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8/3/2019 SAP Utility Conference 2011
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Lessons Learned from Gainesville
Regional UtilitiesBill Shepherd
Energy & Business Services ManagerGainesville Regional Utilities
May 3rd, 2010
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Introduction and Overview
Challenges of current rebate-based
model GRUs FIT
Setting the price
Lessons Learned Summary
Presentation Outline
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The Gainesville Community
City population of 130,000
More than 60 square miles
14th largest in Florida
County population of243,000
930 square miles
Home to the University of
Florida (Gators) Low tax base - rely heavily
on municipal utility (GRU)
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Gainesville Regional Utilities
Municipally-owned Utility(electric, gas, water/wastewater, telecom)
90,000 customers 481 MW Peak
611 MW Capacity
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Carbon Reduction Efforts
Committed to U.S. Mayors Climate ProtectionAgreement
Must achieve 7% of 1990 CO2 levels by 2012(Kyoto Protocol)
Applies to City operations(including electric generation)
Gainesville will meet in 2013 Documented in City Plan
Utility Plays a Key Role
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GRUs Strategies and Options
Energy Efficiency Lowest kilowatt-hour usage per residential customer in
Florida*
Customer incentives/ education
Rebates for efficient gas and electric appliances
Information
Rate designs
Renewable energy based on resource availability Biomass and Solar
Wind, hydro, geothermal, tidal not available
*Among Florida generating utilities
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GRUs Biomass Commitments
3 MW Landfill Gas (Methane)
100 MW Biomass Waste Wood Online in late 2013
Third party ownership and operation
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GRUs Solar Commitments
Solar water heater rebate
Residential solar photovoltaic rebates Net metering
Feed-in Tariff (FIT)
32 MW by 2016
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Why Solar?Its Expensive!
Customer survey of 400 residentialcustomers Would you support or oppose GRUs efforts to
encourage solar energy investments in yourcommunity if it would add one dollar or less permonth to all customers utility bills?
Support: 75 percent
Strong community environmental ethic Continuous advances in cost-effectiveness
Largest single source of energy on planet
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Challenges of CurrentRebate Model
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Rebate Program Challenges:
Customers Perspective Net metering benefits limited to whoever has the
utility account (not necessarily the propertyowner)
Does not create cash flow for financing
System size limited to circuit rating of building
Payments not equal among customer classes
Customers with the greatest square-footage potentialfor PV have the least incentive
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Net Metering Value Varies Among
Rate Classes$/kWh
Rate ClassParameterRes GSN GSD LP
Net Metering Tariff For Excess PV Production .125 .140 .095 .094Taxes Avoided Inside City
City Utility Tax .0062 .0077 .0032 .0031Other Non-Local .0031 .0134 .0093 .0092
Taxes Avoided Outside CityCity Electric Surcharge .0062 .0077 .0032 .0031
County Utility .0068 .0085 .0035 .0038Other Non-Local .0035 .0137 .0094 .0093
Largest RoofsLeast Incentive
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Rebate Program Challenges:
GRU/Gainesville Perspective Incentives pay for capacity with little
guarantee of future performance
Risk to GRU of system performance GRU responsible for policing system
design to ensure adherence to
standards Reduces local tax revenues
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Feed-In TariffAddresses All of These Issues
Predictable, performance-based financialarrangements
Creates opportunity for creative businessmodels that can capture tax benefits forcustomers
Improves financial feasibility of solar PV forall customer classes
No impact to local utility tax revenues
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GRUs FIT
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Implemented first European
style Solar Feed-in Tariff Provides grid interconnection andmust take provision
Involves a separate supply-orientedmeter- its not net metering
Designed to ensure profitability to
owner for investment Different prices offered based on roof
mount versus Greenfield
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Advantages of the FIT
for GRU Reduces Risk to GRU Rebates front load payment and do not
assure continued performance
PV system could be moved (or blown) offroof and never function again
Maintaining system responsibility ofowner
Minimizes solar police function Hedge against future regulation state or
federal RPS/ carbon tax
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Advantages of the FIT for
Gainesville Helps achieve Climate Protection goals
Quicker penetration of solar
Provides jobs and economic growth Local solar contractors have increased
from one in 2006 to six currently
Attracting solar developers from
other states Hope to attract manufacturing
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How does GRUs FIT work?
