Path(s) Forward to Meet Federal

Renewable Energy Goals

Anne Sprunt Crawley

Presented to the Energy Efficiency

Working Group

October 15, 2008

Size of the Challenge

• Statutory renewable energy goals under EPACT 2005 Section 203 are:

– 3% of electric energy by 2007

– 5% of electric energy by 2010

– 7.5% of electric energy by 2013

• Bonus Provision

– Doubled if produced on Federal or Indian land and used by Federal agency

• Under EO 13423:

– At least half of the statutorily required renewable energy consumed comes

from new renewable sources

– New means renewable sources placed into service after January 1, 1999

– Encourages on-site projects

– Information at: http://www.ofee.gov/whats/e013423.pdf

• TEAM and Order 430.2b accelerates and expands requirement:

– Meet the 2013 renewable energy goal by 2010

– On-site renewable energy at all sites

– Adds a thermal renewable energy requirement at same percentage as

electricity goal.

Where We Are

• Estimates for FY08: DOE will exceed 3% electricity

requirement (4.46%).

– 99% of total relies on RECs.

– Contribution varies among sites and PSOs, but overall DOE

is on track.

• Data on progress toward thermal requirement not yet available.

• Coming on line:

– New electric generation: Forrestal, NREL Phase I and II.

– New thermal generation: Tuba City solar thermal, NREL

RFHP.

– New ESPC thermal and electric projects that made it

through process – procurement sensitive.

What We Have to

Work With

• Bonus for Projects on Federal or Indian Land

• REC Swaps

• New/Expanded Authority and Definitions

– Definition of Energy Savings in ESPCs to

Include Excess Renewable Energy Generation

– Incremental Hydropower

• Site Assessments by NREL, ESCOs

• 8-Year Extension of Federal Solar Energy

Tax Credits (Now Available to Utilities!) and

Wind Incentives, Now Available to Utilities!

Bonus + RECs + Swaps

Work Together

• Problem: Sites must retain RECs from on-site projects

in order to receive credit and collect bonus.

• Problem: Typically, developers and site prefer to sell

RECs to reduce costs of project – giving up RE credit

and bonus.

• Solution: Swaps allow sites to sell valuable RECs from

on-site projects, substitute cheaper RECs from other

sources to claim credit for RE generation/consumption

and bonus.

• REC value depends on state policies, particularly

Renewable Portfolio Standards. New markets emerge

with new policies – i.e., Maryland in the past year.

Watch your local policy makers.

RECs and Bonus

Federal Site

10 GWh

of Electricity

10 GWh

of RECs @

$.025/kWh

0 GWh of

Renewable

Electricity

0 GWh

Bonus

At $.05/kWh site spends $500K.

RECs sold for $.025/kWh to

reduce costs by $250K. No RECs

so No Credit toward RE goal

RECs from On-Site Project Sold Outside Government

SOLD!

RECs and Bonus

At $.05/kWh site spends $500K.

RECs sold for $.025/kWh reduced cost

$250K. RECs from new RE bought at

$.0125/kWh for $125K. Net cost =

$375K, 20 GWh credit toward goal.

RECs from On-Site Project “Swapped” to Reduce Costs

Federal Site

10 GWh

of Electricity

10 GWh

of RECs,

$.025/kWh

10 GWh of

Renewable

Electricity

10 GWh

BonusSOLD!

10 GWh

of RECs,

$.0125/kWh

BOUGHT!

Agreements

PPA: Western/DOE - Developer

IAA: Western – DOE

Easement/Access: DOE –

Developer

SO-REC: Developer - Xcel

XCEL

DOE (NREL)‏

Developer

$/RECS

REBATE

RE

CS

POWER PURCHASE

‏($)

POWER (MWH)‏

WESTERN

INTERMEDIARY IN

POWER PURCHASE

FEDERAL TAX

INCENTIVES

NREL: REC Swap and PPA in Practice

• DOE swapped RECs purchased from WAPA to reclaim credit for 750 kW

project, and its bonus.

• NREL reduced the cost of 750 KW project significantly by allowing developer

to sell RECs to Excel at high value.

• Replicated in Phase II projects.

