Kansas Renewable Energy Credits

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Kansas Renewable Energy Credits Scott W. White Kansas Geological Survey Richard Nelson Kansas State University Project Background Renewable energy generation primarily from wind, biomass, and solar is expected to grow over the next 10-25 years due to: 1) 2) 3) Sustainable energy/resource concerns, Climate change, and Environmental benefits associated with renewable resources (Source: Annual Energy Outlook, 2006) Project Background Kansas has significant biomass/bioenergy and wind energy resources that could potentially be utilized for electricity generation. Development of our renewable resources in a practical, prudent, and sustainable manner could add significant environmental and financial value to the public and private sectors through the implementation of renewable energy credits (RECs) which represent the renewable and/or environmental attributes of electricity generated from renewable energy sources. Issues with Renewable Resources Historically, energy derived from renewable resources has not been cost competitive with the conventional fossil fuel mix (coal, petroleum, natural gas). The gap is decreasing due to a variety of factors. Land Resource arable versus non-arable – crops & production competing uses and cost/benefit applies to wind, biomass, and solar Infrastructure and Policy Issues (electric transmission, interconnection, etc.) Sale of RECs on the open market can potentially help reduce the current cost of renewable energy development General Project Objectives Project growth of Kansas-based Renewables Evaluate Renewable Energy Credit and Environmental Credit Markets Analyze Potential Impact and Value of REC/Environmental Credits on Kansas Renewable Energy Credits Background Renewable Energy Credits (RECs) What are RECs? Represents the environmental (clean) attributes of renewable energy Sold separately from the energy component RECs are also known as: Green tags, green tickets, renewable energy certificates, Tradable Renewable Energy Certificates (TRCs) RECs: Unbundling of Green Attributes and Power Commodity Energy Scheduled to Grid Renewable Generator Produces 1 MWH of “green” power 1 MWH of energy Green Credits Traded Financially 1 MWH (1 certificate) of Renewable Attribute (Source: _????___) Renewable Energy Credit All “Renewable Attributes” of the generation convey with the credit Value of “Renewableness”: Satisfy Mandates, Environmental, Customer Preference, etc. REC Value of Electricity: Electricity Energy, Capacity, Ancillary Services, etc. (Source: Sloan, 2005) Renewable Energy Credits Each credit represents 1 MWh of renewable generation input into the grid The green attribute is traded separately from the commodity energy and sold as a “green credit” Green credits do not need to be scheduled Trades are financial transactions, where the buyer purchases the environmental attributes of the power Current Markets for RECs Voluntary Markets/Green Markets Consumers who are willing to pay a premium for green power Compliance Markets Most Renewable Portfolio Standard policies allow compliance through purchase of RECs Emissions Markets NOx, SOx, CO2 markets New Renewables Capacity Supplying Green Power Markets (year end 2004) Source MW in Place % MW Planned % Wind Biomass Solar 2,045.6 135.6 8.1 91.6 6.1 0.4 364.5 58.8 0.4 80.1 12.9 0.1 Geothermal Small Hydro Total 35.5 8.5 2,233.3 1.6 0.4 100.0 0.0 31.3 455.0 0.0 6.9 100.0 (Source: Bird and Swezey, 2005) Renewable Energy Credits Marketers Green-e, Certification Evolution Markets, Brokers of Green-e RECs Environmental Resources Trust, Certification Bonneville Environmental Fund, Sales, Purchase Zephyr Energy, Regional