Category Archives: Market Assessment

Eversource Acquires 50% Interest in Ørsted’s New England Leases and Northeast PPAs

Eversource announced February 8, 2019 that it had acquired a 50% interest in Ørsted’s Massachusetts North and Massachusetts South lease areas and its 700 MW Revolution Wind project and 134 MW South Fork Project.  Both projects are under development and have power purchase agreements (PPAs) with various Northeast electric distribution companies.

The purchase price of about $225 million (≈$540/kW assigning nominal value to the lease area), appears to represent a modest discount relative to what Ørsted recently paid for the Deepwater Wind holdings (≈ $630/kW assigning nominal value to the lease area). This possibly reflects the fact that Eversource didn’t acquire an interest in the operating Block Island Wind Farm, which as an operating largely de-risked asset would command a premium.

The deal provides Eversource with an investment runway to support its earnings growth target, which it needs after Northern Pass was denied by the New Hampshire Site Evaluation Committee and its Bay State Wind partnership with Ørsted failed to secure a contract in the first round of Southern New England OSW procurements.  With a US OSW portfolio that is comparable to Vineyard Wind’s and position as industry leader given the size of its worldwide OSW portfolio, Ørsted is a compelling partner.

The Eversource agreement provides Ørsted with cash and allows it reduce its exposure in the US Northeast.  Given the capital requirements for these projects, long development lead times, and limited permitting track record in the US, partnering for OSW development is a prudent strategy.   Furthermore, as the largest wires company in New England, Eversource represents an attractive partner as interconnection issues are likely to become more challenging for the second phase of Southern New England OSW projects.

IESO Energy Storage Advisory Group Recommendation Report Summary and Commentary

Date: January 21, 2019
For parties interested in: Energy Storage and innovation in Ontario

CONTEXT
• Independent Electricity System Operator (IESO) released “Removing Obstacles for Storage Sources in Ontario” report1 on December 19, 2018 based on consultation with its Energy Storage Advisory Group (ESAG).
• The report focuses on identified obstacles and mitigating strategies to help ensure fair
competition of energy storage resources in the Ontario electricity market.
• IESO makes a series of recommendations to support the mitigating strategies in the report; recommendations are for the IESO as well as the Ontario Energy Board (OEB) and the Ministry of Energy, Northern Development and Mines (MENDE).

BACKGROUND
As outlined in their Long-Term Energy Plan (LTEP) Implementation Plan, the IESO established the ESAG to “Identify potential obstacles to fair competition for energy storage with other technologies in the delivery of services and, where appropriate, propose mitigation strategies” 2. The ESAG3 was launched in April 2018 to advise, support and assist the IESO in evolving policy, rules, processes and tools to better enable the integration of storage resources within the current structure of the IESO-administered markets (IAM). The objectives of the ESAG are to:

• Support the IESO’s work to identify obstacles to fair competition for energy storage
resources;
• Provide input to the IESO’s work plan and/or list of priorities to address storage related issues and opportunities; and
• Advise, consult and coordinate discussions on issues which may affect storage participation in the existing IAM.

Energy Storage Advisory Group
The ESAG met monthly to identify potential barriers to energy storage, develop criteria and principles for assessment of the barriers, and finally develop mitigating strategies to the barriers. The ESAG and IESO identified thirty-five (35) obstacles to energy storage’s fair competition in the Ontario electricity market. The identified obstacles were sorted by the IESO based on those that were in scope (and would have a mitigation strategy developed) and those obstacles that were out of scope for the LTEP implementation plan objective.

Criteria for Identified Obstacles and Principles for Mitigating Strategies

The IESO applied criteria to each identified obstacle to determine if a barrier was in scope to develop a mitigating strategy. The main criteria question was:
• “Is storage prevented from, or burdened in, competing with other technologies in the
delivery of services that they are otherwise capable of providing?”
A “yes” to this criterion implies that the issue under consideration is an obstacle and warrants mitigation. If the answer to the main criteria was not clear, the IESO applied two additional test questions:

1) Are Ontario’s electricity market rules, codes and regulations able to accommodate the evolution and competition of new technologies such as storage resources? and
2) Is the treatment of storage resources, with respect to regulatory and market charges
consistent with the intent of those charges?

