1. Fulfilling the Promise of Renewable Energy with
Long-Term Contracts
April 29, 2005

2. Mass Energy’s Role Supplier to voluntary market Advocate for RPS
New England Green Start
(for National Grid customers)
New England Wind (tag)
Advocate for RPS

3. Promise To Fulfill Allies: Clean Water Action
Conservation Law Foundation
MASSPIRG
Union of Concerned Scientists

4. Expectations Law passed in 1997, with RPS starting in 2003
REC prices should be ~ $25
projection made back when energy was cheap!
Restructuring complicates things
but we can meet RPS without interfering
with competitive markets

5. Status Quo DOER: Our View:
2004: ~ $15 million in Alternative Compliance Payments and “remain approximately level over the next three years if numerous projects in the pipeline can become operational”
“The level of ACPs is not an indication of flaws in the program.”
Our View:
meant to be a safety valve
we can do better

6. Evidence
In 2003, vintage 2003 RECs only contributed 304,112 towards compliance (60%)
REC prices are close to the ACP in the spot market, which most LSE’s are buying from
2006 obligation = 1.3 million RECs
4X amount of 2003 vintage RECs purchased for RPS obligation
CT, RI, and NY all have competing RPS’

7. Not Enough New Projects
Even Cape Wind would not eliminate ACP without a change in RPS
An administration opposing Cape Wind should not base RPS policy on the likelihood of Cape Wind contributing to the Mass. RPS

8. Market Failure
Levelized cost of renewables are increasingly competitive, but capital intensity calls for long-term financing
Discos don’t know what their basic service load will be years from now, but they do know what their distribution service load will be
Most competitive suppliers don’t know what their load will be in two years
they cannot make long-term speculative commitments for energy and/or RECs

9. Why It’s a Problem
If existing projects can get more (either higher short term prices or length of term) from CT, RI, or NY, then RECs will flow to those states
not to mention the energy itself
Sum of spot market prices for energy and RECs (or ACP) are now ~ 11 cents, more than most projects need
Berkshire Wind: < 7 cents for the bundle
low cost energy will go customers of municipal utilities
that are exempt from RPS!

10. Renewables Trump Natural Gas
New England Governor’s Conference, “Meeting New England’s Future Natural Gas Demands: Nine Scenarios and Their Impacts”
renewables are best supply solution available – better than scenarios involving more natural gas, coal gasification, switching to oil, and nuclear
purely in terms of providing additional energy supply at
lower cost, not even considering environmental
benefits

11. What Works – Public Power
Projects involving public power get built
MWRA Deer Island digester gas
Chicopee Municipal Light (LFG, w/ MTC project)
Hull Municipal Light Plant (wind - Hull 1 and Hull 2)
Princeton Municipal Light Plant (wind repowering, with MTC support)
MMWEC (Berkshire Wind – also MTC and RI Renewable Energy Fund)
Washington Electric Coop. & Cape Light Compact (Coventry LFG)
Burlington Electric (Equinox wind)
Lydonville Municipal Light Plant (East Haven Wind)

12. What Works – MGPP MTC’s Mass. Green Power Partnership
Round 1, a success:
REC prices average $25
“Long-Term Revenue Support to Help Developers Secure Project Financing” by Karlynn Cory, Nils Bolgen, and Barry Sheingold, March 2004
Round 2, proposals submitted on
March 18, 2005

13. What Works – Long-Term Contracts
Mass. RPS implementation should learn from public power and MGPP
Prudent: L-T contracts for renewables for at least 4-10% of the load
Environmental benefits are obvious
Economic benefits: save 4 cents / kWh
when buying both energy and RECs

14. Short-Term Solutions 1) Do more MGPP with 2004 ACP and 2005 ACP
2) Support community wind projects, particularly those with municipal aggregators such as the Cape Light Compact

15. Long-Term Solutions
Work by MTC & DOER to coordinate long-term voluntary PPAs with HEFA, AIM, etc. is great, but not sufficient
we need 1.3 million MWh by 2006!
to provide energy price stability to basic service customers
to provide energy price stability to Commonwealth taxpayers – the state itself should buy should buy renewable energy)
Two bills
H.D. 3470: changes RPS obligation from LSE’s to discos
prudently incurred long-term contracts for energy and RECs can be put into rate base
no stranded costs if prudently incurred
H.D. 3471: NY model of central procurement

16. Design for Success
RPS is a social obligation (actually, an opportunity) for all of us, not just discos and not just competitive suppliers
Rather than foisting the obligation onto uncertain market players, make procurement simple and have ratepayers pay commensurate to
the benefits

17. Mass Energy Larry Chretien 670 Centre Street Boston, MA 02130