U.S. Renewables Portfolio Standards 2017 Annual Status Report Galen Barbose Lawrence Berkeley National Laboratory July 2017 Download at: rps.lbl.gov This work was funded by the Office of Electricity Delivery and Energy Reliability (Transmission Permitting & Technical Assistance Division) of the U.S. Department of Energy under Contract No. DE-AC02-05CH11231. Acronyms ACP: Alternative compliance payment RPS: Renewables portfolio standard DG: Distributed generation SACP: Solar alternative compliance payment EIA: Energy Information Administration SREC: Solar renewable electricity certificate GW: Gigawatt TWh: Terawatt-hour GWh: Gigawatt-hour IOU: Investor-owned utility LSE: Load-serving entity MSW: Municipal solid waste MW: Megawatt MWh: Megawatt-hour NEPOOL: New England Power Pool PPA: Power purchase agreement PUC: Public utilities commission RE: Renewable electricity REC: Renewable electricity certificate 2 Highlights Evolution of state RPS programs: Significant RPS-related policy revisions since the start of 2016 include increased RPS targets in DC, MD, MI, NY, RI, and OR; requirements for new wind and solar projects and other major reforms to the RPS procurement process in IL; and a new offshore wind carve-out and solar procurement program in MA. Historical impacts on renewables development: Roughly half of all growth in U.S. renewable electricity (RE) generation and capacity since 2000 is associated with state RPS requirements. Nationally, the role of RPS policies has diminished over time, representing 44% of all U.S. RE capacity additions in 2016. However, within particular regions, RPS policies continue to play a central role in supporting RE growth, constituting 70-90% of 2016 RE capacity additions in the West, Mid-Atlantic, and Northeast. Future RPS demand and incremental needs: Meeting RPS demand growth will require roughly a 50% increase in U.S. RE generation by 2030, equating to 55 GW of new RE capacity. To meet future RPS demand, total U.S. RE generation will need to reach 13% of electricity sales by 2030 (compared to 10% today), though other drivers will also continue to influence RE growth. RPS target achievement to-date: States have generally met their interim RPS targets in recent years, with only a few exceptions reflecting unique, state-specific policy designs. REC pricing trends: Prices for RECs used to meet general RPS obligations fell in most markets in 2016, as surplus RPS supplies emerged in many regions. Price trends for solar RECs were more varied, with a particularly pronounced drop in MD. RPS compliance costs and cost caps: RPS compliance costs totaled $3.0 billion in 2015 (the most-recent year for which relatively complete data are available), which equates to 1.6% of average retail electricity bills in RPS states. Though total U.S. RPS compliance costs rose from 2014, future cost growth in most RPS states will be capped by cost containment mechanisms. 3 Table of Contents • Evolution of state RPS programs • Historical impacts on renewables development • Future RPS demand and incremental needs • RPS target achievement to-date • REC pricing trends • RPS compliance costs and cost caps • Outlook 4 What is a Renewables Portfolio Standard? Renewables Portfolio Standard (RPS) Typically A requirement on retail electric suppliers… To supply a minimum percentage or amount of their retail load… With eligible sources of renewable energy Backed with penalties of some form Often Accompanied by a tradable renewable energy certificate (REC) program to facilitate compliance Never Designed the same in any two states This report covers U.S. state RPS policies. It does not cover: – Voluntary renewable electricity goals – Broader clean energy requirements without a renewables-specific component – RPS policies outside of the United States or in U.S. territories 5 RPS Policies Exist in 29 States and DC Apply to 56% of Total U.S. Retail Electricity Sales WA: 15% by 2020 MT: 15% by 2015 MN: 26.5% by 2025 Xcel: 31.5% by 2020 ME: 40% by 2017 NH: 24.8% by 2025 MI: 15% by 2021 OR: 50% by 2040 (large IOUs) 5-25% by 2025 (other utilities) WI: 10% by 2015 VT: 75% by 2032 NY: 50% by 2030 MA: 11.1% by 2009 +1%/yr RI: 38.5% by 2035 PA: 8.5% by 2020 NV: 25% by 2025 IA: 105 MW by 1999 IL: 25% by 2025 CT: 23% by 2020 NJ: 22.5% by 2020 DE: 25% by 2025 OH: 12.5% by 2026 DC: 50% by 2032 CA: 50% by 2030 CO: 30% by 2020 (IOUs) 20% by 2020 (co-ops) 10% by 2020 (munis) AZ: 15% by 2025 MO: 15% by 2021 NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops) TX: 5,880 MW by 2015 HI: 100% by 2045 MD: 25% by 2020 NC: 12.5% by 2021 (IOUs) 10% by 2018 (co-ops and munis) Source: Berkeley Lab (July 2017) Notes: In addition to the RPS policies shown on this map, voluntary renewable energy goals exist in a number of U.S. states, and both mandatory RPS policies and non-binding goals exist among U.S. territories (American Samoa, Guam, Puerto Rico, US Virgin Islands). 