In 2013-2014, DEEP conducted two procurements under Sections 6 and 8 of Public Act 13-303, in consultation with the OCC, the Attorney General, and the state’s Procurement Manager. These procurements resulted in contracts for 299.2 MW, at an estimated savings of $335 million in RPS compliance costs for ratepayers over the life of the contracts.
DEEP will continue to monitor the Class I market to determine if resources will be available for Connecticut to meet its RPS goals in the years ahead. To a great extent, this will depend on the renewable programs and procurement strategies of the other New England states, including the outcomes of the procurements described in Resource Strategy #4 to help resolve the region’s natural gas infrastructure constraints. In the coming months, DEEP will participate in a regional coordinated procurement of generation and associated transmission (if needed) that is open to Class I and large-scale hydropower, utilizing existing authority under Sections 6 and 7 of Public Act 13-303. In Resource Strategy #4, the Department further recommends seeking legislative authority to solicit bids for resources that can help to alleviate the region’s natural gas infrastructure constraints. As envisioned by DEEP, this solicitation would be open to a broad range of resources, including Class I facilities, and could result in long-term contracts for a significant amount of resources (equivalent to 5,000 MW of non-gas fired generation) if cost- effective.
Continue to Support Deployment of In-State Renewable Generation
As noted in the Department’s 2013 RPS Study, the amount of renewable generation built in the state increased tenfold between 2011 and 2013 with the support of programs such as Project 150, LREC/ZREC, the Section 127 program for utility-owned renewable generation, and the
Connecticut Green Bank’s Residential Solar Incentive Program.216 At the same time, the subsidies provided through several of these programs have been decreasing steadily.
• The LREC/ZREC program is now in its third of six years of implementation, pursuant to a process established by PURA in Docket No. 11-12-06. As of October 2014, the program is providing support to more than 800 active LREC and ZREC projects, with almost 21 MW of Class I capacity installed (approximately 17 MW of solar and 4 MW fuel cell) in the state and more than $300 million in contract commitments executed. The program has seen average project pricing drop substantially in each subsequent solicitation for all size classes except the LREC.
• The Green Bank’s Residential Solar Incentive Program (RSIP) was established under Public Act 11-80 to support the installation of at least 30 MW of residential rooftop solar PV by 2020. As of November 1, 2014, the Green Bank has approved the installation of 45 MW of residential rooftop solar PV – delivering the legislative target of 30 MW eight years ahead of schedule. Since 2011, installed costs have dropped by 20 percent ($5.35 to $4.30 per watt), incentives have dropped by 40 percent ($1.70 to $1.00 per watt), and investment has increased by more than 1,500 percent ($8.3 million to $126.1 million), creating jobs across Connecticut.
In the 2015 legislative session, the Connecticut Green Bank is proposing to evolve their Residential Solar Incentive Program to allow the Connecticut Green Bank to enter into 15-year contracts for the purchase of solar home renewable energy credits by the electric distribution companies (i.e., Eversource and UI) for solar power produced by eligible residential customer- sited generating projects. The purchase price of solar home renewable energy credits would be determined by the Connecticut Green Bank and would not exceed the lesser price of small zero- emission renewable energy credit projects for the preceding year or the alternative compliance payment pursuant to section 16-245(k) of the general statutes.
In the 2014 legislative session, Senate Bill 323 was proposed to establish a community solar program on a pilot basis. SB 323 contemplated a shared Class I renewable facility of up to 3 MW owned or leased by a for-profit or non-profit entity, with two or more subscribers (i.e., EDC customers located within the EDC’s service territory) contracting for the “beneficial use” of the facility, including but not limited to a percentage interest or fixed amount of the electricity produced by the facility. SB 323 would have charged DEEP with establishing a billing credit and consumer protections for subscribers of the shared Class I facility. There may be other models that should be considered that would provide similar benefits to Connecticut residents. Regardless of the program design, DEEP recommends establishing a transparent, competitive request for proposals process to select projects that benefit all Connecticut ratepayers along with an implementation framewok that includes all necessary consumer protections.
216 As of 2011, Connecticut had only about 66 MW of renewable generation installed within the state. As of 2011,
Project 150 had resulted in 47 MW of installed renewable capacity.
DEEP recommends continued deployment of cost-effective renewable generation within the state, at the lowest cost to ratepayers. Over the past several years, Connecticut has developed a myriad of renewable generation programs. It is essential to look at these programs holistically to balance the desire to increase in-state renewable generation with potentially lower cost out of state renewable resources. DEEP believes that the grid modernization process addressed in Resource Strategy #7 will help determine the cost and value of these programs and how they should be balanced in our state energy policy. Additionally, the method for procuring these resources should be considered and designed to be transparent and competitive.
Other Considerations
Under Public Act 13-303 and other renewable procurement programs, the EDCs act as buyers, signing long-term contracts for renewable energy and associated RECs on behalf of all customers. They pass on to all customers the financial equivalent of their contractual position by buying the energy and RECs at the contract prices, re-selling the RECs to load serving entities (LSEs) in the short-term REC market, then charging (or, more likely, crediting) customers for the net cost through a special line item on all customers’ bills. This mechanism provides customers the benefits of long-term contracting without exposing the EDCs to the market risks. However, when implemented at the scale allowed by Public Act 13-303, the EDCs, along with those playing a similar role in Massachusetts, become the largest sellers of RECs into the short- term REC market. This could create an undesirable perception of seller’s market power, even if no such power is exercised. Furthermore, this arrangement can create some administrative and transactional inefficiencies that adversely impact the value of the contracts for customers when the EDCs sell the RECs into the market only to have LSEs buy those RECs to serve the same EDC customers (in effect, customers lose the bid-ask spread on all transactions). The state could consider simplifying the arrangement through legislative change. For example, the EDCs could instead retire most or all the RECs they purchase, and the LSEs’ RPS requirements could be reduced correspondingly.