Sales, Lawrence-based Aquila, Sales from Gray County(?) Mainstay, sales, purchase Community Energy Sterling Planet, Marketer Certification Example - Environmental Resources Trust ERT ECOPowerSM Certificates Equally accepted in the marketplace, emerging certifier Science based approach Based on net environmental benefits Ways to presently trade RECs for Kansas Renewables Sell REC‟s to green-marketers (i.e. B.E.F., Sterling Planet, etc.) Utilities can set up own green-pricing program Buy or sell through REC broker (i.e. Evolution Markets) Who‟s purchasing REC‟s? Federal Government EPA Region 7 buys 8,500 MWh annually from Gray County wind farm Businesses Newspapers, coffee-shops, breweries and others buy REC‟s from Zephyr Energy Whole Foods – 458,000 MWh of wind green tags (Smith, 2006) Residents Can buy increments of 1 MWh Average household uses ~10 MWh annually Wind Energy Wind Energy Wind energy is an intermittent resource that compliments traditional uses of rural lands, such as farming and ranching, by taking little land out of production. Though a wind farm can be spread over many acres, only 2-3 acres/MW are taken out of production due to roads and turbine bases. Kansas wind energy potential is ranked as 1st and 3rd in different studies. (Cassady, 2003; Elliot, 1993), though the state is only ranked 9th for installed capacity, as of Dec. 31, 2005 (AWEA, 2006) with 265 MW. Another 100-106 MW is currently under construction. Wind Energy Production Forecasts Wind energy production and supply in the future will be a function of: Available electric transmission capacity Technology advancements & scales of economy (decreasing costs) Government incentives for renewable energy development (e.g., RPS) Siting issues (bird flyways, fragile ecosystems, bats) Community Acceptance Renewable Energy Credits and Carbon/pollutant emission markets Others Wind Energy Production Forecasts With respect to generating renewable energy credits, wind energy can be produced at large, utility-scale wind farms (10‟s – 100‟s of MW), smaller utility-scale “community” wind farms (<20 MW) or residential or business sized wind turbines (<1 MW). Increases in wind energy production in Kansas can not be accurately quantified due to no set market, but will be enhanced by: A national and/or state-level Renewable Portfolio Standard (RPS) Carbon markets/payments Other environmental payments (SOx, NOx, etc.) Kansas Electricity Production Forecast to 2015 70,000 Million Kilowatt-hours Kansas Energy Council, 2005 60,000 50,000 40,000 30,000 20,000 10,000 0 Energy Information Administration , 2006 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Year 2014 Kansas wind projects, 2006 Legend Existing Under Construction Proposed Wind projects - anticipated 2006 – Spearville Wind ( Ford Co., KCP&L) – 100 MW, broke ground 04/06 2006/7 – Goodland Wind (Sherman Co., city of Goodland) – 6 MW, scheduled to construct in 2006. 2007/8 – Midwest Energy (location TBD) – ~50 MW 2007+ - KCP&L wind farm #2? 100-150 MW? TOTAL - ~256-306 MW Three Wind Growth Scenarios 1. RPS of 2.5% Based on EIA electricity production forecast to 2030 – breaks down to annual growth rate of ~1.57% (Annual Energy Outlook, 2006) 2. RPS of 5% Also based on EIA forecast 3. Governor Sebelius’ goal of 1000 MWe by 2015 Based on KEC renewable energy forecast through 2010 – author‟s assumed growth to 1000 MWe by 2015. (Sebelius, 2005) Expected growth of wind power Generation through 2010 2,000,000 1,800,000 1,600,000 Forecast Mega-watt hours 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Actual Wind Energy Growth in Kansas to 2015 3,500 3,000 Million Kilowatt-hours 5% Penetration 2,500 2,000 1,500 2.5% Penetration 1,000 Actual production 500 0 Expected