The Promise of Wind PowerThe Promise of Wind Power

Is Aggressive Policy Enough Is Aggressive Policy Enough ??

John SaintcrossJohn Saintcross NYSERDA NYSERDACornell Wind Symposium Cornell Wind Symposium June 2009 June 2009

Outline Overview of New York’s Energy and Overview of New York’s Energy and

Environmental Policies and GoalsEnvironmental Policies and Goals Evolving Federal PoliciesEvolving Federal Policies Policy ValuationPolicy Valuation Lingering ChallengesLingering Challenges

Cohocton Wind FarmCohocton Wind Farm

Mission: identify solutions to State’s energy challenges in Mission: identify solutions to State’s energy challenges in ways that benefit the State’s economy and environmentways that benefit the State’s economy and environment

Broad definition of “energy challenges”Broad definition of “energy challenges” Renewable Portfolio Standard ProgramRenewable Portfolio Standard Program Energy Efficiency ProgramsEnergy Efficiency Programs Emissions Trading Schemes (RGGI)Emissions Trading Schemes (RGGI) R&DR&D

By 2010 our funding will be over By 2010 our funding will be over $350 million per year$350 million per year

New York State Energy Research & Development Authority

Major NY Energy/Environmental InitiativesMajor NY Energy/Environmental Initiatives

Renewable Portfolio Standard – Increase supply of renewable Renewable Portfolio Standard – Increase supply of renewable energy to 25% by 2013. $740 million committedenergy to 25% by 2013. $740 million committed

potential increase to 30% by 2015 potential increase to 30% by 2015

Energy Efficiency Portfolio Standard – Reduce electricity Energy Efficiency Portfolio Standard – Reduce electricity consumption 15% below projected levels in 2015. Approximately consumption 15% below projected levels in 2015. Approximately $175 million per year$175 million per year

Regional Greenhouse Gas Initiative (RGGI) –reduce emissions from Regional Greenhouse Gas Initiative (RGGI) –reduce emissions from affected resources 10% by 2019 Auctioning allowances to raise affected resources 10% by 2019 Auctioning allowances to raise over $ 100 million annually over $ 100 million annually

NYSERDA Research and Development – Approximately $20 million NYSERDA Research and Development – Approximately $20 million per year (basic product development)per year (basic product development)

Renewable Portfolio Standard

Goal: 25% of the power consumed in the state to Goal: 25% of the power consumed in the state to come from renewable sources by 2013come from renewable sources by 2013 From the 2003 baseline of ~ 19.3%From the 2003 baseline of ~ 19.3%

NY RPS was adopted in 2004 as a policy goal to:NY RPS was adopted in 2004 as a policy goal to:Stimulate economic developmentStimulate economic developmentImprove the environmentImprove the environmentPursue energy independencePursue energy independence

Spier Falls HydroSpier Falls Hydro

NY RPS TargetsNY RPS Targets Incremental 2013 requirement satisfied as follows:Incremental 2013 requirement satisfied as follows:

Main Tier (NYSERDA)……………………………( 9.8 GWh )Main Tier (NYSERDA)……………………………( 9.8 GWh ) Customer-Sited Tier (NYSERDA)…………….. ( .2 GWH ) Customer-Sited Tier (NYSERDA)…………….. ( .2 GWH ) Voluntary Green Retailing …………………….( 1.8 GWh ) Voluntary Green Retailing …………………….( 1.8 GWh ) State Agency PurchasesState Agency Purchases…………………………… (3 GWh )…………………………… (3 GWh ) Total……………………………………..(12.1 GWh) Total……………………………………..(12.1 GWh)

Enough New Renewable Electricity to Enough New Renewable Electricity to supply almost 2 million homes!supply almost 2 million homes!

Lyonsdale Biomass PlantLyonsdale Biomass Plant

Public Service Commission is responsible for program policy Public Service Commission is responsible for program policy and regulationsand regulations

NYSERDA acts as central administrator of the NY RPS under a NYSERDA acts as central administrator of the NY RPS under a two-tiered approachtwo-tiered approach Customer Tier, behind the meter applications such as Customer Tier, behind the meter applications such as

solar and small windsolar and small wind Main Tier, large generators that sell power to the Main Tier, large generators that sell power to the

wholesale grid for use by all customerswholesale grid for use by all customers Utilities are not subject to complianceUtilities are not subject to compliance