99

Expanded Authority

• EISA Title V, Energy Savings in Government and Public Institutions, Subtitle B, Energy Savings Performance Contracting:– Permanently authorizes ESPCs

– Increases ESPC funding flexibility by allowing a combination of appropriated funds and private financing

– Restricts Federal agencies from limiting the duration of ESPCs to less than 25 years or limiting the total amount of obligations.

– Extends definition of energy savings to include cogeneration, use of excess electrical or thermal energy generated from onsite renewable sources, and energy-efficient use of water resources.

– DOD and DOE to study potential use of ESPCs in non-building applications, which includes equipment to generate electricity

1010

Why DOE is Interested in

Expanded Authority

• Facilities with substantial land areas and

renewable resources, but small facility

energy demand

• Supports broader DOE/EERE mission by

helping to commercialize renewable

energy technologies

• Potential distributed generation benefits

to power quality, reliability, energy surety

1111

Why DOE is Interested in

Expanded Authority

• Many technologies are more

competitive at larger-scale, and

receive a bonus for siting on

Federal land

– Biomass Electricity & Thermal

– Large-Scale Wind

– Concentrating Solar Power

– Geothermal Electric

– Ocean Systems

1212

The Players

• ESCo

– Can provide ECMs that combine with power project that create cost-effective package, financing

• Renewable Project Integrator/Energy Supplier (Could Also be the ESCo)‏

– Ability to construct RE project and offer output as a power sale to government, sells excess to non-government consumers

• Government

– Purchaser for part of the RE project output, and pays for energy savings from any related ECMs

1313

Renewable Project

Integrator/Supplier

• What they bring to the table:

– Investors‏with‏“tax‏appetite”‏who‏can‏use‏tax‏

credits and incentives agencies cannot

– Renewable energy expertise

– Channel for selling RECs if necessary

– Channels for selling excess generation to

other customers (local utility)‏

• Their concerns:

– Land/building access over life of project –leasing terms

– Termination provisions to keep their investors whole

– Contract/project term/lifetime

– Environmental impact, analysis and mitigation requirements

1414

ESCo

• What they bring to the table:

– Those on Qualified list provide a simpler procurement path

– Expertise in bundling ECMs, structuring an overall project that works for all parties

– Access to financing

• Their concerns:

– Maintaining a good return on investment on the overall project

– Risk surrounding the technology, market, and incentives that can change financial profile of a deal

– Legal/procurement interpretation of combining ESPC and PPA in specific situations

1515

Government

• What they bring to the table:– Demand for both renewable

energy and for energy savings

– Reliability as a customer

– Land lease and infrastructure useful in project development

– In some cases EIS or EA that reduces siting costs

– Support NEPA compliance requirements as required

– WAPA as another potential party to assist with purchase and possibly wheeling

• Their concerns:– Limiting costs/maximizing savings

– Complying with all procurement, land-use and environmental requirements

– Expediting/simplifying procurement of renewable energy as much as possible

1616

Challenges to Implementing

Expanded Authority

• Land Use/withdrawal and fair compensation

• NEPA

• Water Use/State permits for withdrawal and fair compensation (some technologies)‏

• Dependence on incentives and sales outside government

• Incentives beyond tax credits, new types of RECs, ?

• Dependence on local utility or other off-taker as purchaser of excess, or power wheeling

• What is the right balance between size of ESPC element and PPA element?

• Long-term power purchase contract authority for RE –all agencies calling for the same language

Expanded Options

• Incremental Hydropower

– 4000 MW of incremental increases from

increased efficiency at Federal facilities

– Potential sources include TVA, Bureau of

Reclamation, and US Army Corps of Engineers

• Hydrokinetic Energy

– 12,500 MW of capacity potential

• Challenges

– Contracting for Incremental Hydropower

– Identifying Incremental and Hydrokinetic

Opportunities

NREL Site Assessments

ANL

Bluewater

BNL

Fermi

Forrestal

Germantown

Hanford

INL

LANL

LLNL

LBL

NREL

NTS

Pantex

PNNL

PPPL

SNL

SLAC

Tuba City

WIPP

Federal Incentives

• Solar electric and thermal tax credits

extended for 8 years.

– Utilities can now use tax credit

– AMT relief

– Removed $2000 cap on residential solar

electric

• Production tax credit (wind and biomass)

and small turbine ITC extended/approved.