State Policy: Can Feed in Tariffs (FiTs) incent heat recovery in California? Vince McDonell

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1 State Policy: Can Feed in Tariffs (FiTs) incent heat recovery in California? Vince McDonell

2 Feed in Tariff or FiT! Concept: Distributed Generation of electricity can be sold to the grid at a price that is established based on multitude of drivers Sufficient price to incent desired deployment Reasonable payback periods to attract development Can be structured to a portfolio of technologies/types Rooftop vs ground, wind vs PV vs biomass, etc Can define technology criteria to qualify Emission levels, minimum efficiency, etc. Fair return to the utilities purchasing electricity Impact on ratepayer bills! Simple in Concept..the devil is in the Details! 2

3 FiT Perspective! FiTs are just one mechanism to drive markets Price set by policy, quantity is market driven Generally a longer term strategy (10-20 year contracts)! Others: Incentive Programs (e.g. SGIP) or Quota Type systems (e.g., Renewable Portfolio Standards) Price set by market, quantity is policy driven Seemingly shorter term strategy more risk! Germany, Spain have used FiTs to dramatically increase renewables (i.e. PV, wind, biomass) 0.27 /kw-hr PV* rate too influential? shortages and subsequent capital cost increases for Spain PV *Spain has a co-gen price ~30% of PV price, PV currently removed from program) 3

4 FiT Perspective /kw-hr Residential Bill: +4 /mo 4

5 FiT in the U.S! States are considering/adopting FiTs in increasing numbers. California, 2008 Vermont, 2009 Florida, 2009 Hawaii, 2009 (rates TBD)! Local municipalities also notable adopters SMUD, others! Generally for renewables (e.g., PV, wind) Some are looking at clean DG/CHP options In CA, waste heat recovery is not yet renewable 5

6 FiT for DG/CHP and/or Waste Heat Recovery?! CHP system design constraints Often (e.g., CA) no export allowed per utility interconnection agreements This issue has been pointed to as a barrier for deployment of CHP in CA.to what extent? FiT could potentially open market for DG/CHP! California: AB1613*--establish FiT for clean DG/CHP < 20MW, clean (meet CARB 2007 emissions), efficient (60+%), sized for site thermal What rate will utilities pay? still being debated CPUC would like to monetize the value of DG/CHP (CO2, deferred T&D, avoided line losses, etc.) *Waste Heat and Carbon Emissions Reduction Act 6

7 A bump in the road! Utilities feel FPA gives FERC exclusive authority over wholesale electricity sales in interstate commerce thus states cannot set prices! 15 Jul 10: CPUC has asked FERC for clarification: Can set price for CHP systems that are QFs It cannot exceed avoided cost of the purchasing utility of /kW-hr..too low for market impact Can require utility purchase from non-qfs (i.e., small and new CHP ), but not set a price. Can set price if CHP is exempt from FPA in publicly owned utility districts.muni s! 16 Aug 10: CPUC filed request for clarification.waiting 7

8 Moving Forward?! Within FERC ruling, states have options. For example: set the feed-in tariff at the utilities avoided cost set price at UAC and cover the gap to a workable price through some mechanism? Require purchase from specific systems but not set price Stay inside the fence business as usual Go with quota system (RPS) i.e., set quantity, not price! Utilities tend to favor quota approach Based on Market Price Referent calculated by CPUC 20 year levelized cost of energy from natural gas combined cycle plant.sce contracted for 140 MW of PV this way MPR 0.08 to 0.10 / kw-hr natural gas prices now reducing MPR 8

9 In Summary! FiTs can influence markets (see Europe)! Current state FiT policy options appear conflicted CPUC/AB1613 attempting to reflect true value (the Goldilocks price) FERC jurisdiction? Price setting authority impacted??! Does a federal FiT policy make more sense? Modernize PURPA or FPA? Key is to set price right.who decides this price and how?! RPS in place in many states does this hinder or help FiTs? FiT + RPS??...Utilities seem to favor RPS? Role for SGIP? SGIP II (CA SB 412) coming ( next two weeks )xn! Context for the market sector here influence of FiTs on waste heat recovery market AB1613 designed for DG/CHP.does heat recovery to electricity qualify? (a)2..sized for site thermal 9

10 References! Combined Heat and Power Market Assessment (2009). ICF International, CEC Report F! A Policy Makers Guide to Feed-in-Tariff Policy Design (2010). NREL/TP-6A , July! New FERC Ruling on State Feed-in Tariff (2010). Law Seminars International, August 18! California Assembly Bill No 1613, Chapter 713, Approved by Governor, 17 Oct 2007! FERC Order on Petition for Declaratory Order 15 July