HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 07/12/2011 - MEETING THE COLORADO RENEWABLE ENERGY STANDARDDATE: July 12, 2011
STAFF: Steve Catanach
Pre-taped staff presentation: available
at fcgov.com/clerk/agendas.php
WORK SESSION ITEM
FORT COLLINS CITY COUNCIL
SUBJECT FOR DISCUSSION
Meeting the Colorado Renewable Energy Standard.
EXECUTIVE SUMMARY
Currently, the State of Colorado Renewable Energy Standard requires that 3% of the energy sold
by the City of Fort Collins is generated from renewable resources. The state requirement is
currently being met by a portfolio of resources purchased on behalf of the City by Platte River
Power Authority. In 2015, the requirement increases to 6% and by 2020 the requirement is 10%.
In order to meet the 2015 requirement, construction of additional renewable resources will be
necessary. Staff is examining two different opportunities for local development of renewable energy
projects.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
The State allows multipliers to be used for projects constructed prior to July 2015 to meet the
Renewable Energy Standard (RES).
• Regional solar projects can multiply the renewable energy credits (RECs) produced by 3x
towards the RES
• Local community projects can us a 1.5x multiplier
• Colorado-based projects can use a 1.25x multiplier
• Projects connecting directly to a municipal system can use a 2x multiplier
Note: The use of the multipliers is currently being challenged through the
Colorado courts.
1. Should the City apply the multipliers to control the cost of meeting the RES?
2. During the upcoming budget process, should Utilities return with the associated 1/2% rate
increase for 2012 and an additional 1/2% in 2013 in support of the Fort Collins Solar
Program?
BACKGROUND / DISCUSSION
The 2009 Energy Policy Goal #2, states the community’s carbon emissions goal is to reduce the
City’s carbon footprint by 20% below 2005 levels by 2020 and 80% by 2050. The following excerpt
is from the Energy Policy.
July 12, 2011 Page 2
“Fort Collins Utilities is committed to first maximizing the benefits of efficiency and
conservation, moving toward clean and renewable energy sources, and adapting to
the opportunities brought by innovation and emerging technologies in the electric
utility industry.
For renewable energy resource investments, balance the interrelated factors of
carbon reduction cost-effectiveness, impact on power plant operations and local
economic benefits.
N Maintain a minimum fraction of renewable energy in compliance with State
of Colorado requirements. In coordination with Platte River Power
Authority, develop generation resources and the delivery of renewable
energy to meet minimum requirements.
N Offer voluntary renewable energy programs, whereby customers can support
renewable energy and local renewable energy projects through opt-in
premium pricing.
N Increase the contribution of renewable energy to reach the 20% by 2020
carbon reduction goal, after accounting for the contributions of resource mix,
energy efficiency, conservation, minimum renewable energy requirements
and voluntary renewable energy programs.
N Include renewable energy sources that can be scheduled to maintain system
stability and reliability.”
A renewable energy credit (REC) represents the environmental and renewable attributes of
renewable electricity. A REC can be sold either "bundled" with the underlying energy or
“unbundled”, as a separate commodity from the energy itself, into a separate REC trading market.
City Council has communicated to staff its desire for more local renewable energy projects and that
the City should not obtain any additional unbundled RECs to meet the state requirements. Platte
River Power Authority purchases both bundled and unbundled RECs on behalf of the City.
Additionally, Council has communicated that the existing unbundled RECs in the portfolio held by
Platte River should not be renewed and, if possible, should be removed from the portfolio.
In the recent Integrated Resource Plan (IRP) prepared by Platte River, the need for additional
renewable resources in 2015 was identified to meet the increase in the state requirement. Knowing
that development of any generation project can take several years, it is prudent to start to look for
local opportunities.
During the 2011 – 2012 Budgeting for Outcomes process, Utilities submitted an offer for the
establishment of a Solar Incentive Program to promote broader installation of solar panels
throughout the commercial community. The offer was declined during the process, but Utilities staff
was asked to bring the program back for reconsideration this year.
Feed-in-tariffs have been very successful in creating an environment where large volumes of solar
panels are being installed rapidly. Utilities worked with Craig Lewis from RightCycle Consulting
to examine how a program structured like a feed-in-tariff might work locally. A feed-in-tariff is
fundamentally a contract between the utility and a solar plant owner for the purchase of the energy
generated at a set price for 20 years. The price is typically set to provide a positive rate of return
showing a dedicated revenue stream for the owner. However, they are not the least cost
methodology to support solar installations for the utility. The RightCycle report recommended
July 12, 2011 Page 3
setting the price of energy purchases between $0.18 to $0.24 / kWh. Utilities recently received bids
from a third party developer for the installation of a 100 kW solar plant at the Water Treatment
Facility. The prices submitted in the bids indicate that the initial prices recommended by
RightCycle need to be adjusted. Staff will continue to develop the program and refine prices, should
Council wish to move forward.
The adoption of the Fort Collins Solar Program, a feed-in-tariff program, is to help meet the
Colorado Renewable Energy Standard (RES). The cost of meeting the Colorado RES will be
significant no matter which path is taken. The proposed program would be a two-year pilot, focused
only on commercial facilities to determine how best to structure the program.
