Advanced Renewable Tariffs Thomas Vlcek – Royal Roads University MBA Power Procurement in British Columbia

This presentation will cover: BCs Electricity Deficit Mechanisms of support for renewable electricity Quota versus Feed-in models BC tender results Feed in tariff results

BCs Electricity Supply Outlook Source: BC Hydro, 2006 Integrated Electricity Plan, (Vancouver: BC Hydro, 2006), p.3.

A Looming Power Crunch Demand for electricity in BC is beginning to outstrip heritage supply BC Hydro a net importer since 2001 Projected shortfall of nearly 20,000 GWh by Source: BC Hydro 2006 IEP.

Imports by Resource Type Source: BC Hydro Company Web site, accessed February 2006.

BC Energy Plans 2002 Plans four main objectives: 1.Continued low electricity rates 2.Secure and reliable supply 3.Private sector investment, jobs 4.Environmentally responsible development Energy Plan –Self-sufficiency by 2016 –Zero net GHG emissions from new electricity generation

Mechanisms for Supporting Renewables 1.Quota obligation/Tender: Quantity fixed, market determines price 2.Feed-in Laws: Fixed Price, market determines quantity PriceQuantity Feed-in LawLawMarket Quota/TenderMarketLaw

Tender Process in BC BC Hydro has issued Calls for Power since the late 1980s: – Green Call –2002 Customer-based Generation Call – Green Call –Vancouver Island Call for Tender (VICFT) –2006 Open Call for Power

CFP Project Status Results of BC Hydro CFP Between 2001 and 2006

CFP Resource Mix Share of BC Hydro EPAs by Resource Since 2001/02

Issues with the Tender Process in BC Reasons for Attrition: Licensing and regulation, cost Financial hurdles, pursuit of lowest price Transmission expense/economies of scale Delivery shortfalls/liquidated damages Other issues: Exclusion of smaller, community developers Lack of technological/resource diversity

So What are Advanced Renewable Tariffs? Basics: Fixed minimum price paid to suppliers of renewable electricity Long term contracts lasting 20 years Guaranteed non-discriminatory access to electricity grid Cost of tariff borne by all consumers based on level of use

Dissemination of Alternatives Obligation or Quota Model –Employed in 38 countries worldwide –Renewable Obligation – RO (UK) –Renewable Portfolio Standard – RPS (USA) –Mandatory Renewable Energy Target (Australia) Feed in Tariffs –Employed in 41 countries worldwide (2006) –Western/Eastern Europe, Asia –Introduced in Ontario in 2006 (SOC)

Renewable Tariff Design Key components: Simple and transparent Simplified Interconnection Prices sufficient to drive development Contract lengths sufficient for profitability Prices differentiated by technology Prices differentiated by resource Limit on project size but no program cap.

Level of Feed in Tariffs 2005 (Cent/kWh) Degression * (%/a) Hydropower Biomass (<20MW) Geothermal energy (<20MW) Wind energy (onshore) Wind energy (offshore) Solar energy

ARTs in Europe 2005 Europe has more than 50% of the worlds wind capacity

Wind Energy in Germany

ARTs in Europe 2005 Germany has developed nearly 40% of world PV capacity

Solar PV in Germany

Benefits of ARTs Pay only for generation Increased program flexibility Lessens Pressure to Get Prices Right the First Time Reduced development risk Contract equals collateral Distributed generation Tiered tariffs distribute development, add security Reduced pressure on best sites Profitability Still Higher at Windy Sites Reduced NIMBYism By Enabling Greater Participation By Reducing Concentrations

Standard Offer Contracts in Ontario Ontario adopted SOC for projects <10MW in 2006 Anticipated benefits: –Improved efficiency through reduced line losses –Improved reliability and stability of the electricity system –Increased rural investment –Creation of skilled jobs –Cleaner air –Greater public acceptance of renewable energy

Standard Offer Prices Source: OSEA

Cost of ARTs in BC

Conclusion Tender model has not delivered in BC ARTs are the best mechanism for delivering large amounts of RE, –Quick, affordable and distributed BC Hydro/Utilities Commission need to explore alternatives to CFP.

Questions? Thank-you for your time…