1 Selling Renewable Energy in Michigan Julie Baldwin Michigan Public Service Commission Michigan Wind Conference 2009 March 3, 2009
2 Michigan Public Service Commission Three Governor-appointed Commissioners Regulates 18 investor-owned and cooperative (member owned) utilities Licenses alternative electric suppliers Regulatory responsibilities for the new Renewable Energy Standard (RES) & net metering program Some new responsibility for ensuring public review and compliance of municipal utility Renewable Energy Plans
3 Top FAQs 1. Grid interconnection at distribution or transmission level? 2. What are RECs and how do they work? 3. How does net metering work? 4. How do I sell to a utility, cooperative utility, or municipal utility? How much can I get paid? 5. I ve found a customer for my energy, how does this work?
4 FAQ 1. Grid interconnection at distribution or transmission level?
5 Michigan Transmission Basics As a result of restructuring efforts, almost all Michigan utility transmission facilities were transferred to what are now independent transmission owners Generally, lines 100 kv and over are transmission Certain radial lines of higher voltage that serve only one customer are classified as distribution facilities Transmission rates & tariffs are regulated by the Federal Energy Regulatory Commission Generally, interconnection at transmission level is managed by the Midwest Independent System Operator (MISO Queue)
6 Michigan Transmission Companies AEP: Serves southwest portion of lower Michigan ATC: Serves upper peninsula ITC: Serves most of the lower peninsula Wolverine Power Supply: Serves various portions of the lower peninsula Xcel Energy: Serves the western upper peninsula See (then Electricity page) for contact information Municipal transmission providers vary by utility
7 Interconnecting with a Utility At Distribution Levels Interconnections at the distribution level are regulated by the Michigan Public Service Commission (excluding municipal utilities) Interconnection rules are under revision and could be in effect as early as April Public hearing this morning to receive comments from the public; written comments due by 5 pm March 6 Documents at Current rules and interconnection contact information for each utility are available at Generators apply for interconnection directly with the utility
8 Some Factors to Consider In general Distribution level interconnections for projects <2 MW Transmission level interconnections for projects >20 MW Projects in between a gray area Projects interconnecting with the distribution system may also impact the transmission system Projects interconnecting with the transmission system may impact the distribution system
9 In general & with many, many disclaimers A generator connected to any MISO transmission provider can sell to any Michigan utility without paying an incremental transmission rate. The utility must be a MISO Network Integrated Load Serving Entity (Not all Michigan utilities fit this criteria.) The Load Serving Entity pays the transmission rate. A generator connected to a utility distribution system and selling into the MISO market would likely be required to pay the distribution company a wholesale distribution rate.
10 FAQ 2. What are RECs and how do they work?
11 PA 295 Renewable Energy Standard 10% RPS by 2015, with interim steps for Michigan needs at least 6% more renewable energy to reach 10%
12 Renewable Energy Credits Compliance with Michigan s RES will be Renewable Energy Credit (REC) based One REC is created for every MWh of renewable energy generated Monthly renewable energy generation will be reported to a REC tracking system One MWh of renewable energy can be thought of as including both one MWh of energy and one REC Both the energy and the REC have financial value REC can be sold separately from the energy RECs can be banked forward for 3 years RECs from the first 120 days of the year can be counted toward the previous year s compliance
13 How much new renewable energy is needed for Michian? Total retail sales for Michigan (EIA, 2006) 108,017,697 MWh in 2006 Michigan needs 6% additional renewable energy (Assuming Michigan already has about a 4% renewable energy portfolio.) 0.06 * 108,017,697 MWh = 6,481,062 MWh or RECs Assuming all wind with a 30% capacity factor: 2,500 MW of new wind needed by 2015 As of the end of 2008, Michigan had 130 MW of installed wind
14 Provider Renewable Energy Plans All providers file renewable energy plans with the MPSC between mid February and early April Schedule of forecasted construction and purchases Show incremental cost for 20-year plan AESs and member regulated cooperatives do not have to show incremental costs Filed plans are available on-line: then Electricity, then Renewable Energy and Energy Optimization Plan Information Page
15 RES Michigan Incentive RECs Solar generation earns 2 additional RECs for each MWh generated On-peak, non wind generation earns additional 20% REC for each MWh generated Renewable energy generated off-peak, stored, and then used on-peak earns additional 20% REC for each MWh Renewable energy generated from equipment made in Michigan earns an additional 10% REC for each MWh generated, for the first 3 years of production. Renewable energy generated from systems constructed by a Michigan work force earns an additional 10% REC for each MWh generated, for first 3 years of production. Details in Section 31 of PA 295 and December 4, 2008 Order in Case No. U-15800, starting on p. 21.
