CT legislature passed three major renewable energy bills
this legislative session. As of today SB 1070, HB 6838, and SB 928 have been
passed by both houses and is before the Governor Malloy for approval. He is
very likely to sign all three bills into law as much of it has been put forward
by his administration, especially HB 6838, which has been his signature
initiative. Broadly, all these bills makes significant changes to the renewable
energy policy in the State.
SB 929
authorizes the Department of Energy and Environmental Protection (DEEP) to
create a pilot “shared clean energy” program. Shared renewable energy program
or popularly known as community energy program allows residents to purchase a
share of energy produced by a solar farm, and claim the energy and
environmental benefits associated with this. This program expands the
solar (or other renewables) energy for
people who do not own their own houses to put solar in the roofs, or live in
situations where solar PV is not practice. A developer in the community would
be able to install a large solar array, and could “sell” portion of the
electricity to any residents. Purchased electricity share of the electricity
from the community energy farm would be deducted from the residents electricity
bill. Total amount of such community solar projects are capped at 4MW in
Eversource territory and 2 MW in UIL territory.
This program however will be offered as a pilot program, and
DEEP is required to analyze and offer recommendations as to the viability of
making such community energy projects into a permanent program. This bill
follows a very recent example of successful legislation in Maryland (HB 1087)
to establish pilot community energy projects as well.
Enabling community solar projects or shared renewables is significant
step towards creating energy justice as it allows people to receive benefits
from solar energy previously would not have been able to because of various
reasons. More solar projects will help decentralize CT’s energy sources and
will enable to receive clean and affordable energy from local sources. It is
perhaps a good idea that the program is capped, since the program would have
otherwise have created exponential demand similar to Minnisota. Pilot program
will help to figure out nut and bolts of offering such program, and given how intrinsically
beneficial solar energy is, this program would surely be continued in the
future.
One key attribute about such community solar projects is who
is allowed own them. If it is the utility who owns and provides such service
then this is would not mean change from the current status quo in the monopoly
energy market (which has been popular in Virginia). However, in CT, the law allows
any party to build such solar projects, which is definitely the right way to
go.
SB 1078
shuffles up the responsibilities of the Board of Public Utilities (BPU) (their
version of public service commission) and the Department of Energy and
Environmental Protection (DEEP). This bill shifts the responsibility of
procuring large scale renewable energy, demand response, and natural gas as
provided in the state’s Integrated Resource Planning from the BPU to DEEP. DEEP
can issue multiple solicitations to contract up to 10% of the total load served
by the state’s electric companies. Renewable energy procured under this would
be used for state’s RPS compliance.
I am not sure why exactly why the legislature decided to
shift this responsibly from BPU to DEEP, but this would be a huge change how
the energy would be procured. This model is very similar to New York where, the
state agency- NYSERDA procures all the energy for RPS compliance. Maybe this is
CT slowly transitioning into the NY central procurement model.
Although, the bill specifies that the utilities can use the
renewable energy credits for its RPS compliance for can sell the RECs out side
of state. More of REC sales analyzed in section below.
HB 6838
has been Governor’s Malloy’s signature initiative, and has been very popular in
the media. The bill expands the State’s Residential Solar Investment Program’s
goal to 300 MW of new residential PV by 2022, from its previous goal of 30MW by
2022. This ten fold increase in the goal would be facilitated by creating Solar
Home Renewable Energy Credits (SHRECs)..( this in a state that already has
LRECs, and ZRECs; a new addition to its REC alphabet soup).
CT has an unique RPS in that it does not have a solar carve
out like other states. It has tried to create distinction between solar and
other resources by creating Zero emission RECs (ZRECs) and Low emission RECS
(LRECs) and has imposed utilities to purchase a percentage of each. This bill
requires the utilities to purchase SHRECs at predetermined price, which creates
a market for these SHRECs. This is very creative and impressive in that this
bill effectively creates a pseudo solar carve out, in the state RPS that does
not have a solar carve out.
Any residential homeowever who installs solar through
participating in the Solar Investment Program offered by DEEP would forgo their
rights to the environmental credits to DEEP. DEEP would then sell these SHRECs
to utilities in a long term contract to generate more revenue to provide
incentives to for more home solar.
This self-funding cyclic process is great, and if you give
it a thought, it appears that the all the homeowners would be paying for the
solar (which they should) by a increase in their general electric bill, but if
you read the bill closer, it specifies that the utilities can sell these SRECs
out of state to generate revenue which then must be used to relieve the
ratepayers in CT.
This bring the issue of double counting of these RECs, especially
since there SHREC by law are going to be priced significantly lower than other
markets. Other unique attribute about CT is its fixed Alternative Compliance
Payment (ACP), which is the amount that the utilities would have to pay if they
do not meet the state’s RPS goal. The law has fixed this payment to $55 MWh,
which effectively provides the ceiling price for these RECs, since a utility would
rather pay the ACP then purchase RECs for higher price.
So since these SHRECs can be sold out of state where they
may be priced higher, this would be a significant revenue stream for CT. In a
way they are funding their solar growth, it other’s back- the same way one
could argue Vermont has been doing it. Vermont does not have an RPS, so most of
the SRECs in VT is sold in CT, so one solar panel is being counted toward
meeting Vermont’s own goal, and to meet CT RPS- effectively counting the output
from the same solar panel twice.
CT although has been careful saying that the if the SHREC is
used to comply with the State’s RPS then the must be retired, which is great,
and limits these RECs from being double counted. But for the RECs that the utilities
sell out of state, it is a little complicated.
The trouble is that CT has two goals - RPS Class I
requirement, and 300 MW goal under this program. I assume most of the SHRECs
will be retired for the compliance towards RPS, but there will be a lot that
the utilities will just sell out of state. While this may not be used to comply
with the RPS, it will be counted towards meeting this 300 MW goal- which I
would argue is a kind of double counting.
But CT has been careful against possible legal challenges.
It its last changes to the bill House changed the language in the bill from
being a "goal" to a "cap" which I think that takes care of
the double counting in a legal way. Since one could argue that there is no goal
under the Residential Solar program.
I dont mean to be critical, this bill is going to be great
for home solar deployment, but it is as not tight that I would hope for; but
again with one of the highest electric rates in US, the legislatures probably
wanted to put in a check that the cost dont escalate further.
Anyways, this sums up little of complexity in electric
markets. Electric markets natural tendency is to act like a monopoly, and for
various reasonable arguments we have tried to make turn it into competitive
market. This process was described as a person trying to push a large bag of spaghetti
up hill- if you push on one side of the bag, the other side bulges down. This
is similar to what we observe in electric market, there are just number of
ways, one can shuffle around, and one has to be careful while modeling such
market.
