State Policy Initiatives

Financing Wind Power: The Future of Energy

May 7-9, 2008

Richard Cogen

State Initiatives

• Renewable Portfolio Standards (RPS)

• Transmission Incentives

RPSs

• RPS is a policy which either requires or encourages that utilities supply a stated percentage of their power from renewable resources

RPSs

• Percentage goals vary from 2% to 40% with varying target years

• Many are mandatory; some are just aspirational

RPSs/Renewable Energy Credits

• RPSs stimulate the development of markets for RECs

• A REC is a credit equal to a unit of production of renewable energy (e.g., a MWh)

• RECS may be used to satisfy RPS requirements, instead of actual generation

RPSs/Renewable Energy Credits - 2

• RECs have economic value that can approach the avoided cost of generation

• Prices for RECS vary geographically, and there is not yet an active market in many areas

- in some places, e.g., MA and CT, can be in the $40 – 50/MWh range

- in others, e.g., ME, economic value is much lower – under $1/MWh

• REC sales can provide a revenue stream to support wind energy projects

Renewables Portfolio Standards

State Goal

☼ PA: 18%¹ by 2020

☼ NJ: 22.5% by 2021

CT: 23% by 2020

MA: 4% by 2009 + 1% annual increase

WI: requirement varies by utility; 10% by 2015 goal

IA: 105 MW

MN: 25% by 2025(Xcel: 30% by 2020)

TX: 5,880 MW by 2015

☼ AZ: 15% by 2025

CA: 20% by 2010

☼ *NV: 20% by 2015

ME: 30% by 200010% by 2017 - new RE

State RPS

☼ Minimum solar or customer-sited RE requirement* Increased credit for solar or customer-sited RE

¹PA: 8% Tier I / 10% Tier II (includes non-renewables)

HI: 20% by 2020

RI: 16% by 2020

☼ CO: 20% by 2020 (IOUs)

*10% by 2020 (co-ops & large munis)

☼ DC: 11% by 2022

DSIRE: www.dsireusa.org May 2008

☼ NY: 24% by 2013

MT: 15% by 2015

IL: 25% by 2025

VT: (1) RE meets any increase in retail sales by

2012; (2) 20% by 2017

Solar water heating eligible

*WA: 15% by 2020

☼ MD: 20% by 2022

☼ NH: 23.8% in 2025

OR: 25% by 2025 (large utilities)5% - 10% by 2025 (smaller utilities)

*VA: 12% by 2022

MO: 11% by 2020

☼ *DE: 20% by 2019

☼ NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops)

☼ NC: 12.5% by 2021 (IOUs)10% by 2018 (co-ops & munis)

ND: 10% by 2015

SD: 10% by 2015

*UT: 20% by 2025

OH: 12.5% by 2025

2007 – 2008 RPS Activity

• 5 New State RPSs in 2007 -8- Ohio

- Illinois

- New Hampshire

- North Carolina

- Oregon

2007- 2008 RPS Activity

• 11 States made major revisions to their RPSs– California– Colorado– Connecticut– Delaware– Maine– Maryland– Minnesota– New Jersey– New Mexico– Pennsylvania– Texas

RPSs - 2008

• Now, there are 26 States with RPSs, plus the District of Columbia

• The RPSs cover approximately half of the electric load in the country

Aggregate Targets

• Existing RPS goals are estimated to require:

• 32 GW of new renewable power by 2015• 60 GW of new renewable power by 2025

Lawrence Berkeley Laboratories Report

http://eetd.lbl.gov/ea/ems/re-pubs.html

State Transmission Incentives

• There is a growing recognition that, in many areas of the country, electric transmission infrastructure is not adequate to enable RPS goals to be met

• To address this problem, some states have adopted initiatives to facilitate construction of new transmission projects needed to serve wind rich regions

State Transmission Activities

• Texas: PUC preliminarily designated 5 Competitive Renewable Energy Zones (CREZ) to stimulate development of over 22 GW of wind energy. Once the process is completed, utilities will have one year to file applications to build transmission to serve the CREZs, and the PUC will be required to review those applications expeditiously

State Transmission Activities

• Colorado: 2007 legislation requires utilities to submit reports every 2 years designating Energy Resource Zones (ERZ), and identifying plans for serving those zones with transmission. Utilities must submit applications for approval of transmission facilities to serve the ERZs. Utilities are eligible for rate adjustment for the costs of planning, developing, and constructing the facilities

State Transmission Activities

• California: California ISO adopted new rate category for “location constrained resources” allowing for initial rate recovery through overall ISO tariff charge, followed by pro-rata sharing of costs by renewable resources using the line once they enter operation. State law also allows utilities to recover costs of lines needed to serve renewable energy facilities needed for RPS compliance for which full rate recovery would not otherwise be available

State Transmission Activities

• Minnesota: requires that utilities submit 5-year plans identifying transmission resources needed to meet RPS goals