Overview Caveats Terminology Assumptions Analysis Conclusions

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3 Caveats Proposing only the use of multipliers as a substitute for set-asides, carve-outs and tiers Analysis requires the use of certain assumptions to make calculations Those assumptions are for illustrative purposes only

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4 Terminology Set-asides Carve-outs Tiers Market-driven Multipliers Mandates within a mandate

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5 Assumptions RPS exists in Florida RPS compliers are required to purchase renewables at costs above avoided cost Some form of renewable, such as PV, is favored or is to be encouraged more than other renewables

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6 Assumptions RPS structure 20% of Retail Sales Retail Sales projections from FRCC Exponential phase-in of 20% RPS mandate in 13yrs The Multiplier in effect at the commercial operation date of a PV generator is applicable for the life of that generator

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7 Assumptions Cost curve for Photovoltaics (PV) from FSEC presentation to FPSC 1/19/07 Cost of non-PV alternatives 5 ¢/kWh growing to 8 ¢/kWh Average PV generating capacity in Florida 4kWh/day/installed kW of PV from FSEC and verified

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8 Analysis On Spreadsheet

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11 ABC A/C

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14 EDF D x E

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15 EDF D x E ABC A/C

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16 BEF

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17 BEF

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18 BEF F/B+G -1 G

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19 BEFGG/E F/B+G -1

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20 BEFGG/EG/ 1.46 F/B+G -1

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21 BE J/B K K+nonPV K/ 1.46 HJ E x H L L/E

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22 BE J/B K K+nonPV K/ 1.46 HJ E x H L L/E D x 0.1

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23 BE J/B K K+nonPV K/ 1.46 HJ D x 0.1 L L/E E x H

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24 BEHJ E x HD x 0.1

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25 BE K HJ E x HD x 0.1 J/B+K -1

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26 BE K K+ non- PV HJ E x H L D x 0.1 J/B+K -1

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27 BE K HJ E x H L L/E D x 0.1K+ non- PV J/B+K -1

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28 BE K K/ 1.46 HJ E x H L L/E D x 0.1K+ non- PV J/B+K -1

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30 Conclusions Multipliers and Set-asides both place emphasis on a particular type of renewable generation Multipliers make no guarantee that kWh of a particular type will be generated

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31 Conclusions Multiplier method offers highest incentive in early years. Set-aside method sets highest mandate in last years. Multiplier offers an incentive to choose PV without removing market pressure to keep PV costs low Multiplier phases out logically and automatically in accordance with cost projections

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32 Conclusions Multipliers can make RPS complier indifferent to higher actual cost of PV Multipliers can bring cost of RPS compliance using PV down to the cost of RPS compliance using other renewable sources

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33 Conclusions But Multipliers must be set high enough to be effective Experience in other states indicates that multipliers of 2x or 3x are inadequate Failure of Multipliers in other states is not due to the mechanism itself, but due to the inadequate level at which the mechanism is set

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34 Conclusions Even if all RPS requirements are met with PV using multipliers, a substantial portion of the original RPS target will be met Within the context of the overall mandate of an RPS, Multipliers allow market forces to work for the benefit of customers

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35 Questions?

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