In addition, a local developer has presented a biomass project to the City. The project is in the early
stages of development and is showing multiple opportunities. The biomass plant will utilize spent
grain from local small breweries. The spent grain will be dried and the grain converted into biogas.
The biogas will be used to run an engine that will turn a generator to produce electricity. The
electricity produced is recognized as a renewable resource for meeting the Colorado RES. Other
benefits the project will provide include making the waste heat from the engine available to the
brewery to help boil water for the brewing process. The Wastewater Treatment Utility anticipates
future regulatory requirements related to treatment of nitrogen and phosphorus. The wastewater
from the drying of the grain shows promise as an organic treatment for nitrogen and phosphorus.
A table-top experiment of the process has shown very positive results. This summer, staff is moving
forward with a plant scale test. Additionally, the waste product from the biogas process is charcoal,
which potentially could be used at Rawhide.
Four scenarios have been developed to help meet the RES goals. The first scenario looks at the use
of unbundled RECs. While Council has clearly communicated its desire not to pursue unbundled
RECs, it is still prudent to recognize the lowest-cost alternative, although the benefits are
questionable. The second is the business as usual case. Platte River will continue to contract for
the delivery of bundled RECs on behalf of the Cities. It is anticipated that utility scale wind projects
will continue to be the primary source. The biomass plant is included with the business as usual
case, since it is cost competitive with utility scale wind energy. The third scenario was developed
with the goal of creating a model that would spur the development of local projects through the Fort
Collins Solar Program along with the biomass plant, and minimize the need for additional utility
scale wind at a cost that is approximately the same as the business as usual case. In order to achieve
the goal above, it is necessary to use the multipliers the State of Colorado provides in the Renewable
Energy Standard. The state allows a utility to use one of a set of multipliers to the environmental
component or the unbundled REC component of a project, for projects constructed prior to July
2015. The multipliers are detailed below:
• Regional solar projects can multiply the RECs produced by 3x towards the RES
• Local community projects can us a 1.5x multiplier
• Colorado based projects can use a 1.25x multiplier
• Projects connecting directly to a municipal system can use a 2x multiplier
The American Tradition Institute (ATI) has filed a lawsuit against the State of Colorado in the
federal district court, challenging the constitutionality of the Colorado Renewable Energy Standard.
The ATI is challenging the use of the multipliers within the state, which adds risk to how effective
the Fort Collins Solar Program future may be. The fourth scenario looks at the cost of meeting the
July 12, 2011 Page 4
RES without using the multipliers recognized by the state, but still implementing the Fort Collins
Solar Program, the biomass plant and some utility scale wind.
ATTACHMENTS
1. RightCycle Report
2. Powerpoint presentation
23 January 2011
Fort
Collins
CLEAN
Recommendations
for
a
2-‐Year
Solar
Incentive
Pilot
Program
ATTACHMENT 1
1
Proposed Local Solar Generation Program
Fort Collins, CO
______________________________________________________________________________
Introduction
The City of Fort Collins and the Fort Collins Utilities engaged RightCycle to
help develop a cost effective two-year pilot Clean Local Energy Accessible
Now (CLEAN) program supported by revenues from a proposed 1% increase
in Utilities electric rate charges and avoided compliance costs. The
recommendations and associated analysis results for such a program are
provided in this report.
Summary of Pilot Program Recommendations
1. General Approach: The Utility
purchases1 wholesale renewable energy,
“bundled” with all environmental attributes2
according to a predefined contract with
fixed price for a 20-year period.
2. Eligible Technology: New Rooftop3 Solar Photovoltaic
3. Program Size: 5 - 14 MW (over two years)
4. Project size limits: 25kW to 1MW
5. Pricing: 19¢ - 23¢/kWh based on project size
6. Participant Eligibility: Fort Collins Utilities customers only
1 Purchase will occur through PRPA
2 “Environmental Attributes” include Renewable Energy Credits (RECs), and Green
House Gas (GHG) or any other emission reduction or resource conservation credit
or valuation associated with the electricity generated,
3 For purposes of this program, “rooftop” could also mean any standard built-
environment, including sides of buildings, carports, paved parking lots, etc.
2
7. Locational Eligibility: Fort Collins Utilities service area only
8. Project Eligibility:
a. Site control
b. Basic engineering plans and estimated output
c. Application fee
d. Reservation deposit
e. Project milestones
9. Contract Allocation and Queuing Procedures:
a. First come, first served queue for allocation of current and future
allotments of program capacity
b. Non-transferable
c. 1MW limit per applicant per year
d. Program capacity to be released annually or semi annually
e. Applications accepted after the current allotment is filled will be granted
a queue position. Such applications will not be processed until allocation
is available.
f. Applications not receiving allocated capacity under the contract offer in
effect at time of submission may qualify for a full refund if withdrawn from
the queue before the application is processed.
