Alan Nogee Energy Program Director Union of Concerned Scientists ucsusa

1. "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

2. EIA gas price forecasts1997 - 2003

3. EIA model and assumptions 2002Gas savings offset electric costs of 20% RPS 8 Change in Consumer Electricity Costs 6 4 Billion 98$ Net Cost 2 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 -2 Change in Consumer Gas Costs Source: EIA, Annual Energy Outlook 2000; RPS: 7.5%, no cap or sunset case -4

4. EIA model and assumptions 2004: 20% renewables reduce both natural gas & electricity bills EIA: 1% reduced demand for gas = 1% price reduction $11 billion NPV Conservative: other studies have found 1% reduced demand for gas = 3% price reduction (EA/ACEEE) $15 billion NPV *Net present value using a 7% real discount rate. Source: UCS, using EIA NEMS model and assumptions

5. ME: 30% by 2000 MA: 4% by 2009 CT: 10% by 2010 NJ: 4% by 2012 PA: varies by utility Renewable Electricity Standards - 2002 • 12 states MN: 4.8% by 2012* WI: 2.2% by 2011 NV: 15% by 2013, solar 5% of total annually IA: 2% by 1999 NM: 5% by 2013 AZ: 1.1% by 2007, 60% solar TX: 2.7% by 2009 * MN has a minimum requirement for one utility, Xcel.

6. ME: 30% by 2000 MA: 4% by 2009 RI: 16% by 2019 CT: 10% by 2010 NY: 24% by 2013 NJ: 6.5% by 2008 PA: varies by utility MD: 7.5% by 2019 Renewable Electricity Standards – November 18, 2004 • 18 states – CA, CO, HI, IA, MD, MN, NY, RI, WI outside of restructuring • Yellow = new since 2002 • Orange = higher MN: 19% by 2015* WI: 2.2% by 2011 NV: 15% by 2013, solar 5% of total annually CA: 20% by 2017 CO: 10% by 2015 IA: 2% by 1999 NM: 10% by 2011 AZ: 1.1% by 2007, 60% solar TX: 2.7% by 2009 HI: 20% by 2020 * MN has a minimum requirement for one utility, Xcel.

7. Renewable Energy Expected From State Standards and Funds - 2002

8. Renewable Energy Expected From State Standards and Funds – November 18, 2004 23,240 MW new renewables 56.1 MMTCO2E reductions Other** CO2 reduction equivalent to * 2.7 billion more trees * 8.3 million less cars California New York Colorado Nevada AZ & NM Texas Minnesota IA & WI Maryland NJ CT & RI MA Maine **Includes Delaware, Hawaii, Illinois, Montana, Ohio, Oregon, and Pennsylvania.

9. 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

10. 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

11. What’s going wrong? • Siting problems • No long-term contracts = no financing = no new renewables

12. 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

13. 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

14. 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

15. 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 ofrenewable 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

16. 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?

17. 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?

18. 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

19. Source:NRDC

20. For more information… Union of Concerned Scientists 2 Brattle Sq. Cambridge, MA 02238 (617) 547-5552 www.ucsusa.org Alan Nogee anogee@ucsusa.org energy Innovations