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 London Economics International LLC 1 contact:717 Atlantic Ave, Suite 1A Julia Frayer/Eva WangBoston, MA02111 617-933-7200www.londoneconomics.com julia@londoneconomics.com
MPUC RPS Report 2011 - Review of RPS Requirements andCompliance in Maine
Prepared by London Economics International LLC for the Maine Public UtilitiesCommission
 
 January 30, 2012
 
 Pursuant to An Act To Reduce Energy Prices for Maine Consumers, P.L 2011, ch. 413, sec. 6 (the
“ 
 Act 
” 
 ), the Maine Public Utilities Commission
(“ 
 MPUC
” or the “Commission”)
was directed by the Legislature t 
o study Maine’s renewable portfolio requirement established in 35
-A M.R.S.A. § 3210 (3-A). The Commission engaged London Economics International LLC
(“ 
 LEI 
”)
 to conduct an in-depth analysis of the renewable portfolio standards ("RPS") required by the
 Act which would support the Commission’s study and report to the Legislature
on the following eight topics:
 
 Item 1: the source and cost of renewable energy credits ( 
“ 
 RECs
” 
 ) used to satisfy therenewable portfolio standard ( 
“ 
 RPS
” 
 ) requirements;
 
 Item 2: the impact of RECs generated in Maine on the regional REC market;
 
 Item 3: the impact of the RPS requirements on the viability of electricity generating  facilities in Maine that are eligible to meet the RPS requirement;
 
 Item 4: the impact of the RPS requirements on electricity costs of Maine ratepayers;
 
 Item 5: if the RPS requirements result in an increase in electricity costs, to the extent  possible, the impact of that increase on economic development in Maine;
 
 Item 6: the cost of the use of the alternative compliance payment ( 
“ 
 ACP
” 
 ) mechanismunder Title 35-A, section 3210, subsection 9 for electricity consumers in Maine and, tothe extent information is available, the reasons competitive electricity providers use the ACP mechanism;
 
 Item 7: the best practices for setting the ACP rate; and 
 
 Item 8: to the extent possible, the benefits resulting from the portfolio requirements,including, but not limited to, tangible benefits and community benefits pursuant to Title35-A, section 3454, economic benefits due to the creation of jobs or investments in thisState including multiplier effects, research and development investment in this State,the impact on electricity rates and benefits due to diversifying this State's energy generation portfolio.
 
 London Economics International LLC 2 contact:717 Atlantic Ave, Suite 1A Julia Frayer/Eva WangBoston, MA02111 617-933-7200www.londoneconomics.com julia@londoneconomics.com
Table of Contents
 
A.
 
E
XECUTIVE
S
UMMARY
:
 
K
EY
F
INDINGS AND
O
BSERVATIONS
........................................ 7
 
B.
 
O
VERVIEW OF
RPS
REGULATIONS AND
REC
MARKETS IN
M
AINE AND THE REST OF
N
EW 
E
NGLAND
............................................................................................................................ 21
 
B.1
 
M
AINE
........................................................................................................................................................... 21
 
B.1.a
 
RPS eligible supply .............................................................................................................................. 22
 
B.1.b
 
Compliance .......................................................................................................................................... 23
 
B.1.c
 
Banking mechanism and compliance cure period ................................................................................ 25
 
B.2
 
S
UMMARY OF
RPS
REGULATIONS IN OTHER
N
EW
E
NGLAND STATES
......................................................... 25
 
B.2.a
 
Comparative RPS requirements .......................................................................................................... 26
 
B.2.b
 
Comparison of eligible renewable supply ............................................................................................. 29
 
B.3
 
O
VERVIEW OF
REC
MARKETS ACROSS
N
EW
E
NGLAND
.............................................................................. 29
 
B.3.a
 
REC supply and demand for different RPS programs across New England ....................................... 30
 
B.3.b
 
REC prices across New England ......................................................................................................... 32
 
C.
 
I
TEMS FOR REVIEW 
............................................................................................................ 35
 
C.1
 
I
TEM
1
 
-
 
S
OURCE AND COST OF
REC
S USED TO SATISFY
M
AINE
RPS
REQUIREMENTS
................................ 35
 
C.1.a
 
 Maine RPS Class I (new renewables) compliance ............................................................................... 35
 
C.1.b
 
 Maine RPS Class II (existing renewables) compliance ........................................................................ 39
 
C.2
 
I
TEM
2
 
-
 
I
MPACTS OF
REC
S GENERATED IN
M
AINE ON THE REGIONAL
REC
MARKET
............................... 41
 
C.2.a
 
Interaction of Class I (new renewables) resources by location and fuel mix in 2009 .......................... 41
 
C.2.b
 
New investment and certification of more renewable resources will change the fuel mix of RPScompliance .......................................................................................................................................................... 44
 
C.2.c
 
Revised Massachusetts RPS Class I (new renewables) regulation on biomass ................................... 45
 
C.3
 
I
TEM
3
 
-
 
I
MPACTS OF
RPS
REQUIREMENTS ON THE VIABILITY OF ELECTRICITY GENERATING FACILITIES IN
M
AINE ELIGIBLE TO MEET THE
RPS
REQUIREMENT
............................................................................................... 47
 
C.3.a
 
The effectiveness of RPS policies in promoting renewable generation development in New England 47 
 
C.3.b
 
Quantifying the economic viability of renewable facilities .................................................................. 49
 