10. Project Milestone Timeline
a. 45 days to submit proof of all applications required to permit project
b. 90 days to submit detailed engineering drawings & order equipment
c. 9 months to complete installation and begin delivering power
11. Application Fees and Deposits
a. Application & connection study fee: $1,000 plus $10/kW
(50% refunded if the Utility finds connection is not cost effective)
b. Reservation deposit: $100/kW
12. Contract Cancelation
a. Fort Collins Utilities retains rights to energy production and has the
obligation to purchase at the fixed contract price for the entire 20 year
contract term once the project is online and the reservation deposit has
been refunded.
b. Contract obligations are not affected by a transfer of facility ownership.
3
Background
Fort Collins Utilities (the Utility) is tasked with providing reliable, low cost
electricity while meeting the City of Fort Collins’ sustainability goals and
Energy Plan, and Colorado State requirements. The City Council has also
directed the Utility to reduce and ultimately eliminate the practice of
purchasing unbundled Renewable Energy Credits (RECs) used to meet
requirements instead of directly acquiring RECs through the purchase of
renewable energy. Where practical, the Utility also seeks to support local
economic growth both through the purchase of locally generated energy
and through the promotion of opportunities to advance the City’s
reputation for effective innovation.
The City of Fort Collins retained RightCycle in September 2010 to assess key
considerations for structuring and implementing a pilot CLEAN program for
the City under the working title ‘Fort Collins Solar Program’ (FCSP). In the
design process RightCycle engaged a broad range of stakeholders
including staff from the City of Fort Collins, the Utility, the Platt River Power
Authority, local solar industry representatives, and other interested
stakeholders. RightCycle’s analysis included comprehensive modeling of
project costs and economic viability in relation to regional solar resource
availability, technological, and market data, and full assessment of the
avoided costs that would otherwise be paid under current practices.
RightCycle conducted an extensive review of best practices from
comparable programs in relation to the City’s specific goals, resources and
constraints to identify key program design factors and appropriate
solutions. Collaborative testing of preliminary analytical findings was then
undertaken with likely FCSP participants, including PV system developers
and property owners, following which a second workshop was organized to
present preliminary findings, seek additional stakeholder input and align
around preferred FCSP design options. This collaborative process lead to
the recommendations contained in this document. Based on its
investigations, RightCycle is confident that Fort Collins can deploy
significant volumes of cost effective clean local energy in a timely fashion
while delivering substantial economic benefits.
4
Program Goals:
The specific goal is to establish a two-year pilot program to demonstrate
that Fort Collins can achieve significant volumes of clean local energy that
is both cost effective and timely.
A successful program will meet the following general goals:
o Maintain economically attractive electric rates
o Accelerate fulfillment of renewable energy objectives
• City of Fort Collins Energy, Sustainability, & GHG targets
• State of Colorado Renewable Energy Standard compliance
o Maximize the generation of cost effective clean local energy
o Develop a robust and comprehensive local clean energy industry to
serve regional solar development
o Support the local general economy
o Realize economies of scale
o Achieve national recognition for innovation
o Keep it simple to assure 100% success
Program Constraints
The pilot program is being designed to stay within an operational budget
equal to no more than 1% of the Utility’s gross electric revenues. This will
serve to limit the impact on ratepayers, resulting in an average household
monthly utility bill increase of 33¢ in 2011, and an additional 31¢ in 2012. As
discussed in the detailed recommendations below, it should be noted that
this program qualifies for a 300% State REC valuation multiplier that will allow
replacement of additional unbundled RECs that the City would otherwise
purchase separately. Separate funding related to the further retirement of
unbundled RECs will be required, but this retirement may be achieved
through application of those funds to expansion of the local solar program
proposal.
Due to contract limitations under the City’s power purchase agreements
with the Platt River Power Authority (PRPA), the City may not purchase
electricity directly from non-PRPA generation sources, with the exception of
net-metered generators. As such, the CLEAN pilot project requires the
5
cooperation and support of PRPA4. To gain this support the CLEAN pilot
project has been formulated in a manner that provides protections for both
the other municipal members of PRPA and the bondholders. As with the
City’s current wind energy purchases, the City and PRPA have agreed to a
buy-sell agreement allowing PRPA to purchase all energy generated from
this program, and pass this purchase through to the City.
As a pilot program, it is also essential that the program successfully
demonstrate practices that can form the foundation of future policies for
meeting the City’s long-term goals. To maximize the likelihood of success,
the pilot program recommendations have been designed to minimize
complexity and avoid implementation delays by focusing on proven, low-
risk approaches. For this reason, achieving 100% success is both a program
goal and a program constraint.
Methods
For purposes of determining the price to be paid for local solar generation
under the program, recent solar irradiation data models of the monthly
weather patterns and sun angles specific to the Fort Collins location were
employed (TMY3 from NREL), and the costs of capturing the solar resource
were evaluated.
Cost evaluation began with modeling individual systems with the
appropriate components for each type and size category to establish
predicted efficiency and energy output profiles over time.
