Understanding Solar Energy Policy Part 2 Prof. Martin J. Pasqualetti & Prof. Ronald J Roedel Arizona State University

Outline 1. What is policy, why is it necessary, and what are its essential elements? 2. What are the most useful sources of information on solar energy policy? 3. What are the pillars of solar policy and who establishes the policies themselves? 4. What are some examples of existing policies? 5. What are the impacts of solar policies? 2

Learning Objectives Learning outcomes: After completing this unit, you should be able to: ◦ Describe — The role of policy on solar energy development ◦ Explain — What policy is, the role of policy, how policies are developed, existing solar energy policies, the barriers to solar energy policy, the drawbacks to solar energy policy, the future role of solar energy policy 3

Conventional Policy Instruments for Promoting Solar Energy 4

Renewable Portfolio Standards (RPS) Arizona 5

6 Renewable Portfolio Standard Policies with Solar / Distributed Generation Provisions. / June states,+ Washington D.C. have Renewable Portfolio Standards with Solar and/or Distribute Generation provisions

Arizona RES (details) 7 In November 2006, the Arizona Corporation Commission (ACC) adopted final rules to expand the state's Renewable Energy Standard (RES) to 15% by 2025, with 30% of the renewable energy to be derived from distributed energy technologies (~2,000 megawatts). final rules o In June 2007, the state attorney general certified the rule as constitutional, allowing the new rules to go forward, and they took effect 60 days later. o Investor-owned utilities and electric power cooperatives serving retail customers in Arizona, with the exception of distribution companies with more than half of their customers outside Arizona, are subject to the standard. Utilities subject to the RES must obtain renewable energy credits (RECs**) from eligible renewable resources to meet 15% of their retail electric load by 2025 and thereafter. o Of this percentage, 30% (i.e. 4.5% of total retail sales in 2025) must come from distributed renewable (DR) resources by 2012 and thereafter. o One-half of the distributed renewable energy requirement must come from residential applications and the remaining one-half from nonresidential, non-utility applications.

Arizona RES (details) 8 The compliance schedule is: 2006: 1.25% 2007: 1.50% (5% DR) 2008: 1.75% (10% DR) 2009: 2.00% (15% DR) 2010: 2.50% (20% DR) 2011: 3.00% (25% DR) 2012: 3.50% (30% DR) 2013: 4.00% (30% DR) 2014: 4.50% (30% DR) 2015: 5.00% (30% DR) 2016: 6.00% (30% DR) 2017: 7.00% (30% DR) 2018: 8.00% (30% DR) 2019: 9.00% (30% DR) 2020: 10.00% (30% DR) 2021: 11.00% (30% DR) 2022: 12.00% (30% DR) 2023: 13.00% (30% DR) 2024: 14.00% (30% DR) 2025: 15.00% (30% DR)

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Net Metering Financial arrangement between a utility and small power producers which allows the customer-generated electricity to be sold back to the utility at the full retail value Not all policies are created equal Many caveats and fine details can make a net metering policy heavily favor the utility

12 Net Metering. / July states, + Washington DC & 4 territories,have adopted a net metering policy. 43 states, + Washington DC & 4 territories,have adopted a net metering policy. Note: Numbers indicate individual system capacity limit in kilowatts. Some limits vary by customer type, technology and/or application. Other limits might also apply. This map generally does not address statutory changes until administrative rules have been adopted to implement such changes.

13 Being Considered: FEED-IN TARIFFS (state or city, at present) Feed-in tariffs (FITs) are the most widely used policy in the world for accelerating renewable energy (RE) deployment, accounting for a greater share of RE development than either tax incentives or renewable portfolio standard (RPS) policies (REN ). In total, FITs are responsible for approximately 75% of global PV and 45% of global wind deployment (Deutsche Bank 2010)

Feed In Tariff Status 14

Feed-In Tariffs (2) Provide guaranteed contracts for a premium $/kWh payment for a fixed period of time German and Spanish feed-in tariffs have led to a boom in PV installations Gainesville Regional Utilities started the first true feed-in tariff in America on March 1, $0.32/kWh for 20 years HI, OR, and VT have feed-in tariffs (of sorts) Many other states are studying them Federal regulation makes a state-run feed-in tariff challenging

FITs offer Simpler Pricing 16

17 3 rd -Party Solar PV Power Purchase Agreements (PPAs). / June At Least 21 states, + Washington DC and Puerto Rico,Authorize or Allow 3 rd -Party Solar PV Purchase Power Agreements. At Least 21 states, + Washington DC and Puerto Rico,Authorize or Allow 3 rd -Party Solar PV Purchase Power Agreements. Note: This map is intended to serve as an unofficial guide; it does not constitute legal advice. Seek qualified legal expertise before making binding financial decisions related to a 3rd-party PPA. See following slides for additional important information and authority references.

