Biomass Qualification under the MA RPS Program and Status of the Biomass Notice of Inquiry Robert Sydney, General Counsel Massachusetts Division of Energy Resources EBC Seminar on Biomass October 28, 2005

2 Outline Summary of the MA RPS Program Eligibility of Biomass Overview of the DOER/DEP Biomass Notice of Inquiry (NOI) DOER Policy Statement (issued 10/27/05) Schedule for RPS Regulatory Revisions

3 RPS Policy Context and Objectives Policy Context 1997 Electric Utility Restructuring Act Recognized need to provide subsidies to promote RE development Employed market forces to expand RE development at least cost (by mandating increasing demand level and encourage supply to respond). Policy Objectives Decrease pollution from fossil fuels Reduce dependence on imported fuels Increase fuel diversity Hedge against volatile fossil fuel markets Dampen electricity market clearing prices Promote economic development

4 RPS Technology Eligibility Which technologies/fuel sources qualify? Landfill gas Biomass (“low-emission, advanced technology”) Wind Ocean thermal, wave or tidal Fuel cells utilizing renewable fuels Solar electric (PV) In all cases, generation unit must have been placed in commercial operation after 1997.

New England RPS (Class I) Demand

6 Biomass Energy Wind and biomass are the dominant renewable energy indigenous resources in New England MA can produce roughly 4 million tons of wood chips per year on a sustainable basis Forestry management, saw mill residues, land-use change, tree trimmings, etc. Biomass offers opportunity for Combined Heat and Power applications C&D wood is eligible for RPS but upcoming regulatory revisions will clarify any limitations.

RPS Compliance: Generation Type and Location Biomass and LFG are currently the predominant contributors to the RPS.

8 Biomass Notice of Inquiry Summary DOER and DEP issued Biomass NOI on July 1, 2005, held informal Stakeholder meeting on July 28, 2005, and has reviewed broad set of comments. Plan to initiate formal RPS rule changes pertaining to biomass eligibility. NOI Key Issues: 1)Eligibility of Retooled biomass units for MA RPS 2)Establishment of standards for Advanced Technology and Low Emissions criteria 3)Eligibility of advanced stoker technology

9 NOI Policy Statement Policy Statement was issued by DOER on October 27 th to address only the issue regarding eligibility of retrofitted biomass units. Policy Statement: Existing biomass units that retrofit to meet advanced, low emission criteria can be qualified for RPS only through recourse of Vintage Waiver (e.g. only net additional annual generation qualifies for RECs). Basis for Decision a)RPS Statute calls for new renewable energy generation – retooling does not add new generation (unless output is increased). b)Clarity of this issue is critical to restore market certainty for biomass and all renewable energy developers. c)Allowing retrofitted biomass RECs into RPS market (including historic generation level) will likely cause rapid oversupply of RPS RECs, jeopardizing ability of new renewable development to continue.

10 RPS Regulatory Revisions Anticipated Schedule DOER will issue proposed revisions to its RPS regulations pertaining primarily to the qualification of biomass units. Proposed revisions will be issued December 2005 triggering formal regulatory review process. Review process including Public Hearings and comments will take 3-4 months. Final rules will be issued in Spring 2006.