MA SRECs: The Massachusetts RPS Solar Carve-Out Program Explained

Transcription

1 For Audio Access Dial: Conference ID: Attorney Advertising Prior results do not guarantee a similar outcome Models used are not clients but may be representative of clients 321 N. Clark Street, Suite 2800, Chicago, IL MA SRECs: The Massachusetts RPS Solar Carve-Out Program Explained 1

2 Speakers Jeff Atkin Partner Bill DuFour Associate Natalie Andrews Renewable Energy Project Coordinator Michael Judge RPS Solar Carve-Out Program Coordinator Housekeeping We will take questions throughout the program via the Q & A tab located on your menu bar at the top of your screen and live questions at the end of the program Today s program is being recorded and will be available on our Web site For audio assistance please press *0 For full screen mode, go to View on your toolbar and select Full Screen or press F5 on your keyboard Materials are available on our Web site at foley.com/energyinsights or simply click the print icon on the bottom right hand side of your screen to print to a PDF. 4 2

3 Who We Are: Foley is a highly regarded, national law firm providing client-focused, industryspecific services that result in high-value legal counsel for our clients. Our practice areas encompass the full range of corporate legal services and we have close to 1,000 attorneys throughout 21 offices worldwide. 85+ attorneys on our Energy Industry Team, which covers all renewable technologies Multidisciplinary team that covers all legal needs of energy clients, including: M&A / Joint Ventures Project Development (PPA, EPC, O&M) Real Estate Project Finance Regulatory Taxes and Incentives Intellectual Property 5 Overview 1. Overview of Solar Development/SREC Trends 2. MA Solar Carve-Out Program Explained 3. Q&A 6 3

4 Overview Renewables Portfolio Standards (RPS) Require utilities to use renewable energy or renewable energy credits (RECs) to account for a certain percentage of their retail electricity sales Solar Carve-Out or Set-Aside Refers to a provision within an RPS that requires utilities to use solar energy or solar renewable energy credits (SRECs) to account for a certain percentage of their retail electricity sales (or a certain amount of generating capacity) according to a set schedule A carve-out is a specific portion of the RPS, not an addition to the RPS 7 Overview 8 4

5 Overview 9 General U.S. Trends Overview Increasing state focus on SRECs as a financial incentive Direct solar incentives remain important and continue to evolve Progress is being made on legal issues surrounding third-party PPAs 10 5

6 Overview 11 SREC Trends Overview Increasingly sophisticated market involvement from states Improving price transparency Web-based forums connecting buyers and sellers 12 6

7 Overview 13 Overview The value of SRECs is driven by three main factors: State RPS/carve-out requirements Value of the state s alternative compliance payment (ACP) Supply and demand for SRECs SRECs are generally sold in two ways: Long-term fixed price contracts Spot market MA s third option: Auction clearinghouse 14 7

8 Overview MA s RPS Solar Carve-Out Program Price Certainty Alternative Compliance Payment (ACP) = price ceiling of $600 Auction Clearinghouse = price floor of $300 Opt-in Term = currently 10 years Flexibility Mechanisms to adjust compliance requirements in future years (i.e., to create demand for SRECs) 15 Massachusetts RPS Solar Carve Out Natalie Andrews Renewable Energy Project Coordinator, DOER Michael Judge RPS Solar Carve out Project Coordinator, DOER January 27,

9 Mass. Solar Carve out Program Explained Overview of the MA RPS Development of the Solar Carve Out Goals and Objectives Current statistics/pipeline SREC Basics Qualification Process Opt in Term Price Support Auction Mechanism Important Dates TransCanada settlement Comparison to other states 17 Summary of MA Renewable Energy Portfolio Standard (RPS) Programs RPS Class Sub Class Technology Minimum Standard ACP Rate, $/MWh Class I Solar Carve-Out Wind, LFG, Biomass, Solar, Small Hydro, etc. Solar PV; 6 MW or less, in MA 5% in 2010, increases 1%/year set by formula to grow installed capacity to 400 MW $60.93; increases with CPI $600; can be reduced by DOER same as Class I 3.6%, stays constant $25; increases with CPI Class II Waste Energy Municipal Solid Waste Combustors, in MA 3.5%, stays constant $10; increases with CPI APS CHP, flywheels, paper-derived fuel, gasification 0.5% in 2010; increases to 5% in 2020 $20; increases with CPI 18 9

10 Cumulative Obligations of RPS / APS* Programs Percent Obligation, % 30% 25% 20% 15% 10% 5% APS Class II - WTE Class II Class I - Solar Class I RPS / APS Minimum Standard 0% Compliance Year *Alternative Portfolio Standard (APS) 19 Massachusetts Solar (PV) Development Strategies Governor Patrick s goal 250 MW by 2017 Commonwealth Solar (Rebates) initiated Dec Rebate Program: $68 million, 27 MW Successfully achieved and completed Oct Created robust PV development sector in MA Commonwealth Solar II (Rebates) Green Communities Act 2008 Allows for a DG carve out of Class I program Establishes new net metering rules Federal Government offers tax incentives and depreciation 20 10