16 FAQ 3. How does net metering work?
17 Net Metering Currently For customers of rate regulated utilities with generators under 30 kw All programs are still open and have room for more participation Coming soon New net metering program under 2008 PA 295 Proposed rules are available for public comment. See
18 New Net Metering Program Proposed Rules PA 295 Three tiered program for rate regulated utilities and alternative electric suppliers totaling 1% of a provider s previous year peak in MW 0.5% for 20 kw 0.25% for >20 kw up to 150 kw 0.25% for >150 kw up to 550 kw (methane digesters only) Generator must be sized no larger than the customer s electricity needs RECs are owned by the generator Customers keep net metering credits and receive a check annually when credit is above $50 Ask your utility to provide a sample bill to help you understand the economics of net metering
19 True Net Metering For Generators up to 20 kw Customer is billed based on net usage Credit is full retail rate for all excess kwh Utility shall use the customer s existing meter if it is capable of reverse registration A generator meter shall be provided at cost if requested by the customer No interconnection costs or study fees $100 interconnection/net metering application fee
20 Modified Net Metering For Generators Greater than 20 kw up to 550 kw Customers pay all interconnection costs/study fees Customers with generators up to 150 kw can use their generation on site without paying a standby charge Customers with generators 150 kw (methane digesters only) pay standby charges Customers pay full retail rate for deliveries from the utility and receive the generation portion of the retail rate for deliveries to the grid Net excess generation is credited at either the generation portion of the retail rate of an Locational Marginal Price (LMP) wholesale rate
21 FAQ 4. How do I sell RECs and/or power to a utility, cooperative utility or municipal utility?
22 Some Sale Options Net Metering (for small systems only) Self-Service Power, various tariff arrangements that vary by utility for larger-than Net Metering Supplier to a utility Green Pricing Program (PPA) Supplier to any provider s RES program (capacity + energy + RECs) (PPA) Possible SOCs or ARTs coming in the future? PURPA qualifying facility status (PPA)
23 Green Pricing Programs Voluntary program where customers pay extra to obtain greater percentages or all their use from renewable energy Some utilities purchase energy and RECs while other purchase only the RECs Consumers Energy and Detroit Edison have offered bid solicitations when supply needed for their voluntary programs
24 Regulated Utility Green Pricing Programs Company 2008 Customers 2008 Sales (MWh) Cloverland Consumers Energy 12,602 76,622 Detroit Edison 15,759 38,635 Edison Sault Presque Isle UPPCO We Energies WPSC Total 28, ,732
25 Supply Renewable Energy for RES Due to the 3-year banking provision, renewable energy generated now can count toward a provider s 2012 target REC sources REC-only or energy-and-rec contracts (all contracts must be approved by MPSC, a 30-day review process) Provider- or affiliate-owned renewable energy facilities REC spot market
26 RES Cost Limitations to Providers Incremental levelized cost of 20-year renewable energy plan, plus savings from the energy optimization program, cannot exceed the cost of a new conventional coal plant. Incremental levelized cost of renewable energy plan = total cost of renewable energy transfer price Transfer price = amount per kwh that is passed through to customers in a power supply cost recovery proceeding. Basically, it is equal to the MISO LMP plus a capacity value. Levelized cost of a new conventional coal plant provided by MPSC Staff as a guidepost rate is $133/MWh Retail rate impact of RES compliance is limited to not more than $3/meter/month for residential customers, $16.58/meter/month and $187.50/meter/month for larger customers.
27 Consumers Energy & Detroit Edison Required to purchase at least 50% of RECs from third party producers Competitive bid process Unsolicited bids may be accepted See then For Business, then Electric Power Notices, then Requests for Proposals (2009 January) for an example RFP. Bids were due yesterday. This RFP is for projects 150 kw to < 5 MW. Please note that under this RFP bids include payment for RECs, energy & capacity.