A “No” to either of these testing questions implies that the issue is an obstacle and warrants mitigation. Of the 35 obstacles identified by the ESAG, 15 were determined by the IESO to be in scope and appropriate to develop mitigating strategies for. A summary of the obstacles identified can be in a table at the end of this client note.
Mitigating strategies were developed under the guidance of the Market Renewal Program (MRP) Guiding Principles. The MRP is a comprehensive enhancement to Ontario’s wholesale electricity market design, addressing known issues with the market design. The principles of MRP are:

• Efficiency – lower out-of-market payments and focus on delivering efficient outcomes
to reduce system costs
• Competition – provide open, fair, non-discriminatory competitive opportunities for
participants to help meet evolving system needs
• Implementability – work together with our stakeholders to evolve the market in a
feasible and practical manner
• Certainty – establish stable, enduring market-based mechanisms that send clear,
efficient price signals

Find the full report in PDF format here.

Power Advisory Offers ISO-NE FCM Expertise

Ready to participate in the ISO-NE Forward Capacity Market? Or, need to understand the FCM as part of your development strategy, solicitation response preparation, or acquisition? Power Advisory can help you navigate the regions’ capacity market. With changes such as CASPR and the forward nature of the market, now is the time to understand the FCM.

download report

Three New Wind Energy Leases Offshore Massachusetts: Review of BOEM Auction Results and Competitive Implications

Over the last two days BOEM auctioned three leases offshore Massachusetts to Vineyard Wind, Mayflower Wind, and Equinor Wind. Vineyard Wind is a joint venture of Avangrid Renewables and Copenhagen Infrastructure Partners, with an existing Massachusetts lease and a contract for an 800 MW project with the Massachusetts electric distribution companies (EDCs). Mayflower Wind Energy LLC is an affiliate of Royal Dutch Shell Plc. and EDP Renewables; it is the first position in the US OSW market for both companies.[1] Equinor is a Norwegian energy developer that holds the rights to the only existing BOEM lease offshore New York. This sale attracted historic attention from 19 qualified parties and 11 bidders. At the end of 32 rounds the total acquisition fee was $405.1 million ($135.1 million Vineyard Wind and $135 million for the other two winning parties).

Competitive Implications of ATLW-4A

Overall this should be a positive development for the competitiveness of the New England and broader Northeast OSW market. It introduces two new competitors to the region and strengthens Vineyard Wind’s position as an incumbent developer. Equinor represents a new competitor to the Southern New England OSW market. Equinor wouldn’t have been able to compete effectively in the Southern New England OSW market from its New York lease given the distance of this lease from New England and the associated incremental cost of transmission and the marginally worse wind resource in its New York WEA. While the primary opportunity will be for long-term contracts with the Southern New England EDCs, the projects from these lease areas should be able to compete in future New York procurements (which has a target of 2,400 MW by 2030) and possibly New Jersey (3,500 MW by 2030).

The interest of Equinor and Shell indicates the similarities of offshore wind and oil/gas development, both require significant engineering capability and careful management of project logistics, with significant capital requirements over an extended period of time before production begins.

The pricing relative to previous lease sales is a strong indication of market interest and the promise offered by the Northeastern OSW market. Adding two new competitors to the Southern New England market will enhance the competitiveness of solicitations. However, with one element of the evaluation criteria in the various OSW RFPs the project’s underlying maturity it may take a while for consumers to see the benefits of this increased competition.

Comparison to Atlantic Wind Lease Sales

Prior to ATLW-4A there have been 7 lease sales for 11 areas from North Carolina to Massachusetts. The average acquisition fee was $6.7 million. One of the first Massachusetts lease areas was acquired by OffshoreMW LLC (now Vineyard Wind) for as little as $150,197. The next highest sale after today’s results is the New York lease sale of OCS-A 0512 to Equinor in 2016 for a total acquisition fee of $42.5 million from 33 rounds of bidding by 6 total participants. Even in comparison to the New York sale the result of ATLW-4A is more than seven times greater.

