State RPS Policies and Solar Energy Impacts, Experiences, Challenges, and Lessons Learned Galen Barbose Lawrence Berkeley National Laboratory SEIA Webinar November 21, 2013 This analysis was funded by the National Electricity Delivery Division of the Office of Electricity Delivery and Energy Reliability and by the Solar Energy Technologies Office of the Office of Energy Efficiency and Renewable Energy of the U.S. Department of Energy under Contract No. - AC02-05CH11231.
Summary of State RPS Experience-to-Date Subject to frequent revisions and refinements; have largely held up against recent political and legal challenges A significant driver for RE and solar growth Generally high levels of compliance Rate impacts have thus far remained relatively modest, though questions exist about future costs Significant additional RE capacity is required to meet future RPS targets, but is well in-line with pace of additions in recent years A diverse set of challenges exist to meeting future RPS obligations 2
RPS Policies Exist in 29 States and 7 More States Have Non-Binding Goals Existing State RPS Policies Apply to 55% of Total U.S. Retail Electricity Sales in 2012 WA: 15% by 2020 OR: 25% by 2025 (large utilities) 5-10% by 2025 (smaller utilities) CA: 33% by 2020 AK: 50% by 2025 NV: 25% by 2025 AZ: 15% by 2025 MT: 15% by 2015 UT: 20% by 2025 CO: 30% by 2020 (IOUs) 20% by 2020 (co-ops) 10% by 2020 (munis) ND: 10% by 2015 SD: 10% by 2015 KS: 20% of peak demand by 2020 NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops) MN: 26.5% by 2025 Xcel: 31.5% by 2020 WI: 10% by 2015 IA: 105 MW by 1999 IL: 25% by 2025 MO: 15% by 2021 OK: 15% by 2015 MI: 10% by 2015 VT: 20% by 2017 NY: 30% by 2015 : 8.5% by 2020 : 22.5% by 2020 : 12.5% by 2024 : 20% by 2022 ME: 40% by 2017 : 11.1% by 2009 +1%/yr RI: 16% by 2019 : 25% by 2025 : 20% by 2020 VA: 15% by 2025 : 24.8% by 2025 CT: 23% by 2020 : 12.5% by 2021 (IOUs) 10% by 2018 (co-ops and munis) HI: 40% by 2030 TX: 5,880 MW by 2015 Mandatory RPS Non-Binding Goal Source: Berkeley Lab Notes: Compliance years are designated by the calendar year in which they begin. Mandatory standards or non-binding goals also exist in US territories (American Samoa, Guam, Puerto Rico, US Virgin Islands) 3
Enactment of New RPS Policies has Waned, but States Continue to Hone Existing Policies CO (2007) HI (2005) IL (2008) (2003) CT (2000) (2006) (2007) (2008) MI (2012) ME (2000) (2001) (2001) NY (2006) (2007) (2010) MO (2011) IA MN (2002) AZ (1999) NV (2001) WI (2000) TX (2002) NM (2002) CA (2003) RI (2007) MT (2008) WA (2012) OR (2011) (2009) KS (2011) 1983 1991 1994 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 IA MN AZ MN NM CT CT AZ CA HI CO CA CO WI NV MN NM CO CA CO IL CT CT NV NV CT CT HI ME IL TX HI MN MN Enactment (above timeline) Enactment (above timeline) Major Revisions (below timeline) ( ) Year of First Requirement NV IL NM MT WI ME OR NY NV MN RI NY NM WI TX 4
State RPS Policies Appear to Have Motivated Substantial Renewable Capacity Development Cumulative and Annual Non-Hydro Renewable Energy Capacity in RPS and Non-RPS States, Nationally Cumulative Capacity Annual Capacity Additions Nameplate Capacity (MW) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 RPS Non-RPS Nameplate Capacity (MW) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 10,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 RPS Non-RPS Though not an ideal metric for RPS-impact, 67% (46 GW) of all non-hydro renewable capacity additions from 1998-2012 occurred in states with active/impending RPS compliance obligations 5
State RPS Have Largely Supported Wind, Though Solar Has Become More Prominent RPS-Motivated* Renewable Energy Capacity Additions from 1998-2012, by Technology Type 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Cumulative RPS Capacity Additions (1998-2012) 88% 8% 1% 3% 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Nameplate Capacity (MW) Annual RPS Capacity Additions Geothermal Biomass Solar Wind * Renewable additions are counted as RPS-motivated if and only if they are located in a state with an RPS policy and commercial operation began no more than one year before the first year of RPS compliance obligations in that state. On an energy (as opposed to capacity) basis, wind energy represents approximately 85%, biomass 8%, solar 4%, and geothermal 3% of cumulative RPS-motivated renewable energy additions from 1998-2012, if estimated based on assumed capacity factors. 6
Solar and DG Set-Asides Have Become Widespread 17 states + D.C. have solar or DG set-asides, sometimes combined with credit multipliers; 3 other states only have credit multipliers WA: 2x multiplier for DG OR: 20 MW solar PV by 2020 2x multiplier for PV installed before 2016 NV: 1.5% solar by 2025 2.4x multiplier for PV until 2015 MN: 1.5% solar by 2020 for IOUs CO: 3% DG by 2020 for IOUs (half from retail DG) 1% DG by 2020 for coops 3x multiplier for munis/coops for solar installed before July 2015 AZ: 4.5% customer-sited DG by 2025 (half from residential) NM: 4% solar electric by 2020, 0.6% customer-sited DG by 2020 MI: 3x multiplier for solar NY: 878 GWh retail DG by 2015 : 4.1% solar electric by 2027 : 0.5% solar PV by 2020 : 0.5% solar electric by 2024 IL: 1.5% solar PV by 2025, 1% DG by 2015 (50% <25 kw) MO: 0.3% solar electric by 2021 : 0.3% solar electric by 2014 : 456 GWh customer-sited solar PV (no specified target year) : 3.5% solar by 2025 3x multiplier for solar installed before Jan. 2015 (applies only to solar used for general RPS target) : 2% solar by 2020 : 2.5% solar by 2023 : 0.2% solar by 2018 Set-aside Set-aside with multiplier Multiplier TX: 2x multiplier for all non-wind Source: Berkeley Lab Note: Compliance years are designated by the calendar year in which they begin Differential support for solar/dg provided via long-term contracting programs (CT,,, and RI) and via up-front incentives/srec payments 11 states created solar/ DG setasides since 2007:, IL,,, MO, MN,,, NM,, OR 7
Impact of Solar/DG Set-Asides is Growing: Drove ~50% of U.S. PV Additions in 2010-12 Annual Grid-Connected PV Installations for Solar/DG Set-Asides (MWac) 1,200 1,000 800 600 400 200 0 Percent of U.S. annual grid-connected PV capacity additions, excluding California, driven by solar/dg set-asides [right axis] Percent of U.S. annual grid-connected PV capacity additions, driven by solar/dg setasides [right axis] 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Percent of U.S. Annual Grid-Connected PV Installations (%) MO IL NY NM NV CO AZ General RPS obligations also driving significant solar additions in California and Southwest 8
Solar Share is Notably Greater in Regions with Set-Asides or Strong Solar Resource Potential RPS-Motivated* Renewable Energy Capacity Additions from 1998-2012, by Region and Technology Type 100% 20,000 % of Capacity Additions (Nameplate MW) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% New England, New York Mid-Atlantic California Non-CA West Texas Midwest 16,000 12,000 *Renewable additions are counted as RPS-motivated if and only if they are located in a state with an RPS policy and commercial operation began no more than one year before the first calendar year of RPS compliance obligations in the host state. 8,000 4,000 0 Capacity Additions (Nameplate MW) Solar Geothermal Biomass Wind Total MW (right axis) 9
Main Tier RPS Targets Largely Achieved; Isolated Struggles Apparent 100% 90% 80% 70% 60% 50% Percent of Main Tier RPS Target Met with Renewable Electricity or RECs (including available credit multipliers and banking, but excluding ACPs and borrowing) 40% 30% 20% 10% 2009 2010 2011 2012 0% AZ CA CO CT HI IA IL KS ME MI MN MO MT NM NV NY OR RI TX WA WI Note: Percentages less than 100% do not necessarily indicate that full compliance was not technically achieved, because of ACP compliance options, funding limits, or force majeure events. 10
Achievement of Solar/DG Set-Aside Targets Has Steadily Increased in Most States Percent of Solar/DG Set-Aside Target Met with Solar/DG Electricity or SRECs (including available credit multipliers and banking, but excluding ACPs and borrowing) Percent of Solar/DG Target Met with Solar/DG Electricity or RECs 100% 80% 60% 40% 20% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 AZ IL MO NM NY OR CO MN NV Note: "Percent of Solar/DG Target Met with Solar/DG Electricity or RECs" excludes ACPs but includes applicable credit multipliers. In cases where this figure is below 100%, suppliers may not have been technically out of compliance due to solar ACP compliance options, funding limits, and force majeure provisions. 11
REC Pricing Reflects Current Supply-Demand Balance; Exhibits Continued Volatility Rising Class I REC prices in Northeastern states reflect tightening supply, while pricing in Mid-Atlantic states remain low Sinking SREC prices in recent years, across most markets, show persistent over-supply Avg Monthly REC Price (2012$/MWh) $80 $70 $60 $50 $40 $30 $20 $10 $0 Jan-05 Jul-05 Jan-06 Main Tier/Class I RECs CT Class I Tier I Class I IL Wind Class I Tier I ME New Class I Class I In-State Tier I RI New TX Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Trading Month Sources: Evolution Markets (through 2007) and Spectron (2008 onward). Plotted values are the last trade (if available) or the mid-point of Bid and Offer prices, for the current or nearest future compliance year traded in each month. Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Avg. Monthly SREC Price ($2012/MWh) $800 $700 $600 $500 $400 $300 $200 $100 $0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 SRECs Jul-08 Jan-09 Jul-09 Jan-10 Trading Month Sources: Spectron, SRECTrade, Flett Exchange, PJM-GATS, and Clean Energy Program. Depending on the source used, plotted values are either the mid-point of monthly average bid and offer prices, the average monthly closing price, or the weighted average price of all RECs transacted in the month, and generally refer to SREC prices for the current or nearest future compliance year traded in each month. Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 12
Rate Impacts of State RPS Policies Have Thus Far Been Generally Modest (<2%) Translating REC prices or other available data on net incremental costs into retail rate impacts yields the results shown below 5% 4% 3% 2% 1% 0% -1% CT Estimated Rate Impact of State RPS Policies* (% increase in average retail electricity rate) ME REC Purchases and ACPs RI Future compliance costs will be impacted by increasing RPS targets, changes to fed. tax incentives, and trajectories of RE costs and natural gas prices (among other factors) TX AZ CO IL MI MN NY Other Methods* OR 2010 2011 2012 * Other Methods for estimating rate impacts include RPS surcharge collections (AZ, CO, MI, ), budget (NY), utility-reported incremental costs (OR, MN, WA), PUC analysis (IL, WI). States omitted if data on RPS incremental costs are unavailable (CA, IA, HI, KS, MO, MT, NM, NV). WA WI Simplified approach ignores some ratepayer costs (e.g., integration) and benefits (e.g., wholesale electricity price suppression) Limited/mixed data for states dominated by bundled contracts Rate impacts vary with target levels, REC prices, presence of setasides, procurement mechanisms 13
Rate Impacts of Solar/DG Set-Asides Vary and Were Tempered by SREC Price Declines in 2012 The rate impacts of solar/dg set-asides can be estimated using SREC prices or data on incentive program expenditures Rate impacts vary with target levels and SREC prices Incentive programs tend to front-load set-aside costs Rate impacts in 2012 fell in many states due to decline in SREC prices or incentive levels, in spite of increasing targets 4% 3% 2% 1% 0% Estimated Rate Impact of Solar/DG Set-Asides* (% of average retail electricity rate) SREC Purchases and SACPs 2010 2011 2012 Set-Aside targets are still in the early phases of ramping up; will increase by a factor of 5 by 2020 AZ CO NY MO Solar/DG Incentive Program *States omitted from the figure if data on incremental costs of solar/dg set-aside are unavailable (IL, MN,, NM, NV, OR). Data for CO represent Xcel Energy's calculated incremental cost of all resources used to meet DG set-aside. 14
Most States Have Capped Rate Impacts Well Below 10% (13 States Below 5%) Many states cost containment mechanisms can be translated into an equivalent maximum increase in average retail rates Estimated Retail Rate Increase 15% 10% 5% 0% RPS Cost Caps (Maximum Allowed Percentage Increase in Average Retail Rates) Effective Cost Cap (Max Retail Rate Increase) Historical Compliance Costs (Most-Recent Year) RI CT ME OR WA NM MI TX NY CO IL MO MT No explicit cap on incremental compliance costs in 9 states (AZ, CA, IA, KS, HI, MN, NV,, WI), though KS caps gross revenue requirements and CA is currently developing its cost containment mechanism 15
Future RPS Requirements are Sizable, But Well Within Recent RE Growth Rates 94 GW of New RE required by 2035, if full compliance is achieved Equates to roughly 3-5 GW/yr through 2020 and 2-3 GW through 2035 By comparison, RPSdriven RE additions have ranged from 6-13 GW/yr in all but one year since 2008 CA IL TX MN CO WA AZ NY OR MO KS MI NM CT WI NV HI MT ME RI IA New Renewable Capacity by 2035 (Nameplate GW) 0 5 10 15 20 25 30 HI MN CA IL OR CT NM CO RI NV KS WA MT ME AZ MO NY WI MI TX IA New Renewable Generation by 2035 (Percent of Statewide Retail Sales) 0% 5% 10% 15% 20% 25% 30% 35% * New RE is defined based on state-specific distinctions between new vs. existing, or based on the year in which the RPS was enacted; it does not represent new renewables relative to current supply 16
Solar Market Growth is on Pace to Meet Future Solar/DG Set-Aside Requirements Cumulative capacity requirement grows to 9,200 MW by 2035 Required average annual solar capacity additions of 700 MW/yr through 2020, tapering off thereafter By comparison, set-aside PV additions reached 1,200 MW in 2012 Annual Solar Capacity Additions (MW ac ) 1,200 1,000 800 600 400 200 Required Annual Capacity Additions (left axis) Cumulative Capacity Required (right axis) 0 0 2010 2015 2020 2025 2030 2035 10,000 8,000 6,000 4,000 2,000 Cumulative Solar Capacity (MW ac ) AZ IL MN CO NM NY NV MO OR 17
The Future Role and Impact of State RPS Programs Will Depend On The outcome of ongoing and future legislative and legal challenges Whether cost caps become binding The ever-present possibility of federal energy legislation How policymakers re-tune RPS in response to changing market conditions Continued efforts to address challenges associated with volatile REC prices and limited availability of long-term contracts in restructured retail electricity markets How other related issues and barriers affecting RE deployment are addressed (transmission, integration, siting, E/environmental regulations, net metering, etc.) 18
Thank You! For further information: LBNL RPS publications and resources: rps.lbl.gov LBNL renewable energy publications: http://emp.lbl.gov/research-areas/renewable-energy Subscribe to email distribution list: http://goo.gl/bljav Contact information: Galen Barbose, glbarbose@lbl.gov, 510-495-2593 Ryan Wiser, rhwiser@lbl.gov, 510-486-5474 19