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Renewable Resources Stakeholder Group
Report to the Joint Standing Committee on Utilities and Energy
I. Background
Over the past five years, at least four bills relating to renewable power generation have been introduced and heard by the Joint Standing Committee on Utilities and Energy of the Maine State Legislature. These bills have sought to amend Maine’s Renewable Portfolio Standard, 35-A M.R.S.A. § 3210(3), which requires that at least 30% of the energy provided Maine consumers be derived from renewable and/or efficient cogeneration resources, as defined by law. The legislation that has been introduced would have amended the definition of eligible resources, or added a second portfolio requirement requiring that a small but growing percentage of the portfolio be derived from new renewable resources, or both.
The genesis of these bills has been an emerging sense that Maine’s current law is neither effective in maintaining Maine’s existing renewable resource base nor in promoting the construction and operation of new renewable resources. In fact, information presented to the Renewable Resource Stakeholder Group by Representative Ken Fletcher, based on information provided by Ridgewood Power and the Independent Energy Producers of Maine, bears this out. According to their analysis, the demand created by Maine’s existing portfolio standard is approximately 4.1 million megawatt hours annually, whereas the supply eligible to meet the standard from the Maine units, projects elsewhere in New England, and imported energy is nearly 33 MMWh/yr., or about eight times the demand created by the standard. This analysis is borne out by the fact that renewable energy credits for Maine-eligible resources are trading at very low prices.
Two of the renewable resource bills were introduced in 2005 and were the subject of a great deal of debate during the last session. At the end of the 2005 session, the Utilities and Energy Committee asked the Governor’s Office of Energy Independence and Security (“OEIS”) to convene a stakeholder group to examine mechanisms to achieve the goals of L.D. 1065, “An Act to Promote Economic Development and Sustainable Energy” and L.D. 1434, “An Act to Reform the Renewable Electricity Portfolio Standard,” by letter dated June 3, 2005. The Group was also asked to monitor and possibly coordinate its work with other groups working on renewable power-related issues, especially the work of the Public Utilities Commission on using long-term contracts as a hedging tool and any group examining “community wind,” which was the subject of L.D. 1379, “An Act to Amend the Wind Energy Act,” which bill is now on the Appropriations Committee table.
On June 22nd the OEIS circulated a memorandum to the designated members of the Renewable Resources Stakeholder Group (“RSG”) setting forth the group’s objectives, mechanisms to be considered to achieve these objectives, and meeting schedule. Appendix A. Five meetings were held between mid July and late November. The composition of the group, its meeting agendas and minutes are included in this report as Appendix B. In addition, all information presented to the group, other related studies, minutes, agendas, and other materials were posted on a the Public Utilities Commission website (www.maine.gov/mpuc/renewable/index/htm). Anne Schink (State Planning Office) facilitated all group meetings, kept notes during meetings, and prepared meeting minutes.
II. Agreed Upon Objective
At its first meeting the RSG agreed upon the following Objective: “Examine the benefits and costs of renewable generation in Maine and develop strategies to maximize renewable generation that is cost competitive and:
● Assures adequate, secure and reliable supply of electricity;
● Encourages economic development opportunities;
● Reduces environmental and public health impacts;
● Reduces price volatility; and,
● Minimizes long term costs.”
III. Meeting Summary
The RSG met five times, on July 21, August 18, September 15, November 10, and November 30. Each meeting lasted nearly the entire day. In addition, extensive discussion and sub-group meetings occurred between these meeting. All meetings were held at the Maine Public Utilities Commission in Augusta, and were broadcast via its web capability.
At the July meeting the Group discussed ground rules, group norms, the proposed composition of the group, the group’s goals and objectives, and the mechanisms that should be reviewed to meet the agreed upon goals and objectives. The group agreed upon the overarching objective set forth above and upon topics to explore in future meetings, including: “green” standard offer products; long term contracts; tribal resources; New England renewable demand; amendments to Maine’s portfolio standard; promotion of “community wind”; and infrastructure adequacy.