Unique RPS Design FeaturesUnique RPS Design Features

Browns Falls Hydro Browns Falls Hydro

RPS Main Tier FeaturesRPS Main Tier Features Eligibility: Projects or new fuel use after Jan. 2003, in-state Eligibility: Projects or new fuel use after Jan. 2003, in-state

and out-of-state and out-of-state Wind, biomass and other bio-fuels, hydroelectric upgradesWind, biomass and other bio-fuels, hydroelectric upgrades

NYSERDA purchases renewable energy attributes (aka RECs) NYSERDA purchases renewable energy attributes (aka RECs) onlyonly Energy must be delivered to NYISO under specific Energy must be delivered to NYISO under specific

requirementsrequirements Offer fixed-price REC contracts of up to 10 yearsOffer fixed-price REC contracts of up to 10 years Prices are set competitively via Request for Proposals Prices are set competitively via Request for Proposals

(“RFPs”) (“RFPs”)

Estimated direct investment in New York: $2 billion Total expected economic benefits are estimated to exceed Total expected economic benefits are estimated to exceed

$4 billion*:$4 billion*: short/long-term jobsshort/long-term jobs fuel acquisition/control/rights fuel acquisition/control/rights purchases of local goods/servicespurchases of local goods/services host community payments/taxeshost community payments/taxes

Estimated $ 6 of benefit for every $ 1 spentEstimated $ 6 of benefit for every $ 1 spent

RPS Program Economic Benefits RPS Program Economic Benefits

* Over 20 year project life and include roll-over/multiplier Over 20 year project life and include roll-over/multiplier effects and energy price suppression benefitseffects and energy price suppression benefits

Maple Ridge Wind FarmMaple Ridge Wind Farm

Main Tier ResultsMain Tier Results Total New capacity(at end 2009) - approaching 1,400 MWTotal New capacity(at end 2009) - approaching 1,400 MW Total available MWh annually - more than 3.5 millionTotal available MWh annually - more than 3.5 million Facilities involved Facilities involved 1 1 - 30 projects/28 in New York- 30 projects/28 in New York Resource type Resource type 11 - 15 hydro/4 biomass/11 wind - 15 hydro/4 biomass/11 wind New capacity under contract - 1,164 MWNew capacity under contract - 1,164 MW RECs under contract annually - approx. 2.9 millionRECs under contract annually - approx. 2.9 million

About 1,300 MW of wind installed in New York…over 8,000 About 1,300 MW of wind installed in New York…over 8,000 MW in pipeline …MW in pipeline …

February 2009 milestone….1,000 at time of system peak February 2009 milestone….1,000 at time of system peak

1 includes two maintenance resourcesincludes two maintenance resources

Cumulative RPS Program OutcomesCumulative RPS Program OutcomesWeighted average REC price - $ 17/MWhWeighted average REC price - $ 17/MWh% of 2009 program target achieved - approx. 63 %% of 2009 program target achieved - approx. 63 %% of 2013 program goal achieved - approx. 30 %% of 2013 program goal achieved - approx. 30 %Total funds committed Total funds committed 1 1 -- $ 637 million $ 637 million

11 Excludes administration and feesExcludes administration and fees

Noble Clinton WindparkNoble Clinton Windpark

About $110 million in funding About $110 million in funding available for new resourcesavailable for new resources

Regional Greenhouse Gas Initiative (RGGI)Regional Greenhouse Gas Initiative (RGGI) 10 states 10 states Cap and reduce carbon Cap and reduce carbon

emissionsemissions Focus on power sectorFocus on power sector

25% of NYS’s GHG 25% of NYS’s GHG emissionsemissions

First mandatory market-First mandatory market-based CObased CO22 reduction reduction program in the USprogram in the US

RGGI GoalsRGGI Goals Reduce COReduce CO22 emissions from the power sector (10% by 2018) emissions from the power sector (10% by 2018) Provide consumers with benefitsProvide consumers with benefits

Support a green economySupport a green economy Encourage investments in low- or non-carbon emitting Encourage investments in low- or non-carbon emitting

technologiestechnologies Advancing clean energy technologiesAdvancing clean energy technologies

Provide a template for a national program to reduce greenhouse Provide a template for a national program to reduce greenhouse gasesgases

Steel Winds Wind FarmSteel Winds Wind Farm

RGGI Reduction RequirementsRGGI Reduction Requirements Compliance started in 2009Compliance started in 2009 Stabilize COStabilize CO2 2 emissions at current levels through 2014emissions at current levels through 2014 Cap reduces each year to a total of 10% by 2019Cap reduces each year to a total of 10% by 2019

155,000,000

160,000,000

165,000,000

170,000,000

175,000,000

180,000,000

185,000,000

190,000,000

2009 - 2014 2015 2016 2017 2018

RGGI Annual Cap 2009 - 2018 (tons)