6 RPS Policies and Rules Are Not Uniform Major Variations Across States – Targets and timeframes – Entities obligated and exemptions – Eligibility rules related to technology, vintage, location, and deliverability – Use of resource tiers, carve-outs, or multipliers (e.g., see map) – REC definitions, limitations, and tracking systems – Contracting requirements or programs – RPS procurement planning/oversight – Compliance enforcement methods, reporting, and flexibility rules – Existence and design of cost caps, alternative compliance payment rates Solar or Distributed Generation (DG) Carve-Outs and Credit Multipliers Carve-out Carve-out and/or Multiplier Multiplier Source: Berkeley Lab 18 states + D.C. have solar or DG carve-outs, sometimes combined with credit multipliers; 3 other states only have credit multipliers 7 Most RPS Policies Have Been in Place for at Least 10 Years States continue to make regular and significant revisions Year of RPS Enactment IA MN AZ MA ME NV CT PA WI NJ TX NM CO HI MD NY RI CA DC DE MT WA IL NH NC OR MI MO OH KS VT 1983 1991 1994 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 IA Year of Major Revisions Source: Berkeley Lab Current as of July 2017 MN WI AZ MN NV NM CT MN NV NJ NM PA CT CO NV TX AZ CA CT HI NJ WI CA CO CT DE MD ME MN NJ NM PA TX DC DE HI MA MD NJ HI IL ME MN NV OR RI CO DE IL MA MD NJ NY CA CT DC DE IL MA MD NC WI MA MD NJ NH NM NY OH CO CT MD MN MT NM NV IL MA OH OR WI CA CT HI KS VT DC IL MA MI NY OR RI MA MD 8 General Trends in RPS Revisions Increase and extension of RPS targets: More than half of all RPS states have raised their overall RPS targets or carve-outs since initial RPS adoption; many in recent years Creation of resource-specific carve-outs: Solar and DG carve-outs are most common (18 states + D.C.), often added onto an existing RPS Long-term contracting programs: Often aimed at regulated distribution utilities in competitive retail markets; sometimes target solar/DG specifically Refining resource eligibility rules: Particularly for hydro and biomass, e.g., related to project size, eligible feedstock, repowered facilities Loosening geographic preferences or restrictions: Sometimes motivated by concerns about Commerce Clause challenges or to facilitate lower-cost compliance In addition, although many states have introduced bills to repeal, reduce, or freeze their RPS programs, only two (OH, KS) have thus far been enacted 9 RPS Legislation and Other Revisions in 2016 and Early 2017 Most proposals sought to strengthen or make small technical changes RPS-Related Bills Introduced and Enacted in 2016 & 2017 Strengthen Weaken Neutral Total Introduced 85 41 55 181 Enacted 7 0 6 13 Contrasts to previous years with more prevalent efforts to repeal or weaken RPS requirements Data Source: EQ Research (February 28, 2017) Notes: Includes legislation from 2016 sessions and from 2015-2016 sessions active in 2016, as well as legislation issued in early 2017. Companion bills in both chambers are counted as a single bill. Major RPS revisions (legislative and administrative) made in 2016 and early 2017: – – – – – – – – DC: Increased and extended RPS to 50% by 2032 IL: Created requirements for “new” solar and wind, with additional carve-outs; IPA takes over procurement for retail suppliers MA: Created requirements for off-shore wind (1,600 MW by 2027) and new solar procurement program (1,600 MW) MD: Increased and accelerated RPS to 25% by 2020 MI: Increased and extended RPS to 15% by 2021 NY: Increased and extended RPS to 50% by 2030, and expanded coverage statewide OR: Increased and extended RPS to 50% by 2040 for large IOUs RI: Increased and extended RPS to 38.5% by 2035 10 Table of Contents • Evolution of state RPS programs • Historical impacts on renewables development • Future RPS demand and incremental needs • RPS target achievement to-date • REC pricing trends • RPS compliance costs and cost caps • Outlook 11 RPS Policies Have Been One Key Driver for RE Generation Growth RPS requirements constitute ~50% of total U.S. RE growth since 2000 Growth in Non-Hydro Renewable Generation: 2000-2016 300 283 250 TWh 200 146 Actual Growth in Total U.S. Non-Hydro RE Generation Since 2000 150 100 Minimum Growth Required for RPS 50 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 0 Notes: Minimum Growth Required for RPS excludes contributions to RPS compliance from pre-2000 vintage