Download Net Metering and Feed in Tariff Tech FINAL_9.20.10[1]

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
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2.
Net Metering Proposal (generally following proposed tariff language)
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3.
Example Customer “Decision Tree” to Demonstrate
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
Feed-In Tariff Proposal (generally following proposed tariff language)
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•
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
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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
Proposed Net Metering and Feed-In Tariffs
Net Metering
Feed-In
$$$
Net Metering Only
Net Metering and Feed-In
Feed-In Only
$$
$
5
10
100
1
5
kW
kW
kW
MW
MW
• Ease of Installation
• Engineered System
• Complex Engineered System
• Low Cost
• Technical Interconnect
• Wind Farms
• Residential/
Small Commercial
• Large Commercial/
Light Industrial
• Solar Farms
For Illustration Only
• Large Farming Operations
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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:
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Biomass
Biogas
Landfill gas
Wind
Solar photovoltaic (PV)
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Feed-in Tariff (cont.)
• Attributes
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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
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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
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