Green Energy Portfolio Standard Barry Moline, Executive Director Florida Municipal Electric Association (850) , ext. 1 December 2007

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

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

20% Goal – What Time Frame? 20% goal is achievable, but probably not in near term. 20% goal is achievable, but probably not in near term. Adding energy efficiency and conservation will make it achievable in a faster time frame Adding energy efficiency and conservation will make it achievable in a faster time frame

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

Why is Affordability Important? Utilities, Regulators, Elected Officials are guardians of cost Utilities, Regulators, Elected Officials are guardians of cost We are careful about every penny added to customer bills We are careful about every penny added to customer bills Example – Orlando Utilities Commission Example – Orlando Utilities Commission 40% of customers earn $35,000 or less 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 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 Easy to think about the big picture Reality – Implementation is harder, and requires trial and error Reality – Implementation is harder, and requires trial and error Ongoing evaluation is vital Ongoing evaluation is vital Lets not overburden consumers from the start Lets not overburden consumers from the start

Goals 1% ~ $200 million/year statewide annually (includes fuel) 1% ~ $200 million/year statewide annually (includes fuel) $5.4 billion over 20 years $5.4 billion over 20 years Column B, trajectory of goals, requires analysis to define Column B, trajectory of goals, requires analysis to define No timing in Executive Order No timing in Executive Order Slow ramp-up? Slow ramp-up? Faster as technologies and implementation improve? Faster as technologies and implementation improve? RFPs sufficient? RFPs sufficient? Resource study needed Resource study needed University, or someone with independence University, or someone with independence If you guess at numbers, the goals are not defensible and will likely be wrong If you guess at numbers, the goals are not defensible and will likely be wrong ABC YearAnnual % of Retail Sales from Green Energy Upper Limit of Total Utility Annual Expense (1% of Revenues) and Consumer Rate Impact ($ millions) 2010* * * * * * * * * * * * * * * * * * * * years Cumulative Total 5,378

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.

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. Consider assigning greater weight to technologies and programs that yield carbon-free kWh. Allows opportunity to achieve Governors preference to give higher priority to solar and wind.

Categories of Green Energy 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. 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.

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

Funding and Avoided Cost GPS budget used only for above-avoided-cost measures and technologies 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) 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 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 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

Considerations All GPS costs may be passed on to customers All GPS costs may be passed on to customers Budget (1%) based on revenues, not rates, less taxes Budget (1%) based on revenues, not rates, less taxes Includes fuel cost in base calculation Includes fuel cost in base calculation Credits (1 MWh) may be traded with others, and may be counted only once Credits (1 MWh) may be traded with others, and may be counted only once Excess Green Energy may be banked for future years 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) 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 Production & savings must be metered or verified by statistical evaluation

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

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

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

Where To Go From Here Learn from experiences of states who have developed RPSs Learn from experiences of states who have developed RPSs What works, what doesnt What works, what doesnt RPS experts at national labs, nationwide RPS experts at national labs, nationwide Resource study – must be done to understand fully where we are and we can go Resource study – must be done to understand fully where we are and we can go Seek outside assistance – University, consultant, think tank, USDOE Seek outside assistance – University, consultant, think tank, USDOE