Initial cost estimates were then developed with US market data on
component prices, installed costs relative to size, and cost trends, including
aggregated reporting from both public solar incentive programs and
developer survey research reported by NREL. These figures were then
reviewed against detailed estimates and cost breakdowns shared by
individual developers, suppliers, installers, and their customers to identify
specific cost components that may vary by location.
Additional location-specific data was collected on applicable State and
Federal incentives, and all taxes, fees, and requirements impacting both
installation and operation within the designated jurisdiction.
4 PRPA has expressed support conditional upon generation being located within
the Utility’s service area, and that no single non-PRPA generation source have a
rated output capacity greater than 1MW.
6
Once these values were determined:
o Financial modeling was performed against the energy output and
costs over a 20-year analysis period to determine the necessary rate
to be paid (¢/kWh) to achieve defined internal rates of return.
o Sensitivity analysis on these results was performed to establish
confidence levels and preempt any unplanned liabilities.
The costs and benefits of the proposed generation and pricing were then
evaluated against Fort Collins’ current renewable energy procurement
practices to determine the avoided costs (what the Utility would have
otherwise be spent) and what if any premium (above the avoided costs)
would need to be paid through a rate increase by the Utility. The cost of
any price premium was used in turn to establish the achievable program
size at a given budget.
As shown in the following table, the primary avoided cost factors5 found for
Fort Collins were:
o The direct value of the energy produced.
o The impact of generation on Utility peak use Demand Charges.
o The value of RECs associated with the type and location of
generation as established by state statute.
2010 Value of Avoided Costs
Qualifying
Renewable
Energy Source
REC
State Value
¢/kWh
Energy
Value
¢/kWh
Demand
Charge Value
¢/kWh
Total Avoided
Cost Value
¢/kWh
Out-of-State
Wind Power
4.08
2.02
0.24
6.34
Local
Solar PV
12.24
2.02 0.24 14.50
Note: Colorado legislation credits REC value required for State environmental
compliance based on a variety of attributes. Taken together, the attributes of
energy produced under the proposed program design are worth 3X those
related to the imported wind energy in Fort Collins current contracts.
5 These avoided cost values are based on 2010 energy rates, current supplier
quotes, market rates reported by the US Dept. of Energy and recent renewable
energy contracts held by the City. Future rates and contract costs will vary based
on the cost of energy and RECs.
7
Additional factors were also evaluated but were found to have very limited
direct cost impact for Fort Collins Utilities; these included:
o Avoided transmission and distribution line losses.
o Conventional generation efficiency effects.
o Improved reliability value.
o Reduced air pollution control costs.
o Reduced water use costs.
o Generation time of day pricing impacts.
Economies of scale realized by larger projects reduce the required premium
under this program. As the price paid per kWh approaches the total avoided
cost value for the Utility, the size of the program can be expanded without
increasing the budget, as illustrated in the following chart.
8
Detailed Recommendations
1. General Approach
Recommendation:
To optimize results in Fort Collins, the most appropriate program model
is the market-driving power purchasing approach broadly known as
feed-in-tariffs. These renewable energy purchasing programs have
recently become known in the United States as Clean Local Energy
Accessible Now (CLEAN) programs.
CLEAN Program Features:
o The wholesale purchase of renewable energy with all environmental
attributes and credits transferred to the purchaser along with the energy
o A predefined contract offered by a Utility to local renewable energy
suppliers
o A predefined fixed price for a 20-year period
Rationale:
The CLEAN approach has been highly successful because it works with
the market - it provides a simple, streamlined and transparent market
opportunity in which sellers can participate at the lowest possible
prices due to reduced risks and greater economies of scale. This
approach has consistently resulted in an effective market response,
driving dramatically greater deployment of renewable generation
while achieving substantially lower prices than other approaches.
[World wide, CLEAN style programs have been responsible for 90% of
PV solar installations in recent years while driving costs down steadily in
all participating markets.] CLEAN programs grant equal market access
to all eligible sellers, allowing local utility customers to successfully
compete in becoming renewable energy entrepreneurs.
State and local governments have established mandatory renewable
energy targets for utilities. CLEAN programs are an effective
mechanism for meeting these targets and accelerating the transition
from fossil fuels to clean energy. As potentially the first “CLEAN”
program to be adopted in the US under the new terminology, Fort
Collins has the opportunity to leverage its early position to gain
national recognition while building upon the experience of prior
programs in design and implementation.
9
2. Eligible Technology
Recommendation: New Rooftop Solar Photovoltaic6
Rationale:
It is important to minimize complexity in a pilot program since the
participants must gain experience with implementation procedures.
These include administrative, engineering, and planning elements of
project development, in addition to any applicable taxation, zoning,
and building permit questions. Selecting a single initial technology
supports the general pilot program approach of keeping it simple. In
considering ground mounted solar PV, the City’s Zoning Department
noted concerns that these projects would require either a variance for
most projects or adoption of a zoning amendment, either of which
would delay deployment. Ground mounted systems may also be
subject to environmental review, risking further delays. These systems
and additional technologies can be accommodated in the
comprehensive program that is anticipated to follow a successful pilot
program.
