PUCT Staff File Revised Draft for Proposal for Publication for Non-Wind RPS Carve-Out

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December 10, 2010

PUCT Staff have filed a recommended proposal for publication which revises an April Staff draft proposal to institute a 500 MW carve-out for non-wind resources in the RPS mandate. Staff's revisions to the earlier draft proposal would use a more narrow definition for Tier 2 resources and would extend the time for the transition to the 500 MW carve-out (Project 35792).

Staff filed a recommended proposal for publication in April (4/19), but the proposal was not published by the Commission.  

Staff's revised draft proposal for publication would establish three tiers of RPS resources: a “new solar” tier (Tier 1), a “new biomass” and “new geothermal” tier (Tier 2), and a tier for all other renewable resources (Tier 3).

New solar resources (Tier 1) would be defined as energy resources interconnected after January 1, 2013 that derive energy by converting solar energy into electric energy.

A new biomass resource (Tier 2) would be an energy resource interconnected after January 1, 2014 that derives electrical power from landfill gas, materials resulting from storm damage, urban waste, non-forest agricultural waste, or from plant materials resulting from selective removal of invasive species or the repurposing of land.

A new geothermal resource (Tier 2) would be a resource interconnected after January 1, 2014 that derives electrical power from underground thermal or hydrostatic energy.

The definition for Tier 2 resources under the April draft was broader, and would have included any non-wind, non-solar resource (e.g. also including hydro, tidal, etc.), and also would have defined "new" as a resource installed after January 1, 2010 (see 4/19).

Tier 3 resources under the new draft include a renewable energy resource that is neither a new solar, a new biomass, nor a new geothermal resource.

Tier 1 resources could still be used to meet any compliance tier; Tier 2 resources could be used for either Tier 2 or Tier 3 mandates.

Alternative compliance payments under the new draft are the same as proposed in April: $120 per each deficient Tier 1 REC, and $60 for each Tier 2 REC.  Penalties for a shortfall in Tier 1 or Tier 2 RECs, or failure to pay the alternative compliance payment, would be set at double the alternative compliance payment.

The draft still does not formally define a alternative compliance payment for Tier 3 RECs but maintains the current de facto alternative compliance payment of $50 for Tier 3 RECs by setting the penalty for non-compliance for Tier 3 at $50 per REC.

The draft also extends the time under which the new carve-outs would be introduced, reflecting the new proposal to limit the carve-outs to new resources which go on-line in either 2013 or 2014 as noted above.

The RPS mandates would be:

• 4,264 MW in 2011 (no carve-out)
• 5,256 MW in 2012 and 2013 (no carve-out)
• 5,880 MW in 2014, with a 5 MW Tier 1 and 10 MW Tier 2 carve-out

The 5,880 MW target would remain in place for every year through 2030, with increasing amounts of the target dedicated to the carve-outs as follows:

• 10 MW from Tier 1 and 20 MW from Tier 2 in 2015
• 20 MW from Tier 1 and 40 MW from Tier 2 in 2016
• 40 MW from Tier 1 and 80 MW from Tier 2 in 2017
• 80 MW from Tier 1 and 160 MW from Tier 2 in 2018
• 167 MW from Tier 1 and 333 MW from Tier 2 in every year after 2018

The draft would establish a default capacity conversion factor for new solar resources as 25%, and a default capacity conversion factor of 90% for new biomass and new geothermal resources.  If a plant using any of these three new resources is of at least 10 MW in size and has been in operation for two years, an individual capacity factor would be calculated based on actual performance.

The draft maintains the prior proposed definition for a renewable energy storage device and the provision that such storage devices that discharge electric energy may generate a renewable energy credit of any tier for the energy it discharges if the operator has retired a renewable energy credit of the same tier in connection with charging the storage device for each megawatt-hour of energy it discharges.

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