New York CES:

Renewable Energy StandardUnderlying Fundamentals

EMA Roundtable

Roman KramarchukManaging Di rec tor | G loba l Power, Emiss ions & Clean Energy

February 2, 2017

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Demand and Targets Outlined

August 2016:

“The Commission requires each New York LSE to serve their retail

customers by procuring new renewable resources, evidenced by the

procurement of qualifying RECs, acquired in the following proportions

of the total load served:

2017 0.6%; 2018 1.1%; 2019 2.0%; 2020 3.4%; 2021 4.8%

2017 expected to yield 974,000 MWh

“This Order also provides for NYSERDA

to conduct regularly scheduled

solicitations for the long-term

procurement of RECs to achieve the

following anticipated and minimum

results for the years 2017 through 2021”

… But Uncertainty Remains

Nov 2016: 2017 Tier 1 RES Obligation on LSEs is actually equal to

0.035%of total load served by an LSE during 2017. (56,142 RECs)

Volume reflects adjustment to reflect Sun Run and other Customer sited

projects

How will these be treated going forward?

Additional Questions about:

Behind the Meter / DER eligibility,

» For long term procurement by NYSERDA, overall Tier 1 eligibility of these

resources, setting of LSE obligations, interactions with voluntary goals.

Treatment of re-powered facilities

Existing renewables / Tier 2 – Maintenance

Etc. etc.

Trends in Weather-Adjusted Load:

NYISO Particularly Weak

Year-

On

-Year

Ch

an

ge

Data through April 30, 2015

Source: PIRA Estimates

New Supply Needed to Meet Goals,

What Will Incent It to Be Built?

Monetization Thru Markets:

Power Prices + Capacity + Ancillary Services + RECs

Key Variables (Wind):

Cost of Turbine / Interconnection

» Wide Range (Wind $1,500 - $4,000 per KW), Location

» PTC/No-PTC, State/Local incentives

Cost of Transmission

» Transmission, line losses (DC vs. AC)

Capacity Factor of Wind

» Wide range (<20% to >50%), Location

Power Fundamentals

» Transmission basis, natural gas prices, retirements, reserve margins,

carbon pricing, demand growth, cost of competing generation, etc

U.S. Utility-Scale PV Project Cost Outlook:

2015-2021

$/MW-week $/kW

0

500

1,000

1,500

2,000

2,500

1,500

1,700

1,900

2,100

2,300

2,500

2,700

2,900

2015 2016 2017 2018 2019 2020 2021Avg. Overnight Cost ($/kW) NC/SC ($/MW-week)

ERCOT ($/MW-week) PJM West ($/MW-week)

CAMX ($/MW-week) NE ($/MW-week)Source: PIRA

Solar Capacity Factors by ISO/RTO

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

SPP CAISO ERCOT NYISO PJM ISONE MISO

All Utility-scale Solar PV Generators

Avg. 2013-2015

Source: S&P Global 2016, PIRA analysis

U.S. Distributed PV Capacity NY Leading YOY Growth

15%

20%

25%

30%

35%

40%

45%

50%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

CA NJ MA AZ NY Other

MW

YOY

Distributed PV Snapshot, Sep 2016

MW

(AC

)

Source: EIA

Total Capacity

12,300 MW

YO

Y

NYISO Wind Queue, New Build

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2017 2018 2019 2020

Under Construction

Pending

MW Capacity

Proposed Online Date

Capacity Value of Intermittent Resources in NY

Unforced Capacity Percentage–Wind

Zones A through J Zone K (land-based) Zone K (off-shore)

Summer 10% 10% 38%

Winter 30% 30% 38%

From NYISO INSTALLED CAPACITY MANUAL

Intermittent Power Resource Unforced Capacity Values,

Based on prior seasonal performance

• Summer: Avg production 14:00 - 18:00 for Jun, Jul and Aug

• Winter: Avg production 16:00 - 20:00 for Dec, Jan and Feb

New Resources: NERC class average values, NYISO estimates.

For Wind – Capacity percentage in the Table above• From Report on Phase II System Performance Evaluation “The Effects of Integrating

Wind Power on Transmission System Planning, Reliability, and Operations” prepared by

GE Energy, March 4, 2005.

Additional Regional Factors / Wildcards

RGGI

» Undergoing program review – potential for higher carbon prices.

» Would increase power prices in New York and in New England

» Increase attractiveness of power imports from neighboring PJM

WCI

» Ontario cap and trade program started Jan 1.

» Ontario prices increase, flows into province face carbon default

factor. Greater incentive for renewables to stay in province

New England IMAPP

» Looking to expand the formal role of the wholesale power markets

beyond low-cost provision of power and reliability – to also

incorporate state emission and clean energy objectives.

» Some tabled proposals would supplant the importance of REC

markets.

New Trump Administration: “Priority List –

Emergency and National Security Projects”?

NYISO Interconnection Queue Projects with

Potential ISO-NE/PJM Impact

Source: PJM

New York REC “Breakeven” Values Required

to Incentivize a New Wind Unit

-5

0

5

10

15

20

25

30

35

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

NY G 30% CF

NY G 35% CF

NY A 30% CF

NY A 35% CF

Note: PIRA estimates based on forecast energy and capacity prices. Assumed Project Cost: $2,000/KW; Capacity factor 30% or 35% PTC

phase-out, National Carbon price starts 2025

$2015/MWh

For 2017:NYSERDA TIER 1 REC: $21.16

ACP: $23.28

Application of Bid Evaluation Criteria w/ Multiple Factors

Could Shift Outcome vs. Market Calculation

NY Renewable Sources Qualified to Generate RECs

in Neighboring States

PJM GATS

» 153 MW of hydro qualified as

MD Tier 1 = 3..9% of Tier I

supply for 2013 compliance

» 0.4 GW of solar qualified as

DC Tier 1

NEPOOL GIS» 1.3 GW NY wind qualified; 96% in MA Class I.

Some wind also qualifies in CT, ME, RI and/or NH

» Nearly all under NYSERDA contract

– 0.2 GW came off contract in 2016; another

0.5 GW from 2nd solicitation expires 2018

» Also landfill & digester gas, hydro

» Wind/LFG from NY supplied 19% of MA Class I

compliance for 2014 (power must be delivered to

NE ISO)

Flight of NYSERDA Wind to other REC programs?

» NY PSC declined to adopt a targeted sub-Tier 2 RES to prevent attrition

of expiring NYSERDA main tier contracts, because:

– Primarily wind units with low O&M

– Barriers to qualifying in other states (vintage/delivery requirements)

– No “imminent” risk; can address at a subsequent triennial program review

In Past, New England RPS Compliance Relied

on NY RECs

Source: Quantifying the Level of Cross-State Renewable Energy Transactions, NREL February 2015

Increased incentive going forward based on growing clean energy requirements?

19Feb 2017

For additional information about PIRA's North American Power or North American Environmental Markets Retainer Services

1-212-438-9146 roman@pira.com

roman.kramarchuk@spglobal.com

Website: www.pira.comTwitter @piraenergygroupLinkedIn www.linkedin.com/company/pira-energy-group