facilities, and from hydro, municipal solid waste, and non-RE technologies. This comparison focuses on non-hydro RE, because RPS rules typically allow only limited forms hydro for compliance. • Total non-hydro RE generation in the U.S. grew by 283 TWh from 2000-2016 – Many factors contributed to that growth (tax credits, other incentives, cost declines, etc.) • RPS policies required 146 TWh increase over that period – Not strict attribution: some of that would have occurred without RPS • Additional RE growth associated with: – Corporate procurement and other voluntary green power markets – Economic utility purchases – Accelerated RPS procurement 12 RPS Role in Driving RE Growth Varies by Region Seemingly most critical in the Northeast, Mid-Atlantic, West Growth in Non-Hydro Renewable Generation: 2000-2016 100 90 Actual Growth in Total Non-Hydro RE Min. Growth Required for RPS 80 TWh 70 Northeast, Mid-Atlantic, West – Actual RE growth closely matches RPS needs – Northeast and Mid-Atlantic rely, to some degree, on RECs from neighboring regions to meet compliance obligations Texas and the Midwest 60 50 – Actual RE growth far outpaced RPS needs, given favorable wind energy capacity factors/economics in those regions 40 30 20 Southeast 10 0 Northeast Mid-Atlantic West Texas Midwest Southeast Notes: Northeast consists of New England states plus New York. Actual growth shown for that region is estimated based on new RE capacity that meets the vintage requirements for RPS eligibility. Mid-Atlantic consists of states that are primarily within PJM (in terms of load served). – Minimal RE growth or RPS demand, with just a single RPS state (North Carolina) 13 RPS’s Have Provided a Stable Source of Demand for RE Growth Though RPS portion of total RE growth has declined over the past couple years Annual Renewable Capacity Additions Nameplate Capacity (GW) 25 100% Non-RPS RE Capacity Additions (left) RPS Capacity Additions (left) RPS Percent of Annual RE Builds (right) 20 90% 80% 70% 15 60% 50% 10 40% 30% 5 20% 10% 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 0% 2000 0 Notes: RPS Capacity Additions consists of RE capacity contracted to entities with active RPS obligations or sold on a merchant basis into regional RPS markets. • Cumulatively, 120 GW of RE capacity added in the U.S. since 2000 – Just over half of that capacity (56%) consist of projects (at least partially) driven by RPS obligations • Over the past decade, an average of 6 GW/year of RE capacity added for RPS demand – Has provided a floor in down years (e.g., 2013) • In the past couple years, the RPS-portion of new RE builds has been lower than previously (44% in 2016 vs. 60-70% in 2008-2014) – Partly due to rebounding wind growth in TX and Midwest, some serving growing demand from corporate procurement – Also the result of net-metered PV in California and some utility-scale PV in non-RPS markets 14 RPS Policies Remain Central to RE Growth in Particular Regions 70-90% of 2016 RE additions in Northeast, Mid-Atlantic, West serve RPS demand Non-RPS RE Capacity Additions (left, GW) RPS Percent of Annual RE Builds (right) Northeast 1.5 RPS Capacity Additions (left, GW) Mid-Atlantic West 8.0 100% 7.0 2.0 6.0 1.0 5.0 4.0 1.0 0.5 50% 3.0 2.0 1.0 Texas 4.0 Midwest 5.0 2015 2010 2005 Southeast 4.0 3.0 0% 2000 2015 2010 2005 0.0 2000 2015 2010 2005 0.0 2000 0.0 100% 2.0 3.0 2.0 50% 2.0 1.0 1.0 1.0 2015 2010 2005 0% 2000 2015 2010 2005 0.0 2000 2015 2010 2005 0.0 2000 0.0 Notes: Northeast consists of New England states plus New York. Actual growth shown for that region is estimated based on new RE capacity that meets the vintage requirements for RPS eligibility. Mid-Atlantic consists of states that are primarily within PJM (in terms of load served). RPS policies have been a larger driver in… • Northeast: Relatively small market, but almost all capacity additions serving RPS demand • Mid-Atlantic: Combo of solar carve-out capacity and wind projects (merchant or corporate procurement, but RPS-certified and likely selling RECs for RPS needs) • West: The bulk of U.S. RPS capacity additions in recent years; split evenly between CA and other states But have been a smaller driver in… • Texas: Achieved its final RPS target in 2008 (7 years ahead of schedule); all growth since is Non-RPS • Midwest: Lots of wind development throughout the region, some contracted to utilities with RPS needs • Southeast: RE growth almost all utility-scale PV; primarily driven by PURPA and utility procurement, but some serving RPS demand in NC and PJM 15 RPS Policies Also Support RE Growth in Non-RPS States More than 10% of RPS additions built in non-RPS states RPS Capacity Additions: 2000-2016 • RPS capacity additions extend to 13 states without an RPS – Most significant: WY, ND, SD, IN, WV * • Several additional states with no further RPS obligations (IA, KS) host significant RPS capacity for others • Illustrative of the role of inter-state commerce for RPS compliance * * * * * * * * * * – Taking advantage of higher resource quality regions to serve neighboring RPS markets • Limitations due to eligibility rules, transmission capacity/costs * * * * * * * none <500 MW 500-1000 MW * 1000-5000 MW * ≥5000 MW * Non-RPS State Source: Berkeley Lab Notes: States denoted “Non-RPS State” if an RPS did not exist at any point over the 2000-2016 period. 