20 year fixed price by contract
Degression schedule to match future cost
GRU pays producers $.32 per kWh for buildingor pavement mounted systems
$.26 per kWh for green field systems
Price set to assure profitability for investor
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GRUs FIT Program Overview
Residential customers can choose rebate+ net metering or the FIT (not both)
4 MW annual stop loss provision- Equivalent to approximately 0.6% price
increase per year, cumulative
- 1 MW annual cap on Ground Mount
First Come First Served CapacityQueue established
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Interconnection AndPurchase Agreements
Interconnection Agreement- Approved Electrical Design
- Operation Rights
- Liability + Indemnification
Solar Energy Purchase Agreements - SEPA- Price per kWh, Term
- $0.32/kWh, 20years ($0.26/kWh greenfield)- GRU retains REC + Carbon Rights- Assignable + Collateralizable- Completion Requirement (120 days)
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Solar Feed In Tariff ScheduleEffective March 1, 2009
2009 2030 $0.32 $0.26
2010 2031 $0.32 $0.26
2011 2032 $0.30 $0.25
2012 2033 $0.28 $0.23
2013 2034 $0.27 $0.222014 2035 $0.26 $0.21
2015 2036 $0.25 $0.20
2016 2037 $0.23 $0.19
Contract Entered into
Under This Policy
During Calendar Year
Fixed Rate per kWh
Applied Uniformly
From the Date of
Installation ThroughDecember 31,
Fixed Rate $/kWh Over Life of Contract
Free Standing
(Non-Building or Non-Pavement Mounted)
Building or Pavement Mounted
(any size)
orGround Mounted < 25 kW
Years 2011 through 2016 subject to change
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Big Roll Out
Cap of 4 MW a year to manage rate impact
Hit capacity limit two days prior to implementation date ofMarch 1
Limit 1 MW Ground Received 32 MW
Capacity queue filledthrough 2016
Backed by excellent
counter-party - GRUcredit AA rated(Moodys/ Standard & Poors)
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Setting The Price
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Setting the Price
Pricing developed using Tax credits and deductions
Documented cost figures Estimated O&M expenses
20 year rate of return
Cost neutral compared with our rebateand net metering program
Modeled total cost to customersPhoto Credit: Kelly LaDuke for The New York Times
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Setting the Price
Extensive public discussion
After Tax Internal Rate of Return (IRR)
5.0% after taxes set as target profit level
IRR greater if reference price beat
With state rebates and lower PV costs,
profit levels should be higher
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Lessons Learned
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Learned on the fly
Queue management Had to ensure submittals were real Required a non-binding agreement for systems installed
on leased property
7 years of applications received in 4 months One or two developers had most of the queue accountedfor
Developers spent a lot of time fishing for the bestprice
Had to require milestones for project 60 days to contact Engineering 60 days to complete Engineering Equipment purchase 60 after SEPA signed Construction complete 120 days after SEPA signed
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Learned on the fly
Selling of capacity queue not allowed No change of size, location, or owner
Ground mount projects needed extra time to
allow for permitting Financing became difficult for large projects Systems
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Future considerations
Charge application and/or capacityreservations for projects allowed to
build early More stringent with extension requests
Differentiate tariff rates based on
observed system costs
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Summary
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Program Stats
1,855 kW installed 804 FIT
1,050 Net Metered 3 large projects remain for 2009
2 ground mount
1 large developer with multiple systems
2010 projects meeting milestones
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GRUs Objectives
Encourage early private investment and innovationin photovoltaic installations
Assure good performance from installed PV
systems
Make solar PV a good investment for both GRUand our customers
Adds diversity to our fuel mix
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Projected Generation mix late 2013
Fossil Fuels
73.0%
Nuclear
6.0%
Renewables21.0%
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FIT in a Nutshell
Simple to understand, easy to explain
GRU will purchase all the energy
produced by the PV system over the
next 20 years for 32 cents per kWh.
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The End
Thank You For Your Time!Any Questions?