Power Advisory_ATLW4A BOEM MA Lease Sale_2018-12-14

[1] Shell did qualify for the North Carolina lease sale (ATLW-7) in 2017 but did participate in the auction.

Review of Atlantic Offshore Wind Procurement Policy and Developments

Over the last year major commitments have been made with respect to the US offshore wind (OSW) market. From only 30 MW operating, approximately 2,000 MW has been contracted and a cumulative +10 GW of installed capacity is now expected by the early 2030s. The growing interest in OSW has been concentrated in the Atlantic, particularly the Northeast which has the strongest state policies for OSW. An indicative schedule of this development by state is presented in the figure below.[1] Power Advisory then provides a high-level review of the procurement processes in New England, New York, and New Jersey as the primary markets, representing about 80% of this total.

New England

As part of the 2016 Act to Promote Energy Diversity, Massachusetts established a procurement target of 1,600 MW of offshore wind by 2030. The first solicitation for OSW proposals, referred to as the 2017 Section 83C RFP, resulted in the selection of 800 MW from Vineyard Wind in May 2018. The contracts for this project are currently before the Massachusetts Department of Public Utilities with a real levelized price for energy and RECs of $64.97 per MWh (2017$).[1]  On July 31st, An Act to Advance Clean Energy was passed, instructing a cost benefit analysis to be completed for an additional 1,600 MW of offshore wind by 2035 and specified that the Department of Energy Resources “may require said additional solicitation and procurements.” Governor Baker, who was recently reelected, signed a pledge to complete this study during the campaign. Given the compelling economics of the long-term contracts secured through the first Massachusetts OSW solicitation we believe that this effectively doubles the Commonwealth’s OSW goal to 3.2 GW by 2035 without the need for additional legislative authority.

In May, Rhode Island selected 400 MW from Deepwater Wind’s Revolution Wind Project.[2] Deepwater Wind has entered into contract negotiations with National Grid. An executed contract for energy and RECs is expected to be filed with the Rhode Island Public Utilities Commission by the end the year.

Connecticut also selected 200 MW from Deepwater Wind’s Revolution Wind Project. The wind farm will be part of the same project selected by Rhode Island, but will deliver electricity directly to the state via a separate export cable. On September 14th, Connecticut closed an RFP for 12 TWh of zero-carbon energy which is said to have received offshore wind proposals. The evaluation phase will be completed in Q4 2018/Q1 2019. Additional opportunities for OSW contracts from Connecticut are uncertain.

The southern New England states have each approached OSW with long-term contracts for bundled energy and RECs, consistent with contracting practice for other clean energy resources in the region. The retention of capacity value by developers provides an incentive for suppliers to maximize that value through efficient operating practices.  The PPA requires the seller to participate in the Forward Capacity Market so that this value can be considered by ISO-NE and ultimately realized by customers.

Evaluation of OSW proposals in New England has focused on economic benefits. For example, the evaluation procedure used in the 2017 Section 83C RFP was based on a 75/25 split between economic benefits and qualitative considerations. Direct economic benefits were assessed based on comparing the proposal price and any required transmission upgrade costs with its direct economic benefits as measured on the basis of the net present value of energy (by LMP) and the value of Class I RECs. Four indirect proposal benefits of wholesale energy price savings, RPS compliance cost savings, incremental greenhouse gas reduction compliance savings, and economic impact of resource winter firmness were also considered. Qualitative considerations included: (1) siting, permitting, and project schedule risks; (2) reliability benefits; (3) other benefits, costs and project risks; (4) environmental impacts from siting; and (5) economic development benefits to the state.

New York

Governor Cuomo established a goal of 2,400 MW of OSW by 2030 in 2017. Offshore wind is a key component of the state’s Clean Energy Standard (CES) of 50% clean energy by 2030. The Long Island Power Authority (LIPA) 2015 South Fork RFP that was open to all resources resulted in the selection of Deepwater’s 97 MW South Fork Wind Farm. This project is expected to come online in 2022 and counts towards the state’s 2.4 GW goal.

NYSERDA released a final RFP to solicit 800 MW or more of offshore wind today (November 8, 2018). Bids are due February 14, 2019. The remainder of the 2,400 MW goal (Phase II) will be procured at a later date. New York has also begun securing stakeholder input on the appropriate transmission development framework for Phase II.