Solar PV generation taps the largest renewable resource available
within the Fort Collins Utilities service territory and presents the widest
opportunities for installation, applicable to a large portion of Utility
customers. Cost reductions achieved through the pilot program will be
applicable to all project sizes, permanently lowering the cost of solar in
Fort Collins across the board and thereby increasing the potential of
other existing solar programs such as net metering. Rooftop installation
in particular also provides widely distributed generation closest to
electrical loads; this largely eliminates potential issues with distribution
grid interconnection and power integration while avoiding line losses
that would otherwise be incurred. The successful similar program in San
Antonio and the proposed program in Los Angeles both have likewise
restricted projects to solar rooftop installation.
Only new projects are eligible since the primary purpose of the
program is to increase the amount of renewable energy generated
and used in Fort Collins. Since existing facilities are already providing
6 For purposes of this program, “rooftop” could also mean any standard built-
environment, including sides of buildings, carports, paved parking lots, etc
10
power, there would be no net increase and no benefit to the City
would result from allowing their participation.
3. Program Size
Recommendation: 5 – 14 MW (over two years)
Rationale:
The program size is determined by the funding, proposed as 1% of
Utility revenues, available to pay any cost premium above current
avoided costs. If the full value of avoided costs is considered, using a 3
times (3x) multiplier for the RECs under the proposed local solar
program, the premium is an average of 6¢/kWh. If additional funding is
available for retirement of more unbundled RECs that are currently
purchased in the City’s REC portfolio, then a larger local solar program
can be supported, as shown in the following table:
CLEAN Solar
Program
Size
State 3X
REC Value
applied
RECs
Acquired
Contribution
to RPS target
Additional REC
replacement
funding required
5.35 MW No 8,000 0.6% No
5.35 MW Yes 24,000 1.7% No
10 MW Yes 43,000 3% Yes
14 MW Yes 60,000 4.25% Yes
5.35 MW is the program size that would be supported solely by the
proposed 1% rate increase. If the city does not make use of the 3X
multiplier, this replaces 8,000 RECs (0.6% toward the RPS targets),
leaving over 32,000 unbundled RECs to be replaced through other
means at additional cost (increasing based on energy usage to nearly
40,000 by 2018, plus an additional 72,000 after the 2020 RPS step
increase). If the 3X valuation is applied, this size program will replace a
total of 24,000 RECs (1.6% toward the RPS target).
14 MW is the maximum program size supported by the 1% rate increase
if additional funding for required unbundled REC replacement is also
allocated to this program to take advantage of the permanent 3X
multiplier offered by the State for programs in operation prior to July
11
2015. This would result in 60,000 RECs, contribute 4.25% toward the RPS
targets, and would maximize local economic development and allow
rapid full retirement of unbundled RECs.
A 10 MW mid sized program would contribute 3% toward the RPS
target, replace the current unbundled RECs if the CLEAN solar 3X credit
and all current Wyoming wind power bundled RECs are used. This
would still require separate additional funding to acquire the RECs
beyond those included in the 5.35 MW program.
4. Project size limits
Recommendation: 25kW to 1MW
Rationale:
Larger systems are more cost effective, supporting economies of scale
and rapidly building efficient installation experience and total installed
capacity at lower energy purchase prices for the Utility. Inclusion of
larger systems also maximizes the use of available large roof areas. The
expertise and efficiency developed in these installations can be
applied at all scales, reducing the costs of smaller installations.
A 1MW limit serves to ensure that no single project holds more than 10%
of the program.
The 25kW initial minimum project size is recommended in line with the
goal of keeping the pilot program simple. The minimum size limit
reduces the number of applications needed to fill the capacity of the
program and avoids overwhelming the project approval process as
this pilot program gets started.
Additionally, smaller projects are relatively cost ineffective until regional
economies of scale are reached and would therefore decrease the
achievable program size. Furthermore, non-corporate entities will often
have challenges associated with using the full tax benefits associated
with renewable energy projects.
San Antonio opened its program in 2010 with project sizes limited to
between 25kW and 500kW systems.
12
5. Pricing
Recommendation: 19¢ - 23¢/kWh based on project size
Prices Required at Specific Project Sizes
System
Size
5kW1 25kW 100kW 500kW 1MW
Price Paid2
(¢/kWh)
28.69 22.74 20.41 19.23 18.33
1. The 5kW rate is listed for illustrative purposes only
2. Prices are based on a 6.5% IRR and assume tax benefits are fully consumed
including the ITC and accelerated depreciation
Rationale:
In order to attract development of new renewable energy generation,
the price offered must reflect the cost of production, which in turn is
related to project size and achievable economies of scale. Pricing
should be set at rates designed to allow comparable and reasonable
profitability in all size ranges to support a diversity of installations.
Previous programs offering substantially higher rates were unnecessarily
attractive and immediately oversubscribed, resulting in avoidable
ratepayer impacts. The prices listed are estimated for late 20ll facility
deployment and are subject to revision as indicated by market
conditions. Final pricing will be included when the application
submission date is established.