The PACE initiative ng 18

19 Property Assessed Clean Energy (PACE).. / May states, + Washington DC, authorize PACE (27 states have passed legislation and HI permits it based on existing law). 28 states, + Washington DC, authorize PACE (27 states have passed legislation and HI permits it based on existing law). *The Federal Housing Financing Agency (FHFA) issued a statement in July 2010 concerning the senior lien status associated with most PACE programs. In response to the FHFA statement, most local PACE programs have been suspended until further clarification is provided. statement

PACE Financing (1) Property Assessed Clean Energy (PACE) financing is a type of financing that is an alternative to a loan. ◦ This financing method may be used to encourage the installation of renewable energy and energy efficiency technologies by helping customers overcome the financial barrier associated with high up-front equipment costs. Some states are also allowing water conservation and other improvements to be financed using this mechanism. ◦ This financing mechanism is similar in some regards to a loan program. While it does not reduce the upfront price tag of solar systems, it can help make purchases more affordable by spreading the cost of the system over time. 20

PACE Financing (2) PACE financing effectively allows property owners to borrow money from a local government to pay for renewable energy and/or energy-efficiency improvements. The amount borrowed is typically repaid via a special assessment on property taxes, or another locally-collected tax or bill, such as utility bills, or water or sewer bills. In addition to reducing the upfront costs of renewable energy and/or energy efficiency improvements, PACE financing allows the cost of home improvements to be linked to the property. This approach has a number of appealing features, including: long-term, fixed-cost financing; loans that are tied to the tax capacity of the property rather than to the owner’s credit standing; a repayment obligation that legally transfers along with the sale of the property; and a potential ability to deduct the repayment obligation from federal taxable income, as part of the local property tax deduction 21

2013 AZ Legislature Bill of Note HB 2584 Formation of Renewable Energy and Energy Conservation Districts  Allows any municipality to form a renewable energy district to promote installation of photovoltaic systems (or efficiency measures or water saving systems). This is a variation of property assessed clean energy (PACE) enabling legislation  Sponsored by two new Representatives o Ethan Orr, Republican, LD 9 o Andrew Sherwood, Democrat, LD 26  Did not get out of House Committee on Energy, Environment, and Natural Resources 10/23/13PSM SEEC Program F’13

Third-Party Ownership Options CustomerUtilitySystem Owner Customer makes lease/electricity payment to system owner Utility purchases RECs from system owner Utility credits customer for net excess generation Customer purchases traditional electricity from utility Customer supplied with solar electricity by system owner System owner transfers REC to utility Lower, predictable energy costs Might be packaged together with an energy service performance contract (ESPC)

24 What are RECs? Renewable Energy Credits o Also called Tradable Renewable Certificates (TRCs) or "green tags" o Created when a renewable energy facility generates electricity o Each unique certificate represents all of the environmental attributes or benefits of a specific quantity of renewable generation

25 What are RECs? _Certificate_(United_States)

Additional Information Regarding 3 rd -Party Solar PPAs Authorization for 3 rd -party solar PV PPAs usually lies in the definition of a “utility” in state statutes, regulations or case law; in state regulatory commission decisions or orders; and/or in rules and guidelines for state incentive programs. And, even though a state may have authorized the use of 3 rd party solar PV PPAs, it does not mean that these arrangements are allowed statewide in every jurisdiction. For example, municipal utilities may not allow 3 rd party solar PV PPAs in their territories even though they are allowed/in use in that particular state’s investor-owned utility (IOU) territories.

Part Five What are the impacts of solar policies? 27

Growth of Wind and Solar in Germany 28

Source: LBNL Environmental Energy Technologies Division / Energy Analysis Department Largest RPS Markets for Solar in Near-Term: NJ, AZ, NM, NV, NC, CO 16

solar installations grew by 333% 3rd in U.S estimates Arizona may rank 2 nd Source: Solar Energy Industries Association Since 2010, 12 companies have located or expanded 1,937+ in jobs $1.049 billion of capital investment Source: Arizona Commerce Authority