NYSERDA is employing a scoring system that considers price and non-price factors, with each project scored according to a 100-point scale based on three criteria:

  1. Project Viability: 10 points – Non-Price Evaluation
  2. New York Economic Benefits: 20 points – Non-Price Evaluation
  3. Offer Strike Prices: 70 points – Price Evaluation

Project viability is assessed in terms of whether the proposed project can reasonably be expected to be in service on or before the proposed Commercial Operation Date. To maximize the score received, proposers must demonstrate that project development plans are mature, and technically and logistically feasible, that they have sufficient experience, expertise, and financial resources to execute the development plans in a commercially reasonable and timely manner. New York Economic Benefits are measured in terms of three considerations: (1) project-specific spending and job creation in New York State; (2) investment in offshore wind-related supply chain and infrastructure development in New York State; and (3) activities that provide opportunities for the New York offshore wind supply chain, workforce, and research and development.

Offer strike prices are assessed in terms of a: (1) an Index OREC price and; (2) a Fixed OREC price. The Index OREC price will vary monthly based on the value of Index OREC Strike Price specified minus the monthly Reference Energy Price and the monthly Reference Capacity Price. The Fixed OREC price is based on the fixed price specified by the proposer. In essence, the Index OREC price is a contract for difference that considers relevant energy and capacity prices, thereby providing a market price hedge that should support more attractive financing terms than the Fixed OREC.[3]  The Index OREC price will be given a weight of 0.9 and the fixed OREC price a weight of 0.1 to establish the weighted strike price for each proposal.  Either OREC strike price option can be chosen at NYSERDA’s discretion. NYSERDA’s decision will be based upon its projection of the relative costs of the Fixed ORECs and Index ORECs compared to the relative price risks of the Fixed ORECs and Index ORECs over the life of the contract.

If the Fixed OREC price option is chosen, the OREC price will remain for the entirety of the contact length, 20 to 25 years. If the Index OREC is chosen, the OREC will remain for the entirety of the contract unless the Index OREC price is invalidated.

New Jersey

The Offshore Wind Economic Development Act authorized the New Jersey Board of Public Utilities (BPU) to establish an OREC program in 2010. After almost eight years of stalled implementation and development under the previous administration, newly sworn in Governor Murphy signed Executive Order #8 (EO8) on January 31st, 2018. E08 directed all New Jersey agencies with responsibilities under the OWEDA to fully implement it in order to meet a goal of obtaining 3,500 MW from OSW by 2030.

On September 20, 2018 New Jersey opened its first “application” for 1,100 MW of OSW. This will be the nation’s largest OSW solicitation to date. The application window will close on December 28, 2018, with the BPU required to act on the proposals by July 1st, 2019. The goal of the compressed procurement timeline is to maximize the ability of developers to capture the expiring federal ITC and increase the attendant economic benefits that can be realized by the state from the development of the regional industry. Governor Murphy has also directed a target of 2020 and 2022 for two additional BPU solicitations of 1,200 MW to reach the overall goal of 3,500 MW. Identifying these second and third large, near-term procurements is also intended to induce the OSW supply chain to locate in New Jersey.

Separately, EDF Renewables and Fisherman’s Energy have submitted an OREC application to the BPU for approval of the 24 MW Nautilus OSW farm with a planned COD in 2020.

The OREC structure in New Jersey differs from the typical Renewable Portfolio Standard (RPS) programs (ex. RECs, SRECs), which provide an additional source of revenue beyond energy and capacity. The BPU’s OREC Funding Mechanism is largely based on the procurement of a bundled energy, environmental attribute and capacity product. The use of an OREC ultimately adds complexity with respect to the administration of the ORECs and risk to OSW developers (e.g., variances between actual and forecast OSW output) and in Power Advisory’s opinion could be more simply administered with stronger performance incentives with a PPA that procured energy and environmental attributes. However, this is the framework that was legislatively directed and is expected to be used for all three upcoming procurements.