C.4
 
I
TEM
4
 
-
 
I
MPACTS OF
RPS
REQUIREMENTS ON
M
AINE RATEPAYERS
'
ELECTRICITY COSTS
.......................... 55
 
C.5
 
I
TEM
5
 
-
 
I
MPACTS OF AN INCREASE OF ELECTRICITY COSTS DUE TO
RPS
REQUIREMENTS ON ECONOMICDEVELOPMENT IN
M
AINE
....................................................................................................................................... 58
 
C.5.a
 
 Measuring economic development impact - direct and indirect effects ............................................... 59
 
C.5.b
 
Residential Customers ......................................................................................................................... 61
 
C.5.c
 
Commercial and Industrial Customers ................................................................................................ 63
 
C.6
 
I
TEM
6
 
-
 
T
HE COST OF AND REASONS FOR USING THE
ACP
MECHANISM FOR
M
AINE
RPS
COMPLIANCE
. 66
 
C.6.a
 
Usage of ACP in Maine for RPS compliance ...................................................................................... 66
 
C.6.b
 
Cost impacts of ACP on Maine customers .......................................................................................... 67 
 
C.6.c
 
Why do Competitive Electricity Providers use ACP for RPS compliance?......................................... 67 
 
C.7
 
I
TEM
7
 
-
 
B
EST PRACTICES FOR SETTING THE
ACP
RATE
............................................................................... 69
 
C.7.a
 
Factors affecting the ACP rate ............................................................................................................. 69
 
C.7.b
 
Case studies of best practices of setting ACP rates .............................................................................. 71
 
C.7.c
 
Conclusion ........................................................................................................................................... 73
 
C.8
 
I
TEM
8
 
–
 
B
ENEFITS OF
RPS
REQUIREMENTS ON ECONOMIC DEVELOPMENT IN
M
AINE
.............................. 74
 
C.8.a
 
Economic Benefits of RPS today .......................................................................................................... 75
 
C.8.b
 
Benefits of RPS in the long run for Maine’s economy
......................................................................... 75
 
C.8.c
 
Other Potential Benefits ...................................................................................................................... 79
 
C.8.d
 
Summary of Costs and Benefits of Maine’s RPS
................................................................................. 80
 
 
 London Economics International LLC 3 contact:717 Atlantic Ave, Suite 1A Julia Frayer/Eva WangBoston, MA02111 617-933-7200www.londoneconomics.com julia@londoneconomics.com
D.
 
A
PPENDICES
...................................................................................................................... 83
 
D.1
 
A
PPENDIX
A:
 
RPS
 
R
EGULATIONS IN OTHER
N
EW
E
NGLAND
S
TATES
........................................................ 83
 
D.1.a
 
 Massachusetts ...................................................................................................................................... 86
 
D.1.b
 
Connecticut .......................................................................................................................................... 90
 
D.1.c
 
New Hampshire ................................................................................................................................... 92
 
D.1.d
 
Rhode Island ........................................................................................................................................ 94
 
D.2
 
A
PPENDIX
B:
 
REC
 
P
RICE
D
RIVERS
............................................................................................................... 96
 
D.3
 
A
PPENDIX
C:
 
RPS
 
C
OMPLIANCE IN OTHER
N
EW
E
NGLAND
S
TATES
......................................................... 98
 
D.3.a
 
 Massachusetts ...................................................................................................................................... 98
 
D.3.b
 
Connecticut ........................................................................................................................................ 103
 
D.3.c
 
New Hampshire ................................................................................................................................. 106
 
D.3.d
 
Rhode Island ...................................................................................................................................... 109
 
D.4
 
A
PPENDIX
D:
 
A
SSESSING THE
O
PTIMAL
REC
 
P
RICE FOR
P
ROMOTING
N
EW
I
NVESTMENT
B
ASED ON THE
B
REAK
-E
VEN
S
HORTFALLS BETWEEN ALL
-
IN LEVELIZED COSTS AND REVENUES FOR VARIOUS RENEWABLETECHNOLOGIES
..................................................................................................................................................... 113
 
D.4.a
 
Impacts of low energy market prices & expiration of PTC on the viability of renewable facilities .... 116
 
D.5
 
A
PPENDIX
E:
 
K
EY
A
SSUMPTIONS USED IN THE
NETP
 
M
ODEL
................................................................. 118
 
D.6
 
A
PPENDIX
F:
 
C
OST
I
MPACTS OF
RPS
 
R
EQUIREMENTS ON
M
AINE
C
USTOMERS
....................................... 119
 
D.6.a
 
Baseline scenario ................................................................................................................................ 119
 
D.6.b
 
Higher RPS requirement scenario ..................................................................................................... 120
 
D.6.c
 
Higher RPS requirement and higher REC price scenario ................................................................. 120
 
D.6.d
 
Higher RPS requirement and lower REC price scenario ................................................................... 121
 
D.7
 
A
PPENDIX
G:
 
C
ASE
S
TUDIES FOR
I
NVESTIGATING
ACP
 
M
ECHANISMS
.................................................... 122
 
D.7.a
 
Case study 1
–
ACP rates in another New England state with inflation escalation (Massachusetts)122
 
D.7.b
 
Case study 2
–
ACP rates in another New England states without escalation (Connecticut) .......... 123
 
D.7.c
 
Case study 3
–
FIT in Germany ........................................................................................................ 123
 
D.8
 
A
PPENDIX
H:
 
F
ACTORS AFFECTING THE
ACP
RATE
.................................................................................. 126
 
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