As Part of the RPS Proceeding, Staff and NYSERDA Prepared a Cost
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EXPRESS TERMS - SAPA No.: 03-E-0188SA19 The Commission is considering whether to adopt, modify, or reject, in whole or in part, potential modifications to the Renewable Portfolio Standard (RPS) program, including base forecast, goals, tier allocations, annual targets and schedule of collections. The base forecast of electricity usage in New York State against which the RPS goals are applied is currently the forecast contained in the 2002 New York State Energy Plan. The Commission is considering updating the base forecast using a 2007 forecast of electricity usage in New York State developed in Case 07-M-0548, the Energy Efficiency Portfolio Standard (EEPS) proceeding. The Commission is also considering updating the base forecast using a post-EEPS forecast of electricity usage in New York State, also developed in the EEPS proceeding, incorporating successful deployment of the targeted levels of energy efficiency planned in the EEPS case into the forecast. The current goal of the RPS program is to increase New York's usage of renewable resources to generate electricity to 25% by 2013. The Commission is considering whether to increase the goal to 30% by 2015 or to otherwise adjust the goal. The RPS program targets are currently divided into tiers. If the Commission modifies the base forecast or the goal, the Commission will consider whether the targets by tier should be adjusted proportionally or on some other basis. The Commission is also considering whether the annual targets should be modified to account for such changes to the RPS program. The Commission is also considering whether the schedule of collections should be modified to account for such changes to the RPS program, to specify collection levels beyond 2013 necessary to fund contracts extending beyond 2013, and to fund maintenance resources and administrative costs not yet accounted for in the current schedule of collections. Attached are some background documents, analyses and sensitivities that the Commission will consider it its deliberations: 1. Executive Summary, New York Renewable Portfolio Standard Cost Study Update (21 pages). 2. New York Renewable Portfolio Standard Cost Study Update, Main Tier Target and Resources (55 pages). 3. Total Collections by Utility (one page). 4. Budget Sensitivities (3 pages). 5. Main Tier Targets and Results (10 pages). 6. Main Tier Clearing Prices and Resources Reached on Supply Curve (12 pages). 7. Main Tier Supply Curve Assumptions (7 pages). 8. Renewable Energy Task Force Report, February 2008 (50 pages) Attachment 1 EXECUTIVE SUMMARY NEW YORK RENEWABLE PORTFOLIO STANDARD COST STUDY UPDATE (21 pages) Executive Summary New York Renewable Portfolio Standard Cost Study Update I. Background The comprehensive RPS cost study conducted in 2003 estimated the overall costs of achieving the Main Tier and Customer-Sited Tier RPS goals as upwards of $1.5 billion. In its September 24, 2004 Order (2004 Order), the Commission included an initial, escalating annual schedule, which provides for collections totaling approximately $741.3 million through 20131. Recognizing that, under the Main Tier, NYSERDA would be entering into long-term contracts requiring administrative support and contract payments beyond 2013, in December of 2005 the Commission approved post-2013 collections, but deferred specifying the amounts of those collections until the program was underway and actual program costs became better known.2 Of the $741.3 million of scheduled collections, approximately $674.9 million has been committed or allocated, leaving a total of $69 million available.3 Current commitments include approximately $561 million for contracts payments to projects awarded under the first, second, and third Main Tier solicitations, $45 million allocated to the Customer-Sited Tier under the Commission’s June, 2006 Order,4 $33.9 million for Maintenance Tier contracts, $25.6 million for NYSERDA administration, and $9.1 million for NYS fees. A detailed accounting of authorized funding and funding commitments as of the first quarter of 2008 is presented in attached Figure 1. NYSERDA engaged the services of Sustainable Energy Advantage and LaCapra to estimate the costs to achieve the balance program targets. The scope of the study was established through consultation with the Department of Public Service. This assessment forms the basis upon which the PSC will authorize funding and associated rate collections necessary to meet RPS program goals. II. Approach In reviewing the future costs of the New York RPS, NYSERDA asked Sustainable Energy Advantage (SEA) and La Capra Associates to update the 2004 Cost Study Report II, Volume A (2004 Report).5 Comprehensive documentation of assumptions, methodology and results associated with the update are contained in the Main Tier and Customer Sited Tier Cost Study Update Reports. For the assessment of Main Tier program costs, several changes have been made to the RPS targets, the supply curve methodology employed to derive costs associated with the Main Tier program component, import potential, resource potential and renewable energy cost assumptions. These include: 1 Case 03-E-0188 Proceeding on Motion of the Commission Regarding a Retail Renewable Portfolio Standard, “Order Regarding Retail Renewable Portfolio Standard,” at Appendix E. 2 Order Regarding Petitions for Clarification and Reconsideration, at p. 5. 