2009 RGGI Allowance Allocations (tons)

Total tons = 188,076,976Total tons = 188,076,976

64,310,805

37,503,983

26,660,204

22,892,730

10,695,036

7,559,78718,454,431

NY

MD

MA

NJ

CT

DE

NH, ME, RI, VT

Allocation of Allowances by StateAllocation of Allowances by State

RGGI Allocation Method: AuctiRGGI Allocation Method: Auction The states prefer auctions rather than free allocationThe states prefer auctions rather than free allocation

92% of the allowances will be auctioned92% of the allowances will be auctioned 8% for strategic set-asides8% for strategic set-asides

Quarterly auctions with open participationQuarterly auctions with open participationPower plant owners, environmental organizations, Power plant owners, environmental organizations, brokers, investment house, etc.brokers, investment house, etc.

Free allocation models have tended to increase electricity Free allocation models have tended to increase electricity rates rates

Auction proceeds will be used by the states for:Auction proceeds will be used by the states for:Renewable energy, energy efficiency, and carbon Renewable energy, energy efficiency, and carbon abatement technologiesabatement technologies

RGGI Futures Prices on theRGGI Futures Prices on theChicago Climate Futures ExchangeChicago Climate Futures Exchange

Allo

wan

ce P

rice

($ p

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Pending Federal Energy and Environmental Pending Federal Energy and Environmental InitiativesInitiatives

American Clean Energy and Security Act 2009American Clean Energy and Security Act 2009

Increase renewable energy content from 6% of retail electric Increase renewable energy content from 6% of retail electric sales in 2012 to 25% in 2025sales in 2012 to 25% in 2025

Establishes cap and trade program -reduce greenhouse gas Establishes cap and trade program -reduce greenhouse gas emissions beginning in 2012 (83% of 2005 emissions by emissions beginning in 2012 (83% of 2005 emissions by 2050). EPA to administer auction of allowances.2050). EPA to administer auction of allowances.

State cap and trade programs are preempted beginning in State cap and trade programs are preempted beginning in 2012. RGGI allowances issued before 2012 can be exchanged 2012. RGGI allowances issued before 2012 can be exchanged for federal allowances. for federal allowances.

What does all this policy action mean?What does all this policy action mean?It depends on one’s perspective…It depends on one’s perspective… If you are concerned with economic development in New York….be If you are concerned with economic development in New York….be prepared for less wind to be installed here under a federal programprepared for less wind to be installed here under a federal program

If you are concerned with ratepayer costs, then a federal program would If you are concerned with ratepayer costs, then a federal program would likely lower the price paid for windlikely lower the price paid for wind

If you are concerned with climate change, you might be indifferent to If you are concerned with climate change, you might be indifferent to location of wind resources…if you are interested more in local environmental location of wind resources…if you are interested more in local environmental benefits, then a federal RPS might not be as desirable. benefits, then a federal RPS might not be as desirable.

If you were counting on RGGI auction proceeds to drive additional If you were counting on RGGI auction proceeds to drive additional investment in wind in New York, you would need to concern yourself on how investment in wind in New York, you would need to concern yourself on how EPA distributes federal cap & trade program revenues and what qualifies for EPA distributes federal cap & trade program revenues and what qualifies for support.support.

It could mean little change near term…It could mean little change near term…

Marginal NY carbon emission rate: approx 1,000 lbs/MWhMarginal NY carbon emission rate: approx 1,000 lbs/MWh Impact on wholesale energy prices(revenues to non-carbon Impact on wholesale energy prices(revenues to non-carbon emitting resources) from carbon cap & trade… emitting resources) from carbon cap & trade…

At allowance cost of:At allowance cost of:4$ /ton________________________ increase of $2.0 /MWh4$ /ton________________________ increase of $2.0 /MWh$10/ton________________________increase of $5.0 /MWh$10/ton________________________increase of $5.0 /MWh$20/ton________________________increase of $ 10.0 /MWh$20/ton________________________increase of $ 10.0 /MWh$40/ton________________________increase of $20.0 /MWh$40/ton________________________increase of $20.0 /MWh

CurrentCurrent RGGI driven revenues do not appear sufficient in RGGI driven revenues do not appear sufficient in near-term to drive investment in “ in-region” renewable near-term to drive investment in “ in-region” renewable energyenergy New York wind investment demands a higher premiumNew York wind investment demands a higher premium

less attractive wind resourcesless attractive wind resources constrained deliverabilityconstrained deliverability aggressive environmental permitting requirements aggressive environmental permitting requirements