16 Wind Was Historically the Dominant Source of New-Build for RPS, But Solar Has Recently Taken the Mantle RPS Capacity Additions by Technology Type Annual RPS Capacity Additions Cumulative RPS Capacity Additions 14 Nameplate Capacity (GW) Geothermal 12 4% 1% Biomass Solar 10 34% Wind 8 6 4 61% 2 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 0 Notes: “RPS Capacity Additions” represent RE capacity contracted to entities subject to an RPS or sold on a merchant basis into regional RPS markets. On an energy (as opposed to capacity) basis, wind represents approximately 75%, solar 16%, biomass 5%, and geothermal 4% of RPS-related renewable energy growth. Wind is 61% of all RPS builds to-date, but solar was 79% of 2016 RPS builds • Growing role of solar for RPS reflects: – Ramping up of solar carveout requirements – Increasing costcompetitiveness of utilityscale solar vis-à-vis wind • Wind capacity growth still strong, but recent additions primarily not for RPS 17 Recent Wind Additions Built Primarily Outside of RPS Requirements, While Solar is More-Concentrated in RPS States In 2016, 21% of all wind additions were dedicated to RPS demand, compared to 59% for solar (46% for general RPS obligations + 13% for carve-outs) Wind Capacity Additions Solar Capacity Additions 14 14 Non-RPS RPS: Solar/DG Carve-Out RPS: General RPS Obligations 41% 0 73% 42% 79% 77% 60% 59% 57% 61% 61% 4 17% 18% 2 35% 31% 26% 21% 43% 57% 61% 37% 46% 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 0 2001 21% 2016 2 13% 6 2015 4 8 Percentages are of total annual U.S. solar capacity additions 2014 6 10 2001 8 Percentages are of total annual U.S. wind capacity additions 2000 10 2013 RPS 12 2012 Nameplate Capacity (GWAC) 12 2000 Nameplate Capacity (GWAC) Non-RPS 18 Table of Contents • Evolution of state RPS programs • Historical impacts on renewables development • Future RPS demand and incremental needs • RPS target achievement to-date • REC pricing trends • RPS compliance costs and cost caps • Outlook 19 States Are Starting to Approach Final Target Years Half of all RPS states reach their final target year by 2021 Year of Final RPS Target Most others will do so in 2020 or 2025 Several states have already reached the terminal year of their RPS IA MT TX WI 1999 2015 ME 2016 2017 CO CT MD MN (Xcel) NJ MI NM MO PA NC WA (IOUs) NC (POUs) 2018 2019 2020 2021 2022 2023 2024 AZ DE IL MN NH NV 2025 Recent revisions in CA, DC, HI, NY, OR, RI, VT extended targets to 2030 and beyond; MA has no final target year OH CA NY DC VT RI OR HI 2026 2030 2032 2035 2040 2045 RPS needs will continue to slowly grow after final targets, due to load growth and RE retirements 20 Projected RPS Demand Total U.S. RPS demand roughly doubles by 2030 Projected RPS Demand (TWh) • Under current policies, total RPS demand grows from roughly 235 TWh in 2016 to 450 TWh in 2030 • To be sure, increased demand does not equate to required increase in supply – Some utilities/regions ahead of schedule, others are behind – Some growth in demand will likely be met with banked RECs 500 450 400 350 California TWh 300 250 Non-CA West 200 Mid-Atlantic 150 State-level RPS demand projections available for download at: rps.lbl.gov Northeast 100 Midwest 2030 2029 2028 2027 2026 Southeast 2025 2022 2021 2020 2019 2018 2017 2016 2023 Texas 0 2024 50 Notes: Projected RPS demand is estimated based on current targets, accounting for exempt load, likely use of credit multipliers, offsets, and other state-specific provisions. Underlying retail electricity sales forecasts are based on regional growth rates from the most-recent EIA Annual Energy Outlook reference case. 21 Required Increase in RPS Generation Supply Equates to roughly 50% increase in U.S. renewable energy generation Required Increase in RPS Generation (TWh) 160 100% - 90% 140 31% 80% 120 California 70% 10% 100 Non-CA West TWh Required increase in RPS supply estimated: 80 60% 50% 25% Mid-Atlantic 60 40% 30% 40 25% Northeast 20 