At the August meeting, Marjorie McLaughlin (PUC Staff) gave a presentation summarizing a number of renewable power studies, including two New York Studies, a Rhode Island 2002 Greenhouse Gas Action Plan Study, a Massachusetts 2002 RPS Cost Analysis Update, a 1994 Mainewatch Institute Study, Maine’s 2004 Climate Action Plan, the Commission’s 2003 Renewable Resources Report, the Independent Energy Producers of Maine’s 2003 Presentation on L.D. 1312, a 2002 Mainewatch Study, a 2001 Mainewatch Study, a 1994 report from the Alliance for a Renewable Maine Economy, a 2005 Commission study on Windpower development, and the 2003 Study and Report to the Energy Resources Council from Energy Advisors. These studies looked at the costs and benefits of renewable energy and attempted to quantify them. The group discussed these studies, the system benefit charge mechanism to promote renewable generation, and the “green” product offer approach.
At the September meeting, presentations were made by commission Chairman Kurt Adams and commission attorney Mitch Tannenbaum on the long term contract approach; Ed Simons on tribal wind power development; Ed Holt on green power programs nationwide; and Maine DEP Commissioner Dawn Gallagher on the Regional Greenhouse Gas Initiative.
At the first November meeting Ron Kreisman, Steve Cole, and Gore Flynn presented the results and conclusions of the recently completed private business study on “community wind.” They define community wind based on the size and scale of the turbines, locating the turbines near established communities and infrastructure (T&D, roads, etc.), and the relationship of the community to the project. Generally, these projects are thought of as between one and five or six turbines of sizes ranging from 100 kilowatts to 1.5 megawatts. The overarching conclusion of the study is that, under current market conditions and based on existing wind technology, small wind projects are not economic without government assistance. The basic reason for this is economies of scale: high development costs that must be recovered over small energy output. The project would need to be paid the bundled retail rate, because at 7.5 to 8 cents per kilowatt hour they could be economic, and would need a “large pool” of state money to finance them.
At this meeting, Representative Ken Fletcher presented a proposal he had developed with input from the Maine Energy Investment Corp., the Passamaquoddy and Penobscot Tribes, Ridgewood Power and Environment Maine. Representative Fletcher’s proposal set forth as its goal increasing the amount of renewable generation in Maine by 1% by 2008, and 1% annually thereafter to a total of 10% by 2017. The goal is to add new steel in the ground from cost-competitive renewable generation, help suppress energy prices over the long term, and back out fossil fuels. This group found that the most viable means to the end were a renewable portfolio standard, long term contracts, and expansion of the voluntary green market. Representative Fletcher recommended creation of three sub-groups to discuss the long term contracting approach, eligible resources, and the voluntary market.
In the interim between the November 10th meeting and the November 30th meeting, each of these three sub-groups met at least twice. They presented their reports and recommendations to the full RSG at the final meeting. Those findings are set forth above.
IV. Renewable Stakeholder Group Conclusions and Recommendations
As can be seen from the above summary of the meetings, the RSG’s discussions covered a wide range of topics related to the Group’s objective. In the end, the Group divided into sub-groups that focused on three specific areas: the definitions of eligible renewable resources, the use of long-term contracts to meet the Group objective, and proposed changes to current practice to promote the voluntary market for renewable resources. The three sub-group reports are included as Appendix C.
The Group reached a general level of consensus on the following goal: to increase renewable generation and usage in Maine by 10% by 2017. According to information provided by the Eligible Resource sub-group, the ten percent goal represents approximately 1.2 million megawatt hours of energy, or between 150 and 450 megawatts of capacity, depending on the capacity factor of the renewable resource. The recommendations of the three sub-groups were:
1. Long Term Contracts. The Group agreed that, if a long-term contracting program were to be adopted by the Legislature, it should have the aspects described in the Long-Term Contracts sub-group Report dated November 30, 2005. The sub-group Report includes two variations of a long-term contract approach. The first uses contracts to provide a price volatility hedge for the benefit of the general body of ratepayers and promote, where possible, the development of new renewable resources. It is based on the principles set forth in the Commission’s August 11, 2005 letter to the Utilities and Energy Committee Chairs. The second provides a ratepayer credit “backstop” to aggregations of commercial and industrial customers who enter into long-term power contracts.