3 As is shown on Table 1, interest earnings of approximately $1.55 million and $854,363 in contract security funds retained by reason of contract defaults have been added to the overall funding amount. 4 “Order on Customer-Sited Tier Implementation,” at pp. 9-11. 5 Retail Renewable Portfolio Standard — Case 03-E-0188, “Cost Study Report II, Volume A” February 27,2004 http://www.dps.state.ny.us/03e0188_CostStudy_II.htm. 1 RPS annual MWh target changes are a result of updated load forecasts and anticipated increases in new energy efficiency programs that New York is planning – specifically, implementation of the Governor’s 15 x 15 plan (15% reduction in load by 2015). Three scenarios were evaluated: (1) 25% Reference; (2) 25% Reduced Load (by 2013); (3) 30% Reduced Load (by 2015). The modeling approach was modified to better reflect the approach to evaluation and contracting ultimately adopted by NYSERDA subsequent to the 2004 Report. The available import potential from Canadian provinces and Pennsylvania-Jersey Maryland (PJM) have been greatly reduced due to both expansive new renewable energy directives and RPS in these regions, and to the costs and risks associated with ultimate requirements placed upon generators importing energy into the New York Control Area. The resource potential for certain resources was modified to reflect updated information or a change in methodology/assumptions. With increasing demand for renewable energy across the country and internationally, high material and fuel costs, and the weakened US dollar, the installed cost of renewable generation capacity has increased by 50% or more relative to the 2004 Report; fossil fuel cost increases and increased demand has also driven the cost of biomass fuel higher since 2004. In the assessment of CST program costs, a supply curve analysis of the type employed to estimate program costs for the Main Tier component of the program was not used. Instead, annual resource budgets were developed using NYSERDA projections of funding for individual projects and the maximum annual potential of developing each resource type. The resources examined are the same as those proposed in the Operating Plan. Anaerobic Digester Biogas (farm-based and water treatment facilities)6 Small wind Solar photovoltaics (PV) Fuel cells (small and large) The approach used in estimating future costs of the program is also based on the existing CST Operating Plan Allocations, as established by the PSC.7 This method allocated funding between resources proportional to the allocation developed in the Operating Plan, while achieving the intermediate annual targets for CST resources. In addition, the cost of achieving an overlapping 100 MW solar photovoltaic (PV) goal resulting from the recommendations of the Renewable Energy Task Force convened by Governor Paterson was also calculated. The proposed plan would require the state to achieve 100 MW of solar PV installations over the next four years (2009 to 2012). Since a portion of the CST resources developed to meet the RPS CST targets would already consist of solar PV, the calculation of additional solar related costs are based on the incremental PV needed to achieve a total of 100 MW of solar PV. Below is a summary of estimated CST targets under three RPS scenarios and the associated costs of meeting the targets, with and without an expanded PV program. III. Load Forecasts Examined Three different types of forecasts are used in the derivation of incremental program costs. The first is the state load forecast, which is the underlying basis for estimating the amount of renewable energy needed to 6 Within the anaerobic digester group, resources located within the NYPA service territory have been included. 7 Retail Renewable Portfolio Standard — Case 03-E-0188, “ Order on Customer-Sited Tier Implementation 2 meet the RPS target. Second, a description of the methodology used in estimating the amount of Main Tier and Customer-Sited Tier resources that NYSERDA is responsible in procuring is presented. NYSERDA’s obligation is then incorporated into a third set of forecasts that represent the New York renewable energy market as a whole, where multiple demands compete for the same pool of resources each year. The load forecast used in the 2004 Report was updated using more current data. The analysis employs a summary of utility sales forecasts that was assembled by a working group under the Efficiency Portfolio Standard (EPS) proceeding8. The sales forecast was then grossed up to reflect generation (supply) level requirements. This forecast is referred herein as the New Load Forecast (used for the Reference Scenario). The revised load growth is slower than originally anticipated in the “As-ordered” Load Forecast from the September 24, 2004 PSC order9 (“Order”, see Table 1).