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U.S. Renewable and Industry

Presentation at CNREC

Ella Zhou

October 2015

NREL/PR-6A20-65255 NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and , operated by the Alliance for , LLC. U.S. Renewable Energy Policy and Industry

• Federal and State Drivers for RE • Solar Update • Wind Update • Biofuel Update.

2 Federal Drivers for Renewable Energy

• Investment Credit (ITC) • Production Tax Credit (PTC) • Clean Plan (final rule) • Modified Accelerated Cost Recovery System Depreciation Schedule (MACRS) • DOE Loan Program.

3 Summary of U.S. Renewable

Policy Name Description Technologies Amount Expiration

Production A per-kilowatt-hour Wind, closed- and open-loop , geothermal, solar, $23 / MWh for Projects under Tax Credit tax credit for small irrigation power, municipal solid waste, and some wind, closed-loop construction (PTC) electricity generated hydroelectric sources biomass, and prior to 2015 by qualified energy geothermal. $11 / qualify resources and sold by MWh for others; the ; eligible generally applies projects can opt for to first 10 years of ITC instead operation Investment Allows the tax credit Solar water , solar space heat, solar thermal electric, 30% for solar, For commercial Tax Credit to be taken based on solar thermal process heat, photovoltaics, landfill gas, wind, cells, and small solar placed in (ITC) the amount invested biomass, hydroelectric, geothermal electric, fuel cells, wind; 10% for service after rather than electricity geothermal heat pumps, municipal solid waste, geothermal, 2016, reverts to produced CHP/, solar hybrid lighting, hydrokinetic power microturbines, and 10%; (i.e., flowing water), anaerobic digestion, small CHP geothermal hydroelectric, tidal energy, wave energy, ocean thermal, remains at 10%; fuel cells using renewable , microturbines, geothermal for all other direct-use technologies, expires end of 2016 MACRS and Five year accelerated All ITC-eligible technologies as well as large wind projects Depends on tax No expiration bonus depreciation schedule (essentially all renewables) situation (MACRS) depreciation means greater “loss” on paper, reduces

Source: United States Department of Energy (U.S. DOE) 4 Extended Incentives for Renewable Energy Generation

CS: central scenario (current case) Ext: extending PTC and ITC

Source: NREL. 2015. Annual Technology Baseline (ATB). Golden, CO: NREL. Accessed September 2015, http://www.nrel.gov/analysis/data_tech_baseline.html. 5 Clean Power Plan (final rule) CPP sets target emission rates (or -totals) for each state and aims to lower total power sector emissions by 32% by 2030 from 2005 levels.

Projected Generation Mix (thousand GWh)

See more on CPP’s impact at: EPA (U.S. Environmental Protection Agency). 2015. Regulatory Impact Analysis for the Clean Power Plan Final Rule. Research Triangle Park, NC: U.S. EPA. Accessed September 2015, http://www3.epa.gov/airquality/c pp/cpp-final-rule-ria.pdf.

6 State-Level Drivers of Renewable Energy

• Renewable Portfolio Standards (RPS) • Renewable Energy Certificates (RECs) or Performance Based Incentives • Net Metering; Virtual Net Metering • Carbon Markets • State Tax Credit • Assessed Clean Energy (PACE) Programs • Property Tax Exemptions • State Sales Tax Exemptions • Grants • Clean Energy Financing Program • Subsidized Loans • On-Bill Financing.

7 RPS

Source: www.dsireusa.org / June 2015

WA: 15% x 2020* ME: 40% x 2017 NH: 24.8 x 2025 ND: 10% x 2015 MT: 15% x 2015 MN:26.5% VT: 75% x 2032 x 2025 (IOUs) new resources) OR: 25%x 2025* 31.5% x 2020 (Xcel) MA: 15% x 2020( (large utilities) 6.03% x 2016 (existing resources) MI: 10% x SD: 10% x 2015 WI: 10% NY: 29% x 2015 2015*† RI: 14.5% x 2019 2015 CT: 27% x 2020 IA: 105 MW IN: 10%OH: 12.5% x NJ: 20.38% RE x 2020 NV: 25% x IL: 25% x x 2025† 2026 + 4.1% solar by 2027 UT: 20% x 2025* CO: 30% by 2020 2026 PA: 18% x 2021† 2025*† (IOUs) *† VA: 15% x CA: 50% KS: 20% x 2020 DE: 25% x 2026* MO:15% x 2021 2025† DC x 2030 MD: 20% x 2022 NC: 12.5% x 2021 (IOUs) DC: 20% x 2020 OK: 15% x AZ: 15% x 2025* NM: 20%x 2020 (IOUs) 2015 SC: 2% 2021

