Pushing the Renewable Energy Policy Envelope American Bar Association

November 20, 2009

Matt Futch Utilities Program ManagerGovernor’s Energy Office

Presentation Topics THE RECOVERY ACT FUNDS AND THE GEO Governor’s Energy Office: The State Energy Plan The long term potential impacts on RE/EE development in Colorado

CHALLENGES:

REGULATORY AND POLITICAL LANDSCAPE Disaggregation amongst the electric utility markets Coordination on long term generation and transmission planning Putting a price on carbon GEO actions in this area of challenge

FINANCING AND CAPITAL MARKETS Financing energy efficiency Mitigating risk for capital investors GEO actions in this area of challenge

Presentation Topics

SYSTEM RELIABILITY AND INTEGRATION The learning curve on RE integration Central station versus distributed generation The disruptive potential of smart grid deployment GEO actions in this area of challenge

THE MIND OF THE CUSTOMER What is a kWh….and why should I care? Cheap, clean and not in my backyard please GEO actions in this area of challenge

THE RECOVERY ACT AND THE GEO

The GEO has identified three primary market barriers to RE and EE in CO

Information – where is it?Services – who can do it? Finance – reducing up front costs

The GEO has created infrastructure for information outreach, rebates, and grant programs that address these barriers.

The graph represents how the State Energy Program grant of 50M is being spent by program.

• State Energy Program (SEP)– Colorado energy office $49M– Primary way in which state offers energy

efficiency and renewable energy services

ACCESS TO INFORMATION

ACCESS TO CAPITAL/FINANCING

ACCESS TO SERVICES

PROJECT GRANTS

$42,618,700 total to Colorado

$ 32,878,300 directly to 20 cities and 10 counties, based on a population-related formula grant

$ 9,593,500 to the state energy office, of which GEO will issue no less than $5,756,100 in subgrants to non-entitled municipalities and counties

Southern Ute Indian Tribe of the Southern Ute

Reservation, Colorado $ 71,900

CO/NM/UT Ute Mountain Tribe of the Ute Mountain Reservation, Colorado, New Mexico &Utah $ 75,000

Nationwide Competitive Grants to be announced in the fall 2009

$400M – state, all local governments$ 50M – non-entitled local governments

CHALLENGES: REGULATORY AND POLITICAL LANDSCAPE

Disaggregation amongst the electric utility markets

There is a degree of difficulty in defining statewide energy policy and renewable energy resource development due to a bifurcated utility market.

09I-041E: Current docket exploring what level of regulatory analysis should be imposed upon the current resource plans of Tri-State Generation and Transmission.

Coordination on long term generation and transmission planning

Currently, there is no statewide land use permitting authority. This is an obstacle to efficient and equitable decision making for transmission development.

The current system for transmission planning works on an as needed CPCN basis. To achieve market transformation we will need an integrated approach which uses carbon as a systemic driver for blueprint planning

CHALLENGES: REGULATORY AND POLITICAL LANDSCAPE

Putting a price on carbon

Utilities and regulators are making some progress on assessing environmental externalities for electric resource planning.

A high tax or price per ton ($60/ton or higher?) on carbon is required to move past incremental gains in renewable generation

GEO actions in this area of challenge:

Analytical work on generation and transmission – REDI and CAP

Increasing resource modeling capacity at the State level

Working with Governor’s office on legislative agenda

CHALLENGES: FINANCING AND CAPITAL MARKETS

Financing energy efficiency and renewable energy projects

Capital markets are beginning to better understand energy service contract model using energy savings as loan payment

Relative low cost of gas and electric power remain a motivational obstacle

Mitigating risk for capital investors

Credit crisis increased real cost of capital and total transaction cost Recession induced downward pressure on electric demand

GEO actions in this area of challenge

PACE model – working on a potential statewide application for this vehicleGEO currently leveraging ARRA funds for a large scale clean energy fundClean Energy Financing Fund may exceed $100M

CHALLENGES: SYSTEM RELIABILITY AND INTEGRATION

Integrating intermittent resources

Utilities are on the learning curve: Xcel has achieved 35% wind penetration during specific night loads

Existing base load plant system must be converted to a flexible, firming system

Central station versus distributed generation

Healthy policy and technology tension existing between DG and utility scale renewables

Troubles in transmission build out is providing a significant market vacuum for DG to prove out its business case

CHALLENGES: SYSTEM RELIABILITY AND INTEGRATION

The disruptive potential of smart grid deployment

Granular view of demand and demand response have the potential to become a “dispatch resource” reducing generation requirements

Energy savings of up to 9% have been achieved with in-home energy monitors and other technologies

Smart grid has the capacity to accelerate transportation electrification

GEO actions in this area of challenge

GEO has proposed a new Distributed Generation rate

GEO updating State energy emergency plan to incorporate smart grid and distributed generation for increased resiliency and integration

Smart Grid policy consortium in development

CHALLENGES: THE MIND OF THE CUSTOMER

What is a kWh….and why should I care?Electric power industry and policymakers have work to do on communicating energy issues

Energy literacy is a major challenge in encouraging a new relationship between customer and energy use

Cheap, clean and not in my backyard Polling and voting trends indicate sometimes contradictory directives to policymakers

Energy technology advocates must be honest with public of environmental and economic impact.

GEO actions in this area of challengeCreation of a call center, database of all RE / EE programs statewideEnergy Education and Outreach :

http://www.colorado.gov/energy/index.php?/resources/profile/flash-map

Governor’s Energy OfficePrimary Mission – “Closing the Gap”

Thank you

Matt Futch, Utilities Program ManagerColorado Governor's Energy Office(303)-866-4663matt.futch@state.co.uswww.colorado.gov/energy