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Massachusetts DOER – RPS Advisory Group Thursday, April 27, 2000 Facilitator: Dr. Jonathan Raab, Raab Associates, Ltd. Meeting # 8: Summary 37 people attended the meeting, which began at 9:15 and concluded at 3:30. Documents Distributed Prior to Meeting: 1. Agenda for today’s meeting, Raab Associates, Ltd. 2. Meeting Summary of March 30th meeting, Raab Associates, Ltd. 3. “Massachusetts Renewables Portfolio Standard, Analysis of Costs & Impacts”, Douglas C. Smith, et al. (3/21/00) 4. White Paper # 9: “Evaluation Methodology”, Wiser, Ryan et al. At the Meeting: Overhead slide presentations: 1. “Existing Renewable Supply/Demand”, Douglas Smith (La Capra Assoc.) 2. “Massachusetts RPS Preliminary Design”, Nils Bolgen (DOER) Administrative Matters 1. There was one correction to the March 30th Meeting Summary: p.3, first bullet under “Accounting for Losses” – change “contested area” to “congested area.” Existing Renewable Supply/Demand Doug Smith from La Capra Associates reviewed draft analysis on the projections of existing renewable supply vs. demand thru 2020 in New England. He looked at the demand from the RPS requirements in MA, CT, and ME and also made some projections regarding additional demands from green marketing. On the supply side he included all potentially qualifying renewables, including all hydro and biomass. According to La Capra’s analysis, demand is not projected to exceed supply for approximately 12 years when estimated green demand is included, and approximately 16 years with all the RPS requirements but assuming no additional green demand. [Note: It was discovered during the course of the presentation that some of the supporting tables were not the ones that matched the graph. Corrected slides were distributed via email the day after the meeting.] Group members asked numerous questions, and made some observations and requests for additional data documented below: 1 HQ sales may be higher than shown. Numbers do not appear to include HQ sales to NY that are passed thru to New England. Figures need to be checked. Imports may be more 8 or 9 million MWh. Do the renewable facilities’ licenses last beyond their contract period? The Maine Standard for eligible hydro is under 100 MW Did you estimate the price premium that might be anticipated over time based on your projections of the supply and demand balance over time. [Answer: not yet.] At the close of the discussion, numerous Group members requested that La Capra run other scenarios and sensitivities on the data, including: 1. Alternative hydro assumptions: a. Leave out “large” hydro b. Leave in only “low impact” hydro c. Leave in only hydro that can be considered “daily cycle hydro” 2. Alternative Biomass assumptions 3. Do sensitivity analyses on the following 3 variables: a. Attrition b. Green demand c. Going forward operation costs La Capra agreed to make some additional runs, and try and distribute the output prior to the next meeting. (Please contact Jonathan Raab immediately if you feel that anything was left off the list of scenarios and sensitivities.) DOER’s Preliminary RPS Design Following opening remarks by Commissioner David O’Conner, Nils Bolgen spent the rest of the day stepping the Group through DOER’s preliminary RPS design [see handout for description of DOER’s recommendations]. After each major topic, the Group asked clarifying questions and then provided DOER with some initial feedback. These questions and comments are captured below, organized by topic. Applicability: Some of the DISCO’s have standard offer contracts through 2004 or 2005. How will they comply, specifically how will DISCO’s stockholders be sheltered from any cost increases caused by meeting the RPS? Compliance with the RPS will be mandatory for all suppliers, but will be voluntary for generators (i.e., generators who want to be eligible for selling RECs will need to comply with DOER’s requirements). Change “owner of any generation” to “owner, operator, or holder of contract for power.” 2 Would it be unfair for munis to be able to sell RECs but not have to buy RECs? Perhaps you need to require reciprocity to make sure accounting system clears (i.e., RECs are associated with equivalent amount of power sold to non-muni MA customers). Standards: Existing Renewables: DOER probably can’t design standards for existing renewables that adequately protects those in need of protection (i.e., the higher priced renewables). Maine’s inclusion of existing renewables, at a minimum had a psychological benefit. If no great cost to consumers, then why not include requirements for existing renewables? If there’s attrition of existing renewables, let new renewables replace them. Even if there’s not a lot of activity related to existing renewables in the short run, it would still be useful to have a standard for existing renewables at least to clarify the standards (e.g., for biomass). If DOER holds off on implementing a standard for existing renewables, it should use the questions identified on slide #12 to monitor the market. Not implementing a standard for existing renewables now can impact the green market, perhaps making it more meaningful and more environmentally beneficial by accelerating adoption of new renewables by green marketers. DOER shouldn’t give up on trying to design meaningful requirements for existing renewables. If DOER limits hyrdo eligibility could lead to a more meaningful RPS for existing renewables. DOER should have the authority to restrict hydro based on market power issues. One option would be to not allow any generator to control more than 35% of the RECs; 55% for 3 generators; and 75% for top 5 generators. [Others asked whether DOER had the authority to address market power issues.] Early Start Trigger: Will early compliance complicate things for those coming on-line in 2003 by reducing the price they could get for their RECs? Eligibility for New Renewables: It will be challenging to figure out the renewable content of dual fuels. Maybe put onus on owner to demonstrate amount of renewables actually used. DOER should also look at capacity expansion (i.e. MW) in addition to increased energy production (MWh). Generator Eligibility: Biomass and Landfill Gas: What does DOER mean for biomass by “most recent MA air quality permit?” 3 How does DOER propose to treat out-of-state biomass plants built between 1997 and today? Should it apply 1997 or current MA BACT standard? Is this differential treatment with in-state facilities? Another approach for biomass is to have DEP do a BACT analysis now and put numbers in the regulations, given that the Pinetree facility, which was DEP’s last biomass BACT analysis is nearly a decade old. Pipelines probably won’t take landfill gas, so DOER should only include landfill gas that is converted to electricity on-site or is transported by a dedicated pipe to an electricity plant nearby. Location: Be consistent with transmission tariffs. RECs created either at the plant or at the border to New England would need to be derated for distance. What’s an adequate demonstration that a supplier in MA made a purchase? What if anything beyond just buying the credits? It could be a chilling problem if every REC from an import needs to show a bilateral contract to prove that the power came into New England. Interstate commerce could allow restrictions on imports if good policy rationale. DOER needs to do a comprehensive legal analysis of the issue. DOER should consider issuing credits to generators, only to those states outside New England where credits have value (i.e., reciprocity where the other states also have an RPS or certificate systems). Generators need to demonstrate sales not suppliers. At least 2 other states have put some restrictions on imports. DOER should just limit imports to contiguous states and provinces. Restrict imports to only those places with comparable comprehensive GIS (generation information system) [to the one that ISO-NE may eventually have in place]. Make sure that exporting state treats energy as null energy once RECs are sold. Make sure generators in exporting states can’t resell energy as renewables again once sold RECs as a contractual matter. Customer-Owned Generation: Attendees were unanimous in their lack of support for DOER’s recommendation that customer-owned generation not be eligible for the RPS. Arguments included: 1) it would be inefficient; 2) force people to structure strange deals to qualify; 3) it’s inconsistent w/state support for DSM; and 4) customer-owned generation could be considered a "pre-paid" sale of energy. People felt that DOER was reading too much into “retails sales” language in the legislation, and some pointed out that will likely be sales to the grid sometimes during the year or day in any case. 4 Accounting Systems: Suppliers’ use of the RECs should appear on the register to help avoid double use. Supplier Compliance: Product vs. Company and the Disclosure Label: Most attendees disagreed with DOER’s preliminary recommendation to require compliance on a Company basis rather than a product basis. Some pointed out that they were very surprised given the recommendations of the white paper and the seeming consensus of the Group on this issue at the session where it was discussed. DOER pointed out that they did not feel that they had the authority to require product-based compliance. Many disagreed with DOER’s interpretation of the law. Some attendees were also skeptical about the workability and advisability of DOER’s recommendations to change the disclosure label which would effectively turn disclosure into a product-based system. Some felt that this would create problems w/disclosure in other states and with the GPS. The Maine Legislature was convinced to effectively administer the RPS on a product basis and amended the law. Show customers what resources RPS compliance comes from. Customers may also want to see what’s new vs. existing renewables. Emission rates need to show up, and would be inconsistent with what DOER is recommending for fuel type. This could be a “disconcerting mismatch.” Can you change the regional disclosure label to accommodate MA RPS? There’s a math error in DOER’s supporting table (slide 46), should be 5 MWh MA and CT RPS allocation (not 10 MWh). Don’t add a statement regarding compliance w/RPS on the label. If they weren’t in compliance they ultimately won’t be selling in MA or have a label. DOER should go back to the Legislature, if it feels it need to, to clarify that the RPS should be on a product rather than a company basis. DTE regulations have some restrictions already about what can be marketed as green energy above RPS requirements. Use term “EPS” and not “GPS”. Flexibility Mechanisms: The Group was divided regarding DOER’s recommendation not to include banking. Some argued that customers and suppliers could be adversely impacted without banking, while others felt that banking wouldn’t work with disclosure. Some wondered whether banking would circumvent the letter of the law which requires that certain levels be met in certain years. Look at symmetry of the flexibility mechanisms. Isn’t the penalty set up to deal with shortcomings of supply? Can early compliance credits be banked for use in years after 2003? 5 Sanctions for Non-Compliance: Consider accelerating future requirements for those in non-compliance. Options for placement of any penalty money: general fund; MTC, or purchasing and retiring RECs. What about all the penalty details recommended in the Consultants’ white paper, is that being dropped? [DOER, we have streamlined the recommendations considerably.] The penalty will act as a de facto cost cap. Next Steps Next meeting, on Thursday May 18, will once again be at Foley, Hoag, & Eliot. DOER will refine its recommendations and prepare a draft of its comprehensive RPS proposal for discussion at the meeting. La Capra Associates will also be updating its analysis on supply vs. demand of existing resources and running various alternative scenarios. Both sets of documents should be circulated prior to the meeting. t:\renewabl\rps\advisory group\meeting #08-0427\mtg#8 summary-0427.doc 6
"Massachusetts DOER – RPS Advisory Group"