Advanced Renewable Tariffs Thomas Vlcek – Royal Roads University MBA Power Procurement in British Columbia
Mar 30, 2015
Advanced Renewable Tariffs
Thomas Vlcek – Royal Roads University MBA
Power Procurement in British Columbia
This presentation will cover:
• BC’s Electricity Deficit• Mechanisms of support for renewable electricity• Quota versus Feed-in models• BC tender results• Feed in tariff results
BC’s Electricity Supply Outlook
Source: BC Hydro, “2006 Integrated Electricity Plan,” (Vancouver: BC Hydro, 2006), p.3.
A Looming Power Crunch
Demand for electricity in BC is beginning to outstrip heritage supply
• BC Hydro a net importer since 2001
• Projected shortfall of nearly 20,000 GWh by 2025.
Year GW/h Imported2001 1,7002002 5,2002003 1,7002004 5,1002005 7,400
Source: BC Hydro 2006 IEP.
Imports by Resource Type
Source: BC Hydro Company Web site, accessed February 2006.
BC Energy Plans
2002 Plan’s four main objectives:1. Continued low electricity rates2. Secure and reliable supply3. Private sector investment, jobs4. Environmentally responsible development.
2007 Energy Plan– Self-sufficiency by 2016– Zero net GHG emissions from new electricity
generation
Mechanisms for Supporting Renewables
1.Quota obligation/Tender:
Quantity fixed, market determines price
2.Feed-in Laws:
Fixed Price, market determines quantity
Price Quantity
Feed-in Law Law Market
Quota/Tender Market Law
Tender Process in BC
BC Hydro has issued Calls for Power since the late 1980’s:– 2001-02 Green Call– 2002 Customer-based Generation Call– 2002-03 Green Call– Vancouver Island Call for Tender (VICFT)– 2006 Open Call for Power
CFP Project Status
Result Sum of Capacity (MW) Completion %Overdue 436.02 45.58%Withdrawn 313.6 32.78%Complete 200.1 20.92%Unknown 6.9 0.72%Grand Total 956.62 100.00%
Results of BC Hydro CFP Between 2001 and 2006
CFP Resource Mix
Type Project Count Sum of Capacity (MW) % of Total CapacityHydro 59 1,455.0 64.29%Wind 4 383.7 16.95%Coal/Biomass 2 240.0 10.60%Biomass 2 110.0 4.86%Biomass/other 1 50.0 2.21%Waste Heat 2 11.8 0.52%Landfill Gas 2 6.9 0.30%Solid Waste 1 6.0 0.27%Grand Total 73 2,263.4 100.00%
Share of BC Hydro EPA’s by Resource Since 2001/02
Issues with the Tender Process in BC
Reasons for Attrition:• Licensing and regulation, cost• Financial hurdles, pursuit of lowest price• Transmission expense/economies of scale• Delivery shortfalls/liquidated damages
Other issues:• Exclusion of smaller, community developers• Lack of technological/resource diversity
So What are Advanced Renewable Tariffs?
Basics:
• Fixed minimum price paid to suppliers of renewable electricity
• Long term contracts lasting 20 years• Guaranteed non-discriminatory access to
electricity grid• Cost of tariff borne by all consumers based on
level of use
Dissemination of Alternatives
Obligation or Quota Model– Employed in 38 countries worldwide– Renewable Obligation – RO (UK)– Renewable Portfolio Standard – RPS (USA)– Mandatory Renewable Energy Target (Australia)
Feed in Tariffs– Employed in 41 countries worldwide (2006)– Western/Eastern Europe, Asia– Introduced in Ontario in 2006 (SOC)
Renewable Tariff Design
Key components:
• Simple and transparent• Simplified Interconnection• Prices sufficient to drive development• Contract lengths sufficient for profitability• Prices differentiated by technology• Prices differentiated by resource• Limit on project size but no program cap.
