Green Energy Portfolio Standard

1. Barry Moline, Executive Director Florida Municipal Electric Association (850) 224-3314, ext. 1 bmoline@publicpower.com www.publicpower.com July 2007 Green Energy Portfolio Standard

2. Our Goal • Put proposal on table • Focus on what is “Do-Able” • We studied state RPSs nationwide • Proposal takes the next logical step • Puts Florida in a national leadership position • Thinks “Outside The Box”

3. GPS: “Next Generation RPS” • Green Energy Portfolio Standard (GPS) • All state RPSs created in era with less attention to climate change issues • Includes renewable energy, energy efficiency, energy conservation • NO difference between a kWh generated from renewable energy vs. energy efficiency or conservation

4. 20% Goal – Achievable? • Difficult to achieve Governor’s 20% goal from renewable energy alone • Adding energy efficiency and conservation will make it achievable in a faster time frame

5. Affordability Rate Cap • Utilities, Regulators, Legislators, Public concerned with open-ended cost of RPS/GPS • Affordability Rate Cap = 1% of utility revenues • LBNL study (2006) of rate impact of RPSs across U.S. • Impact in the range of 1% • Let’s not argue about cost • If rate impact is around 1%, let’s agree that 1% is a reasonable upper limit • Minimizes debate on cost-effectiveness tests

6. Why is Affordability Important? • Utilities, Regulators, Elected Officials are guardians of cost • We are careful about every penny added to customer bills • Example – Orlando Utilities Commission • 40% of customers earn $35,000 or less • 47% of customers are renters and may not be able to easily make changes that would reduce their energy consumption • Easy to think about the big picture • Reality – Implementation is harder, and requires trial and error • Ongoing evaluation is vital • Let’s not overburden consumers from the start

7. Goals • 1% ~ $200 million/year statewide annually • $5.4 billion over 20 years • Column B, trajectory of goals, requires analysis to define • No timing in Executive Order • Slow ramp-up? • Faster as technologies and implementation improve? • RFPs sufficient? • Resource study needed • University, or someone with independence • If you guess at numbers, the goals are not defensible and will likely be wrong

8. Categories of Green Energy • Solar photovoltaics • Solar thermal • End-use energy efficiency • Energy Conservation • Measures that reduce end use energy consumption • Biomass (with land management) • Biofuels • Wind • Landfill methane • Methane digester or wastewater treatment • Geothermal • Ocean energy – thermal, tides, currents or waves • Transmission or distribution system efficiency improvements • Power plant efficiency improvements • Waste-to-energy • Hydro power • Fuel cells (renewable-resource-derived) • Combined heat and power • Thermal storage • Other resources identified by individual utilities and approved by the PSC.

9. Categories of Green Energy • Solar photovoltaics • Solar thermal • End-use energy efficiency • Energy Conservation • Measures that reduce end use energy consumption • Biomass (with land management) • Biofuels • Wind • Landfill methane • Methane digester or wastewater treatment • Geothermal • Ocean energy – thermal, tides, currents or waves • Transmission or distribution system efficiency improvements • Power plant efficiency improvements • Waste-to-energy • Hydro power • Fuel cells (renewable-resource-derived) • Combined heat and power • Thermal storage • Other resources identified by individual utilities and approved by the PSC. • The PSC may consider assigning greater weight to technologies and programs • that yield carbon-free kWh. • Allows opportunity to achieve Governor’s preference to give higher priority to • solar and wind.

10. Categories of Green Energy • Solar photovoltaics • Solar thermal • End-use energy efficiency • Energy Conservation • Measures that reduce end use energy consumption • Biomass (with land management) • Biofuels • Wind • Landfill methane • Methane digester or wastewater treatment • Geothermal • Ocean energy – thermal, tides, currents or waves • Transmission or distribution system efficiency improvements • Power plant efficiency improvements • Waste-to-energy • Hydro power • Fuel cells (renewable-resource-derived) • Combined heat and power • Thermal storage • Other resources identified by individual utilities and approved by the PSC. • Utility side programs: Why relegate measures to a handful of renewable energy and DSM staff? Give everyone in the utility the opportunity to think creatively about implementing efficiency options across all operations. The goal is to generate more kWh with renewables or reduce kWh consumption through efficiency or conservation.

11. Funding vs. Goals • Achieve either the goal in a particular year OR spend the budget for the year • Example: • Goal is 5%, and budget is 1% ($10 million) • Achieve 5% goal by spending $5 million • Utility can stop spending at $5 million • Achieve 4% of goal by spending $10 million • Utility stops spending at $10 million • In both cases, report reasons to PSC in annual report • Information becomes input for 3-year evaluation and recommendation to Legislature

12. Funding and Avoided Cost • GPS budget used only for above-avoided-cost measures and technologies • If photovoltaics cost $130/MWh and avoided cost is $60/MWh, the only charge to the GPS budget is $70/MWh ($130-$60/MWh) • Not the full $130/MWh • If a 13 SEER air conditioner costs $7,000 and a 15 SEER air conditioner costs $9,000, a utility may provide a $500 customer incentive to motivate the customer to purchase the efficient unit. Only $500 is charged to the GPS budget, not the full $9,000

13. Considerations • All GPS costs may be passed on to customers • Budget (1%) based on revenues, not rates, less taxes • Credits (1 MWh) may be traded with others, and may be counted only once • Excess Green Energy may be banked for future years • Programs & projects may be counted that were initiated on or after January 1, 1997 – but only current MWh count (Green-E Standard) • Production & savings must be metered or verified by statistical evaluation

14. Considerations • Utilities with sales less than 500,000 MWh asked to meet standard voluntarily (PURPA Standard) • Excludes small entities such as Havana, Bushnell, Wauchula • Lack administrative staff to implement program locally • Could “write a check” to comply, but that removes the most attractive option – local programs • FMEA would work with small cities to bring into program voluntarily • 20 cities, 1.4% of state electric load

15. Annual Reporting • Report annually to PSC • Progress toward achieving goals and budget expenditures • Discussion of technologies and measures used • Lessons learned and recommendations for improvement

16. 3-Year Evaluation • Evaluate program every three years • Determine if goals, budget are too low or high • Share lessons learned • Are some programs more successful than others? • Are some projects easier to implement? • Are there economies of scale for larger utilities vs. smaller ones? • Recommend changes to Legislature

17. Goals – Non Achievement • Average goal achievement over 5 years • Allows for over- and under-production in a particular year, as well as initial ramp up • If goals not achieved in 6th year, utility must participate in the alternative program or pay the non-compliance penalty (for the 1st year not achieved)

18. Alternative Program • Part or all of GPS budget may be spent on: • State fund to provide Green Energy grants to public • Another utility to develop Green Energy projects or programs • Qualified university or research center for research, development and/or demonstration of Green Energy

19. Non-Compliance • Pay Green Energy budget x 1.1 to state fund for Green Energy grants

20. Where To Go From Here • Seek input on proposal • Learn from experiences of states who have developed RPSs • What works, what doesn’t • RPS experts at national labs, nationwide • Resource study – must be done to understand fully where we are and we can go • Seek outside assistance – University, consultant, think tank, USDOE