NARUC Releases Final DER Compensation Manual

Today, the National Association of Regulatory Utility Commissioners (NARUC) released its final manual on distributed energy resources (DER) compensation.  The draft manual was circulated for review and comment in August 2016, and is intended to help jurisdictions navigate the policy and stakeholder considerations behind DER compensation.

Read our previous post for more information on NARUC’s DER compensation manual.

 

Xcel Wins Approval to Transform Minnesota Generation Fleet

Today, the Minnesota Public Utilities Commission approved Xcel Energy’s dramatic proposal to shift away from coal generation toward renewable energy.   In authorizing the company’s 2016-2030 Integrated Resource Plan (RP-15-21), the Commission directed Xcel to retire two large coal units capable of generating approximately 680 MW each, procure at least 1,ooo MW of wind by 2019, procure at least 650 MW solar by 2020 , begin the process of procuring replacement generation for the coal units in mid-2020s, and acquire at least 400 MW of demand response resources by 2023.

Xcel has already started the wind procurement process with an RFP for up to 1,500 MW issued last month.  The required solar resources are likely to be procured through Xcel’s community solar garden program, but Xcel also is authorized to pursue other cost effective solar resources.   With respect to other replacement generation for the Sherco 1 and 2 coal units now slated to be shutdown, the Commission authorized Xcel to file a petition for a certificate of need to select replacement resources.  Xcel had proposed to build a 750 MW combined cycle gas facility to be located at the Sherco site in Becker, Minnesota, but the Commission determined that a final decision on that proposal and other alternatives (such as additional renewable energy and demand side options) should be made in a subsequent certificate of need proceeding.  Longer term, the Commission also directed Xcel to study options and scenarios for orderly and cost effective retirement of its other baseload resources, including two other large coal units and the company’s nuclear fleet.

Southern California Edison to bring 125 MW of clean energy resources to Orange County

Around the country clean energy resources, energy efficiency and demand response are quickly being adopted alongside more traditional resources. Southern California Edison (“SCE”) recently contracted for an assortment of clean energy resources that will be used in a groundbreaking attempt to see whether those resources can supply electricity to a densely populated area – Orange County – with the same reliability as a traditional power plant.[1]

  • Project Name: The Preferred Resources Pilot.
  • Goal: The multiyear study is designed to determine whether these preferred resources –including solar, wind, battery storage, energy efficiency and demand response – can be used to safely, reliably and affordably serve the electrical needs of customers in a real-world environment,[2] and to determine if more gas-powered capacity is needed in the region.[3]
  • Preferred Sources: Preferred sources include solar and wind power, along with demand response and energy efficiency products.

 

  • Potential Consequences: Proving the capabilities of preferred resources may defer or eliminate the need for new gas-fired generation in the PRP region.[4]
  • Territory: A large part of the cities of Irvine, Tustin, Santa Ana and Newport Beach, as well as all or parts of the cities of Aliso Viejo, Corona del Mar, Costa Mesa, Laguna Beach, Laguna Woods, Laguna Hills, Laguna Niguel, Lake Forest and Mission Viejo. The area is home to approximately 204,000 SCE residential customers and 30,000 SCE commercial and industrial customers.[5]
  • Current Accomplishment: SCE recently contracted with six developers for 125 MW of power representing an assortment of battery storage, “demand response”[6] and the combination of solar and battery storage resources. These clean energy resources are expected to come online between 2019 and 2020 and will add to the 136 MW of “preferred” clean energy resources that have already been acquired for the Preferred Resources Pilot.[7] The utility’s combined 261 MW of clean energy in the pilot is enough to power about 195,000 customers, moving SCE closer to a 100% adoption in Orange County.[8]
Developer Product Capacity (MW) Term

(Years)

Commercial Online Date
AMS Demand Response from Energy Conservation and Battery Storage 40 15 Jan. 2019 –

Jan. 2020

Convergent Battery Storage 35 20 Dec. 2019
Hecate Battery Storage 15 10 Jan. 2020
NextEra Battery Storage 10 15 Jan. 2020
Demand Response from Energy Conservation and Battery Storage 10 15 June 2018 – June 2019
NRG Hybrid of Solar and Battery Storage 10 15 April 2019 – August 2019
Swell Demand Response from Battery Storage 5 15 June 2019
TOTAL:   125

For more details about Preferred Resources Pilot, please consult SCE’s webpage at http://www.edison.com/home/innovation/preferred-resources-pilot.html.