Growth (KEC, 2005) Growth to meet Governor's 1000 MW goal 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year 2015 Wind Energy Growth in Kansas to 2015 (million kilowatt-hours) Scenario 2.5% Renewables 2010 1,288 2,576 1,888 2015 1,392 2,785 3,267 5.0% Renewables 1000 MW by 2015 Wind REC Assumptions Value of Kansas REC‟s on wholesale market - $1.00-$1.50/MWh Lack of a strong regional market is keeping price down for Kansas and Great Plains REC‟s. Western regions with heavier markets (utility green tag programs, companies “greening” their energy – see Whole Foods) are selling REC‟s at $3.00-$3.50/MWh. Assume 100% of Kansas wind REC‟s are purchased. Due to low regional demand for Great Plains REC‟s, they sell cheaper than other regions on the national market. It‟s anticipated that the National market will purchase them, just not at the same value as other regions. For the following analysis, it was assumed that all Kansas wind farms would have an annual capacity factor (Energy produced  Maximum energy produced) of 35%. Renewable Energy Credits for Wind Voluntary Aquila – sells RECs Federal Government – buys RECs Mainstay – buys/sells RECs – specializes in LEED certification Bonneville Environmental Foundation (BEF)/Zephyr Energy – buys/sells RECs Community Energy, buys/sells RECs Compliance Texas NEPOOL California Renewable Energy Credit Values for Wind Voluntary Wholesale Retail Zephyr Energy Community Energy $1.00-1.50/MWh $15-25/MWh $20/MWh (retail, 2006) $25/MWh ($2.50/100 kwh block, retail, 2006) Compliance Texas NEPOOL California $9.75/MWh (2005) (Evomarkets, 2006) Renewable Energy Credits for Wind (revenue stream as a function of penetration rate) Low value ($1/MWh) 2.5% by 2020 5% by 2025 1000 MW by 2015 Value of REC‟s in 2015 $1,392,285 $2,784,569 $3,267,480 High Value ($1.5/MWh) 2.5% by 2020 5% by 2025 1000 MW by 2015 Value of REC‟s in 2015 $2,088,427 $4,176,854 $4,901,220 Value of RECs for “typical” wind projects Commercial Wind – 150 MW 458,325 MWh annually (35% CF) $458,000 – $687,000 value for REC‟s (voluntary market) Community Wind – 6 MW 18,333 MWh annually (35% CF) $18,000 – $27,500 value for REC‟s (voluntary market) Biomass Kansas Biomass Resources and Technologically Viable End-uses Biomass - organic matter derived from plant and animal matter Waste Resources for Sustainable Energy Production switchgrass and big bluestem bioethanol, heat, and electricity corn stover and wheat straw bioethanol oilseed crops, edible and inedible tallow, and waste greases - biodiesel landfill gas - heat and electricity wood wastes – heat and electricity All of the above can be used to produce alternative liquid fuels, electricity, heat, and/or hydrogen Environmental /Air Quality Enhancement Environmentally Responsible Use of Natural Resources Biomass Energy Production Forecasts { electricity generation only } Biomass is a „land-based‟ enterprise and as such, in most cases, will compete against current land use and product markets. In addition, biomass production and supply in the future will be a function of: Farm programs and land base competition Competing energy prices and end-use markets (liquid fuels and electricity) Renewable Energy Credits and C/pollutant emission markets Federal/state incentives for renewable energy development (e.g., RPS) Others Biomass Energy Production Forecasts { electricity generation only } With respect to generating renewable energy credits, biomass used primarily for co-firing at electric generating facilities (large-scale) and possibly distributed generation (small-scale). Increases in biomass production in Kansas can not be accurately quantified due to no set market, but will be enhanced by: A national and/or state-level Renewable