20% 10% 9% 0% 2030 2029 2027 2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 2028 Midwest 0 Percent of Growth through 2030 Notes: For regulated states, incremental RPS needs are estimated on a utility-specific basis, based on each utility’s RPS procurement and REC bank as of year-end 2016. For restructured states, incremental RPS needs are estimated regionally, based on the pool of RPS-certified resources registered in the regional REC tracking system, allocated among states based on eligibility, demand, and other considerations. - Relative to available RPS resources as of year-end 2016 (see notes for further details) Accounting for REC banking over the forecast period, per each state’s rules • 150 TWh increase in RPS resources needed to meet RPS demand growth through 2030 – By comparison, current U.S. RE = ~300 TWh • Relatively steady rate of growth at aggregate national level; some regions are lumpy • Greatest incremental needs in: – California (50% statewide RPS by 2030) – Mid-Atlantic (well distributed among states) – Northeast (mostly NY’s 50%-by-2030 CES) 22 Residual RPS Procurement Needs by 2030 8 states with (effectively) no remaining need; 8 others with needs >10% retail sales • For regional REC markets (New England and PJM), residual needs may be more meaningfully expressed in aggregate regional terms – NEPOOL residual needs = 10% of retail sales by 2030 – PJM residual needs = 7% of retail sales by 2030 • For some states, residual needs continue to rise beyond 2030 with increasing RPS targets and/or depletion of REC banks (Percent of Applicable Retail Sales) 30% 25% 20% 15% 10% 5% 0% IA MT NC TX WI ME CO PA MI CT DE AZ WA MN NJ NH MD OR NM MO OH VT NV CA IL MA HI RI NY DC – DC, NY, RI targets rise by 20-30% of retail sales by 2030 – CA, HI, OR have similar target rise, but much smaller residual procurement needs due to current surplus and (in CA/OR) relatively permissive REC banking rules Residual RPS Procurement Needs by 2030 Percent of Applicable Retail Sales • Residual RPS procurement needs a function of target rise, current surplus, and REC banking rules Notes: For regulated states, residual procurement needs are estimated on a utilityspecific basis, based on each utility’s RPS procurement and REC bank as of yearend 2016, assuming no future sales of surplus RECs and accounting for the accumulation of banked RECs over time, per each state’s rules. For New England and PJM states, aggregate regional procurement needs are allocated among states in proportion to each state’s growth in RPS demand through 2030. For PJM, aggregate procurement needs are calculated separately for the “premium” states with more restrictive eligibility rules (DE, MD, NJ, PA) and for others (DC, IL, OH). 23 Required RE Capacity Builds for RPS Roughly 18 GW needed by 2020, 55 GW by 2030 Required Increase in RPS Capacity (GW) • Equates to a 40% increase in U.S. RE capacity by 2030 – A slowing, but not elimination, of RPS-driven growth (historically ~6 GW/yr associated with RPS needs) • RE already under development will likely meet some portion of remaining RPS needs – Could easily meet all residual needs in Non-CA West and Midwest regions – Some of that capacity may also serve RPS demand in neighboring regions (e.g., California and Mid-Atlantic) Nameplate Capacity (GW) • Requires an average build-rate of 4 GW per year 25 20 2030 RPS Capacity Needs 2020 RPS Capacity Needs RE Under Development 15 10 5 0 California Non-CA West Midwest Mid-Atlantic Northeast Notes: Calculated from estimated incremental generation needed to meet RPS demand, based on state-specific assumptions about the mix and capacity factor of new RPS supply. RE Under Development consists of units permitted or under construction, site preparation, or testing as of June 2017, plus units that entered commercial operation in 2017, based on data from ABB-Ventyx Velocity Suite. 24 Required Capacity Builds for Solar/DG Carve-Outs Concentrated primarily in IL, MA, NJ • Among those with some remaining need, an additional 4 GW required by 2020, 8 GW by 2030 – IL: recently enacted requirement for long-term contracts with “new” solar (25% of which must be DG) – MA: recently developed SMART program; exact trajectory is undetermined – NJ: aggressive targets and 15-year limit on solar project eligibility; need for “replacement capacity” in later years – Various others (AZ, DC, MD, MN, NM, OH, VT) each with 100-400 MW remaining need Required Increase in Solar/DG Carve-Out Capacity (GW) 3.0 2030 RPS Capacity Needs 2020 RPS Capacity Needs Nameplate Capacity (GWAC) • About half of all states have already met their final carve-out targets, have no further needs 2.5 2.0 1.5 1.0 0.5 0.0 AZ CO DC DE IL MA MD MN MO NC NH NJ NM NV NY PA OH OR VT Notes: Calculated from estimated incremental generation needed to meet solar/DG carve-out demand, based on state-specific assumptions about the capacity factor of new solar/DG carve-out supply. For MA, we assume that the aggregate 1600 MW target under the SMART program is met by 2021, consistent with current build rates. 