Level of Feed in Tariffs
2005 (Cent/kWh) Degression* (%/a)
Hydropower 6.65-9.67 0
Biomass (<20MW) 8.27-17.33 1.5
Geothermal energy (<20MW) 7.16-15.00 1.0
Wind energy (onshore) 5.39-8.53 2.0
Wind energy (offshore) 6.19-9.10 2.0
Solar energy 43.42-59.53 5.0
ARTs in Europe 2005
Europe has more than 50% of the world’s wind capacity
World Wind Capacity 2005 (MW)
Germany - Feed Law32%
India - Quota3%
Rest of World27%
Denmark - Feed Law
5%
US - Quota16%
Spain - Feed Law17%
Wind Energy in Germany
0,000
5,000
10,000
15,000
20,000
25,000
30,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
[GW
h/a
]
0,000
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
[MW
]
Electricity generation Capacity
ARTs in Europe 2005
World PV Capacity 2005 (MW)
Rest of World21% Germany -
Feed Law44%
Japan22%
US - Quota13%
Germany has developed nearly 40% of world PV capacity
Solar PV in Germany
0
50
100
150
200
250
300
350
400
450
500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
[GW
h/a
]
0
100
200
300
400
500
600
700
800
[MW
]
Capacity Electricity generation
Benefits of ARTs
• Pay only for generation• Increased program flexibility
• Lessens Pressure to Get Prices Right the First Time• Reduced development risk
• Contract equals collateral
• Distributed generation
• Tiered tariffs distribute development, add security
• Reduced pressure on best sites
• Profitability Still Higher at Windy Sites
• Reduced NIMBYism
• By Enabling Greater Participation
• By Reducing Concentrations
Standard Offer Contracts in Ontario
Ontario adopted SOC for projects <10MW in 2006
Anticipated benefits:– Improved efficiency through reduced line losses– Improved reliability and stability of the electricity
system– Increased rural investment– Creation of skilled jobs– Cleaner air– Greater public acceptance of renewable energy
Standard Offer Prices
Technology and Criteria YearsYield
kWh/M2/yr
Specific Price $CAD/kWh
Wind
High Wind (<1,100kWh/m2/yr) 6-20 1,100 $0.069
Medium Wind (<900kWh/m2/yr) 6-20 900 $0.090
Base Wind (<650kWh/m2/yr) 6-20 650 $0.133All 1-5 $0.133Solar PhotovoltaicsCommercial Loans 1-20 $0.830Soft Loans 1-20 $0.670Small Hydro 1-20 $0.133Biomass 1-20 $0.133Source: OSEA
Cost of ARTs in BCBritish Columbia Premium Cost for Wind Generation with Advanced Renewable Tariffs
Assumptions:Tariff Price ($CAD/kWh) $0.133 Reference Price ($CAD/kWh) $0.088 Premium Cost ($CAD/kWh) $0.045 Total BC Consumption (TWh/year) 60Capacity Factor 30%
New Cumulative Premium Premium Cost/Capacity Capacity Generation Penetration Cost Total Consumption
Year MW MW TWh % $ $/kWh2010 250 250 0.7 1% 30,000,000 $0.00050 2011 300 550 1.4 2% 65,000,000 $0.00108 2012 400 950 2.5 4% 112,000,000 $0.00187 2013 450 1400 3.7 6% 166,000,000 $0.00277 2014 500 1900 5.0 8% 225,000,000 $0.00375 2015 600 2500 6.6 11% 296,000,000 $0.00493
894,000,000
Summary: ARTs premium will cost British Columbia ratepayers ~0.49 ¢/kWh in 2015.This works out to about $49 for a typical household consuming 10,000 kWh annually.
*Adapted from work done by Paul Gipe for OSEA.
Conclusion
• Tender model has not delivered in BC
• ARTs are the best mechanism for delivering large amounts of RE, – Quick, affordable and distributed
• BC Hydro/Utilities Commission need to explore alternatives to CFP.
Questions?
Thank-you for your time…