Portfolio Standard (RPS) Carbon markets/payments Other environmental payments (SOx, water quality, etc.) Potential Scenario for Increasing Biomass Energy Production Renewable Electricity Generation Mandate (state and/or national) of 5% Two Potential Co-firing Scenarios at each of Three Electric Generating Facilities  5% by 2025 { electricity generation only } Quantity, Q (dry tons biomass) and MWh generated Jeffrey Tecumseh Q MWh 5,244 20,977 47,199 52,444 3,632 14,530 32,693 36,326 Lawrence Q MWh 12,129 48,516 109,161 121,290 8,401 33,605 75,611 84,013 Q 2010 2015 2020 2025 50,968 203,897 458,715 509,684 MWh 35,303 141,231 317,733 353,038 Herbaceous energy crop production and utilization as a potential co-firing fuel, and potential environmental mitigation Use of Herbaceous Energy Crops (Switchgrass) as an Alternative Energy Source Qualified Electric Generating Facilities for Biomass (Herbaceous Energy Crop) Co-firing in Kansas Co-firing herbaceous energy crops with coal, a proven technology, is one way to generate RECs. Biomass contribution to each Co-firing Scenario (% of total heat input for electricity generation) 2010 2015 2020 2025 RPS #1 1.50% 5.00% 10.0% 10.0% RPS #2 1.50% 5.00% 7.50% 10.0% RPS #3 0.75% 2.50% 5.00% 5.00% RPS #4 0.65% 0.90% 2.00% 2.00% Estimated cumulative environmental parameter improvement versus conventional commodity crop production for two co-firing scenarios at Jeffrey and Tecumseh electric generating facilities 10% by 2020 / 5% by 2020 Jeffrey Savings in soil erosion (tons) Savings in N w/ sediment (kgs) CO2 sequestered (tons) 2010 2015 2020 42,972 / 22,393 138,364 / 89,320 268,043 / 138,364 709,912 / 493,949 2,213,510 / 1,490,738 4,555,267 / 2,213,510 Tecumseh 20,492 / 10,607 68,465 / 38,081 138,462 / 68,465 Savings in soil erosion (tons) Savings in N w/ sediment (kgs) CO2 sequestered (tons) 2010 7,237 / 1,867 142,513 / 31,912 1,903 / 827 2015 2020 15,284 / 9,967 25,173 / 16,333 271,676 / 186,202 402,282 / 295,792 5,985 / 3,254 13,015 / 6,688 Renewable Energy Credits for Biomass ( NPV analysis of potential revenue stream as a function of co-firing rate) Jeffrey Energy Center Value of Renewable Energy Certificates 2,160 MW nameplate capacity 77.8% annual capacity factor 10,986 heat rate, Btu/kW-h 15.86 MMBtu per ton switchgrass 10% by 2020 Nominal Value Required Biomass of Renewable (herbaceous energy Energy Credits crops), tons 10% by 2025 Required Biomass (herbaceous energy crops), tons Value of Renewable Energy Credits 5% by 2020 Required Biomass (herbaceous energy crops), tons Value of Renewable Energy Credits 2% by 2020 Required Biomass (herbaceous energy crops), tons Value of Renewable Energy Credits $5.00 MW-h 8.0% Internal ROR 3.0% inflation rate Year MW-h Value of Renewable Energy Credits MW-h MW-h MW-h NPV 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 $5.00 $5.15 $5.30 $5.46 $5.63 $5.80 $5.97 $6.15 $6.33 $6.52 $6.72 $6.92 $7.13 $7.34 $7.56 $7.79 $8.02 $8.26 $8.51 25,484 50,968 101,937 17,652 35,304 70,607 $20,301,466 $88,259 $181,814 $374,537 $578,660 $794,693 $1,023,167 $1,264,635 $1,736,765 $2,236,085 $2,763,801 $3,321,168 $3,909,489 $4,530,120 $5,184,471 $5,340,005 $5,500,205 $5,665,211 $5,835,167 $6,010,222 25,484 50,968 101,937 152,905 203,873 254,842 305,810 407,747 509,684 560,652 611,620 662,589 713,557 764,525 815,494 866,462 917,430 968,399 1,019,367 17,652 35,304 70,607 105,911 141,215 176,519 211,822 282,430 353,037 388,341 423,645 458,948 494,252 529,556 564,860 600,163 635,467 670,771 706,074 $18,085,145 $88,259 $181,814 $374,537 $578,660 $794,693 $1,023,167 $1,264,635 $1,736,765 $2,236,085 $2,533,484 $2,846,715 $3,176,460 $3,523,427 $3,888,353 $4,272,004 $4,675,174 $5,098,690 $5,543,409 $6,010,222 12,742 25,484 