25 Comparison of U.S. RPS Demand and RE Supply EIA-forecasted RE growth projected to well-exceed minimum RPS needs U.S. RPS Demand vs. RE Supply (% of Retail Electricity Sales) 20% AEO2017 w/o CPP Min. Trajectory for RPS Compliance Total U.S. Non-Hydro RE Aggregate State RPS Demand 15% 18% 13% 10% 10% 10% 5% Notes: The figure focuses on non-hydro RE, given the limited eligibility of hydro for state RPS obligations. Accordingly, the Aggregate State RPS Demand excludes historical and projected contributions by hydro as well as by municipal solid waste, demand-side management, and other non-RE technologies. 2030 2025 2020 2015 2010 2005 0% 2000 – Accounts for the fact that not all existing RE supplies are available for future RPS demand • EIA projects much greater RE growth, reaching 18% of retail sales by 2030 – Rapid growth prior to expiration of ITC/PTC 5% 2% • In aggregate, state RPS targets equate to 10% of U.S. retail electricity sales by 2030 • However, to meet those targets, total U.S. RE supply will need to reach 13% of retail sales • RPS policies clearly just one driver for continued RE growth – Other drivers: tax credits, RE cost declines, corporate procurement 26 Table of Contents • Evolution of state RPS programs • Historical impacts on renewables development • Future RPS demand and incremental needs • RPS target achievement to-date • REC pricing trends • RPS compliance costs and cost caps • Outlook 27 States Have Generally Met Their Interim RPS Targets Exceptions typically reflect unique state-specific issues Percentage of RPS Obligations Met with RECs or RE For most-recent compliance year available in each state • Many states/utilities well ahead of schedule, easily meeting interim targets • Others met interim targets only by relying on stockpile of banked RECs from prior years • Relatively few instances where interim targets significantly missed General RPS Obligations 100% 80% 60% 40% 0% CT MA ME NH NY RI DC DE IL MD NJ OH PA IA MI MN MO WI AZ CA CO HI MT NM NV OR WA NC TX 20% Northeast Mid-Atlantic Midwest West – IL (General RPS & Solar): Alternative retail suppliers required to meet 50% of RPS with ACPs Solar/DG Carve-Out 100% – DC (Solar): In-district eligibility requirements limit pool of supply – NH (Solar): Unusually low solar ACPs have led to SRECs flowing into neighboring Class I markets 80% 60% – NY (General RPS): Procurement has lagged targets, partly due to budget constraints 40% PA OH NY NV NM NJ NH NC MO MD MA DE DC CO AZ 0% IL 20% Notes: “General RPS Obligations” refers to the non-carve-out portion of RPS requirements in each state. For New England states, it refers to Class I obligations, and for PJM states it refers to Tier I obligations. 28 Table of Contents • Evolution of state RPS programs • Historical impacts on renewables development • Future RPS demand and incremental needs • RPS target achievement to-date • REC pricing trends • RPS compliance costs and cost caps • Outlook 29 REC Pricing Trends for General RPS Obligations Most markets saw significant decline in 2016 New England Class I $80 CT MA ME NH RI $/MWh $60 • As a result, REC prices can be volatile and are sensitive to sudden changes in eligibility rules • Regional markets in New England and Mid-Atlantic emerge based on common pools of eligible supply $40 $20 $0 2010 2011 2013 2012 2014 2015 2016 2017 Mid-Atlantic/PJM Tier I $40 DC DE IL MD NJ OH PA $/MWh $30 $20 $10 $0 2010 REC prices are a function of ACP rates and current/expected supply-demand balance 2011 2012 2013 2014 2015 2016 2017 Source: Marex Spectron. Plotted values are the average monthly closing price for the current or nearest future compliance year traded in each month. New England: • Growing regional supplies have pushed prices to near a 5-year low (~$20/MWh, compared to $55-65 ACP levels) Mid-Atlantic/PJM: • Bifurcated market based on geographic eligibility rules (more restrictive rules & higher prices in NJ/PA/MD/DE) • Recent wind growth in PJM and adjacent states driving down prices 30 SREC Pricing Trends for RPS Solar Carve-Outs Varying trends by state; Maryland saw the most significant movement in 2016 $800 Solar Renewable Energy Certificates (SRECs) DC NH DE NJ MA (I) OH MA (II) PA SREC pricing is highly