m/*ss, c/q LV.V i>S UMASS/AMHERST 312066 0308 0574 5 Commonwealth of Massachusetts Office of Consumer Affairs and Business Regulation The Viability and Impact of Establishing a Minimum Purchase Requirement in Massachusetts for Existing Renewable Energy A Study to the Joint Committee on Energy 6Wffissr- October 2003 ^ Uni f of Masseuse* D rory Copy Mitt Romney Beth Lindstrom Governor Director, Consumer Affairs and Business Regulation Kerry Healey David L. O'Connor Lt. Governor Commissioner, Division ofEnergy Resources . OVERVIEW Summary The Division ofEnergy Resources (DOER) is pleased to present this analysis ofthe viability and impact ofestablishing a minimum purchase requirement for existing renewable energy, per order ofthe Joint Committee on Energy. A minimum purchasing requirement would oblige electricity suppliers to Massachusetts customers to include generation from existing renewable energy. The requirement would be set at the percentage of existing renewable energy supplied in New England in 1997. DOER spent considerable time collecting and analyzing all available renewable supply data in order to establish a minimum purchase requirement for benchmarking purposes and to examine the recent performance ofthis benchmark. Generally, the examination shows no reduction in the existing renewable energy supply in New England and notes the current markets for existing renewable energy in Maine DOER and Connecticut. determines that adding a similar requirement in Massachusetts will not provide significant market benefit to existing renewables, and will add undue DOER administrative and other costs to Massachusetts customers. recommends that a minimum purchase requirement in Massachusetts not be pursued. Structure of Study The study is structured in the following manner. New 1 Calculation ofthe percentage ofexisting renewable electricity sales to England end-use customers to total sales to New England's end-use customers in 1997. This percentage is referred to as the "New England Baseline Percentage". New 2. Determination ofexisting renewable energy generation in England in 2002 and analysis ofsupply trends by technology between 1997 and 2002. 3. Evaluation ofcurrent demands for the attributes of existing renewable energy in New England within the Maine and Connecticut RPS programs and the green power market. 4. Analysis ofthe viability and impact ofestablishing a minimum purchase requirement in Massachusetts. CALCULATION OF MINIMUM PURCHASE REQUIREMENT II. 1997 The following equation was used to calculate the Baseline Percentage for New England on which a minimum purchase requirement would be based. The baseline percentage is developed using the retail sales and supply resources ofNew England investor-owned utilities. Baseline Percentage = 1997 New England Renewable Energy Generation - Line Losses x 100 1997 Retail Sales to New England End-Users The numerator is the existing renewable energy purchased from retail suppliers by New England end-users during the 1997 base period. The total amount ofexisting renewable energy generated for New England retail customers is 7,652 GWh. The amount is GWh reduced from 8,241 to reflect transmission and distribution losses. New The denominator ofthe baseline percentage is the total retail sales to England end- New users during the 1997 based period as reported by each utility ofevery England New state. The total amount ofelectricity sold to England end users in 1997 is 96,088 GWh. These data are summarized in Table 1, which shows the results ofDOER's calculation of the 1997 New England Baseline Percentage, and the similar calculation that was done for Massachusetts in a previous study1 The calculated percentage of 8.0% represents the . fraction for New England end-use sales derived from existing renewable energy in 1997; and 7.8% represents the percentage ofMassachusetts end-use sales in 1997 derived from existing renewable energy. Table 1. Summary of 1997 Baseline Percentage Calculation MA 1997 Baseline Calculation New England Summary Section Eligible Eligible Renewables Renewables Renewable Generation (MWh) 8,240,712 3,453,499 Less: Loss (MWh) 589,090 238,008 Equals: Numerator 7,651,622 3,215,491 Retail Sales (MWh) 96,087,852 41,294,095 Baseline Percentage 8.0% 7.8% Data Source: FERCForm 1pp.: 326-327;pp.: 310-311;pp: 401; 2000 Study. SeeAppendixAforadditionaldetail. & Existing Renewable Eligibility Supply The New England Baseline Percentage is calculated based upon the definition ofexisting renewable energy as stated in the Massachusetts Electric Utility Restructuring Act. The "Act" defines existing renewable energy technologies to include hydro, wind, solar, landfill gas, municipal solid waste, and biomass commercialized before December 31, 1997. Table 2 lists all the technologies that are eligible as existing renewable energy and provides some indication oftheir significance in the New England supply. The study " Massachusetts Renewable Portfolio Standard - Report on Sales from Existing Renewable Energy Generation Sources" which will herebybe referred to as the "2000 Study" was conducted for the RPS Stakeholder process in May 2000. Table 2. Existing Renewable Supply: Technology Eligibility in New England Technology Eligibility Amount Available Hydroelectric Eligible, excluding the Highly significant, Hydro Quebec Firm especially in states like RI, Energy Contract (FEC)~ NH and ME. Biomass Eligible Significant MSW Eligible Highly significant Landfill gas Eligible Somewhat significant Wind Eligible Very little Solar Eligible Insignificant Fuel Cells Eligible None Ocean Wave/Tidal Eligible None Unlike the Massachusetts Renewable Energy Portfolio Standard (RPS) market established for new renewable energy, the Act does not establish a market premium for existing renewable energy. Eligibility ofexisting renewable energy does not specify a size restriction on hydropower eligibility nor a low-emissions requirement for biomass. Thus, all technologies are qualified under the definition of existing renewable energy. Figure 1 shows the percentage ofexisting renewable energy supply in 1997 by technology. However, due to limitations ofthe FERC Form data to definitively 1 establish the generation source ofelectricity supply, the allocation ofthe total existing DOER renewable energy to the various technologies is not possible. is confident, however, that the total aggregate supply ofexisting renewable energy is accurately evaluated. Figure 1 is offered to provide the general understanding that hydroelectric and MSW facilities account for the large percentage ofthe renewable supply, with important contribution from biomass as well. The Hydro Quebec FEC was excluded due to the fact that it was not renewed and expired in September 2001. D Biomass 4.5% Landfill 1.3% msw a % 28.5 Hydroelectric 65.7% Wind 0.01% Source: FERC Form 1. See Appendix A for more detailed data. Figure 1. Existing Renewable Energy Supply in New England by Technology, 1997 Data Sources and Analysis The data for the Baseline Percentage were taken from FERC Form 1 for 19973,. The data does not include municipalities and cooperative utilities. Appendix B presents the complete list oftotal retail sales by the major utilities in each state. As discussed above, the total retail electricity sales ofinvestor-owned utilities was used as the denominator for the 1997 New England baseline percentage. The numerator ofthe Baseline Percentage is the renewable electricity generation owned or purchased by retail suppliers in New England, reduced by transmission and distribution line losses to determine the supply to customers. All data are determined at the consumption level and not at the generation level. For the 1997 baseline calculation, only the largest utilities were used, resulting in sample coverage of88% oftotal New England sales.