50,968 76,453 101,937 127,421 8,826 17,652 35,304 52,956 70,607 88,259 $10,150,733 $44,130 $90,907 $187,269 $289,330 $397,347 $511,584 $632,317 $868,383 $1,118,042 $1,381,901 $1,660,584 $1,954,744 $2,265,060 $2,592,235 $2,670,002 $2,750,102 $2,832,606 $2,917,584 $3,005,111 50,968 56,065 61,162 66,259 71,356 76,453 81,549 86,646 91,743 96,840 101,937 127,421 152,905 203,873 203,873 203,873 203,873 203,873 203,873 35,304 38,834 42,364 45,895 49,425 52,956 56,486 60,016 63,547 67,077 70,607 88,259 105,911 141,215 141,215 141,215 141,215 141,215 141,215 $4,491,828 $176,519 $199,996 $224,722 $250,753 $278,143 $306,950 $337,236 $369,063 $402,495 $437,602 $474,453 $610,858 $755,020 $1,036,894 $1,068,001 $1,100,041 $1,133,042 $1,167,033 $1,202,044 152,905 105,911 203,873 141,215 254,842 176,519 305,810 211,822 407,747 282,430 509,684 353,037 611,620 423,645 713,557 494,252 815,494 564,860 917,430 635,467 1,019,367 706,074 1,019,367 706,074 1,019,367 706,074 1,019,367 706,074 1,019,367 706,074 1,019,367 706,074 152,905 105,911 203,873 141,215 254,842 176,519 305,810 211,822 356,778 247,126 407,747 282,430 458,715 317,734 509,684 353,037 509,684 353,037 509,684 353,037 509,684 353,037 509,684 353,037 509,684 353,037 Renewable Energy Credits for Biomass ( NPV analysis of potential revenue stream as a function of co-firing rate) Tecumseh 10% by 2020 10% by 2025 5% by 2020 2% by 2020 NPV of RECs $2,012,095 $1,776,255 $1,006,047 $ 448,339 Lawrence NPV of RECs 10% by 2020 10% by 2025 5% by 2020 2% by 2020 $4,587,163 $4,049,498 $2,293,582 $1,022,122 Potential Emission Markets Applicable to Biomass Energy Utilization Because renewable generation has low or zero on-site emissions (depending on the energy resource and conversion technology), renewable energy developers are increasingly looking to emissions markets for new revenue opportunities. One analysis estimated that the value of emission reductions could range from about $6 to $39 per MWh, depending on the assumption about the future value of CO2 allowances. U.S. Environmental Protection Agency (EPA) operates a national SO2 cap-and-trade program under its Acid Rain Program. Other environmental markets may emerge as regulation or cap-and-trade is extended to mercury or other emissions. Carbon Sequestration/Emissions Reduction Potential of Biomass Biomass (switchgrass) has the ability to not only sequester carbon for long periods, but is also a “closed carbon” emitter due to adsorption of CO2 to grow the plant which is expelled upon combustion Coal is defined as an “open-loop” C emitter Carbon payments are made on a CO2 emissions reduction versus conventional fossil fuel basis not on a sequestration basis due to the ability to accurately verify actual sequestration rates or amounts CO2 Emissions per Electricity Unit Output, 2001-2004 Energy Production (MW-h) and Carbon Dioxide (CO2) Emissions 2001 Jeffrey EC Electricity Production from Coal (MWh) Carbon Dioxide Emissions (CO2) (tons) 2002 2003 2004 Average MW-h 2001 - 2004 14,612,844 23,033,140 1.576 3.153 14,324,123 15,319,780 15,013,432 13,794,040 22,706,509 24,050,368 23,678,314 21,697,369 tons CO2 per MW-h 1.585 1.570 1.577 1.573 pounds CO2 per kW-h 3.170 3.140 3.154 3.146 Lawrence EC Electricity Production from Coal (MWh) Carbon Dioxide Emissions (CO2) (tons) 940,094 3,688,183 3,481,042 3,646,980 1,387,127 5,780,766 5,864,203 5,408,597 tons CO2 / MW-h 1.476 1.567 1.685 1.483 pounds CO2 per kW-h 2.951 3.135 3.369 2.966 2,939,075 4,610,173 1.553 3.105 La Cygne Electricity Production from Subbitumious Coal (MWh) Carbon Dioxide Emissions (CO2) (tons) 7,566,203 8,610,061 9,447,624 9,626,424 11,292,706 13,010,362 13,944,380 14,551,970 tons CO2 / MW-h 1.493 1.511 1.476 1.512 pounds CO2 per