state-specific due to de facto in-state requirements in most states and varying ACPs MD $700 $/MWh $600 $500 $400 $300 $200 $100 $0 2010 2011 2012 2013 2014 2015 2016 2017 Sources: Marex Spectron, SRECTrade, Flett Exchange. Depending on the source used, plotted values are either the mid-point of monthly average bid and offer prices or the average monthly closing price, and generally refer to prices for the current or nearest future compliance year traded in each month. • MD: Substantial over-supply emerged with completion of several 10-20 MW projects in 2015-2016 • DC: Acute undersupply due to in-district requirements and limited market footprint • MA: Price movements bounded by clearinghouse floor and SACP • NJ: Generally well-balanced market • DE, PA, OH heavily oversupplied, in part due to eligibility of out-of-state projects • NH: Low solar ACP ($55/MWh) 31 Table of Contents • Evolution of state RPS programs • Historical impacts on renewables development • Future RPS demand and incremental needs • RPS target achievement to-date • REC pricing trends • RPS compliance costs and cost caps • Outlook 32 RPS Compliance Costs Definition, data sources, and limitations RPS Compliance Costs: Net cost to the load-serving entity (LSE), above and beyond what would have been incurred in the absence of RPS Restructured Markets • We estimate RPS compliance costs based on REC plus ACP expenditures • Rely wherever possible on PUC-published data on actual REC costs • Limitations: Growing use of bundled PPAs; ignores merit order effect and some transmission/integration costs Regulated Markets • Estimated by comparing gross RPS procurement costs to a counterfactual (e.g., market prices, long-term avoided costs) • We synthesize available utility and PUC compliance cost estimates • Limitations: Varying methods across states; incomplete or sporadic reporting (no data for several states) Compliance cost reporting is lagged  Data available for many states only through 2015 33 Aggregate U.S. RPS Compliance Costs Totaled roughly $3.0B in 2015, up from $2.4B in 2014 Total RPS Compliance Costs • Cost growth year-over-year associated with increasing targets, dampened by falling REC prices in some markets 4 Solar/DG Carve-Outs General RPS Obligations $Billion 3 1.2 0.8 2 0.5 1 0.3 1.0 1.5 1.7 1.8 0 2012 2013 2014 2015 Notes: General RPS obligations consist of all non-solar/DG carve-out requirements, including both primary and secondary tiers. Costs were extrapolated to several states/utilities without available data, based on other states/utilities in the region. These data should be considered a rough approximation given diverse methods used to estimate compliance costs across states • Solar/DG carve-outs a growing share of aggregate RPS compliance costs • Important note: Total U.S. RPS compliance costs highly sensitive to California – We use PUC estimates, which rely on the all-in cost of a combined-cycle gas turbine as the basis for avoided costs – Alternate IOU avoided cost estimates based on short-term market prices yield RPS compliance costs roughly $2.8B higher in 2015 (increasing total U.S. costs to $5.8B)* * The CPUC has noted several concerns with the IOUs’ approach: namely, that many of the IOUs’ other generation resources, including nuclear and large hydroelectric generation, also would not be cost-effective compared to spot market prices, and that the utilities likely would not be able to procure such a large volume in the spot market. In addition, relying on actual realized spot market prices does not account for the merit order effect. 34 RPS Compliance Costs as a Percentage of Customer Bills Averaged 1.6% of retail electricity bills in 2015 RPS Compliance Costs A proxy for “rate impact”, albeit a rough one: • Costs as a percent of retail bills have risen over time with rising targets, as discussed on previous slide • Wide variability across states, as evident by percentile bands, ranging from 0.4% to 5.2% in 2015 (10th to 90th percentile range)  more detail on next slide Percentage of Average Retail Electricity Bill 6% % of Retail Electricity Bills – Some impacts (merit order effect, integration costs) not fully captured – Compliance costs borne by LSE not always fully or immediately passed through to ratepayers – ACPs may be credited to ratepayers or recycled through incentive programs 5% Weighted Average Across States Median & 10th/90th Percentiles 4% 3% 2% 1% 0% 0.8% 1.0% 1.2% 1.6% 2012 2013 2014 2015 Notes: Annual averages are weighted based on each state’s total revenues from retail electricity sales. Using IOU avoided cost estimates for CA, rather than the CPUC’s estimates, would raise the U.S. weighted average costs substantially (e.g., to 3.1% of retail electricity bills in 2015). 