TX: 5,880 MW x 2015* 29 States + Washington, D.C. U.S. Territories + 3 territories have a Renewable HI: 100% x 2045 NMI: 20% x 2016 Guam: 25% x 2035 Portfolio Standard (8 states and 1 territories have PR: 20% x 2035 USVI: 30% x 2025 renewable portfolio goals)

Renewable portfolio standard Extra credit for solar or customer-sited renewables Renewable portfolio goal *† Includes non-renewable alternative resources 8 RPS with Solar or DG provisions

9 Comparison of RE Estimated Market Sizes, 2006-2013

Source: Heeter, Jenny. 2014. Status and Trends in the U.S. Voluntary Green Power Market (2013 Data). Golden, CO: NREL. Accessed September 2015, http://www.nrel.gov/docs/fy15osti/63052.pdf. 10 Renewable Energy Certificates (RECs)

Source: “Green Power Markets: Renewable Energy Certificates (RECs).” (2015). Washington, D.C.: U.S. DOE Energy Efficiency and Renewable Energy (EERE). Accessed September 2015, http://apps3.eere.energy.gov/greenpower/markets/certificates.shtml?page=5.

11 Net Metering

www.dsireusa.org / March 2015 • PV project capacity limits range from 10 kW to 80 MW • Net metering rules are being actively discussed in over a dozen state public service and utility commissions across the country.

ME: 660* WA: 100 VT: 20/250/2,200 100* MT: 50* ND: NH: 1,000 OR: 25/2,000* MN: 40 MA: 60/1,000/2,000/10,000* WI: 20* RI: 5,000* MI: 150* WY: 25* CT: 2,000/3,000* IA: 500* OH: no limit* NY: 10/25/500/1,000/2,000* NV: 1,000* NE: 25 IL: 40* PA: 50/3,000/5,000* UT: 25/2,000* IN: 1,000* NJ: no limit* KS: 15/100/150* VA: 20/1,000* CA: 1,000* CO: 120%* KY: 30* MO: 100 DC DE: 25/100/2,000* NC: 1,000* MD: 2,000 OK: 100* AZ: 125% AR: 25/300 SC: 20/1,000* WV: 25/50/500/2,000 NM: 80,000* DC: 1,000/5,000/120% GA: 10/100 25/300 AK: 25* LA: 44 States + D.C., FL: 2,000* U.S. Territories: AS, Guam, USVI, & PR HI: 100* American Samoa: 30 Guam: 25/100 have mandatory net Puerto Rico: 25/1,000/5,000 metering rules State-developed mandatory rules for certain utilities Virgin Islands: 20/100/500 No uniform or statewide mandatory rules, but some utilities allow net metering State policy applies to certain utility types only (e.g., investor-owned utilities) State: kW limit residential/ kW limit nonresidential *Note: Numbers indicate individual system capacity limit in kW. Percentages refer to customer demand. Some limits vary by customer type, technology and/or application. Other limits might also apply. This map generally does not address statutory changes until administrative rules have been adopted to implement such changes. 12 Carbon Markets

Regional Greenhouse Gas Initiative California

Source: International Emissions Trading Association, Environmental Defense Fund, CDC Climate Research. (2015). The World’s Carbon Markets. Accessed September 2015, http://www.ieta.org/worldscarbonmarkets. 13 U.S. Regional Transmission Organizations Regions

Source: “Regional Transmission Organizations (RTO)/Independent System Operators (ISO).” 2015. Washington, D.C.: Federal Energy Regulatory Commission (FERC). Accessed September 2015, http://www.ferc.gov/industries/electric/indus-act/rto.asp. 14 Solar Update

U.S. Installation Breakdown

U.S. PV Installations by Market Segment U.S. PV Installations by State 2.5 (MWDC), Q1 '15 2.19 Utility 2.11

)

