The State of the CT RPS:

Transcription

1 The State of the CT RPS: Where, What Kind, and How Much Presented to: Connecticut Business and Industry Association Ken Nelson, Sr. Vice President October 2012

2 Connecticut RPS Overview Targets 20% by 2020 (+1% /yr until 2014, +1.5% thereafter) Class I Class II Class III 3% by % by 2010 ACPs / Floor $55 ACP $55 ACP $31 ACP, $10 Floor Eligible Resources 1) Solar 2) Wind 3) Fuel Cells 4) LFG/AD 5) Ocean thermal, wave or tidal 6) Low-emission advanced renewable energy conversion 7) Newer ROR hydro < 5MW 8) Sustainable biomass 9) DG using Class I resources 1) Trash-to-energy 2) certain biomass facilities not in Class I 3) and certain older run-of-the-river hydro 1) Customer-sited CHP with 50% efficiency, COD 1/1/06; 2) electricity savings from CLM, post 1/1/06; 3) Waste Heat Recovery, COD 4/1/07 Eligible Geographies RECs from facilities either in ISO-New England or the power must be imported into the ISO from an adjacent control area 2

3 Class I Location of Renewable Generation MWh 800, ,000 In % of RECs originated in Maine, New Hampshire, and Vermont; less than 4% of funds directly benefitted Connecticut 38% 2010 CT Class I Compliance by Generator Location 600, ,000 24% 400,000 17% 300, , ,000 - PA 2% 3.8% 6% 6.2% 2% Maine New Hampshire Vermont Connecticut New York Quebec Massachusetts Rhode Island Source: CT Docket #

4 Class I Fuel Sources Used In 2010, 74% of Class I RECs were generated by 8 out-of-state wood fired facilities 2010 CT Class I by Fuel Source 1% 1% 0% 0% 3% 9% 12% 2010 CT Class I by Unit (Top 10) Unit Type State Compliance % (2010) JC McNeil Wood VT 15.8% Reenergy Stratton Wood ME 15.1% Reenergy Livermore Wood ME 11.9% Reenergy Ashland Wood ME 8.7% Source: CT Docket # % Wood / Biomass Landfill Gas Wind Hydro Solar Fuel Cell / Other 4 DG Whitefield Wood NH 7.7% Hemphill Wood NH 6.3% Bridgeport LFG CT/PA 6.2% Bridgewater Wood NH 5.6% Indeck Alexandria Wood NH 2.6% High Sheldon Wind Wind NY 2.3% Total 82.3%

5 Class I REC Generation Decrease CT is the only state that has experienced a sizeable drop in the supply of Class I credits that did not result from a rule change or new program # of RECs 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 PJM/NEPOOL REC Generation MD precompliance period MI switch to MIRECs NJ Class 1 MD Tier 1 DC Tier 1 PA Tier 1 DE New IL (*) OH CT Class I 10% Drop MA Class 1 ME Class 1 RI New NH Class 1 CT Class 1 2,000, Source: PJM GATS and NEPOOL GIS Registries 5 * Note: IL Data does not include RECs from MRETs

6 Class I Price History The CT Class I REC market has seen prices increase by nearly 400% since last year along with a notable increase in open interest $60 CT Class I REC Futures 7000 $ $40 $30 $ $ $0 0 CT Open Interest CT Class I Price Source: ICE 6

7 Class II Fuel Sources Used Since 2008, share of trash to energy resources has nearly doubled 80% Class II Compliance by Fuel Source 70% 60% 50% 40% 30% 20% 10% 0% Trash to Energy Biomass Hydro LFG 2008 Percentage 2010 Percentage Between 2.5MM 3.5MM credits Class II credits are currently available for demand of ~900K RECs, resulting in Class II prices under $1/REC Source: CT Docket # ; CT Docket #

8 Class II Location of Renewable Generation CT s share of Class II resources has increased as other states (MA, NH) have designed policies to accomplish their specific state-level environmental objectives 50% 45% Class II Compliance by Generator Location 40% 35% 30% 25% 20% 2008 Percentage 2010 Percentage 15% 10% 5% 0% Connecticut Maine Vermont Massachusetts New Hampshire Rhode Island Source: CT Docket # ; CT Docket #

9 Class III Eligible Resources vs. Demand The CT Class III program is oversupplied, with more facilities expected to come online the program currently trades at the floor price of $10/REC 2,500,000 CT Class III Compliance by Project Type 2,000,000 1,500,000 1,000, , # CT Class III - CHP # CT Class III - CLM RPS Demand Source: NEPOOL GIS Registry 9

10 New England RPS Overview Current estimates indicate that only ~17% of the $176MM 2013 CT RPS compliance cost will be spent on in-state resources Structure Recent Changes Supported Projects Est Compliance ($MM) Est Cost per Capita Est % spent in state CT 3 Classes LREC / ZREC Plainfield $176,624 $49.42 * 16.8% * MA NH ME 4 Classes 1 Carve-out 4 Classes 1 Carve-out 2 Classes 1 Multiplier Biomass ruling >50% efficiency 2012 thermal carve-out, new % and ACPs Cape Wind $345,360 $ % Berlin $49,266 $ % MPRP $26,988 $ % RI 2 Classes Block Island $27,909 $ % VT No RPS, SPEED program grants PPAs to local projects who sell RECs into region * Excludes LRECs and ZRECs Source: EM estimate based on information from the following sources: Spectron (pricing), 2010 Census, and various state program reviews 10

11 Millions of MWh Current Class I Structure Dependence on older wood resources Out of state wood facilities represent the majority of Class I REC supply ZRECs LRECs Plainfield Regional Wind * Biomass RECs Supplied Class I RECs Required Source: NEPOOL Registry and 2011 CELP Report and EM estimates for 2012 data 11

12 Concluding Thoughts Unless addressed, the CT RPS will continue to favor woody biomass over in-state CHP Class I: 93% of the RPS funds and growing Class II: 0.2% of the RPS funds and declining Class III: 6.8% of the RPS funds and declining The LREC/ZREC programs, while providing many benefits and dramatically increasing investment in the state, will produce a relatively small number of RECs, resulting in minimal impact on Class I prices. Futures prices for Class I credits are near the ACP There are no regulators outside of Connecticut with jurisdiction either over the RPS program or the market it has created It is critical to examine the program structure to address whether the RPS achieves CT s environmental objectives and produces the intended benefits for rate payers and the CT economy 12

13 Thank You Ken Nelson Senior Vice President, Renewables 3555 Timmons Lane, Suite 900 Houston, TX Office: Please Note: The views expressed in this presentation are my own and do not necessarily represent the views of my employer. Element Markets is a participant in the environmental credit markets. The purpose of my comments is to provide general background on the market structure, and should not be interpreted as advice on particular trading strategies. 13