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California Incentives For Renewable Markets Timothy N. Tutt California Energy Commission (916) 654-4590 California Energy Commission, May, 1999 California Renewable Energy 27,500 GWh in 1998 Solar Thermal 3% Small Hydro 23% California Energy Commission, May, 1999

Wind 10% Biomass & Waste 18% Geothermal 46% Background: Electricity Deregulation Key Elements of AB 1890 Established Power eXchange and Independent System Operator

Recovery of stranded costs over four-year transition period Funds to Support Public Purpose Programs Non-bypassable surcharge: System Benefit Charge Four Programs Supported: Renewables, Energy Efficiency, Low Income, and Research & Development Retail Competition Customer Choice, Green Market, Consumer Education 10% Residential Rate Decrease; No Shopping Credit California Energy Commission, May, 1999 Renewable Portfolio Standard or System Benefit Charge? Straight RPS lets market players decide how and when to meet standard - cost is unknown RPS with price cap still lets market decide, but

cost is capped and level of renewables is unknown SBC collects money for some kind of administrative allocation: level of renewables is unknown Can be made market-oriented - maximize reactivity with market decisions California Energy Commission, May, 1999 California Bill After Trans- Restructuring Energy mission Efficiency Distribution

Energy Low Income Decommissioning Stranded Costs California Energy Commission, May, 1999 Public Interest R&D Renewable Bond Payments

System Benefit Charge Renewables Program $540 Million established to support New, Existing, and Emerging Renewable Technologies Funds Allocated to Four Accounts Existing Technologies ($243 Million) New Technologies ($162 Million) Emerging Technologies ($54 Million) Customer-Side Purchases ($81 Million)

$76 Million to Consumer Credit Subaccount, $5 Million to Consumer Education Subaccount California Energy Commission, May, 1999 Ramping Allocations by Year Allocation (% ) 60 Existing 50 40 New 30 20

Customer 10 0 1998 Emerging 1999 Year California Energy Commission, May, 1999 2000 2001

Assisting Green Market Green Market Over the Grid Demand Customer Credit SubAccount Green Market Installed At Site California Energy Commission, May, 1999 Supply New Account Existing

Account Emerging Account Over the Grid Supply: Market-Driven Payments Existing Account production incentives (cents/kWh) are the lesser of: a payment cap (either 1 or 1.5 cents/kWh) a target price minus the market electricity price the available funds divided by the eligible generation New Account production incentives (cents/kWh) are: the result of bidding in an auction paid only for first five years of generation after startup California Energy Commission, May, 1999

Over the Grid Supply: Results New Account: auction induced 55 winning bids which laid claim to entire $162 million available 300 MW of wind, 157 MW of geothermal, 70 MW of landfill gas, 12 MW of biomass, 2 MW of digester gas, 1 MW of small hydro Full amount of $162 million allocated at an average incentive of 1.2 cents/kWh all projects expected to pass Milestone #1 by this month Existing account: $55 million paid out, $21 million rollover in 1998 nearly 50 facilities off the cliff but continue operating

California Energy Commission, May, 1999 Assisting Green Market Green Market Over the Grid Demand CUSTOMER CREDIT SUBACCOUNT Green Market Installed At Site California Energy Commission, May, 1999 Supply

New Account Existing Account Emerging Account Now thats crisp, reliable, hassle-free toast, and at peak hours with no long waits! Who do you say is your electricity provider? California Energy Commission, May, 1999 Over the Grid Demand: Market-Driven Payments Incentives constant at 1.5 cents/kWh for six month intervals at beginning, but starts floating as demand grows significantly Only direct access transactions eligible Administrative costs reduced by distributing

funding through energy service providers Incentive $ capped for large Commercial and Industrial customers (> 20 KW) at $1,000/year Cap removed if incentive stays at 1.5 cents/kwh in 1999 California Energy Commission, May, 1999 Over the Grid Demand: Results 14 marketers have registered as renewable providers offering 27 products containing a percentage of renewable energy Six marketers have submitted invoices covering up to 12 months for $5 million Market expected to continue to grow rapidly in 1999 Recent development: at least 3 products priced lower than conventional energy through PX

California Energy Commission, May, 1999 Participants in Customer Credit 100000 80000 60000 40000 20000 0 California Energy Commission, May, 1999 Assisting Green Market Green Market Over the Grid

Demand Customer Credit SubAccount Green Market Installed At Site California Energy Commission, May, 1999 Supply New Account Existing Account Emerging Account

Installed at Site Demand/Supply: Market-Driven Payments Buydown incentives decrease over time: foreshadowing decrease in technology costs $3.00, 2.50, 2.00, 1.50, 1.00 per watt, or 50%, 40%, 30%, 25%, 15%, whichever is less Technology must be installed prior to payment Technology must be creditable: Installation by liscensed professional or do-it-yourself 5-year warranty required on equipment/installation

UL Listing or 1 year demonstrated operation in market California Energy Commission, May, 1999 Installed at Site: Results 35 30 25 20 15 10 5 0 California Energy Commission, May, 1999 Large Medium Small

In Conclusion Very Encouraged By Results So Far SBC Structure Seems Workable - Can Be Made MarketOriented Next Piece of Puzzle To Get In Place Consumer Education Campaign $5.4 million to fund campaign Opting For Stakeholder Coalition Asking For Leveraging Questions: Does Program Funding Continue Beyond Transition? How To Structure Next Steps California Energy Commission, May, 1999

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