rationale for indiana voluntary feed-in tariffs (vfits)

Rationale for IndianaVoluntary Feed-in Tariffs (VFITs)

Presentation on 9/18/13 to theRegulatory Flexibility Committee

by Laura Ann Arnold, PresidentIndiana Distributed Energy Alliance(Presentation available at IndianaDG.net)

Our Mission Statement

To be the voice of the renewable energy (RE) and distributed generation (DG) business, educational and public sectors in Indiana to advocate public policies and to foster economic growth which fosters this business sector, creates jobs, promotes national security, provides stabilized energy resources and improves the quality of the environment.

IndianaDG Members

Renewable energy and distributed generation (RE&DG) developers both located in Indiana doing projects here and elsewhere across the country, as well as developers located outside the state either doing business or wanting to do business in Indiana

Manufacturers of RE systemsSupporting non-profits and

individuals wanting to develop a project

Properly designed VFIT #1

The key element of a feed-in tariff is to set a price that reflects the cost of generating the energy, including a reasonable rate of return that is fair and equitable to both investors and ratepayers. 

A Properly Designed Feed-in Tariff Can Lower the Cost of Capital and Keep Electric Rates Down

Properly designed VFIT #2

Properly designed FIT pricing is generally designed the same way that regulators set electricity rates, by looking at a utility’s costs – including investments in new generation – and setting rates at a level to recover those costs plus a reasonable rate of return to their investors. 

Properly designed VFIT #3

The rate of return is critical, because there is evidence that the necessary rate of return under a feed-in tariff program can be lower than the typical rate of return that utilities require.  This means that renewable energy is cheaper with a feed-in tariff than without a feed-in tariff.

VFIT Golden Rule

Golden Rule: Do onto others as you would have them do unto you.

VFIT Golden Rule: Treat VFITs like electric utilities treat themselves, i.e. VFIT contracts should reflect the cost of generation including a reasonable rate of return that is fair and equitable to both investors and ratepayers.

What’s a good Indiana VFIT?

Collaborative process to establish terms and conditions as well as rates

Broad range of renewable energy and distributed generation technologies

Contract length of 25-30 years for solar PV

Allows third party financingDoes not limit project to customer

usageTransparent selection processReasonable milestones

Advanced Renewable Tariffs

Tariffs based on cost of generationDifferentiation by technology, project

size, application and densityFor example, solar PV tariff could

depend on: Solar PV integrated into building design; Solar PV panels installed on the roof; or Solar PV ground mounted.

FITs not just for IOUs

FIT programs of US municipalities include: Gainsville Regional Utilities (FL) Sacramento Municipal Utility District

(SMUD) Long Island Power Authority (LIPA)  Los Angeles Department of Water and

Power (LADWP) Palo Alto (CA) Municipal Utility

Cogeneration & Alternate Energy Production Rates

Utility 2013 Rates 2013 Capacity

2012 Rates 2012 Capacity

IPL peak $0.0299 $7.42 $0.0282 $7.30

IPL off-peak $0.0257 $0.0246

Duke $0.02851 $7.05 $0.033687 $9.85

I&M TOD peak

$0.0234 $8.56 $0.0274 $8.70

I&M off-peak $0.0223 $0.0241

NIPSCO peak

.03221-.0399

$5.45 .03533-.03990

$5.49

NIPSCO off-peak

.02377-.02847

.02196-.02631

Vectren peak

$0.03882 $4.81 $0.04077 $5.03

Vectren off-peak

$0.03428 $0.03603

170 IAC 4.1. Cogen & Alternate Energy Production Facilities

170 IAC 4-4.1-4 Filing of rate data—annually

170 IAC 4-4.1-5 Obligation to purchase and sell

170 IAC 4-4.1-8 Rates for energy purchase

170 IAC 4-4.1-9 Rates for capacity purchase

History of Indiana VFITsIndianapolis Power and Light (IPL) Rate REP & Northern Indiana Public Service Company (NIPSCO) Experimental Rate 665 Renewable FIT

IPL Rate REP History

Cause No. 43623 Petition filed 12/29/08 Order issued 2/10/10

Cause No. 43960 Petition filed 10/13/10 Motion to temporarily suspend Rate REP

2/7/11 Order issued 11/22/11

IPL Rate REP History con’t

Cause No. 44018 Petition filed 4/11/11 Order issued 03/07/2012 Tariff expired 3/30/2013 All projects with IURC approved

contracts must be commissioned by ???

NIPSCO VFIT 1.0 History

Cause No. 43922 filed 7/16/10Technical conference held 10/04/10Settlement Agreement filed 4/18/11 IURC order issued: 7/11/2011Two stakeholder annual meetings

held in Goshen on 7/18/ 12; and Munster on 8/1/13

NIPSCO VFIT 1.0 expires 12/31/13

NIPSCO VFIT 2.0

NIPSCO filed petition with IURC 9/11/13 in Cause No. 44393 to explore another VFIT Prehearing conference TBA Technical conference TBA

IndianaDG filed petition to intervene 9/15/13

Duke Air Permit Settlement

Duke Energy Indiana (DEI) enters into Settlement Agreement on Edwardsport air permit on 8/28/13 requiring DEI to either: Implement a feed-in tariff for Solar PV

modeled on the current NIPSCO FIT; or Construct/install, and/or execute a long

term contract with one or more independent producers for energy and capacity from wind and/or solar with a combined nameplate capacity of no less than 15 MWs (minimum shall be 5 MW solar).

Possible Duke VFIT

Duke Energy Indiana (DEI) VFIT: Implemented in DEI service territory; Total program cap no fewer than 30 MW; No fewer than 5 MW to be reserved for

small systems (no larger than 10 kW in size); and

Be requested in a filing not later than 6/1/14.

Settlement not to preclude DEI and Petitioners from collaborating on other or additional VFITs.

IPL vs. NIPSCO VFIT Rates

IPL RATE REP

Wind 50-100 KW: $0.14/kWh

Wind 100 kW-1 MW: $0.105

Wind > I MW:$0.075/kWh

Solar 20-100 kW: $0.24/kWh

Solar >100 kW: $0.20/kWh

Biomass 50 kW- 1 MW: $.085

NIPSCO RATE 665

Wind ≤ 100kW: $0.17/kWh

Wind 101kW-2MW: $0.10/kWh

Solar ≤ 10kW: $0.30/kWh

Solar 11kW-2MW: $0.26/kWh

Biomass ≤ 5MW: $0.106/kWh

New Hydro ≤ 1MW: $0.12/kWh

Conclusion, Next Steps?

What steps or actions can be taken to encourage more electric utilities to offer VFITs in Indiana?

What happens at the end of current 15 year VFIT contracts?

To give VFIT customers option to net meter, net metering rule needs to be revised to: Allow net metering > 1 MW; and Allow third party net metering.

References and resources

Provided upon request

Contact information

Laura Ann Arnold, PresidentIndiana Distributed Energy Alliance545 E. Eleventh StreetIndianapolis, IN 46202(317) 635-1701(317) 502-5123 cellLaura.Arnold@IndianaDG.net orLaura.Arnold@thearnoldgroup.biz

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