DC 2.0 Non-Residential Residential Other 1.38 1.5 1.31 1.36 1.31 318 1.4 1.28 1.5 0.96 0.94 1.0 0.82 0.8 0.6 MA 0.69 0.9 0.74 0.9 0.7 CA 55 0.55 0.6 0.5 718 0.5 0.5 0.3 0.3 0.3 0.2 NC 0.1 0.4 0.3 0.2 Quarterly PV Installed (GW PV Installed Quarterly 0.3 0.2 0.2 58 0.3 0.2 0.3 0.2 0.2 0.4 NV 0.3 0.3 0.4 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.2 NY 97 0.0 59 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 '12 '12 '12 '12 '13 '13 '13 '13 '14 '14 '14 '14 '15 • United States installed 1.3 GW in Q1 ’15, down Q/Q and Y/Y – Q1 is typically a down quarter (weather, tax purposes); this year was particularly snowy – Residential market was actually up (11% Q/Q, 76% Y/Y), with 9 states adding more than 10 MW – CA (53% of res. market) had interconnection backlogs for some utilities which pushed installs from Q4 to Q1 • GTM reports that technology convergence is gaining traction (, demand response, load control, EV charging), though it’s still in its infancy due to high costs. As costs come down and rates evolve, demand should pick up. Source: Green Tech Media (GTM)/ Industries Association (SEIA). U.S. Solar Market Insight Q1 2015. Accessed September 2015, http://www.seia.org/research-resources/solar-market-insight-report-2015-q1. 16 Systems Installed Without Incentives

California Arizona

100 100%

350 100%

90% 90 90% 300 80% 80 80% 250 70% 70 70% 60 60% 200 60% 50% 50 50% 150 40% 40 40% 100 30% 30 30% 20% 20 20% 50 Installations Quarterly 10% 10 10% Quarterly Installations (MW) Installations Quarterly 0 0% 0 0% % of Total Quarterly Installations Quarterly Total of % % of Total Quarterly Installations Quarterly Total of % Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 '11'12'12'12'12'13'13'13'13'14'14'14'14'15 '13 '13 '14 '14 '14 '14 '15 '15 CSI Installs Non-CSI, CA Distributed CSI % of Total APS & SRP w/o incentives APS & SRP w/ incentives % of capacity w/ incentives • CA distributed PV installations continue to grow; however, majority of them are now doing so without CSI incentives – Only 15% of distributed PV used California Solar Incentive (CSI) in Q1 ’15 – Additionally, the queue time for projects in CSI program has significantly increased, from 133 days in 2013 to 410 days in H1 ’15 for systems under 10 kW (median between incentive application to installation) • AZ distributed PV installations in SRP & APS territories have increased between H1 ’14 and H1 ’15, but only 13% of these systems received incentives in Q2 ‘15

Sources: For CA: CSI Database, accessed April 8, 2015; GTM/SEIA Q4 2014 U.S. Solar Market Insight. For AZ: APS & Salt River Project (SRP), accessed April 10, 2015. Data set segmented by “incentive type”; all projects listed as “non-incentive”, “non-incentive residential”, or “non-incentive commercial” assumed to have received non-incentives. 17 PPA Pricing by Region

ERCOT Southwest California Northwest MISO SPP Southeast $200

300MW

$150 100MW

$100

$50 Average PPA Price ($/MWh) PPA Average

$0 2008 2009 2010 2011 2012 2013 2014 2015 PPA Signing Date • From 2008-2015, PPA signed contracts have dropped from ~$150/MWh to ~$50/MWh – Wider geographic distribution of where contracts are being signed • Recent announcements of much lower PPA bids – In June ‘15 Austin Energy received 1.3 GW of bids under $40/MWh (though not yet signed) – In July ‘15 NV Energy announced that it had agreed to a PPA price of $38.7/MWh (3% escalator) with a 100MW First Solar project • GTM reports that over 5 GW of PV have been procured by utilities based solely on its competiveness with

Sources: 1. Bloomberg NEF, “U.S. PPA Market Outlook.” Accessed July 8, 2015. 2. GTM/SEIA. 2015. U.S. SMI Q1 2015. 18 How Are Developers Able to Bid so Low?

• Current unsubsidized LCOE for PV projects across the United States is around $0.10-$0.11/kWh • However, federal and state subsidies still exist, and certain locations have lower labor costs and better insolation • Additionally, developers typically bid PPAs based on where they think system costs will be – Some are also able to achieve lower cost financing with larger projects.

$0.12 $0.11

$0.10 $0.024

$0.08 $0.006 $0.022 $0.06 $0.003 $0.009 $0.006 $0.04

LCOE ($/kWh) LCOE $0.04

$0.02

$0.00 • Union labor • Las Vegas, NV • Non-union • Federal • State • Bid for future • Reduced ($2.07/W) insolation labor subsidy: 30% subsidy: $3 price of financing: • Kansas City, ($1.89/W) ITC REC at 2.4 $1.5/W nominal MO insolation multiple WACC 5.5% • No subsidies from 7.0% Sources: Current installed system price from Fu et al. (forthcoming). Economic Competitiveness of U.S. Utility-Scale Photovoltaics Systems in 2015: Regional Cost Modeling of Installed Cost ($/W) and LCOE. Golden, CO: NREL. LCOE calculated using the System Advisory Model (SAM). 19 Solar PV Plant Cost and Performance Projections

Current (2013) Future Projections Note: 14%, 20%, 28% are capacity factors 320 Utility PV - 14% - Low Utility PV - 14% - Mid 270 Utility PV - 14% - High Utility PV - 20% - Low Utility PV - 20% - Mid Utility PV - 20% - High Utility PV - 28% - Low Utility PV - 28% - Mid 220

170 ($/MWh)

120

70 Solar PV Levelized Cost of Energy of Cost Energy Solar PV Levelized

20 2010 2015 2020 2025 2030 2035 2040 2045 2050

• In general, the degree of adoption of a range of technology innovations distinguishes between the low, mid, and high cost cases • The range of LCOE associated with variation in solar resource across the United States is reduced from $94-187/MWh for high cost to $48-94/MWh for low cost reduction scenarios.

Source: NREL ATB 2015

20 Wind Update

U.S. Wind Installation

• additions rebounded in 2014, with 4,854 MW of new capacity added • $8.3 billion invested in wind power project additions in 2014 • Cumulative wind capacity up nearly 8%, bringing total to 65.9 GW. Source: Wiser, Ryan and Mark Bolinger. 2015. 2014 Wind Technologies Market Report. Washington, D.C.: DOE. DOE/GO-102015-4702. Accessed September 2015, http://eetd.lbl.gov/sites/all/files/lbnl-188167.pdf. 22 Wind Represented 24% of Generating Capacity Additions in 2014

100 50% From 2007-2014, wind 80 40% comprised 33% of capacity 60 30% additions nationwide, and a 40 20% much higher proportion in 20 10%

Wind Capacity Additions some regions. 0 0%

Total Annual Capacity Additions (GW) Capacity Annual Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (% of Total Annual Capacity Additions) Wind Solar Other Renewable Gas Other Non-Renewable Wind (% of Total, right axis)

2% 100% 2014) - 27% 26% 80% 33% 54% 49% 60%

40%

20% Percentage of Generation

Capacity Additions (2007 Capacity 0% Interior Great Lakes Northeast West Southeast U.S. Total

Wind Solar Other Renewable Gas Coal Other Non-Renewable Source: Wiser, Ryan and Mark Bolinger. 2015. 2014 Wind Technologies Market Report. Washington, D.C.: DOE. DOE/GO-102015-4702. Accessed September 2015, http://eetd.lbl.gov/sites/all/files/lbnl-188167.pdf. 23 Land-Based Wind Cost and Performance Projections

Current (2013) Future Projections Note: TRGs, “techno-resource groups” represent different resource classes TRG 1 - Low TRG 1 - Mid TRG 1 - High TRG 2 - Low TRG 2 - Mid TRG 2 - High 95 TRG 3 - Low TRG 3 - Mid TRG 3 - High TRG 4 - Low TRG 4 - Mid TRG 4 - High 85 TRG 5 - Low TRG 5 - Mid TRG 5 - High

75

65

($/MWh) 55

45 Based Wind Levelized Cost of Cost Energy Based Wind Levelized - 35 Land

25 2010 2015 2020 2025 2030 2035 2040 2045 2050 • In general, the degree of adoption of a range of technology innovations distinguishes between the low, mid, and high cost cases • The range of LCOE associated with variation in wind resource across the United States is reduced from $50-83/MWh for High Cost to $31-53/MWh for Low Cost reduction scenarios. Source: NREL ATB 2015 24 Recent Wind Prices Competitive with Expected Future Cost of Natural Gas Plants

100 Range of AEO15 gas price projections 90 AEO15 reference case gas price projection 80 Wind 2012 PPA execution (985 MW, 14 contracts) 70 Wind 2013 PPA execution (3,674 MW, 26 contracts) Wind 2014 PPA execution (1,768 MW, 13 contracts) 60 50 40

2014 $/MWh 2014 30 20 10 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Price comparison shown here is subject to variability; see full report for caveats.

Source: Wiser, Ryan and Mark Bolinger. 2015. 2014 Wind Technologies Market Report. Washington, D.C.: DOE. DOE/GO-102015-4702. Accessed September 2015, http://eetd.lbl.gov/sites/all/files/lbnl-188167.pdf. 25 Update

26 U.S. Bioenergy Market Overview

2013 U.S. Bioenergy Production • 1,500 trillion Btu total produced in 2013, or 1.8% total primary Biodiesel energy production in the United 11% States • 98% of U.S. ethanol production Biopower 14% use corn as feedstock • Key driver of the biofuel industry Renewable Hydrocarbons is the federal Renewable Fuel 0% Standard (RFS), which requires Starch Ethanol 75% transportation fuel sold in the United States to contain a minimum of renewable fuels. The majority of fuel ethanol Sources: 1. EIA Annual Energy Review 2. EPA 2014 RFS2 Data 3. Lewis, John. 2015. “Systems-Level Analysis & Bioenergy Market and biodiesel made in the United Assessment”. Golden, CO: NREL. Accessed September 2015, http://energy.gov/sites/prod/files/2015/04/f22/sustainability_and_ States is blended with gasoline strategic_analysis_lewis_4121.pdf.

27 U.S. Renewable Biofuels Production U.S. Renewable Fuels Production 16000 14000 Fuel Ethanol Production

12000 Biodiesel Production

10000 Cellulosic Ethanol Production 8000 6000

Million Gallons Million 4000 2000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sources: Ethanol and biodiesel production: EIA Annual Energy Review. Washington, D.C.: EIA. Accessed September 2015, http://www.eia.gov/totalenergy/data/annual/ ; cellulosic ethanol: EPA-RFS2 2014, EPA-420-R-10-006. Washington, D.C.: EPA. Accessed September 2015, http://www3.epa.gov/otaq/renewablefuels/420r10006.pdf. • Ethanol: More than 96% of gasoline sold in the United States contains ethanol, and nearly all ethanol is used in E10 (10% ethanol 90% gasoline blend which does not require vehicle modification), creating an effective constraint on total ethanol use at near 10% of total gasoline . This is referred to as the “blend wall”. Ethanol is competitive against fossil fuels without subsidies. • Biodiesel: Accounted for approximately 2% of the 50 billion gallon diesel market in 2013, driven primarily by the RFS. The biodiesel PTC($0.50- $1.00/gallon) expired at the end of 2014. • Cellulosic: Since 2010, the renewable volume obligations under RFS for cellulosic ethanol has been adjusted down due to insufficient capacity. Annual cellulosic ethanol production capacity is estimated at 113 million gallons, with 60.3 million gallons registered under RFS2 (Bloomberg New Energy Finance June 2015). • Advanced biofuels: Small quantities entered commercial markets in 2012 and 2013 due to RFS2. 28 Renewable Fuel Standard

RFS2: RFS1: 2005 Revised Quotas 2014-2016 2007 Amendment

• Required gasoline refiners • Increased the volume of • EPA proposed new renewable or importers to meet renewable fuel blend from 9 volume obligations for biofuels specific volume-based billion gallons in 2008 to 36 in the United States for 2014- requirements for biofuels. billion gallons by 2022. 2016. • 7.5 billion gallons of • Included diesel in addition to • Cut corn ethanol and cellulosic renewable fuel to be gasoline, included new biofuel markets below the blended into gasoline by categories of renewable fuel original RFS2. 2012. (ethanol, biodiesel, and • Biodiesel sees continued • Renewable identification cellulosic biofuels, and other increase from 2014-2016. numbers assigned to each advanced biofuels), and set • The new still must gallon of qualifying fuel to separate volume be finalized to be in effect. demonstrate compliance requirements for each one. and are traded as credits. EPA Proposed Renewable Fuel Standards for 2014, 2015, and 2016

Source: EPA Proposed Renewable Fuel Standards for 2014, 2015, and 2016, and the Biomass-Based Diesel Volume for 2017. Washington, D.C.: EPA. Accessed September 2015, http://www.gpo.gov/fdsys/pkg/FR-2015-06-10/pdf/2015-13956.pdf. (billion gallons) 29 Biofuel Outlook U.S. Biofuel Production Outlook, 2012-2030 20000 Other Biomass-derived Liquids Biodiesel Fuel Ethanol

15000

10000

Million Gallons Million 5000

0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: EIA Annual Energy Outlook 2015 reference case • Ethanol: EIA’s projection assumes that both ethanol blending into gasoline and E85 consumption are essentially flat through 2030. The United States is expected to experience decline in gasoline consumption and limited penetration of flexible fuel vehicles that can accommodate E85. • Biodiesel production is also expected to remain constant, assuming the EPA will continue to follow the 1.38 billion gallons per year requirement in the RFS. • In June 2015, EPA proposed reducing the RFS renewable biofuel requirement for 2014-2016 due to the blend wall (10% of demand) and limited cellulosic production. If passed, cellulosic production would be limited and biodiesel would experience an increase in demand. • Renewable Fuel Standard (RFS), which requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels. (The new regulations still must be finalized to be in effect). • Near term opportunity to expand the ethanol market is selling more E15 and E85. The U.S. Department of Agriculture has issued $100 million to build E15 and E85 infrastructure.

30