In absence of a far more stringent RGGI carbon cap, other In absence of a far more stringent RGGI carbon cap, other policy drivers remain necessary in near term (RPS)policy drivers remain necessary in near term (RPS) Price tag will be higher Price tag will be higher

Carbon Valuation and Wind Cost EffectivenessCarbon Valuation and Wind Cost Effectiveness

Nearly 2 dozen analyses of future carbon reduction Nearly 2 dozen analyses of future carbon reduction programs have been conducted and analyzed. Expected programs have been conducted and analyzed. Expected levelized (2007$)prices range widely… levelized (2007$)prices range widely…

about $ 15/ton low end to $ 45/ton at the high end. about $ 15/ton low end to $ 45/ton at the high end. 11

If marginal carbon emission rates in the US trend higher than If marginal carbon emission rates in the US trend higher than New York, valuation under a federal cap & trade regime is New York, valuation under a federal cap & trade regime is likely higher than under RGGI. likely higher than under RGGI.

Probably a better proposition over long term-depending on Probably a better proposition over long term-depending on how aggressive the cap is…how aggressive the cap is…

1 1 Synapse 2008 CO2 Price Forecasts, July 2008Synapse 2008 CO2 Price Forecasts, July 2008

Carbon Valuation under Federal Program - a Carbon Valuation under Federal Program - a Better Proposition ?Better Proposition ?

Policy Outlook: PromisingPolicy Outlook: PromisingBut is it Sufficient ?But is it Sufficient ?

Increased deployment of wind energy faces further Increased deployment of wind energy faces further challenges…not insurmountable …but real challenges…not insurmountable …but real nonethelessnonetheless.

Technology Technology

InfrastructureInfrastructure

Market Market

Technology Challenge Technology Challenge

Turbine performance must improveTurbine performance must improve capacity factors not stellar…capacity factors not stellar… gear boxes/drive train problemsgear boxes/drive train problems sub-optimal operational/maintenance practicessub-optimal operational/maintenance practices

Hard to convince the public Hard to convince the public that the technology is that the technology is mature when machine mature when machine failures are so noticeable…failures are so noticeable…and warranties seemingly and warranties seemingly short . short .

Infrastructure/Reliability ChallengeInfrastructure/Reliability Challenge

Energy production must be deliverableEnergy production must be deliverable delivery to load centers is hampered by limited delivery to load centers is hampered by limited transmissiontransmission Integration with bulk power system planning Integration with bulk power system planning must become more sophisticated must become more sophisticated Forecasting must become real-time, centralized and Forecasting must become real-time, centralized and coordinated with operationscoordinated with operations Wider-area/regional balancing must be consideredWider-area/regional balancing must be considered Projects will likely be subjected to economic and Projects will likely be subjected to economic and scheduling commitments scheduling commitments

Market Design/Implementation Market Design/Implementation ChallengesChallenges

Markets must evolve to manage wind…Markets must evolve to manage wind…

provide clear signals on desirable project behaviorsprovide clear signals on desirable project behaviors dispatch, scheduling and pricingdispatch, scheduling and pricing

reward good siting (resource expectations)reward good siting (resource expectations) pricing /contracts must penalize poor forecasting and pricing /contracts must penalize poor forecasting and performanceperformance

reward good siting (location on grid) reward good siting (location on grid) zonal cost allocation of transmission improvementszonal cost allocation of transmission improvements

NYSERDA will continue to centrally implement the NYSERDA will continue to centrally implement the RPS program, as long as so asked and allowed, in an RPS program, as long as so asked and allowed, in an agnostic, impartial manner. agnostic, impartial manner.

NYSERDA will however, in its long standing tradition, NYSERDA will however, in its long standing tradition, continue to explore collaboration with others to continue to explore collaboration with others to address gaps in knowledge and other challenges, address gaps in knowledge and other challenges, some mentioned earlier, to see that wind energy some mentioned earlier, to see that wind energy delivers on its promise of clean and affordable delivers on its promise of clean and affordable energy .energy .

Role of NYSERDA Role of NYSERDA

For More InformationFor More InformationContact InformationContact Information::John SaintcrossJohn SaintcrossNew York State Energy Research and Development New York State Energy Research and Development

AuthorityAuthorityEmail: Email: js1@nyserda.orgPhone: 518-862-1090 ext. 3384Phone: 518-862-1090 ext. 3384

Informational WebsitesInformational Websites::www.rggi.orgwww.rggi.orgwww.nyserda.org