 

[1] http://insideedison.com/stories/orange-county-pilot-tests-whether-clean-energy-resources-can-meet-major-metro-needs.

[2] Id.

[3] http://www.utilitydive.com/news/socal-edison-seeks-125-mw-of-clean-energy-resources-for-orange-county/426620/

[4] http://www.edison.com/home/innovation/preferred-resources-pilot.html.

[5] Id.

[6] Demand response means customers reduce their use of electricity from the power grid in response to an electronic signal. SCE has continued to add demand response and storage projects in its power portfolio in the wake of the Aliso Canyon methane gas leak disaster and regulatory mandates. Part of those efforts include a partnership with Nest thermostats to connect 50,000 homes in SCE’s service territory and transform them into a virtual power plant capable of controlling about 50 MW of load reduction. See supra note 3.

[7] See supra note 1.  Please see the chart below for more details.

[8] See supra note 3.

MISO Transmission Owners’ Return on Equity Cut by FERC

Following a decision of the Federal Energy Regulatory Commission (FERC) released last week that cuts transmission owners’ return on equity (ROE) by more than 200 basis points,[1] ratepayers in the Midcontinent Independent System Operator, Inc. (MISO) footprint will save an estimated $200 million per year.

Spurred by industrial customers’ challenge to MISO’s ROE rate in 2013, FERC ultimately found in its September 28, 2016 order that MISO’s ROE of 12.38% – which had been in place since 2002 – was unjust and unreasonable, and reset it to a base rate of 10.32%.[2]  Transmission owners may also qualify for transmission incentive ROE adders, although the maximum ROE rate may not exceed 11.35%.[3]  FERC also ordered that refunds be issued on a prospective basis for the period from November 12, 2013 through February 11, 2015.[4] Continue Reading

New BLM Wind and Solar Development Guidelines on Public Lands Expected Soon

With a goal to spur wind and solar development on public lands, the Bureau of Land Management (BLM) is expected to soon release a new rule that will streamline approval of new renewable energy projects.

First proposed for advance notice and comment in 2011, the rule would amend BLM regulations at 43 C.F.R. §§ 2800 and 2880 and implement, among other things, competitive leasing processes, developer incentives, revised rent and fee schedules and new megawatt (MW) capacity fees for wind and solar energy projects on BLM lands.[1]

The provisions depend on whether the project is located inside or outside “designated leasing areas” (DLAs), as determined by the BLM, which include “preferred areas” for development.[2]

Competitive Leasing

Lands within DLAs will be subject to competitive bidding procedures that provide for variable offsets to developers. Bidding developers may also pre-qualify for the offsets – limited to 20 percent of the high bid – by meeting factors set forth in a Notice of Competitive Offer.  While these factors will vary from lease to lease, they may include whether the developer has a power purchase or interconnection agreement in place for the project.[3]

Outside DLAs, the proposed rule amends existing regulations to create a competitive bidding process specifically applicable to wind and solar project development. Currently, BLM regulations only provide for competitive bidding where there are “competing applications for the same facility or system.”[4]  Under the new regulations, the BLM will be able to use a competitive bidding process to open new lands to wind and solar project development, with the winning bidder becoming a preferred applicant for the right-of-way to the project site.[5]

Incentives

To incentivize bidding within DLAs, the proposed rule includes, among other incentives:

  • Reduced application fees, with a $5 per acre “nomination fee” within DLAs, as opposed to a $15 per acre application fee outside DLAs.
  • Streamlined processing and environmental review of projects within DLAs.
  • A 30-year fixed lease term within DLAs. Leases outside DLAs are available for up to 30-years, subject to adjustable terms and conditions.
  • A 10-year phase-in of the MW capacity fee, outlined below, rather than a three-year phase-in for facilities outside DLAs.
  • Standard bonding requirements of $10,000 per acre and $20,000 per acre for solar and wind energy developments, respectively. Outside DLAs, the bond requirement is based on the reclamation cost estimate minimum bond.[6]

Rent and Fees

Updated annual rent schedules are provided for in the proposed rule. These schedules are based on the approved acreage for the development, with a 10 percent encumbrance value for wind projects and a 100 percent encumbrance for solar projects.[7]

MW Capacity Fee

Additionally, the proposed rule establishes a MW capacity fee, based on the approved project MW, average wholesale energy prices, the federal rate of return per a 20-year treasury bond, and the project’s capacity factor, set at:

  • 20 percent for solar photovoltaic,
  • 25 percent for concentrated solar power,
  • 30 percent for concentrated solar power plus storage, and
  • 35 percent for wind.[8]

BLM explains that the MW capacity fee is intended to “capture the increased value of a solar or wind energy project on the public lands above the rural land value captured by the acreage rent.”[9]

BLM is implementing the wind and solar energy development rules pursuant to the President’s Climate Action Plan, announced in 2013, which uses “existing authorities to reduce carbon pollution, increase energy efficiency, expand renewable and other low-carbon energy sources and strengthen resilience to extreme weather and other climate impacts.”[10]

Since 2009, the BLM has approved an aggregate capacity of over 9,700 MW in solar, 4,700 MW in wind, and 600 MW in geothermal projects, for a total of approximately 15,000 MW of renewable energy.[11] In 2016 and 2017, BLM expects to review proposals for seven renewable energy projects, including five solar and two geothermal, with generation capacity of approximately 1,300 MW.[12]

We will continue to track this issue, and will report back with readers once the proposed rule has been finalized.

[1] 79 Fed. Reg. 59,022 (Sept. 30, 2014).

[2] Id.

[3] Id. at 59,022-023.

[4] Id. at 59,024.

[5] Id.

[6] See BLM, Competitive Solar and Wind Energy Leasing Regulations, available at http://www.blm.gov/style/medialib/blm/wo/MINERALS__REALTY__AND_RESOURCE_PROTECTION_/energy/solar_and_wind.Par.70101.File.dat/Public%20Webinar%20Dec%203%202014%20-%20Solar%20and%20Wind%20Regulations.pdf.

[7] 79 Fed. Reg. at 59,023.

[8]  Id.

[9] Id.

[10] BLM Press Release, Secretary Jewell Announces Competitive Leasing Policy to Encourage Solar and Wind Energy Development on Public Lands, Create Greater Certainty for Developers, Sept. 25 2014, available at http://www.blm.gov/wo/st/en/info/newsroom/2014/september/nr_09_25_2014.html.

[11] See BLM, Renewable Energy Projects Approved Since the Beginning of Calendar Year 2009, available at http://www.blm.gov/wo/st/en/prog/energy/renewable_energy/Renewable_Energy_Projects_Approved_to_Date.html.

[12] See BLM, 2016-2017 Renewable Energy Projects, available at http://www.blm.gov/wo/st/en/prog/energy/renewable_energy/2014-15_Renewable_Energy_Projects.html.

