1 net metering & feed in tariff review iurc technical conference cause no.43922 september 21,...
TRANSCRIPT
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NET METERING & FEED IN TARIFF REVIEW
IURC Technical Conference Cause No.43922
September 21, 2010
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Agenda
1. High Level Overview of NIPSCO Proposal and Interaction Between Net Metering and Feed-In Tariff• Example Customer “Decision Tree” to Demonstrate
2. Net Metering Proposal (generally following proposed tariff language)• Overview • Discussion of Questions re Net Metering Proposal (e.g. eligible technologies, facility size,
facility ownership, meter aggregation, system cap)• Interaction and Consistency with Draft Commission Rule
3. Feed-In Tariff Proposal (generally following proposed tariff language)• Overview • Discussion of Questions/Issues re Feed-In Tariff Proposal (e.g. eligible technologies, facility
size, facility ownership, pricing, system cap)
4. Any Other Related Matters (e.g. interconnection, etc.)
5. Next Steps
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Policy Overview
• Feed-in Tariff– Renewable initiative– Increasing customer interest – Technological advancements (both application and cost) and federal initiatives
through tax credits– Gather information about how and when customers use these programs
• Experimental rates under a three pilot program– This effort is consistent with the Hoosier Homegrown Energy Policy
• Net Metering – Permanent change that is supportive of the renewable initiative – Complimentary to the feed in tariff– No sunset on the effectiveness of expansion to net metering
• Part of NIPSCO’s Mission to invest in clean, modern and affordable energy solutions
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Policy Overview (cont.)
• Encourage job and economic growth
• Increase diversity of energy supply system
• NIPSCO filed a request to enhance the current Net Metering tariff and provide a Feed-in tariff for its customers on July 16, 2010
• Based on customer requests– Higher project limits and expansion of availability beyond residential and K-12
customer for Net Metering– Adding Feed-in tariff for larger projects
• Feed-in tariffs can be implemented alongside net metering
• IPL has the only Feed-in tariff in Indiana at this point
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Customer Feedback
• Approached by a customer looking to install a solar farm in Porter County– Told by the solar project developer that a long term contract is
essential– Limited window due to the expiration of a federal tax credit
• A developer responding to school’s request to install wind power in Elkhart County– Indicated that fixed-price and long-term contract are desirable– Use of feed-in tariff affords multiple locations for project
• Approached by a large agricultural business for pricing to support a bio-gas to electricity project in White County
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Project Facts
• A 50 kW wind machine costs around $365,000 installed
• For solar applications, Indiana there are 35 systems in the database with an average cost of 11.84 $/W installed – Illinois: 8 systems with an average cost of 7.94 $/W installed – Michigan: 7 systems with an average cost of 9.67 $/W installed – Ohio: 166 systems at an average cost of 12.67 $/W installed – Missouri: 5 systems at an average cost of 7.26 $/W installed – Avg. of all 5 – 9.87 $/W installed
• 7-10 $/W installed is probably the range for the Midwest, though other factors for your area such as labor costs and numbers of installers could change that – In the cases of Ohio and Indiana, the majority of systems are from 2008 and
back– Illinois and Missouri (the lower $/W) have the majority of their systems from
2009 – 2010
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Customer Decision Model
5 10 100 1 5 kW kW kW MW MW
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$$
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Cost and Complexity
Net Metering Feed-In
Net Metering Only
Net Metering and Feed-In
Feed-In Only
Proposed Net Metering and Feed-In Tariffs
• Ease of Installation
• Low Cost
• Residential/ Small Commercial
• Engineered System
• Technical Interconnect
• Large Commercial/ Light Industrial
• Complex Engineered System
• Wind Farms
• Solar Farms
• Large Farming Operations
For Illustration Only
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NET METERING PROPOSAL
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Net Metering
• Customers owning qualifying renewable generators are billed only for their net energy consumption over a given billing period
• Obtain a credit for future billing periods if production exceeds consumption
• Provides a direct, inexpensive, and easily administered mechanism for encouraging the customer installation of small scale renewable energy facilities on their buildings
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NIPSCO Proposal Highlights
• All Customers eligible
• Participation level increased to 100 kW (from 10 kW)
• Wind, Solar and Hydroelectricity generation qualify– The state proposal
• A renewable energy resource as defined in IC 8-1-8.8-10• Hydrogen• Other emerging renewable energy technologies the commission determines
appropriate
• No changes to interconnection policy
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NIPSCO Proposal Highlights (cont.)