kW-h 2.985 3.022 2.952 3.023 8,812,578 13,199,855 1.498 2.996 Tecumseh EC Electricity Production from Coal (MWh) Carbon Dioxide Emissions (CO2) (tons) tons CO2 / MW-h pounds CO2 per kW-h 453,268 1,478,124 1,347,574 1,329,181 610,305 2,281,222 2,091,686 2,002,288 1.346 1.543 1.552 1.506 2.693 3.087 3.104 3.013 1,152,037 1,746,375 1.487 2.974 Carbon Offset Prices 2004 - 2006 2005 Vintage Carbon Offset Prices 2.60 2.40 2.20 2.00 $ Per Metric Ton 1.80 1.60 1.40 1.20 1.00 0.80 0.60 5Ja n 5Fe b 5Ma r 5Ap r 5Ma y 5Ju n 5Ju l 5Au g 5Se p 5Oc t 5No v 5De c 5Ja n 5Fe b 5Ma r 5Ap r 5Ma y 5Ju n 5Ju l 5Au g 5Se p 5Oc t 5No v 5De c 5Ja n 5Fe b 5Ma r • CO2 would increase in value if a „cap and trade‟ system were in place. Thus, if renewable generators could earn income from any one emission market, a significant revenue stream roughly equivalent to what they could make at the lower end of values in REC compliance or voluntary markets would be extremely beneficial. (Source: Chicago Climate Exchange, 2006) Emissions Reductions due to Biomass Use CO2, SO2, Mercury all reduced when biomass is added; NOx may increase depending upon type of biomass (cellulosic vs. woody) Current Emission Markets:  U.S. Environmental Protection Agency (EPA) operates a national SO2 cap-and-trade program under its Acid Rain Program.  Another emissions market is the federal NOx Budget Trading Program. Not active for renewables at this time.  Other environmental markets may emerge as regulation or cap-and-trade is extended to mercury or other emissions. Potential Revenue from Other Environmental Credits for Biomass for Electricity Generation Biomass Renewable Energy Certificates (RECs) and Environmental Emissions Markets $/MW-h low RECs CO2 $3 $3.73 $/ton CO2 $2.37 $4.66 $/ton SO2 $630 Potential Added Value ($/MW-h) $8.39 $10.09 $25.09 high $15 $10.09 $6.40 SOx Total Potential (Maximum) Environmental Credit $11.39 (Source: Holt & Bird, 2005) Pollutant / Water Quality Trading While gains in water quality due to herbaceous energy crop production can be significant and affect water quality, the current price structure and payments are minimal primarily due to lack of quality verification techniques (Source: Annual Energy Outlook, 2006) Projected growth of existing Renewable Energy Credit Markets Current REC Current REC Market Size Market Value (million MWh) ($million) Compliance Markets Voluntary Markets Total 8-13 $140 2010 REC 2010 REC Market Size Market Value (million MWh) ($million) 45 $600 3 $15-$45 20 $100-$300 11-16 $155-$185 65 $700-$900 (Source: Holt & Bird, 2005) Estimated REC Market Size in 2004 and 2010 70 60 50 40 30 20 10 0 2004 REC Market Size (million MWh) (Source: Holt & Bird, 2005) Compliance Markets Voluntary Markets Total 2010 REC Market Size (million MWh) Estimated REC Market Value in 2004 and Projected for 2010 800 700 600 500 400 300 200 100 0 2004 REC Market Value ($ millions) 2010 REC Market Value ($ millions) Compliance Markets Voluntary Markets Total (Source: Holt & Bird, 2005) Scenarios that could impact potential renewable energy development RPS Transmission expansion Energy storage options (for wind - smooth out intermittency) Load following ability (i.e. more gas plants near wind) Renewable Portfolio Standard (RPS) General Background  A policy requiring that an increasing amount of an electric suppliers‟ load (e.g., 1% to 20%) come from renewable energy resources within a set timeframe. 