6. Participant Eligibility
Recommendation: Fort Collins Utilities customers only
Rationale:
This eligibility requirement supports local ownership and control of
facilities, ensuring that payments are directed to participating residents
and improving the local economy. This also effectively inhibits the
potential for a “land rush” by non-local owners, while project
allocation and project size limits ensure that no local entity will
dominate the program.
13
7. Locational Eligibility
Recommendation: Fort Collins Utilities service area only
Rationale:
In practice, this means generation connected directly to the City’s
distribution grid. Interconnection at the distribution level supports
generation close to load, avoiding wheeling and transmission costs as
well as transmission line and transformer losses that would render
projects uneconomic while adding substantial complexity to program
design.
In line with other eligibility criteria, the purchase of locally generated
power also supports local ownership and control of facilities and
directs payments to City residents, resulting in maximum economic
benefits to Fort Collins.
All existing programs restrict projects to their own service territories.
8. Project Eligibility
Recommendation:
a. Site control
b. Basic engineering plans and estimated output
c. Application fee
d. Reservation deposit
e. Project milestones
Rationale:
The purpose of project eligibility criteria is to ensure that projects have
a high probability of successful completion and that viable projects
are not displaced by speculative or unrealistic proposals. The criteria
need to be sufficient to ensure that contracts are only allocated to
such proposals, but at the same time not so restrictive as to discourage
proposals that would otherwise be viable. These eligibility criteria are
intentionally simplified to avoid unnecessary administrative barriers, but
are generally comparable to other programs.
Securing site control is essential to ensure that the applicant has legal
authority to proceed with installation at the designated location.
14
Basic single line engineering plans and estimated output are essential
to determine the size of the contract allocation and the amount of
program capacity reserved for each provider.
As detailed below, a significant application fee and deposit ensure
that applicants have a stake in successful project outcomes and have
an incentive to meet milestones.
Establishing project milestones defines continuing eligibility by specific
measurable criteria.
9. Contract Allocation and Queuing
Recommendation:
a. First come, first served queue for allocation of current and future
program capacity
• Applications and queue position for both program
capacity and interconnection capacity will be
offered on a first come, first served basis in the order
of application submission.
b. Non-transferable
• Applications and reservations are assigned to the
original location and owner/applicant only and are
non-transferrable.
c. 1MW per applicant per year
• The total program capacity allocated to any one
applicant shall not exceed 1MW (1,000kW) per year.
An applicant may have multiple projects up to this
combined annual limit.
d. Program capacity to be released annually or semi annually
• Program capacity is intended for annual release
under updated contract price offers. The Utility may
choose to adjust the release period and new
capacity with 60 days notice.
e. Applications accepted after the current allotted capacity is filled
will be granted a position in the queue.
• Such applications will not be processed until
allocation of capacity is available.
f. Applications not receiving allocated capacity may be eligible for
refund.
15
• Applications in queue not receiving allocated
capacity under the contract offer in effect at time of
submission may withdraw from the queue with a full
refund either:
a. Up to 30 days following the formal announce-
ment of a subsequent contract offer.
b. In the event of termination of the program.
c. If no additional allotment is provided for a period
of 18 months.
Rationale:
The proposed program is designed to attract only the most cost
effective projects, resulting in a quantity of applications commensurate
with the available program capacity. This is expected to avoid an
excessive rush in submissions and result in an orderly uptake of
reservations while the “first come, first served” allocation of capacity
allotment is fair, rewards early action, and encourages timely planning
and application submission. These features would not be achieved
through use of a lottery system, and use of subjective criteria would
raise issues of accuracy and fairness while adding a significant burden
on staff time and resources. All applications meeting the eligibility
criteria will be treated equally.
Applications will not be transferable in order to avoid speculation or
surrogate procurement by ineligible entities and to discourage
potential applicants from taking a position in the allocation queue
before they are ready to proceed with the project.
As the total capacity allocation granted to any single person or
business is limited to 1MW annually, any applications representing
capacity exceeding this limit will be given a position in the allocation
queue for future periods commensurate with allocation eligibility.
Program capacity will be released periodically (annually or semi
annually) with at least 60 days prior notice in order to ensure equal
access to the application period for all participants and to ensure
predictable contract cash flow obligations that fall within the
program’s predefined budget. Applications will be allowed to hold a
position in the queue to take up any capacity that becomes available
under the terms on offer at time of submission. Such applications will
not be processed until allocation is available in order to avoid incurring
16
premature study and reservation expenses on applicants and City
agencies.
While applicants may retain their position in queue pending planned
release of additional program capacity, the rates offered in future
contracts will not be known until at least 60 days in advance. As such,
applicants will have the option to withdraw their applications and
receive a full refund of application fees once the new contract terms
are announced. Likewise, they may withdraw and receive a full refund
if the program is terminated or new allocations are delayed by more
than six months.
Sacramento, offering similarly cost effective pricing, experienced an
orderly application submission process, meeting allocated capacity
over the course of seven days, and employing a comparable
secondary space-available queue to fill projects that were withdrawn
from the initial allotment.
