1. "What Electricity Resources Can We Count On to Meet New England's Growing Electricity Demand? Renewable Energy"
Alan Nogee
Energy Program Director
Union of Concerned Scientists
Massachusetts Restructuring Roundtable
Boston, MA
November 19, 2004

2. EIA gas price forecasts 1997 - 2003

3. EIA model and assumptions 2002 Gas savings offset electric costs of 20% RPS8
Change in Consumer Electricity Costs 6 4
Billion 98$
Net Cost 2
When you put the two together a national RPS becomes even more affordable to consumers.
EIA results show that gas savings to consumers offsets a large portion of the higher electricity costs and even produces a net savings after 2015.
Change in electricity costs = 3.2% higher in 2010 and 1.4% in Incremental cost falls over time as the incremental cost of renewables falls.
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020 -2
Change in Consumer Gas Costs
Source: EIA, Annual Energy Outlook 2000; RPS: 7.5%, no cap or sunset case -4

4. EIA model and assumptions 2004: 20% renewables reduce both natural gas & electricity bills
EIA: 1% reduced demand for gas = 1% price reduction
$11 billion NPV
Conservative: other studies have found 1% reduced demand for gas = 3% price reduction (EA/ACEEE)
$15 billion NPV
*Net present value using a 7% real discount rate.
Source: UCS, using EIA NEMS model and assumptions

5. Renewable Electricity Standards - 2002
MN: 4.8% by 2012*
CT: 10% by 2010
ME: 30% by 2000
PA: varies by utility
NJ: 4% by 2012
MA: 4% by 2009
WI: 2.2% by 2011
NV: 15% by 2013, solar 5% of total annually
IA: 2% by 1999
NM: 5% by 2013
AZ: 1.1% by 2007, 60% solar
12 states
TX: 2.7% by 2009
* MN has a minimum requirement for one utility, Xcel.

6. Renewable Electricity Standards – November 18, 2004
MN: 19% by 2015*
CT: 10% by 2010
RI: 16% by 2019
ME: 30% by 2000
PA: varies by utility
NJ: 6.5% by 2008
MD: 7.5% by 2019
MA: 4% by 2009
NY: 24% by 2013
WI: 2.2% by 2011
NV: 15% by 2013, solar 5% of total annually
CA: 20% by 2017
CO: 10% by 2015
IA: 2% by 1999
NM: 10% by 2011
AZ: 1.1% by 2007, 60% solar
18 states – CA, CO, HI, IA, MD, MN, NY, RI, WI outside of restructuring
Yellow = new since 2002
Orange = higher
TX: 2.7% by 2009
HI: 20% by 2020
* MN has a minimum requirement for one utility, Xcel.

7. Renewable Energy Expected From State Standards and Funds - 2002

8. Renewable Energy Expected From State Standards and Funds – November 18, 2004
23,240 MW new renewables
56.1 MMTCO2E reductions
Other**
CO2 reduction equivalent to
* 2.7 billion more trees
* 8.3 million less cars
California
New York
Colorado
Nevada
AZ & NM
Texas
Minnesota
IA & WI
Maryland NJ
CT & RI MA
Maine
**Includes Delaware, Hawaii, Illinois, Montana, Ohio, Oregon, and Pennsylvania.

9. Renewable standards are the primary driver
“RPS will be the most important driver for new renewables in the U.S. and Canada over the next ten years.” Navigant
“State-level renewable electricity standards, along with the federal production tax credit for wind, will be the primary drivers of new renewable energy growth...” Platts
“In 2001, 75 percent of the wind power developed in the U.S. was within those states with renewable energy requirements.” LBL National Lab
“Renewable portfolio standards or purchase mandates are the most powerful tool that a state can use to promote wind energy.” NREL
“Renewable portfolio standards have emerged as an effective and popular tool for promoting renewable energy.” Council on State Governments

10. New capacity contributing to renewable standards thru 2003
U.S. = 2,335 MW
Connecticut = MW
Massachusetts = 9 MW
Built to meet RPS = 0 MW
Source: U.S. EIA

11. No long-term contracts = no financing = no new renewables
What’s going wrong?
Siting problems
No long-term contracts = no financing = no new renewables

12. Wind siting Challenges on land and sea
Encouraged by Cape Wind review process and draft EIS
Still reviewing EIS
Visual impact of wind: if 6 miles out to sea is not enough to mitigate, what is?
Need leadership at all levels

13. Long-term contracts Potential solutions
Central procurement (NY)
State-agency funding backstop (MA, RI, NV)
Massachusetts Green Power Partnership
Mass. Renewable Energy Trust
Contracts and options for renewable energy certificates (RECs)
Re-sells certificates for RPS, green marketing
Fund needs to escrow money, but recycles
100 MW in round 1 ($36 million)
Preparing for round 2 ($15 million)
Only partial solution: not enough revenues, time lag using alternative compliance revenues
Criticized in Boston Herald for supporting out-of-state facility

14. Why support facilities in other New England states?
RPS and fund both for Mass. Customers
Fuel diversity
Energy security
Price stability
Environmental improvement
Same economic and environmental benefits to customers generated anywhere in New England grid (or delivered to New England grid)
US Commerce Clause prohibits discriminating against out-of-state renewables

15. Consensus Report to the Legislature on the Proposed Renewable Energy Fund
We agree that the goal of the Fund should be to increase the AVAILABILITY, AFFORDABILITY AND USE OF RENEWABLE ENERGY BY MASSACHUSETTS CONSUMERS through:      ·   Markets - Supporting increased demand for renewable energy resources via market development in the Commonwealth; ·   Industry - Supporting the continued survival, development and growth of renewable energy projects, enterprises and related institutions in the Commonwealth AND REGION; and ·   Knowledge - Supporting the expansion of renewable energy expertise at all levels in the Commonwealth.

16. Potential solution: Require distco long-term contracts
CA, NV, NM, IA, MN
Provide diversity, price stability for customers
Regional energy security, price stability
Hedge against carbon reduction costs
How many people do not have at least 5-10% of their financial portfolios in investments that are likely to cost them more but protect them from price volatility?

17. Prudence review
Companies required by DTE to comply with RPS at least-cost
Allowed to sign long-term contracts
How is it prudent to pay $50/MWh in spot market for RECs available for $20-25/MWH in long-term market?
Can you convince the public even if you could convince the DTE?
Can we avoid this train wreck?

18. National Commission on Energy (Rowe, Tierney, Holdren, Cavanagh, Joskow, Sharp, et. al.)
Electric- industry restructuring has derailed….
Small customers … have received little direct benefit from retail competition itself. Because the pocketbook advantages have been insubstantial, many consumers find the choices associated with retail competition to be more of an annoyance than an advancement….
Retail marketers have lost some billions in capital…
At the same time, it is often unclear who is responsible for assembling a diversified mix of short- and long-term resource commitments and other risk management tools, in order to sustain the economical and reliable electricity services that a healthy economy requires.
Retail distribution should remain a responsibility of utilities under state and local regulation, along with electric energy resource portfolio management for residential and small business customers (and any larger customers who choose regulated portfolio services).

19. Source: NRDC

20. For more information…
Union of Concerned Scientists
2 Brattle Sq.
Cambridge, MA 02238
(617)
Alan Nogee
energy Innovations