Rather that issue a formal request for proposals the New Jersey BPU issued Guidelines for applications for the sale of ORECs.[4] These guidelines identify the requirements for applications and outline the six criteria that the BPU will use to rank proposals.  These six criteria are:

(1)   OREC Purchase Price, which can be fixed or escalating;

(2)   Economic impacts, which includes, the number of jobs created, increases in wages, taxes receipts and state gross product for each MW of capacity constructed;

(3)   Ratepayer impacts, which considers the average increase in residential and commercial customer bills along with the timing of any rate impacts;

(4)   Environmental impacts, which includes the net reductions of pollutants for each MWh generated and the feasibility and strength of the applicant’s plan to minimize environmental impacts created by project construction and operation;

(5)   The strength of guarantees for economic impacts, which considers all measures proposed to assure that claimed benefits will materialize as well as plans for maximizing revenue from the sales of energy, capacity and ancillary services; and

(6)    Likelihood of successful commercial operation, which includes feasibility of project timelines, permitting plans, equipment and labor supply plans and the current progress displayed in achieving these plans.

There’s very little transparency regarding the evaluation process and how tradeoffs regarding these six criteria will be assessed.  The Guidelines indicate that “ranking and weighting of the six criteria by the BPU will reflect the goals of the solicitation especially as stated in the Governor’s Executive Order No. 8.” Based on our experience we believe that this lack of detail regarding how these criteria as well as tradeoffs among these criteria will be assessed, may hamper the ability of proponents to craft proposals that best satisfy New Jersey’s objectives.

Power Advisory would welcome the opportunity to assist clients in understanding the opportunities presented by the emerging US offshore wind industry.

 

A PDF of this update is available here.

[1] Note the schedule represents anticipated commercial operation date versus when the capacity is expected to be solicited. For Massachusetts, Vineyard Wind was originally proposed as two 400 MW phases coming into service in late 2021 and 2022, but in its Supplemental Draft Environmental Impact Report Vineyard Wind announced that it would construct the full 800 MW simultaneously and commission the project in mid-2022.

[1] This price escalates at 2.5% per annum and the project owner retains revenues from ISO-NE’s Forward Capacity market.

[2] On October 8th Ørsted announced that it was acquiring Deepwater Wind and its portfolio of 5 PPAs representing 810 MW for $510 million.

[3] An assumption must be made regarding the UCAP Production Factor so that the project nameplate capacity can be converted to UCAP.  NYSERDA allows a proponent to use a default UCAP Production Factor of 38% consistent with the NYISO’s Installed Capacity Manual or to specify a project-specific value. These values will be constant throughout the contract term. The ability to specify an alternative UCAP Production Factor presents an opportunity for proponents to change the risk/reward profile and as such warrants analysis.

[4] Guidelines for Application Submission for Proposed Offshore Wind Facilities

 

Competitive Implications of Ørsted’s Acquisition of Deepwater Wind

Yesterday, Ørsted A/S (Ørsted) announced that it agreed to acquire Deepwater Wind (Deepwater) from D.E. Shaw & Co. LP for $510 million. With this acquisition Ørsted, who was unsuccessful in the various New England competitive procurement processes, will get access to Deepwater’s 5 PPAs and 810 MW contracted project development portfolio. The transaction is subject to review by US competition authorities, the US Department of Justice (DOJ) and the Federal Trade Commission (FTC). Given the nascent state of the US OSW industry the acquisition of one of the US industry leaders by the world’s largest OSW project developer may raise some competitive concerns, particularly when the lease holdings of the combined company are considered in several relevant geographic markets.

Specifically, Ørsted will have ownership interests in two of the three existing BOEM leases in the Rhode Island/Massachusetts Wind Energy Areas (WEAs) through its Bay State Wind partnership with Eversource Energy and its acquisition of Deepwater. In addition, Ørsted will have development rights to two of the three existing leases off the coast of New Jersey as result of its Ocean Wind project and with the acquisition of Deepwater’s 50% interest in the Garden State Offshore Energy project, a joint venture with Public Service Electric & Gas that holds the rights to a BOEM lease off the coast of Delaware and New Jersey. (See Figure 1 below.)
A critical issue with respect to the assessment of the competitive implications of mergers is defining the market, which considers the relevant products and geographic definition of the market. The geographic definition of the market considers the ability of competitors to compete effectively with the merged entity recognizing that there is a cost to accessing a more distant market (e.g., for OSW the cost of undersea transmission cables or transmission service).

