Renewable Portfolio Standards in the West

Environmental Markets Association 16th Annual Spring Meeting

Jeff Gorman, IVG Energy April 26, 2012

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IVG Energy

•  Independently owned

•  Targeted market coverage

•  Extensive customer base of over 600 companies

•  Neutral market intermediary

•  Commitment to maintaining customer privacy and confidentiality

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WECC RPS Position

•  Most LSE’s meeting their near term RPS obligations

•  Most incremental needs seem to begin in the 2016-2018 timeframe

•  Although IVG covers the entire WECC, the bulk of my focus is in California and their aggressive 33% by 2020 program

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Pacific Northwest

•  Washington – I937 – 15% by 2020 •  Must have 25k customers = 17 qualified utilities = 84% of state’s load •  Eligible renewable resources or REC’s •  Located in the Pacific Northwest (Pacific Northwest Electric Power Planning and

Conservation Act ) •  Build out of wind to meet RPS •  4100 MW in BPA on 3/11

•  Recent Developments •  Environmental Redispatch •  In oversupply conditions BPA will replace all displaced thermal and wind generation

with free hydropower from federal dams on the Columbia River •  No REC’s •  No PTC

•  I937 Biomass definition expanded to include certain existing projects •  New biomass resources that COD’d prior 3/31/99 that contribute to a qualifying

utility’s load and owned by a utility or industrial facility can now meet RPS •  Definition includes organic by-products of pulping and wood manufacturing processes,

untreated wood and construction debris, liquors derived from algae, yard waste, and several other resources

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California RPS

•  SB 1078 – set a specific goal of 20% renewable by 2017 for retail sellers

•  SB 107 – accelerated this goal to 20% by 2010

•  SBX1-2 – set a specific goal of 33% renewable by 2020 for all retail providers of electricity (IOU’s, POU’s, ESP’s, CCA’s) •  CP1 (2011-2013) - 20%, average compliance period

•  CP2 (2014-2016) – 25% by 2016

•  CP3 (2017-2020) – 33% by 2020

•  Not less than 33% for subsequent years

•  For CP2 and CP3, reasonable progress is expected to be demonstrated for the interim years

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Portfolio Content Categories (Buckets)

•  Contracts executed prior to June 1, 2010 “shall count in full” toward the RPS

•  Contracts executed post June 1, 2010 are subject to the product content categories or buckets

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Portfolio Content Categories (Buckets)

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Bucket 1

• Have a first point of interconnection with the utility or distribution facilities within a CBA, scheduled from an eligible renewable energy resource into a CBA without substituting electricity from another source, or agreement to dynamically transfer electricity to a CBA

Bucket 2

• Firmed and shaped electricity from eligible renewable energy resources providing incremental electricity and scheduled into a CBA

Bucket 3 • Anything that doesn’t qualify for Buckets 1 and 2 including unbundled REC’s

Portfolio Content Categories (Buckets)

•  Bucket 2 Details •  A buyer cannot sell purchased energy back to the generator

•  The purchased energy must be made available to the buyer-i.e. the energy must not, in practice, be already committed to another party

•  The substitute energy in the transaction must be acquired no earlier than the date the RPS eligible energy is acquired and no later than the initial date of generation of the RPS eligible energy

•  An initial contract for the substitute energy must be for a minimum of five years, or the same length of the contract for RPS eligible energy if it is less than five years

•  The decision clarified that a buyer of substitute energy is likely to be, but is not necessarily, the retail seller ultimately claiming the firmed and shaped procurement for RPS compliance

•  The decision also defines “incremental” electricity as electricity that is not in the portfolio of the retail seller using this for RPS prior to the Bucket 2 transaction

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Procurement Requirements

•  Bucket 1 Requirements •  Not less than 50 % for the compliance period ending December

31, 2013, 65 % for the compliance period ending December 31, 2016, and 75 % thereafter

•  Bucket 3 Requirements •  Not more than 25% for the compliance period ending December

31, 2013, 15 % for the compliance period ending December 31, 2016, and 10 % thereafter

•  Bucket 2 Requirements •  Remaining

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Procurement Requirements Continued

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Regulatory Issues and Development

•  Plenty of uncertainty •  SBX1-2 official on April 12, 2011, however CP1 begins 1/1/2011 •  Seams Issues – moving from 20% by 2010 to 33% by 2020 program •  Still Not Set – banking rules, procurement expenditure or cost limitation methodology,

reporting requirements and timely compliance, early action carryover or pre-Jan 1, 2011 REC’s, grandfathering and count-in-full provisions

•  Progress? •  CEC RPS Eligibility Guidebook Edition 5 •  12/15 CPUC Decision Implementing Buckets •  Biomethane – moratorium implemented on 3/28/12 •  CEC released its 33% RPS Pre-Rulemaking Draft Regulations for POU’s •  General idea of SBX1-2 is to bring all LSE’s under one program with consistent rules –

level playing field •  POU’s have discretion on how to implement •  Has CEC exceeded their jurisdiction?

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Pricing

•  IOU’s have programs like the FIT, RAM, RFO, and bilateral •  incremental needs in CP3 and post-2020

•  POU community – RFO’s, bilateral •  more near term needs

•  State seems to be well supplied with PPA’s and the ISO interconnection queue shows significant renewable competitiveness

•  Natural Gas prices at historical lows and data from CPUC paints a dismal picture

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Pricing Continued

•  Aug 2011 – 2010 RPS Compliance Report •  PG&E – 15.9% •  SCE – 19.3% •  SDG&E – 11.9%

•  Aug 2011 – 2011 RPS Solicitation •  91k MW of proposed capacity submitted •  4.5 times the demand needed to meet the RPS •  Bids increased 250% from 2009 RPS •  Sellers increased by 150% •  Bids were 30% lower

•  IOU’s – wind and solar

•  Smaller POU’s – solar and base-load technology

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Pricing Continued

•  Long Term PPA’s •  Trending down, but varies by technology

•  Short Term Transactions •  Bucket 1 (in-state) – index + upper $30’s to low $40’s •  Bucket 1 (out-of-state) – index + mid to upper teens ??? •  Bucket 2 - $9 - $15 for the REC ??? •  Bucket 3 – significant price deterioration

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2011   2012   2013   2014   2015   2016   2017   2018   2019   2020  

$0.85   $1.00   $1.25   $1.31   $1.38   $1.45   $1.52   $1.60   $1.68   $1.76  

Contact Details

Jeff Gorman 714-227-5277

jeff.gorman@ivgenergy.com

gormanjs28@gmail.com

http://www.ivgenergy.com/environmental-markets.html

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