The Regulatory Assistance Project 177 Water St. Gardiner, Maine USA Tel: Fax: State Street, Suite 3 Montpelier, Vermont USA Tel: Fax: Website: Renewable Portfolio Standard Vermont and Elsewhere Vermont PSB RPS Collaborative July 18, 2003 Richard Sedano

Experience in Vermont PURPA and Rule Roundtable on Restructuring Docket 5854 – The Restructuring Docket S. 62 Subsequent legislation

PURPA and PSB Rule Conform to federal law Promote renewable energy, transmission access Vermont implementation: 1980s Allocate 150 MW Aggregate utility obligation thru purchasing agent Long run levelized avoided costs available 20 projects, roughly half of allocated MW built Program effectively shelved in early 1990s Implementation with long run avoided costs an expensive bet for consumers

Roundtable on Restructuring Stakeholder process convened by PSB and DPS – Many meetings Outcome: principles 7. A restructured industry must preserve key public benefits of the current system, including cost-effective end-use efficiency, research and development, and the development, commercialization and use of renewable resources.

Alternative principle 7. A restructured industry must preserve key public benefits of the current system, including cost-effective end-use efficiency, research and development, and the development, commercialization and use of renewable resources. … (about energy efficiency) Clean and renewable energy sources can play a valuable role in providing fuel diversity, managing risks and reducing environmental impacts. At least during any transition period, recovery of investments in the development, commercialization and use of renewable and low emissions technologies, which are determined to be cost-effective and approved by regulators, shall be included in a non- bypassable, non-discriminatory, appropriately structured charge.

Docket 5854 An investigation into whether Vermont should initiate retail electric competition, and if so, how PSB concludes that retail competition can be beneficial, with many conditions, including RPS

Public Benefits from Renewable Energy 5854 Report Section X (pg 99) Resource Diversity: A generation portfolio made up of plants of varying sizes and technologies, dispersed throughout the state or region, bears lower risks associated with unplanned outages and high required reserve margins. This reduced risk equates to lower costs of power in the long run. Reduced Fuel-Price Risk: Perhaps the primary risk offset by the development of renewable resources is fossil-fuel price volatility. At a time when this nation is dependent upon foreign markets for more than half of our demand for oil, renewables offer a great measure of energy security and price stability. Environmental Protection: For the most part, renewables provide significant environmental benefits, largely in the form of reduced emissions of airborne pollutants. Sustainability: Renewable technologies do not rely upon depletable resources. As such, they do not decrease the stock of "natural capital" passed on from one generation to the next; nor are they as susceptible as fossil fuels to price increases resulting from eventual scarcity.

S. 62 (1997) Proposed Legislation mostly consistent with Docket 5854 Report and Order § RENEWABLE ENERGY RESOURCE STANDARDS AND MONITORING (a) The public service board shall prescribe by rule or order a standard for renewable energy resources. The standard shall be stated as a portfolio requirement, by type of energy source, and shall be applicable to all providers of electricity to retail consumers in this state.

S. 62 as passed by the Senate Findings: (4) Investment in renewable energy technologies, which over the past 15 years has enabled Vermont to meet all of its growth in electric demand, is declining. In recent years, new investment has declined precipitously, to the detriment of the system's long-term price-stability, reliability, and the environment.

S. 62 as passed by the Senate Goals: 6) Renewable energy. Renewable energy resources shall be developed, commercialized and used at the existing or an improved rate, in facilities that are environmentally sound, and by means of technologies that are sustainable. Goal intends to reverse decline in renewable energy deployment

Renewable, Defined by the Senate (14) "Renewable technology" means a technology that relies on a resource that is being consumed at a harvest rate at or below its natural regeneration rate. (A) For purposes of this section, methane gas and other flammable gases produced by the decay of landfill and agricultural wastes shall be considered renewable energy resources, but no form of solid waste, other than agricultural or silvicultural waste, shall be considered renewable. (B) For purposes of this section, no form of nuclear fuel shall be considered renewable. (C) A technology may be deemed to be renewable, even for installations currently using nonrenewable fuels, if the board finds all of the following: (i) that the technology is an emerging technology that holds special promise for enabling or enhancing the future sustainable use of renewable resources, (ii) that the technology is significantly less polluting than existing technologies for using similar fossil fuels, and as such, warrants special consideration in the public interest, (iii) that the technology is not in widespread use for utility applications, will be readily convertible to renewable fuels, and is significantly less expensive with fossil than renewable fuels, and (iv) that the use of the technology with fossil fuels will accelerate its use with renewable fuels.