10. Project Milestone Timeline
Recommendation:
a. 45 days to submit all permit applications
b. 90 days to submit detailed engineering drawings & order
equipment
c. 9 months to complete installation and deliver power
Rationale:
Firm timelines are necessary in order to ensure that projects proceed,
delivering renewable energy on schedule both to meet City and state
targets, and to allow the City to realize the benefits of early progress
and the available but time-limited incentives. Projects that are not
prepared to proceed in a timely fashion will be dropped from the
queue to make room for others, and may reapply. This practice is in
line with other successful programs in the US.
While many applicants may be ready to proceed immediately and
deliver energy well in advance of the contract requirements, ample
time is allowed to reasonably accommodate all applicants, and to
allow for both unforeseen events and more predictable delays related
to winter weather patterns.
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11. Application Fees and Deposits
Recommendation:
a. Application & connection study fee: $1,000 plus $10/kW
(50% refunded if utility finds connection is not cost effective)
b. Reservation deposit: Plus $100/kW
Rationale:
Application fees and deposits serve two functions: self-regulation and
cost recovery. Application review fees and deposits are standard
practice to cover the costs incurred by city departments and to
encourage potential applicants to seriously consider their ability to
perform. The proposed deposits are larger than used in other programs
but are proportional to project size, are refunded at completion, and
represent a meaningful good faith commitment without creating a
significant burden to any serious project.
Significant but reasonable fees and deposits act as a strong incentive
for applicants to regulate their own project’s viability, eligibility and
development. This can dramatically reduce the number of poorly
planned or problematic applications and discourage speculative
submissions from displacing serious projects, while greatly reducing the
burden on City staff. This in turn leads to speedier evaluation and
approval of applications, permits, and inter-connection for
participants, and reduced program administrative costs.
The Utility does not anticipate connection issues in built up areas.
However, if a project is proposed for a marginal area, the applicant
should bear some responsibility for site selection and not receive a full
refund if interconnection to the site is not found to be cost effective
after review and field study by the City.
The reservation deposit will be due once the application has been
approved, the connection review completed, and a contract offer
tendered by the Utility.
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12. Contract Cancellation
Recommendation:
a. Fort Collins Utilities has both the right and the obligation to purchase
all energy produced by the project at the fixed contract price for the
entire 20 year contract term after project is on line and reservation
deposit refunded.
b. Contract obligations are not effected by transfer of facility ownership
Rationale:
Both buyer and seller must be assured of long-term value and benefits.
This allows producers to secure low risk/low cost financing in order to
operate profitably under the contract rates offered by the Utility, and
guarantees the Utility a predictable fixed price source of qualifying
renewable energy while conventional energy prices continue to rise
over time. Failure to secure rights to purchase all energy produced by
each facility would leave the Utility vulnerable to loss were the owner
to seek other higher priced markets in the future.
Change of ownership may be necessary under a variety of
circumstances, and is allowable as long as it continues to conform to
current participant eligibility and allocation criteria.
_________________________
Effects Beyond Utility Costs:
Community Goals and Social Value
The additional value categories listed below will result in benefits
realized by the community as a whole, and therefore the City
may choose to consider them when investing in renewable
procurement practices or choosing between alternative
programs.
Community goals and social values, including direct economic
investment and job growth, are highly significant factors of value
to the Fort Collins community; however, these do not represent
direct benefits or cost avoidance values managed by Fort
Collins Utilities. As such, no financial valuation has been assigned
in the RightCycle assessment for the following benefits:
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o Direct Employment
o Green Business Leadership and Development
o City Reputation/State and National Profile
o Fort Collins Energy Plan
o Fort Collins Sustainability Goals – 20% GHG reduction by 2020
(vs 2005 base year)
o Fort Collins’ Council preference to phase out use of RECs in
favor of actual renewable generation for meeting RPS
standards
o Colorado Climate Action Plan
o National or State Green House Gas emission avoidance value
(if not included in current REC value)
o Healthcare: long-term cost reductions attributable to avoided
emissions
o Criteria air pollutant compliance and control value: PM2.5 &10,
VOC, NOx, SO2
o Price stability
o Diversification of Energy Supply
1
1
Meeting the State Renewable Energy Standard
Through the
Fort Collins Solar Program
and
Potential Biomass project
City Council Work Session
July 12, 2011
Steve Catanach, P.E.
Light & Power Manager
Fort Collins Utilities
2
Goals
1. Reduce carbon emissions 20% below 2005
levels by 2020
• Energy Policy; reduce energy usage by 1.5%
per year
2. Meet the State Renewable Energy Standard
(RES)
• 3% of total energy sold by 2011
• 6% of total energy sold by 2015
• 10% of total energy sold by 2020
ATTACHMENT 2
2
3
Meeting our carbon goals:
Energy Efficiency programs are a lower cost
route to carbon reduction
$6 $12 $12 $14 $20
$23 $34
$38 $42
$62 $68
$224
$386
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
Cost per Ton of CO2 reduced
New Comm
Multi-Fam Eff
Comm Eff
Res Ltg
Retro Comm
Comm Ltg
Res Audits
Appliance
Res HVAC
Res Weath
Low Inc
Wind
Solar
Utility Programs shown in blue
Lifecycle cost per ton CO2
Note: Wind &
Solar avoid natural
gas generation.