California Continues Ambitious Regulation of Greenhouse Gas Emissions

Yesterday, Governor Jerry Brown signed Senate Bill (SB) 32 into law, extending and expanding California’s 10-year old greenhouse gas (GHG) emissions reductions mandate under Assembly Bill (AB) 32.  SB 32 provides for a 40% reduction in GHG emissions from 1990 levels by 2030.  This builds on AB 32’s existing mandate to reduce statewide emissions to 1990 levels by 2020.  In negotiations to pass SB 32 in the final weeks of the state legislative session, the bill was trimmed to add only one sentence to existing statute, to insert the 2030 target.  Left unaddressed was one question of the moment, can the cap and trade program authorized by AB 32 legally continue past 2020?  The California Air Resources Board (ARB) has its own answer to the question, the subject of this earlier post.  The courts will no doubt end up as the final arbiter.  Whether post-2020 GHG emissions reductions are met through a cap and trade program or other screws and hammers in ARB’s toolbox, the 2030 target is now written into law, rather than just Executive Order B-30-15.

The vital component of the compromise to pass SB 32 was companion bill AB 197.  AB 197 establishes legislative oversight of ARB’s actions to implement AB 32 and SB 32, by creating a Joint Legislative Committee on Climate Change Policies and adding two ex officio nonvoting members to the Board.  AB 197 also puts a new twist on ARB’s broad authority to adopt rules and regulations to achieve emissions reductions.  AB 32 requires ARB to achieve maximum technologically feasible and cost-effective emissions reductions from sources or categories of sources.  AB 197 further requires ARB to prioritize direct emissions reductions, including from large stationary sources and mobile sources, when adopting rules and regulations to achieve reductions.

In addition to headliner SB 32, the Legislature passed one additional bill with direct emissions reduction mandates, SB 1383.

Continue Reading

SDG&E Seeks Projects for Community Renewables Program

Via my colleague Xiaowan Mao:

On August 31, 2016, SDG&E will issue one ECR Request for Offers (“RFO”), seeking contracts with facilities that produce Renewable Portfolio Standard (RPS)-eligible energy for the purpose of implementing its ECR program. In this solicitation, SDG&E is seeking PPAs for the ECR program only. This solicitation is not requesting bids for feed-in-tariff projects (e.g. Re-MAT, Bio-MAT), GT projects, BioRAM or other RPS procurement activities that currently exist or are being contemplated.

Approved on September 28, 2013, Senate Bill (SB) 43[1] created the Green Tariff Shared Renewables (“GTSR”) program, which consists of a Green Tariff (“GT”) option and an Enhanced Community Renewables (“ECR”) component.[2]  San Diego Gas & Electric Company (“SDG&E”) plays an active role in implementing the GTSR program to: (1) make clean, renewable energy available to bundled utility customers, whether or not they own a home and/or can afford a significant capital investment; (2) increase the overall volume of renewable energy in the area of San Diego and (3) increase options for institutional, commercial and residential customers to meet their renewable energy goals. [3] Continue Reading

NARUC Accepting Comments on Draft Distributed Energy Resources Manual that Seeks to Guide Regulators Through Tricky Territory

The National Association of Regulatory Utility Commissioners (NARUC) recently issued a draft manual on distributed energy resources (DER) compensation to assist jurisdictions in navigating the challenges and policy considerations associated with this hot button issue. The release of the manual marks the first time NARUC has specifically weighed in on DER compensation issues.

DERs are generally smaller-scale electric generation facilities that are located close to customers and can be used to provide a portion or all of their immediate electricity needs, and can also be used by the distribution grid to reduce demand or increase supply. Examples of DERs include solar, wind, thermal, and storage technologies, among others.  Given their contrast to the traditional utility scale bulk electric generation model, state regulators across the country are struggling to determine how to appropriately compensate DERs.  The manual discusses the myriad questions associated with DER compensation, including the cost of integrating DERs with the grid, monetizing the benefits DER resources provide, and determining ownership of the resources.

Seeking to provide flexible advice to jurisdictions implementing DER compensation methodologies, the manual focuses on factors jurisdictions should consider in developing DER rates. It presents key questions for regulators to consider, including “What costs should be paid by DER and what should be recovered from base rates?” and “Does DER avoid utility infrastructure costs?” The manual also discusses the “divisive” issues of cost-shifting between users and non-users of DERs.