21 states have an RPS. Potential Kansas renewable resources: • • • •   Hydro (limited viability & applicability), Wind, Biomass (many potential KS resources), and Solar. Wind is the dominant RPS technology   An RPS can be “market-based” to minimize cost. A 10% national RPS was considered in the 2005 Energy Bill What are the energy, environmental, and economic implications of a national RPS with respect to Kansas and what would be the net cost or benefit if one were implemented? Renewable Portfolio Standards Nevada: 20% by 2015, solar 5% of annual New York: Minnesota: 19% by 2015* 24% by 2013 Wisconsin: Iowa: 2% by 1999 2.2% by 2011 Illinois: 8% Montana: by 2013** 15% by 2015 Maine: 30% by 2000 MA: 4% by 2009 RI: 16% by 2019 CT: 10% by 2010 NJ: 6.5% by 2008 DE: 10% by 2019 Maryland: 7.5% by 2019 California: 20% by 2017 Arizona: 1.1% by 2007, 60% solar Washington D.C: 11% by 2022 Pennsylvania: 8% by 2020 New Mexico: Texas: 5,880 MW 10% by 2011  21 States (~4.2%) by 2015 Colorado: D.C. 10% by 2015 Hawaii: 20% by 2020 (Source: ????) *Includes requirements adopted in 1994 and 2003 for one utility, Xcel Energy. **No specific enforcement measures, but utility regulatory intent and authority appears sufficient. + Why an RPS Should Be Considered Diversification of fuel mix Consumer insulation from price volatility (?) Fuel price competition Improved National Security (Source: ??????) Reduced reliance on imported fuel Health and environmental benefits Potential economic development (Source: International Energy Outlook, 2006) RPS Opportunities for Kansas Kansas has a competitive advantage in renewable energy resources Export potential of the renewable aspect of generation (?) Renewable energy industry development potential (Source: UCS????????) Billion kWh (Source: Annual Energy Outlook, 2006) 400 350 300 250 200 150 100 50 0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Senate-passed RES with PTC (no hydro/MSW) RES = Renewable Electricity Standard National 10% RPS Actual (non-hydro and MSW) Business as Usual (State RES') (no hydro/MSW) Potential Drawbacks of an RPS Required infrastructure investment System reliability Higher electricity prices Negative economic development % Change in Real GDP Energy and Macro Economic Growth Economic Growth vs. Crude Oil Prices 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 19 72 19 76 19 80 19 84 19 88 19 92 -2.0% -4.0% Year Real GDP Crude Price 19 96 Real $97 per Barrel Externalities 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 RPS Design Components Structure  Who? IOUs? Munis?  Target? 2%, 5%, 10%?  Ramp-up rate?  Single requirement or multiple tiers?  Resource diversity (set-asides or multipliers)  Funding mechanisms  Capacity requirements Eligibility  Resource types?  In-state vs. out of state?  Generation deliverability or RECs?  New vs. existing?  Customer-sited resources? Administration  Oversight?  Compliance verification?  Resource eligibility certification?  Enforcement mechanisms?  Filing requirements?  Cost caps or floors?  Contract standards?  Program review? Other Issues  Interaction with other policies?  Interaction with green power programs?  Compatibility with RPS programs in other states? (Source: Wiser, 2004) Wind Energy – future trends Larger nacelles Taller towers Improved technology/efficiency Scales of economy – lower price Off-shore Domestic production of turbine components Biomass Energy – future trends Biomass Biodiesel Distributed generation Future trends and impacts Wind Lower costs and scales of economy will drive down cost of electricity and the price of RECs. In lieu of a compliance market and low regional demand, the price of KS RECs will be low, but will continue to have a strong demand on the national market. Biomass Biodiesel Distributed generation Energy, Environmental, and Economic Impact Matrix for Kansas Renewable Energy Production, Development, Conversion, and Utilization, Biomass Major Renewable Energy Resource & Sub-type Biomass bioethanol corn stover, wheat straw, switchgrass yes