The Rhode Island/Massachusetts WEAs offer more attractive wind regimes than the New York (NY) or New Jersey (NJ) WEAs, suggesting that it may be difficult for leaseholders in NY or NU WEAs (e.g., Equinor) to compete effectively with the RI/MA leaseholders. The competitiveness of the New England OSW market will be enhanced when BOEM issues the two additional MA leases that are scheduled for auction in early 2019. However, the ability of these new leaseholders to compete in the forthcoming Massachusetts 83C OSW RFP may be constrained by the relative immaturity of the corresponding projects and the fact that Massachusetts OSW RFPs typically considered the development status of projects in the evaluation and project scoring.

Figure 1: Ørsted US Offshore Wind Portfolio

A PDF version of this memo is available here.

Potential Asset Sale: Canadian Utilities Limited’s Generation Portfolio

On September 13, Canadian Utilities Limited (CU), a subsidiary of ATCO, announced that it would be exploring strategic alternatives for its Canadian electricity generation business. Canadian Utilities Limited is engaged in electricity (generation, distribution, and transmission), pipelines and liquids (natural gas transmission, distribution and infrastructure development), energy storage and industrial water solutions, and retail energy (electricity and natural gas retail sales). The company has 5,200 employees and assets of $21 billion.

CU owns and operates 2,391 MW across six Canadian jurisdictions, with the majority located in Alberta. The geographic composition of these generation assets and their fuel type are indicated in the pie charts below.  An overview of the individual generation assets is provided in the table below.

Power Advisory would welcome the opportunity to assist clients in understanding the opportunities presented by Canadian Utilities Limited’s announcement and other potential generation acquisitions across North America. 

A PDF version of this note is available here

John Dalton, President, Carson Robers Consultant, Robie Webster Jr., Researcher, Power Advisory

Review of Massachusetts Compromise Bill ‘An Act to Promote a Clean Energy Future’

On July 30, 2018, the conference committee appointed to reconcile the Senate and House clean energy bills finalized a compromise bill, H.4857. The bill’s contents more closely align with the House of Representatives bills passed last week (H. 4756 and H. 4739) than the omnibus Senate bill (S. 2545) (see Power Advisory’s report on the differences between the initially proposed bills). The House and Senate voted in favor of the bill on July 31, the last day of the legislative session.

Renewable Portfolio Standard

The compromise bill will increase the state’s Class I Renewable Portfolio Standard (RPS) at the rate proposed by H.4756. Between 2020 and the end of 2029, the rate would increase to 2% per year. After 2030, it would return to the current growth rate of 1%. The rate will ensure that the state procures 35% of Class I renewables (new resources) by 2030.

Offshore Wind

The bill directs the Department of Energy Resources (DOER) to conduct a cost benefit analysis for the procurement of an additional 1,600 MW of offshore wind by the end of 2035 and “may require said additional solicitations and procurements.”  This suggests that DOER doesn’t require additional legislative authority to mandate the distribution companies to solicit and procure this additional 1,600 MW of offshore wind.  The DOER can also require distribution companies to hold competitive procurements for offshore wind transmission to deliver energy from designated wind energy areas as long as it can serve more than one project. The transmission service cannot exceed 3,200 MW of total capacity. The procurement of offshore wind transmission must be the most cost-effective means to deliver offshore wind.

Interestingly, in the filing letter that it submitted to the Massachusetts Department of Public Utilities (DPU), DOER expressed strong support for the 800 MW Vineyard Wind Project and asserted that the “Project is highly cost-effective [and] significantly aligns with the Commonwealth’s goals of creating a clean, affordable, and resilient energy future for the Commonwealth.”  This clearly suggests that DOER has a favorable view of offshore increasing the likelihood of DOER mandating the procurement of an additional 1,600 MW of offshore wind.