Compensation methodologies addressed by the manual include net energy metering (NEM); valuation methodologies, which include value of resource, value of service, and transactive energy; demand charges, fixed charges and minimum bills, standby and backup charges, and interconnection fees and metering charges. NARUC emphasizes that technological advances, such as advanced metering infrastructure, smart transformers, Advanced Distribution Metering Systems, and others can support the grid and integration of DERs, as well as accompanying DER compensation methodologies.

Stakeholders can submit comments on the draft manual by emailing responses@naruc.org, and comments will be accepted through September 2. The final version of the manual is expected in late November. A copy of the draft manual is available here (pdf).

Minnesota Power Requests Proposals for Wind; Solar, Demand Response & Customer Self-Generation to Follow

Minnesota Power released a Request for Proposals (RFP) yesterday for up to 300 MW of wind generation, with proposals due by September 7, 2016. A copy of the RFP and additional details are available at http://www.mnpower.com/Company/PowerSupplyRFP. Minnesota Power also filed its press release with the Minnesota Public Utilities Commission (MPUC).

Minnesota Power will also release several more RFPs over the next few weeks for up to 300 MW of utility-scale solar generation and an unspecified amount of demand response and customer self-generation.

This series of RFPs comes on the heels of the MPUC’s Order issued last week approving and modifying Minnesota Power’s Integrated Resource Plan. The Order requires Minnesota Power to “initiate a competitive-bidding process to procure 100–300 MW of installed wind capacity” by the end of 2017. The Order also requires Minnesota Power to “acquire solar units of 11 MW by 2016, 12 MW by 2020, and 10 MW by 2025” and finds that “up to 100 MW of solar by 2022 is likely an economic resource for Minnesota Power’s system.” Minnesota Power must also “propose a demand-response competitive-bidding process within six months,” and “include a full analysis of all alternatives to natural gas, including renewables, energy efficiency, distributed generation, and demand response, for providing the energy and capacity sufficient to meet the Company’s needs” in its next resource plan. A copy of the Order is available here (pdf).

Minnesota Public Utilities Commission Approves Some Changes to Community Solar Program, Declines Other Changes

The Minnesota Public Utilities Commission (MPUC) approved several major changes to Xcel Energy’s Community Solar Garden (CSG) program yesterday, while also voting to maintain other aspects of the CSG program. Mike Hughlett of the Star Tribune has this report. The MPUC’s decisions are summarized below:

Bill Credit Rate

  • Declined to modify the Applicable Retail Rate at this time or take any action on further bill credit adders.
  • Decided to shift to the Value of Solar for CSGs submitted after next year, with some tweaks to lock in the inflation adjustment, weather normalization and include location specific avoided costs. The Department of Commerce is also tasked with determining whether there should be adders to the rate based on certain locational characteristics of the CSG or type of subscribers.

CSG Development

  • Retained the ban on co-location over 1-megawatt.
  • Eliminated the material upgrade limitation on interconnection.
  • Required Xcel to develop a CSG specifically for low-income customers by March 2017. Other proposals for increasing access for low-income customers are encouraged to file at that time as well.

Timeline for Completion

  • Extended the deadline for developers to complete CSGs by requiring that CSGs achieve Mechanical Completion within 24 months of Xcel finding the application Expedited Ready.
  • Broadened day-for-day extensions to include projects involved in Independent Engineering disputes with Xcel as well as other affected projects lower in the queue.
  • Required Xcel to provide, upon applicant’s request, written confirmation of the then-current Mechanical Completion deadline for an application, accounting for applicable day-to-day extensions.
  • Modified the definition of Force Majeure in the CSG tariff to extend the 24-month deadline by 6 months where there is a local government moratorium that prevents a CSG from obtaining a local permit, but excludes from the extension failure to seek a permit or other permitting delays.
  • Required projects that have been deemed complete but not expedited ready to become expedited ready in 60 days.

The MPUC declined to take action on consumer protection issues, such as how disclosures must be conveyed to subscribers, and will consider those issues at a later date.

 

 

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