35 State-Specific RPS Compliance Costs Including 2016 data where available RPS Compliance Costs (Percentage of Average Retail Electricity Bill) Regulated States Based on Utility- or PUC-Reported Costs WI WA OR NM NC MO MN MI CO CA (IOUs) RI TX CA (CPUC) Northeast NY NH ME MA CT PA 2016 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% AZ Mid-Atlantic/PJM OH 2015 NJ IL DE MD 2014 2013 DC % of Retail Electricity Bills Restructured States Based on REC+ACP Expenditures 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Cross-state cost variation reflects differences in: • RPS target levels • Resource tiers/mix • REC prices • Wholesale electricity prices • Reliance on pre-existing resources • State-specific cost calculation methods (see notes regarding CA) Notes: RPS compliance cost estimates for restructured states (the left-hand figure) are based, whenever possible, on the average cost of all RECs retired for compliance, including both spot market purchases and long-term contracts. Among regulated states (the right-hand figure), compliance cost data are wholly unavailable for IA, HI, MT, NV; these states are therefore omitted from the chart. The two sets of values for CA reflect alternate avoided-cost estimates (see earlier slide for explanation and discussion). Falling REC prices in 2016 lead to declining RPS costs in a number of restructured states 36 RPS Cost Containment Mechanisms Will cap growth in RPS compliance costs in most states 20% Historical Compliance Cost (Most-Recent Year) Cost Cap (Equivalent Max Rate Impact) 15% 10% ACP-Based Cost Containment WA TX OR OH NC NM MT MO MI IL DE CO VT RI NJ NH ME MD DC 0% MA 5% CT • Highest cost caps (10-20% of electricity bills) occur in states relying only on ACPs for cost containment and with relatively aggressive targets and/or high ACP rates • Cost caps in states with other cost containment mechanisms are generally more restrictive (1-4% of bills)  Have already led to curtailed procurement in NM, and are close to binding in several other states (DE, IL) Recent Costs Compared to Cost Caps % of Retail Electricity Bills RPS policies have various cost containment mechanisms – ACPs (which cap REC prices) – Caps on rate impacts or revenue-requirements – Caps on surcharges for RPS cost recovery – RE contract price caps – Renewable energy fund caps – Financial penalties – Regulatory oversight of procurement Other Cost Containment Mechanisms Notes: Each state’s cost containment mechanism was translated into the equivalent maximum allowed rate impact for the final year in the RPS. For states with an ACP, this corresponds to the scenario in which the entire RPS obligation in the final RPS year is achieved with ACPs or RECs priced at the ACP rate. For MA, the year 2030 is used as the final target year, and the estimated cap does not yet account for the SMART program. Excluded from the chart are states currently without any explicit mechanism to cap incremental RPS costs (AZ, CA, IA, HI, MN, NV, NY, PA, WI), though many of those states have other kinds of mechanisms or regulatory processes to limit RPS costs. 37 Table of Contents • Evolution of state RPS programs • Historical impacts on renewables development • Future RPS demand and incremental needs • RPS target achievement to-date • REC pricing trends • RPS compliance costs and cost caps • Outlook 38 The Future Role & Impact of State RPS Programs Will Depend On…  RPS compliance costs and ACPs/cost caps  Legislative and legal challenges to state RPS programs, including possible federal pre-emption  Whether additional states decide to increase and extend RPS targets as they approach their final target year  Other ongoing refinements (e.g., REC banking rules, long-term contracting programs, eligibility rules, etc.)  The many related issues affecting RE deployment (integration, transmission, siting, net metering, etc.) 39 For Further Information RPS reports, presentations, data files, resources rps.lbl.gov All renewable energy publications emp.lbl.gov/reports/re Follow the Electricity Markets & Policy Group on Twitter @BerkeleyLabEMP Contact information: Galen Barbose, glbarbose@lbl.gov, 510-495-2593 Acknowledgements This analysis was funded by the Office of Electricity Delivery and Energy Reliability (Transmission Permitting & Technical Assistance Division) of the U.S. Department of Energy under Contract No. DE-AC02-05CH11231. We also thank the many state RPS administrators that graciously offered their time and assistance in providing and clarifying information contained in this report. 40