The Group agreed generally to a proposed contract term (3 to 20 years); the amount of energy that would be under contract (20% of annual usage); a price cap (not to exceed current market price at time of contracting); a solicitation process (Commission to conduct periodically); an evaluation criteria (price, diversity of resources, and diversity of contract type); renewable energy credit treatment (no requirement that RECs be sold along with power); disposition of power (power to be sold periodically into the market, as is the case for qualifying facility entitlements, when economically beneficial); contracting entity (the group agreed that the T&D utility is in the best position to be the contracting entity, but that significant further work was needed to ensure risk protection for the utility); and, consumer owned utility opt-out (COUs should be able to opt-out). No agreement was reached, because of time constraints, as to whether large customers should be able to opt out of the program. The overall purpose of this program would be to suppress the price volatility associated with the regional electric market.
The Group also discussed another approach, offered by Chair Adams, which was referred to as “targeted aggregation.” Under this approach, ratepayers would provide a credit backstop of commercial and industrial long-term contracts with generators in the event a C&I customer defaulted. This long-term contract approach has two primary purposes: 1) help new (but not necessarily new renewable) generation secure project financing, and 2) price stability (and perhaps lower prices) for participating customers who are currently subject to and under significant price pressure due to current high energy prices and market price volatility. The Group agreed that this approach needed to be fleshed out further, but was worth considering. The overall purpose of this second program is to enable businesses to benefit from long-term contract relationships with low cost suppliers.
2. Eligible Renewable Resources. The purpose of this group was to “define the renewable electrical generation resources that will be eligible for incentive programs designed to increase investment and supply in Maine.” This group did not necessarily achieve consensus on all the definitions. The goal of the group was to increase the amount of “steel in the ground” in Maine, but the group did not exclude generation from elsewhere in the New England Power Pool or from the Northern Maine control areas. The following grid-connected renewable resources were discussed for eligibility for mechanisms designed to promote new renewable resources: solar photovoltaic; tidal; wind; geothermal; municipal solid waste, including both new plants and capacity increases from existing plants; biomass, including new or capacity increases at existing eligible plants, using eligible biomass fuels; hydroelectric from new plants or capacity increases at existing facilities, where certain fish passage requirements are met; fuel cells using renewable resources; and, future low emission advanced renewable energy sources not currently defined above but approved by the Commission.
This Group left many issues to be resolved, including: the appropriate goal for any increase in renewable generation in Maine; the use of out-of-state resources to meet the goal; applicable hydro and biomass eligibility requirements; whether MSW should be treated as renewable; whether resources on tribal land should be given extra weighting; the baseline years used to define “new” resources; whether generation produced during particular times of the day or year (the peaks) should be given extra weighting. In addition, the group raised the questions of what assurance can be offered so that ratepayers are not paying more for certain renewable power if lower cost renewable options are available. Finally, the group considered without resolution how best to ensure fuel diversity within the renewable portfolio.
3. Voluntary Markets. The goal of this group was to “support higher levels of customer awareness regarding the availability of clean electricity products in specific, of competitive electricity markets in general, and thereby higher levels of voluntary purchasing of electricity from renewable generators.” The group also sought to level the playing field among clean electricity providers (supply and RECs) and to reduce the price of clean electricity by promoting active competition.
The group’s proposed program attempts to remove existing market barriers to promotion of clean electricity products, and would include consideration of: marketing clean electricity through a mailing in T&D bills of some, but not all, in-state supply products and REC products; providing funds for marketing costs from ratepayer and/or public funds; and, providing a common billing mechanism in T&D bills.
This sub-group did not promote the use of a check-off or other mechanism for clean electricity products on the customer T&D bill, commonly referred to as a “green” standard offer product.
V. Next Steps.
With this report to the Utilities and Energy Committee, the work that the Renewable Resources Stakeholder Group was asked to do has been completed. Further action involving this group, or any other individual or group, will depend on the will of the Committee members. Next steps could take the form of proposed legislation, further analysis and research, and/or work with other state agencies or other entities to advance the objective of the Group.