Renewable Tiers Defined (22) "Tier one renewable technology" means any renewable and sustainable electric generation technology employed at a specific generating facility that has a capacity under 80 megawatts and, in the case of a hydroelectric facility: (A) possesses and operates in compliance with a Federal Energy Regulatory Commission operating license and a water quality certification from each applicable state, or (B) in case of a Vermont hydroelectric facility that is not required to obtain water quality certification, has complied with the Vermont water quality standards and all other applicable provisions of Vermont law, and taken any actions required under 10 V.S.A. § (23) "Tier two renewable technology" means a technology that has been found by the board to be a renewable, sustainable and emerging electric generating technology and that is employed at a specific generating facility that entered commercial service (or, for self-generation, began regular production of electricity) for the first time after January 1, 1998, or that was built by construction that commenced after July 1, 1997.

The RPS in S. 62

§ RENEWABLE ENERGY RESOURCE STANDARDS AND MONITORING (a) No company shall sell or otherwise provide or offer to sell or provide electricity in the state of Vermont without ownership of sufficient tradeable renewable energy credits as provided for by the renewable energy portfolio standards to be established pursuant to this section. (b) The public service board shall prescribe by rule or order, and may from time to time amend, a standard for renewable energy resources, as well as requirements for implementation of that standard and compliance with that standard. The standard shall include a two-part portfolio requirement that shall be applicable to all providers of electricity to retail consumers in this state. The first part shall require that a percentage of each providers sales in Vermont shall be generated by tier one renewable technologies, and the second part shall require that an additional percentage of each providers sales in Vermont shall be generated by tier two renewable technologies, each as defined in this section and the standard established by the board. The standard shall establish required levels of renewable resources under each part of the standard. The required level for part one shall be at least equal to that proportion of the retail electric consumption and associated transmission and distribution losses in 1995 in Vermont that met the standard for part one. The required level for part two shall increase each year, beginning in 1998, and in the year 2007 shall be at least equal to four percent of Vermont retail electric consumption and associated transmission and distribution losses in that year.

(c) Renewable energy facilities that qualify for tradeable renewable energy credits shall be sustainable, environmentally sound facilities and shall be determined by factors which include the following: (1) Fuel type, which may include wind, solar, biomass other than municipal solid waste, and other nondepletable fuels identified by rule or order of the board, subject to the criteria established in subdivision (3) of this subsection; (2) Technology, which may include renewable fuel conversion technologies such as solar-thermal, photovoltaics, fuel cells, biomass gasification, biomass combustion and other technologies that may be approved by rule or order of the board, subject to the criteria established in subdivision (3) of this subsection; (3) Environmental impacts of the facility. Renewable energy facilities eligible for tier one or tier two renewable energy credits shall not result in undue adverse air, water or land use impacts, including impacts associated with the gathering of generation feedstocks. The board may, by rule or order, establish a certification process, or may otherwise provide for certification through other entities selected by the board, to ascertain whether a particular facility has met these criteria and has such impacts, and is otherwise eligible to obtain tier one or tier two renewable energy credits. Until the board has established such a certification process, the board may grant temporary certification. For the purpose of such temporary certification, evidence that a facility has obtained and is in compliance with all applicable state, local and federal siting and environmental permits shall create a rebuttable presumption that it does not have those adverse impacts. Determination of eligibility for purposes of this section shall be made by the public service board by order or rule of general applicability or case-by-case, as determined by the board.

(d) For each tier, the board shall establish a system of tradeable credits that may be earned by electric generation qualifying for one of the parts of the standard. Under the system, the owner of a facility may apply for a certificate entitling the facility to earn tradeable credits based on its electric energy production. (1) These certificates shall be issued to the specific facility, shall establish any necessary conditions for the certificate to continue in force, and shall be for a stated period of time no longer than the economic life of the facility. (2) Certificates for tier two tradeable credits shall be for no more than 10 years, but may be renewed for a period determined by the board, if the board finds that the facilitys technology remains eligible for tier two credits. (3) A certificate for tier two credits may be converted to a tier one certificate, if eligible. (4) Owners of self-generation and customer-producers may apply for and may be awarded certificates upon meeting all other applicable conditions. (5) The standard may provide for the issuance of a certificate entitling a facility to earn tradeable credits, in addition to those that it would normally earn under this standard, if that facility employs a tier two fuel type or technology that the board has found requires special incentives to promote orderly, sustained commercialization. (6) Tradeable credits of independent power producers that are defined as qualifying facilities under board rule shall be assigned to distribution utilities pro rata, based on their energy purchases from these facilities.