liquid fuel yes sustainable, environmentally cost and logistics of preferable versus production alternatives sustainable, environmentally cost and logistics of preferable versus production alternatives cost and viable resource diffusion of resource; not mitigation of GHG enough quantity to meet large-scale needs sustainable resource application improved local efficiency sustainable resource cost, chemical aspects petroleum Renewable Resource Feedstock Proven/Mature Technology Primary EndUse Products Environmental Impacts (air, water, soil) Strengths of Renewable Resource Weaknesses of Renewable Resource Conventional Energy Source Replaced biodiesel waste greases, animal fats (edible & inedible tallow), soybeans, other fats & oils municipal/urban refuse yes liquid fuel yes petroleum landfill gas & waste-to-energy yes heat & electricity yes coal, natural gas anaerobic digestion animal (livestock) wastes yes heat & electricity yes coal, natural gas co-firing (utility application) switchgrass/herbaceous energy crops biomass resources (switchgrass) yes electricity yes coal small-scale combined heat & power yes heat & electricity stationary & transportation fuel yes cost natural gas, petroleum petroleum, natural gas hydrogen any cellulosic material moderate yes cost, local infrastructure Energy, Environmental, and Economic Impact Matrix for Kansas Renewable Energy Production, Development, Conversion, and Utilization, Solar & Wind Major Renewable Energy Resource & Sub-type Solar solar thermal sun yes space and water heating space heating & lighting electricity electricity & fuel source no sustainable, emissions free sustainable, emissions free sustainable, emissions free sustainable, emissions free not large-scale application, cost cost and ability to begin incorporation cost cost, local infrastructure coal, natural gas, petroleum coal, natural gas, petroleum coal, natural gas, petroleum petroleum, coal Renewable Resource Feedstock Proven/Mature Technology Primary EndUse Products Environmental Impacts (air, water, soil) Strengths of Renewable Resource Weaknesses of Renewable Resource Conventional Energy Source Replaced daylighting sun yes no solar electric sun yes no hydrogen Wind electricity generation (large-scale) sun moderate yes wind yes electricity & hydrogen yes sustainable, local resource, energy security possible siting issues cost, maintenance of system coal, natural gas electricity generation (small-scale) wind yes electricity no sustainable technology coal, natural gas hydrogen wind moderate hydrogen yes cost, local infrastructure coal, petroleum Conclusions (Richard – I think we need to have a slide or two of conclusions to wrap this up. I‟ll work on the wind part if you‟ll work on the biomass part.) Bibliography American Wind Energy Association web-site, “Wind Energy Projects Throughout the United States of America,” http://www.awea.org/projects/, accessed June 2006. Annual Energy Outlook 2006, EIA, Report #:DOE/EIA-0383(2006), February 2006, p. 77. Bird, Lori and Blair Swezey, “Estimates of New Renewable Energy Capacity Serving U.S. Green Power Markets (2004),” National Renewable Energy Laboratory, September 2005, from DOE/EERE web-site http://www.eere.energy.gov/greenpower/resources/tables/new_gp_ca p.shtml. Cassady, A. and K. Morrison, “Generating Solutions: How Clean, Renewable Energy Is Boosting Local Economies And Saving Consumers Money,” U.S. PIRG Education Fund, April 2003, 158 p. (Available on-line at: http://uspirg.org/uspirg.asp?id2=9634) Bibliography cont. Chicago Climate Exchange, www.chicagoclimatex.com/, 2006 Community Energy, “NewWind Energy® RECs,” http://www.newwindenergy.com/, accessed July 2006. 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