Clean Peak Standard

The bill also provides for the creation of a Clean Peak Standard (CPS) for all retail electricity suppliers, which was detailed in H. 4756. The CPS will be in place starting January 1, 2019 and will require each retail electric supplier to meet a baseline percentage of sales with clean peak certificates. The clean peak certificate would be a credit received for each MWh of energy or energy reserves provided during a seasonal peak period. After 2019, every retail electricity supplier must provide a minimum of at least an additional 0.25% per year of sales met with clean peak certificates.  The legislation defines seasonal peak periods as the times when net electricity demand is the highest. The periods must be more than one hour but less than four hours in any season. A clean peak resource according could be any qualified RPS resource, an energy storage system, or a demand response resource that delivers energy to the distribution system during seasonal peak periods or can reduce load on the system. The DOER will need to establish the procurement mechanism of the certificates, the percentage of kilowatt-hour sales from clean peak resources, the seasonal peak periods, and an alternative compliance mechanism.

Energy Storage

Massachusetts’ current energy storage target is 200 MWh by 2020. The compromise bill increases this target to 1,000 MWh by December 31, 2025. Neither the House nor Senate bills included this specific target. Similar to H. 4739, the comprise bill will require electric distribution companies (EDCs) to file an annual distribution system resilience report that would highlight areas of the distribution system where non-wires alternatives could serve as system resiliency measures. EDCs can hold competitive solicitations for such non-wires alternatives. The legislation provided guidance on which monetary and non-monetary factors to be considered in a solicitation, which include: 1) resiliency improvements, 2) reduce greenhouse gas emissions, 3) reducing peak demand, 4) reducing congestion in constrained areas, and 5) benefits to low-income areas.

Power Advisory would welcome the opportunity to assist clients in understanding the opportunities created by these changes to the Commonwealth of Massachusetts’ clean energy policies.

A PDF version of the report is available here.

Review of Massachusetts House of Representatives Energy Bills Relative to the Senate’s ‘An Act to Promote a Clean Energy Future’

The Massachusetts House of Representatives passed two major energy bills on July 12, 2018. The bills address a subset of the legislation that was approved by the Massachusetts Senate omnibus clean energy bill (S. 2545) in June. The House bills are now in conference committee with the Senate and are expected to be reconciled ahead of the close of the legislative session on July 31.

Renewable Portfolio Standard

H.4756 would increase the state’s Renewable Portfolio Standard (RPS) to promote an accelerated procurement of renewable energy. Currently, the minimum percentage of Class I renewable energy that Massachusetts’ retail electricity suppliers must provide customers increases 1% per year through 2050. In the legislation, this rate would increase to 2% each year starting in 2021 through 2030. After 2030, it would return to the current growth rate of 1%. The increased rate would raise the RPS from the current target of 25% by 2030 to 35% by 2030. This goal is less aggressive than the Senate’s bill, which called for a 3% annual increase and an ultimate target of 100% renewable energy in the state by 2047.

Offshore Wind

H.4756 would also increase the state’s offshore wind procurement target to 3,200 MW by 2035, doubling the current procurement target of 1,600 MW by 2030. While this target is a significant increase to current levels, it is far less than the goal of 5,000 MW of OSW capacity by 2035 put forward by the Senate in S. 2545. With either target, Massachusetts is signaling that it is interested in making further commitments to the emerging US OSW industry. An increased procurement target will provide additional opportunities for the three existing wind energy lease holders and increase the value of the two remaining MA lease areas being auctioned by BOEM through ATLW-4A this fall.

Clean Peak Standard

H.4756 also includes a provision for the establishment of a Clean Peak Standard (CPS) for all retail electricity suppliers. Such a standard would ensure that Renewable Portfolio Standard (RPS) and greenhouse gas emissions reductions are met by having clean energy generation in peak load hours instead of fossil fuels. According to the bill text, the CPS could be similar to the state’s existing RPS, but the methodology would be established at a later date. If similar to the RPS, each retail electricity supplier would need to meet a certain percentage of their total sales with clean peak certificates, similar to renewable energy certificates (RECs) under the RPS. The clean peak certificate would be a credit received for each MWh of energy or energy reserves provided during a seasonal peak period. The legislation defines seasonal peak periods as the times when net electricity demand is the highest. The periods must be more than one hour but less than four hours in any season. A clean peak resource according to the legislation could be any resource that qualifies under the RPS, an energy storage system, or a demand response resource that delivers energy to the distribution system during seasonal peak periods.