(e) To assist the public service board in determining environmental sustainability, the department of public service, the agency of natural resources, and the environmental board shall conduct a public process and prepare a report assessing windpower development potential throughout Vermont, and shall present an interim report to the general assembly by January 15, The report shall include an analysis of potential sites, projected energy production, environmental impacts, including aesthetics, and an analysis of effects on Vermonts tourism and recreation economy. The report shall develop wind-siting criteria based upon this analysis, and make appropriate recommendations for implementation. (f) To assist the public service board in determining environmental sustainability, the agency of natural resources and the department of public service shall conduct a public process, shall prepare a report assessing additional biomass generation development throughout Vermont, and shall present an interim report to the general assembly by January 15, The report shall include an analysis of estimated sustainable harvest rates, energy production, environmental impacts, including forest health, aesthetics, and biodiversity, and an analysis of effects on Vermonts tourism and recreation economy. The report shall include recommended forest practices requirements to assure protection of wildlife habitat, biodiversity, water quality, and wetlands.

Subsequent Legislation Legislative proposals in 2001, 2002 Attempts failed primarily due to concern about cost of compliance and effect on retail rates 2003: Act 69

§ RENEWABLE PORTFOLIO STANDARDS FOR SALES OF ELECTRIC ENERGY (a) The public service board shall design a proposed renewable portfolio standard in the form of draft legislation. The standard shall be developed with the aid of a renewable portfolio standard collaborative. The renewable portfolio standard collaborative, composed of representatives from the electric utilities, industry, renewable energy industry, ratepayers, environmental and consumer groups, the department of public service, and other stakeholders identified by the board, shall aid in the development of a renewable portfolio standard for renewable energy resources, as well as requirements for implementation of and compliance with that standard. The proposed renewable portfolio standard shall be applicable to all providers of electricity to retail consumers in this state. The proposed renewable portfolio standard developed by the board will be presented to the house committee on commerce, the house and senate committees on natural resources and energy, and the senate committee on finance in the form of draft legislation for consideration in January (b) In developing the renewable portfolio standard, the board shall consider the following goals, which shall be afforded equal weight in formulating the standard: (1) increase the use of renewable energy in Vermont in order to capture the benefits of renewable energy generation for Vermont ratepayers and citizens. (2) maintain or reduce the rates of electricity being paid by Vermont ratepayers and lessen the price risk and volatility for future ratepayers.

RPS Elsewhere Arizona, California, Connecticut, Hawaii (goal), Illinois (goal), Iowa, Maine, Massachusetts, Minnesota (has one RPS and one RP Goal), Nevada, New Jersey (increasing), New Mexico, Pennsylvania (PECO only), Texas, Wisconsin New York under development, other states are considering an RPS: WA, UT, CO, MD, RI, VT e.cfm?Type=RPS&Back=regtab&CurrentPageID= 7&Search=TableType e.cfm?Type=RPS&Back=regtab&CurrentPageID= 7&Search=TableType

State has a Renewable Portfolio Standard State has a Renewable Portfolio Goal Source: Database of State Incentives for Renewable Energy (DSIRE) States with a Renewable Portfolio Standard Arizona, California, Connecticut, Hawaii, Illinois, Iowa, Maine, Massachusetts, Minnesota (has one RPS and one RP Goal), Nevada, New Jersey, New Mexico, Pennsylvania, Texas, Wisconsin

RPS in brief AZ – solar emphasis, escalating 1.1% in 2007 CA – 20% by 2017 CT – 2 tier, escalating; 13% by 2009 HI – goal; existing + new; escalating to 9% by 2011 IL – goal w/ incentives; 15% by 2020 IA – applies to IOU; a MW requirement ME – existing + new; 30% RPS << existing (50%) MA – new, escalating to 4% in 2009 MN – esc. goal w/ MW mandate XCEL NV – esc. 15% in 2013 NJ – 2 tiers + 6.5% in 2008; 20% in 2020 NM – 10% in 2011 TX – 2000 MW by 2009 WI – 2.2% by 2011

RPS Experience Benefits and Costs Improve Environment Diversity, Domestic Price Stability (gas), lower clearing prices Economic Developmt Prompt, co-ordinate other policy actions Possible higher cost Intermittence Transmission (remote) Degrade environment

RPS Experience Some Other Issues Credible Enforceable Fair and Consistent Permanence Favor specific fuels Behind the Meter Near/long term targets Alternative Compliance Cost Geography Long term contracts Relation to green pricing