Assume 50% of
CO2 reduction vs.
Coal
4
Meeting our Renewable Energy Standard (RES):
• Council has communicated:
– No additional unbundled renewable energy certificates
(RECs)
– Local projects are desirable
• In addition to Utility scale projects, Utilities is
currently looking at two new local programs that
would help meet our RES.
– Fort Collins Solar Program (FCSP) pilot
– Spent grain Biomass plant
3
5
• Fort Collins Solar Program features (2 year pilot)
− Guaranteed contract between the utility and solar facility owners
− Fixed rate for 20 years
− Rate increases limited to 1% over 2-year pilot program
− Each year of pilot rate increase of no more than 0.5% for a total
of 1%
− Local projects - Fort Collins service territory only
• Spent Grain Biomass features
− Early stages of project. Potential for a 4 MW plant that would use
brewery spent grain to produce gas to run a generator. Waste heat
from generator would go back to heat brewery water.
− Private developer. City will purchase through PRPA bundled energy
and Renewable energy certificates to meet RES from the plant.
− Local project in the FortZED area
6
4
7
State Multipliers
• The State allows multipliers to be used to meet the
RES.
– Regional solar projects can multiply the RECs produced by
3x towards RES
– Local community projects can us a 1.5x multiplier
– Colorado based projects can use a 1.25x multiplier
– Projects connecting directly to a municipal system can use
a 2x multiplier
• Note: The use of the multipliers is currently being
challenged through the Colorado courts.
• Should the City apply the multipliers to control cost of
meeting the RES?
8
Four options to meet RES examined
1. Go back to purchasing RECs
2. Business as usual – continue to add utility scale
wind or solar through PRPA. (Biomass could also
be part of business as usual case, cost is the
same as wind)
3. Implement the Fort Collins Solar Program and
continue to work with Biomass developer and
leverage other options. Use State multipliers.
4. Implement the Fort Collins Solar Program and
continue to work with Biomass developer and
leverage other options. Do not use State
multipliers.
5
9
Utility Scale wind & Biomass (Business as Usual)
0
5
10
15
20
25
30
35
40
45
50
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Year
M eg aw atts added
Biomass
Wind
FCSP
10
FCSP+Biomass+Utility Wind w/ multipliers (Local projects - use multiplier)
0
5
10
15
20
25
30
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Year
Megawatts
Biomass
Wind
FCSP
6
11
FCSP+Biomass+Utility wind w/o multipliers (Local projects - no multiplier)
0
5
10
15
20
25
30
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Year
Megawatts
Biomass
Wind
FCSP
12
Note: values are approximate.
Annual cost to meet Renewable Energy Standard
(3%-2011, 6%-2015, 10%-2020)
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Year
Annual Cost
RECs only purchase (Go back to buying RECs)
Utility Scale wind & Biomass (Business as Usual)
FCSP+Biomass+Utility Wind w/ multipliers (Local projects - use multiplier)
FCSP+Biomass+Utility wind w/o multipliers (Local projects - no multiplier)
7
13
Electric Rate Increases
0.00%
1.00%
2.00%
3.00%
4.00%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Year
Annual rate increases
RECs only purchase (go back to buying RECs)
Utlity Scale Wind & Biomass (Business as usual)
FCSP+Biomass+Utility Wind w / multipliers (local projects - use multipliers)
FCSP+Biomass+Utility Wind w /o multipliers (local projects - no multipliers)
14
Electric Rate increases
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
2012 2013 2014 2012 2015 2016 2012 2017 2018 2012 2019 2020 2012 2021 2022
Year
cum m ulative increase
RECs only purchase (go back to buying RECs)
Utlity Scale Wind & Biomass (Business as usual)
FCSP+Biomass+Utility Wind w/ multipliers (local projects - use multipliers)
FCSP+Biomass+Utility Wind w/o multipliers (local projects - no multipliers)
8
15
Ten year program costs + CO2 avoided
Note: Avoided CO2 calculated as natural gas generation which is approximately
50% of coal. As a base load plant the biomass plant will avoid coal generation but
does emit. CO2 avoided calculated at 50% of coal.
Program
Ten year
program cost
Short tons of
CO2 avoided
RECs only purchase (Go back
to buying RECs) $26,450,378 variable
Utility Scale wind & Biomass
(Business as usual) $45,250,120 426,394
FCSP + Biomass+Utility Wind
w/ multipliers (Local projects -
use multiplier) $49,171,096 405,814
FCSP + Biomass+Utility Wind
w/ multipliers (Local projects -
no multiplier) $60,411,052 506,801
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Direction Requested
• Should the City apply the multipliers to control
cost of meeting the RES?
• During the upcoming budget process should
Utilities return with the associated ½% rate
increase for 2012 and an additional ½% in 2013 in
support of the Fort Collins Solar Program?
9
17
Thank you