New York CES: Renewable Energy Standard Underlying Fundamentals

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1 New York CES: Renewable Energy Standard Underlying Fundamentals Roman Kramarchuk EMA Roundtable Managing Director Global Power, Emissions & Clean Energy February 2, 2017

2 Why we re different WE TAKE THE TOTAL VIEW OF THE MARKET We Take an Objective View WE HAVE NO BIAS OR INTERESTS We Take an Integrated View TOP DOWN, BOTTOM UP AND CONNECTED We Take an Expert View PEOPLE, METHODOLOGY, MODELS & TRAINING 2

3 What do we offer? Analysis & Reports REGULAR REPORTS AND ANALYST BREIFINGS Data Sources & Tools DATA SETS AND INTERACTIVE TOOLS Seminars / PIRA University ANNUAL, REGIONAL KNOWLEDGE SHARING 3

4 Demand and Targets Outlined August 2016: The Commission requires each New York LSE to serve their retail customers by procuring new renewable resources, evidenced by the procurement of qualifying RECs, acquired in the following proportions of the total load served: %; %; %; %; % 2017 expected to yield 974,000 MWh This Order also provides for NYSERDA to conduct regularly scheduled solicitations for the long-term procurement of RECs to achieve the following anticipated and minimum results for the years 2017 through 2021

5 But Uncertainty Remains Nov 2016: 2017 Tier 1 RES Obligation on LSEs is actually equal to 0.035%of total load served by an LSE during (56,142 RECs) Volume reflects adjustment to reflect Sun Run and other Customer sited projects How will these be treated going forward? Additional Questions about: Behind the Meter / DER eligibility,» For long term procurement by NYSERDA, overall Tier 1 eligibility of these resources, setting of LSE obligations, interactions with voluntary goals. Treatment of re-powered facilities Existing renewables / Tier 2 Maintenance Etc. etc.

6 Year-On-Year Change Trends in Weather-Adjusted Load: NYISO Particularly Weak Data through April 30, 2015 Source: PIRA Estimates

7 New Supply Needed to Meet Goals, What Will Incent It to Be Built? Monetization Thru Markets: Power Prices + Capacity + Ancillary Services + RECs Key Variables (Wind): Cost of Turbine / Interconnection» Wide Range (Wind $1,500 - $4,000 per KW), Location» PTC/No-PTC, State/Local incentives Cost of Transmission» Transmission, line losses (DC vs. AC) Capacity Factor of Wind» Wide range (<20% to >50%), Location Power Fundamentals» Transmission basis, natural gas prices, retirements, reserve margins, carbon pricing, demand growth, cost of competing generation, etc

8 U.S. Utility-Scale PV Project Cost Outlook: ,900 $/MW-week $/kw 2,500 2,700 2,000 2,500 2,300 1,500 2,100 1,000 1,900 1, ,500 Source: PIRA Avg. Overnight Cost ($/kw) NC/SC ($/MW-week) ERCOT ($/MW-week) CAMX ($/MW-week) PJM West ($/MW-week) NE ($/MW-week) 0

9 Solar Capacity Factors by ISO/RTO 25.0% All Utility-scale Solar PV Generators Avg % 15.0% 10.0% 5.0% 0.0% SPP CAISO ERCOT NYISO PJM ISONE MISO Source: S&P Global 2016, PIRA analysis

10 MW(AC) YOY U.S. Distributed PV Capacity NY Leading YOY Growth 5,000 Distributed PV Snapshot, Sep % 4,500 4,000 Total Capacity 12,300 MW 45% 3,500 3,000 MW YOY 40% 35% 2,500 2,000 30% 1,500 25% 1, % 0 CA NJ MA AZ NY Other 15% Source: EIA

11 NYISO Wind Queue, New Build 1,800 1,600 1,400 1,200 MW Capacity Under Construction Pending 1, Proposed Online Date

12 Capacity Value of Intermittent Resources in NY Unforced Capacity Percentage Wind Zones A through J Zone K (land-based) Zone K (off-shore) Summer 10% 10% 38% Winter 30% 30% 38% From NYISO INSTALLED CAPACITY MANUAL Intermittent Power Resource Unforced Capacity Values, Based on prior seasonal performance Summer: Avg production 14:00-18:00 for Jun, Jul and Aug Winter: Avg production 16:00-20:00 for Dec, Jan and Feb New Resources: NERC class average values, NYISO estimates. For Wind Capacity percentage in the Table above From Report on Phase II System Performance Evaluation The Effects of Integrating Wind Power on Transmission System Planning, Reliability, and Operations prepared by GE Energy, March 4, 2005.

13 Additional Regional Factors / Wildcards RGGI WCI» Undergoing program review potential for higher carbon prices.» Would increase power prices in New York and in New England» Increase attractiveness of power imports from neighboring PJM» Ontario cap and trade program started Jan 1.» Ontario prices increase, flows into province face carbon default factor. Greater incentive for renewables to stay in province New England IMAPP» Looking to expand the formal role of the wholesale power markets beyond low-cost provision of power and reliability to also incorporate state emission and clean energy objectives.» Some tabled proposals would supplant the importance of REC markets.

14 New Trump Administration: Priority List Emergency and National Security Projects?

15 Source: PJM NYISO Interconnection Queue Projects with Potential ISO-NE/PJM Impact

16 New York REC Breakeven Values Required to Incentivize a New Wind Unit $2015/MWh NY G 30% CF NY G 35% CF NY A 30% CF NY A 35% CF For 2017: NYSERDA TIER 1 REC: $21.16 ACP: $ Application of Bid Evaluation Criteria w/ Multiple Factors Could Shift Outcome vs. Market Calculation Note: PIRA estimates based on forecast energy and capacity prices. Assumed Project Cost: $2,000/KW; Capacity factor 30% or 35% PTC phase-out, National Carbon price starts 2025

17 NY Renewable Sources Qualified to Generate RECs in Neighboring States PJM GATS» 153 MW of hydro qualified as MD Tier 1 = 3..9% of Tier I supply for 2013 compliance» 0.4 GW of solar qualified as DC Tier 1 NEPOOL GIS» 1.3 GW NY wind qualified; 96% in MA Class I. Some wind also qualifies in CT, ME, RI and/or NH» Nearly all under NYSERDA contract 0.2 GW came off contract in 2016; another 0.5 GW from 2 nd solicitation expires 2018» Also landfill & digester gas, hydro» Wind/LFG from NY supplied 19% of MA Class I compliance for 2014 (power must be delivered to NE ISO) Flight of NYSERDA Wind to other REC programs?» NY PSC declined to adopt a targeted sub-tier 2 RES to prevent attrition of expiring NYSERDA main tier contracts, because: Primarily wind units with low O&M Barriers to qualifying in other states (vintage/delivery requirements) No imminent risk; can address at a subsequent triennial program review

18 In Past, New England RPS Compliance Relied on NY RECs Increased incentive going forward based on growing clean energy requirements? Source: Quantifying the Level of Cross-State Renewable Energy Transactions, NREL February 2015

19 For additional information about PIRA's North American Power or North American Environmental Markets Retainer Services Website: LinkedIn Feb