11 RPS Solar Carve Out PV Solar Growth (Cumulative MW) M250 W Comm Solar Rebate Program Federal Stimulus Program TOTAL Solar Carve Out MW Target ACP of $600/MWh $285/MWh Price Floor Goals and Current Statistics Goals Cultivate solar development through varied generator sizes across multiple sectors Develop a sustainable solar market that reduces dependence on state subsidies and has longterm growth potential Minimize impact on ratepayers Stats Approved 207 systems, ~17 MW About 4 MW of projects are installed Installed costs of $5 a watt 1140 SRECs created in the first 3 quarters of 2010 Compliance obligation for 2011 is approx. 78,577 SRECs 22 11

12 SREC Basics The RPS Solar Carve Out is a market based incentive 1 SREC = 1,000 kwh of generation Useful life of 1 year In 2011 require 69 MW = 78,577 MWh must be met with Solar PV 30% growth rate if no triggers ACP rate of $600/SREC Auction Account of $285/SREC 400 MW target 23 Qualification Process Eligibility criteria Have a capacity of 6 MW (dc) or less per parcel of land Be located in the Commonwealth of Massachusetts, which includes municipal light district territories Use some of its generation on site and be interconnected to the utility grid Have a Commercial Operation Date of January 1, 2008, or later Cannot have received additional funding from sources deemed ineligible by DOER Online application Notarized signature sheets Review process is quick and straightforward 24 12

13 Statement of Qualification Application Form User Registration Opt in Term and Calculation of Min. Standard Long Market: Opt In Term reduced by 4 quarters for each 10% of Compliance Obligation deposited into the Auction Account Short Market: Opt In Term increased by 4 quarters for each 10% of Compliance Obligation met through ACP Payments Opt In Term may not increase or decrease more than two years as a result of an annual adjustment Assumed 30% annual growth rate in newly installed capacity For 2012 and beyond the Standard will calculated as follows: Example: MinStnd MWh, CY =Total Compliance Obligation CY 1 +[Total SRECs Generated (projected) CY 1 SRECs Generated (actual) CY 2 ] x 1.3 ACP Volume CY 2 + Banked Volume CY 2 +Auction Volume CY Min. Stand = 78,577 MWh +[Projected 2011 SRECs Actual 2010 SRECs] x ACP Volume Banked Volume Auction Volume Once 400 MW has been qualified, future qualifications will cease, but market will continue to exist until all Opt In Terms have expired 26 13

14 Price Support Auction Mechanism Solar Credit Clearinghouse Auction Account Open every year from May 16 th June 15 th Any unsold SRECs may be deposited into the Account Auction will be held no later than July 31 st Deposited SRECs are re minted as extended life SRECs (good for compliance in either of the following two Compliance Years) SRECs are sold to buyers for a fixed price of $300/MWh before being assessed a $15/MWh auction fee by DOER SREC owners will be paid $285/MWh for each SREC sold through the Auction 27 Price Support Auction Mechanism If auction fails to clear, it will be held again, and SRECs will be re minted with a three year shelf life If second auction fails to clear, the Minimum Standard for the following Compliance Year will be increased by the number of SRECs in the Auction and a third auction will be held If the third auction fails to clear, SRECs will retain their three year shelf life, but the unsold SRECs will be returned to their owners on a prorated basis DOER would only expect to hold an auction during years when there is an oversupply of SRECs 28 14

15 Important Dates Date January 15 January 31 April 15 May 16 - June 15 July 1 July 15 Event SRECs from Quarter 3 of the previous calendar year are minted at the NEPOOL GIS Any change in the ACP rate announced by this date SRECs from Quarter 4 of previous calendar year are minted at NEPOOL GIS Solar Credit Clearinghouse auction account available for deposit of SRECs Compliance Filings due from Retail Electric Suppliers SRECs from Quarter 1 of current calendar year are minted at NEPOOL GIS July 20 Opt-in term announced Auction held no later than this date, if the auction does not clear DOER shall conduct a July 31 new auction within three business days Cleared auction date + Each successful bidder is required to submit payment for the awarded volume of 10 SRECs within 10 business days August 30 October 15 The Minimum Standard shall be announced by DOER not later than this day SRECs from Quarter 2 of the current calendar year are minted at NEPOOL GIS 29 TransCanada Settlement Filed with concerns over the Commerce Clause and the fact that only projects built in MA are eligible for the Solar Carve out A settlement was reached between the parties The regulations were amended to apply the ACP rate for RPS Class I to retail suppliers contracted obligations that were in effect on or prior to January 1, 2010 for their portion of their SREC obligation 30 15

16 SREC Program in NJ and Pennsylvania New Jersey has 235 MW of PV installed SRECs have a life of 15 years Rolling ACP schedule out 8 years High value for the SRECs ~$600 Long term contracts are available through the utilities Pennsylvania has an oversupplied AEC/SREC program Accept SRECs from 8 other states SRECs sell in the low $200s SRECs have a useful life of 3 years ACP based on double the average price of SRECs purchased in an energy year by the LSEs 31 Questions and Answers 16

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