28 2007 Renewable Energy % Investor Owned Utilities Alpena Power 5.1 American Electric (Indiana Michigan) Power Co. 0.5 Consumers Energy 5.0 Detroit Edison 1.1 Edison Sault 26.4 Upper Peninsula Power Co. 8.3 We Energies 1.9 Wisconsin Public Service Corp. 3.9 Xcel Energy 14.2
29 Working with Consumers Energy See then For Business, then Customer Generation for contacting the company about selling renewable energy Consumers Energy pays for all electricity delivered from renewable energy systems at the hourly real-time Locational Marginal Price (LMP) subject to some deductions 2008 Average Energy Purchase Price: ($51.13/MWh - $5/MWh) = $46.13/MWh or /kwh
30 Working with Detroit Edison For customer generation information, see Detroit Edison is in the process of adding customer generation contact information to its web site. Detroit Edison issued an RFP for RECs from existing facilities in December. Responses were due by January 23, 2009.
31 MEGA Electric Service Territories Edison Sault Electric Company Xcel Energy Upper Peninsula Power Company We Energies Wisconsin Public Service Corp Alpena Power Company Indiana Michigan Power Company Service areas shown are approximate and do not separately identify gas and electric areas for combination utilities.
32 Working with Cooperatives Some cooperatives have all-requirements purchase agreements Your initial contact regarding renewable energy/rec sales should be with the distribution cooperative (See then Electricity then Cooperatives for contact information) Purchase contracts may include the cooperative, allrequirements power supplier and the generator
33 Michigan Cooperatives Alger Delta Cooperative Electric Association Cherryland Electric Cooperative Cloverland Electric Cooperative Great Lakes Energy Cooperative Midwest Energy Cooperative Ontonagon Rural Electrification Association Presque Isle Electric & Gas Cooperative Thumb Electric Cooperative Tri-County Electric Cooperative Red text indicates the cooperative has an all-requirements purchase agreement with Wisconsin Public Power, Inc. Green text indicates the cooperative has an all-requirements purchase agreement with a Wolverine Power Cooperative. Blue text indicates the cooperative has an all-requirements purchase agreement with Wabash Valley Power Association
34 Cooperative Service Territories
35 2007 Renewable Energy % Cooperatives Alger Delta 11.0 Cherryland Electric 0.6 Cloverland Electric 34.6 Great Lakes Energy 0.6 Midwest Energy 1.6 Ontonagon County REA 8.6 Presque Isle Electric & Gas 0.6 Thumb Electric 1.1 Tri-County Electric 0.6 *Data is from 2007 production. New projects like the Harvest Wind Farm are not included.
36 Municipal Utilities See for contact information Municipal utilities might be especially interested in purchasing renewable energy and RECs instead of building and owning Municipals can not presently take advantage of renewable energy production tax credits (PTC), investment tax credits (ITC), & federal grants available
37 PURPA Qualifying Facility PPA PURPA is the Public Utility Regulatory Policies Act PURPA contained a provision that required local utilities to buy excess power from these so-called "qualifying facilities" at avoided cost rates generally equivalent to the cost of producing power by conventional means. With the availability of wholesale energy markets like MISO, utilities are not required to purchase electricity from facilities large enough to have market access Rate is avoided cost with various deductions Avoided cost rate is for energy plus RECs
38 Consumers Energy Avoided Cost From the January 9 th RFP: For informational purposes, the following historical averages (all hours) of day-ahead LMP for CEC's load node are provided: $43.8/MWh (2006), $48.8/MWh (2007), $52.8/MWh (2008).
39 Detroit Edison Avoided Cost Year Month Average Marginal Price On-Peak ( /kwh) Average Marginal Price Off-Peak ( /kwh) July August September October November December January February March April May June Month Average
40 FAQ 5. I ve found a customer for my renewable energy, how does this work?
41 FAQ 5. I ve found a customer for my renewable energy, how does this work? The self-service power provision in 2008 PA 286 (Section 10a (12)) provides for a third party generator to operate on the customer s property and provide service to the customer Under this self-service power provision it may be possible to generate power and then serve an industrial customer situated in a contiguous location
42 FAQ 5. I ve found a customer for my renewable energy, how does this work? This is our most frequently asked question for larger generation projects In order to serve a third party customer located down the street, across town or across the state, or to serve more than one third-party customers, a generator could need to become a public utility or licensed alternative electric supplier
43 Questions? Julie Baldwin Michigan Public Service Commission