Also, similar to the procurement of RECs, regulations could include a process through which clean peak certificates are competitively procured and electric distribution companies would enter into long-term contracts ultimately approved by the Department of Public Utilities. Seasonal peak periods would need to be established as well as an alternative compliance mechanism.

By the end of this year, the Department of Energy Resources (DOER) will determine the current kilowatt-hour sales from existing clean peak resources during seasonal peak load hours. This will be used to establish a baseline percentage of sales that must be met with clean peak certificates beginning on January 1, 2019. After 2019, every retail electricity supplier must provide a minimum of at least an additional 0.25% of sales that must be met with clean peak certificates. The procurement of clean peak certificates will not apply to municipal light plants.

The House’s bill is a response to Governor Baker’s legislation entitled “An Act Promoting Climate Change Adaptation, Environmental and Natural Resource Protection, and Investment in Recreational Assets and Opportunity.” This legislation called for a Clean Peak Standard. The Senate bill did not include language pertaining to a Clean Peak Standard.

Energy Storage

Massachusetts’ current energy storage target is 200 MWh by 2020. The Senate bill aimed to increase this target to 2,000 MW by 2025. While not increasing the energy storage procurement target, H. 4739 addresses the need for additional integration of storage into the transmission and distribution grids.

The bill would require electric distribution companies (EDC) to file an annual distribution system resilience report which will include maps that show the most congested areas of the distribution system as well as areas most vulnerable to power outages. These maps could serve as a basis for identifying areas that would require system upgrades that could be deferred or replaced by non-wires alternatives. Each EDC could then hold a competitive solicitation for now-wires alternatives (such as energy storage) from third-party developers that would serve a resiliency need of the grid. The Senate bill did not mention non-wires alternatives or a resilience report.

Greenhouse Gas Emissions

One topic that was not addressed in the House bills was greenhouse gas emission reductions. The Senate bill established additional interim GHG reductions goals of 35-45% below 1990 levels by 2030 and 55-65% below 1990 levels by 2040, beyond the existing goal of a 25% reduction by 2020. These new interim goals could help the Commonwealth stay on track to meet its economy-wide mandate for an 80% reduction in GHG emissions below 1990 levels by 2050 established in the Global Warming Solutions Act of 2008. Furthermore, S. 2545 directs that a market-based system to reduce emissions from the transportation sector be implemented by 2021, for the commercial and industrial building sectors by 2022, and for the residential building sector by 2023.

Power Advisory would welcome the opportunity to assist clients in understanding the opportunities created by potential changes to the Commonwealth of Massachusetts’ clean energy policies.

A PDF version of the report is available here.

Review of NYSERDA Renewable Energy Standard RFP 1 Results

On June 2, 2017 the New York State Energy Research and Development Authority (NYSERDA) issued the 2017 Renewable Energy Standard Request for Proposals (RESRFP17-1). The RFP was the first issued under the state’s Clean Energy Standard. The Clean Energy Standard requires that 50% of the state’s electricity come from renewable sources by 2030, representing about a doubling of the state’s renewable energy requirements. The standard puts an obligation on retail electricity suppliers to purchase increasing amounts of renewable energy to supply their customers. To assists these retailers in meeting their obligations, NYSERDA is required to support the development of large-scale renewable projects by issuing periodic requests for proposals (RFPs) to enter into long-term contracts (i.e., up to 20 years) with renewable energy developers. These RFPs provide for the purchase of renewable energy credits (RECs), rather than bundled energy and RECs.

The 2017 Renewable Energy Request for Proposals resulted in agreements to develop 26 new large-scale renewable projects. Of the 26 projects selected, 22 are solar, 3 are wind, and one is a hydroelectric project. In addition, one of the selected wind farms will include an energy storage component. The 26 projects will add 1,383 MW of capacity and generate 3.2 TWh per year, providing about 2% of the 50% 2030 target. The weighted average price for the Tier 1 RECs purchased was reported as $21.71. A map of the selected projects is included below: