"What Electricity Resources Can We Count On to Meet New England's

Growing Electricity Demand? Renewable Energy"

Alan Nogee

Energy Program Director

Union of Concerned Scientists

www.ucsusa.org

Massachusetts Restructuring Roundtable

Boston, MA

November 19, 2004

EIA gas price forecasts1997 - 2003

00.5

11.5

22.5

33.5

44.5

5

AEO 1997AEO 1998AEO 1999AEO 2000AEO 2001AEO 2002AEO 2003bAEO 2003a

EIA model and assumptions 2002Gas savings offset electric costs of 20% RPS

-4

-2

0

2

4

6

8

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Bil

lio

n 9

8$

Change in Consumer Electricity Costs

Change in Consumer Gas Costs

Net Cost

Source: EIA, Annual Energy Outlook 2000; RPS: 7.5%, no cap or sunset case

EIA model and assumptions 2004: 20% renewables reduce both natural gas & electricity bills

*Net present value using a 7% real discount rate.

Cumulative Natural Gas and Electricity Bill Savings* (20% by 2020 RES)

$0

$5

$10

$15

$20

$25

$30

$35

2005 2010 2015 2020 2025

$Bill

ion

Electricity Bill Savings

Natural Gas Bill Savings

Source: UCS, using EIA NEMS model and assumptions

$15 billion NPV

$11 billion NPV

EIA: 1% reduced demand for gas = 1% price reduction

Conservative: other studies have found 1% reduced demand for gas = 3% price reduction (EA/ACEEE)

12 states

WI: 2.2% by 2011

IA: 2% by 1999

MN: 4.8% by 2012*

NV: 15% by 2013, solar 5% of total annually

TX: 2.7% by 2009

NM: 5% by 2013

AZ: 1.1% by 2007, 60% solar

Renewable Electricity Standards - 2002

* MN has a minimum requirement for one utility, Xcel.

CT: 10% by 2010

ME: 30% by 2000

PA: varies by utility

NJ: 4% by 2012

MA: 4% by 2009

18 states – CA, CO, HI, IA, MD, MN, NY, RI, WI outside of restructuring

Yellow = new since Yellow = new since 20022002

Orange = higherOrange = higher

WI: 2.2% by 2011

IA: 2% by 1999

MN: 19% by 2015*

NV: 15% by 2013, solar 5% of total annually

TX: 2.7% by 2009

NM: 10% by 2011

AZ: 1.1% by 2007, 60% solar

Renewable Electricity Standards – November 18, 2004

CA: 20% by 2017

* MN has a minimum requirement for one utility, Xcel.

HI: 20% by 2020

CT: 10% by 2010

RI: 16% by 2019

ME: 30% by 2000

PA: varies by utility

NJ: 6.5% by 2008

MD: 7.5% by 2019

MA: 4% by 2009

NY: 24% by 2013

CO: 10% by 2015

Renewable Energy Expected From State Standards and Funds - 2002

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Meg

awat

ts

12,700 MW new renewables6,250 MW existing renewables

*Includes Illinois, Montana, New York, Oregon, Pennsylvania and Rhode Island.

Other*

California

Nevada

Texas

IA & WI

New JerseyConnecticut

MassachusettsMaine

Minnesota

CO2 reduction equivalent to* 1.6 billion more trees* 5.3 million less cars

AZ & NM

Renewable Energy Expected From State Standards and Funds –

November 18, 2004

0

4,000

8,000

12,000

16,000

20,000

24,000

28,000

32,000

Meg

awat

ts

**Includes Delaware, Hawaii, Illinois, Montana, Ohio, Oregon, and Pennsylvania.

Other**

California

Nevada

IA & WI

NJCT & RIMAMaine

Minnesota

AZ & NM

New York

Texas

23,240 MW new renewables56.1 MMTCO2E reductions

CO2 reduction equivalent to* 2.7 billion more trees* 8.3 million less cars

Maryland

Colorado

Renewable standards are the primary driver

“RPS will be the most important driver for new renewables in the U.S. and Canada over the next ten years.” Navigant

“State-level renewable electricity standards, along with the federal production tax credit for wind, will be the primary drivers of new renewable energy growth...” Platts

“In 2001, 75 percent of the wind power developed in the U.S. was within those states with renewable energy requirements.” LBL National Lab

“Renewable portfolio standards or purchase mandates are the most powerful tool that a state can use to promote wind energy.” NREL

“Renewable portfolio standards have emerged as an effective and popular tool for promoting renewable energy.” Council on State Governments

New capacity contributing to renewable standards thru 2003

• U.S. = 2,335 MW

• Connecticut = 0 MW

• Massachusetts = 9 MW

–Built to meet RPS = 0 MW

Source: U.S. EIA

What’s going wrong?

• Siting problems

• No long-term contracts = no financing = no new renewables

Wind siting

• Challenges on land and sea

• Encouraged by Cape Wind review process and draft EIS

• Still reviewing EIS

• Visual impact of wind: if 6 miles out to sea is not enough to mitigate, what is?

• Need leadership at all levels

Long-term contractsPotential solutions

• Central procurement (NY)

• State-agency funding backstop (MA, RI, NV)

Massachusetts Green Power Partnership – Mass. Renewable Energy Trust– Contracts and options for renewable energy certificates (RECs)– Re-sells certificates for RPS, green marketing– Fund needs to escrow money, but recycles– 100 MW in round 1 ($36 million)– Preparing for round 2 ($15 million)

– Only partial solution: not enough revenues, time lag using alternative compliance revenues

– Criticized in Boston Herald for supporting out-of-state facility

Why support facilities in other New England states?

• RPS and fund both for Mass. Customers• Fuel diversity

• Energy security

• Price stability

• Environmental improvement

• Same economic and environmental benefits to customers generated anywhere in New England grid (or delivered to New England grid)

• US Commerce Clause prohibits discriminating against out-of-state renewables

Consensus Report to the Legislature on the Proposed Renewable Energy Fund

We agree that the goal of the Fund should be to increase the AVAILABILITY, AFFORDABILITY AND USE OF RENEWABLE ENERGY BY MASSACHUSETTS CONSUMERS through:    ·   Markets - Supporting increased demand for renewable energy resources via market development in the Commonwealth; ·   Industry - Supporting the continued survival, development and growth of renewable energy projects, enterprises and related institutions in the Commonwealth AND REGION; and·   Knowledge - Supporting the expansion of renewable energy expertise at all levels in the Commonwealth.

http://www.raabassociates.org/Articles/Renewable_Fund_Final.doc

Potential solution: Require distco long-term contracts

• CA, NV, NM, IA, MN

• Provide diversity, price stability for customers

• Regional energy security, price stability

• Hedge against carbon reduction costs

• How many people do not have at least 5-10% of their financial portfolios in investments that are likely to cost them more but protect them from price volatility?

Prudence review

• Companies required by DTE to comply with RPS at least-cost

• Allowed to sign long-term contracts

• How is it prudent to pay $50/MWh in spot market for RECs available for $20-25/MWH in long-term market?

• Can you convince the public even if you could convince the DTE?

• Can we avoid this train wreck?

National Commission on Energy(Rowe, Tierney, Holdren, Cavanagh, Joskow, Sharp, et. al.)

Electric- industry restructuring has derailed…. Small customers … have received little direct benefit from retail competition

itself. Because the pocketbook advantages have been insubstantial, many consumers find the choices associated with retail competition to be more of an annoyance than an advancement….

Retail marketers have lost some billions in capital… At the same time, it is often unclear who is responsible for assembling a

diversified mix of short- and long-term resource commitments and other risk management tools, in order to sustain the economical and reliable electricity services that a healthy economy requires.

Retail distribution should remain a responsibility of utilities under state and local regulation, along with electric energy resource portfolio management for residential and small business customers (and any larger customers who choose regulated portfolio services).

http://www.energycommission.org/ewebeditpro/items/O82F2989.pdf

Source: NRDC

energy energy InnovatioInnovationsns

For more information…For more information…

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Alan NogeeAlan Nogee

anogee@ucsusa.org