• Aggregate amount increased to 6 MW (was 1 MW previously)– State proposes an optional limit of (1%) of the most recent summer peak load
of the utility, with at least fifty percent (50%) of the capacity reserved solely for participation by residential customers
• Metering requirements remain unchanged
• Allows all customers to roll over credits from month to month– State proposes to limit customers with capacity up to 200 kW rollover credits
from month to month
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Customer Benefits
• Expanded to all customer groups
• Allows for the customer to “spin the meter backward” and be credited for feed back at retail value
• Fits in with the “Green” Building movement
• Supports the growth of the renewable energy equipment sales and service industry
• Moves the renewable energy option for our customers beyond the test period and allows for mainstream use
• Gives our customers another option for conserving energy
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Net Metering Customer Solar Site
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Net Metering Customer Solar Site
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Net Metering Customer Wind Site
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Overview of NIPSCO Proposal and Interaction Between Net Metering
and Feed-In Tariff
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Interaction and Consistency with Draft Commission Rule
• Eligible facilities
• System Wide Cap (.2% vs. 1%)
• Unit Cap (100 kW vs. 1 MW)
• 50% Reserve for Residential Customers
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FEED-IN TARIFF PROPOSAL
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Feed-in Tariff
• Encourages new renewable energy development – Long term financial incentive to customers who generate renewable electricity– Standardized and streamlined process to do so, easing the entry of new systems
• Contract term up to 10 years obligates NIPSCO to purchase eligibility renewable energy
• NIPSCO’s feed-in tariff is its first comprehensive purchase rate schedule for renewable electricity production
• It offers stable prices under long-term contracts for energy generated from renewable sources, including:– Biomass – Biogas – Landfill gas – Wind– Solar photovoltaic (PV)
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Feed-in Tariff (cont.)
• Attributes– Rates developed using a standard Discounted Cash flow model– Capped at 1% of project peak system demand – 30 MW– No Single technology can exceed 50% of the 30 MW cap– Could use up to 100 kW of renewable generation against own
energy load– NIPSCO will retain all environmental attributes
• Contracts subject to IURC approval
• One year from contract signing to put project into service
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Purchase Rate Schedule As Filed July 16, 2010
• Discounted Cash Flow Model Approach– Solar = $0.26/kwh– Wind 0-100kw = $0.17/kwh– Wind 100-2MW = $0.10/kwh– Biomass = $0.07kwh + $6.58/kw
• Long Term Contract 10 years
• Contracts subject to IURC approval
• One year from contract signing to put project into service
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FEED-IN TARIFF PROPOSAL
Discounted Cash Flow Modeling
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Discounted Cash Flow Model Assumptions
• 20-year DCF model
• 2% Inflation Rate
• Includes 30% investment tax credit
• Effective Tax rate 40.53%
• Accelerated depreciation
• Prices set to achieve approximate zero net present value at year 20
• Assumptions were used for capital, operating and maintenance expenses, capacity availability, and installed project size
• Positive cash flows range from year 10-13
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Project model Size Considerations
• Net metering option available at 100 kW
• Economies of scale
• Footprint of the project (land required)
• Simple to sophisticated operating requirements
• Construction Expertise- Home owner to Professional developers
• Customer applications and load considerations
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FEED-IN TARIFF PROPOSAL
Discounted Cash Flow Modeling
Review of Spreadsheets
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Other Related Matters and Next Steps