Back in May 2012, the Vermont Legislature enacted into law (Act 170) significant changes to the “SPEED” Standard Offer program for in-state renewable electric energy projects with a capacity of 2.2 megawatts or less. In an Order issued on March 1, 2013 (Dockets 7873/7874), the Vermont Public Service Board implemented the new statutory mandates, including replacing the existing lottery-based system of selecting eligible projects with a market-based approach and a cap on the price to be paid to these projects for the energy, capacity, and renewable energy credits they produce over the term of the standard offer contract (10 – 25 years). The new selection criteria and prices take effect on April 1, 2013.
With the exception of solar projects, the Board left in place the standard-offer prices (the “avoided costs“) for each class of renewable technology that it previously set in 2012 in Docket 7780 – wind, biomass, hydro, farm methane, and landfill gas. The standard offer price for solar projects was lowered by approximately 5% (from $0.271 per kWh to $0.257/kWh), reflecting the downward trend in solar panel prices and the belief that price declines will continue into the foreseeable future. These avoided costs were set as caps on the prices solicited through the market-based mechanism.
The market-based mechanism is a drastic departure from the system previously required by statute, implemented, and used by the Public Service Board to qualify projects for a standard-offer contract. In the past, project developers entered a lottery and, if their project was selected through a random drawing, they were guaranteed the standard-offer price for the contract period (provided they met a few basic requirements concerning site control, application for interconnection, application for a section 248 certificate of public good, etc.). As there were many more proposed projects than could be accommodated under the Program’s statutory cap of 50 MW, a sizable waiting list (queue) was created. After Act 170 and the Board Order of March 1st, the selection process is now more complex and more competitive.
For some background, Act 170 requires the Board to establish a market-based mechanism so long as the Board first finds that such a mechanism (1) is consistent with federal law and (2) meets the goals of timely development at the lowest feasible cost. The Board made those findings in its Order, and went on to lay out what the market-based approach would entail.
Starting on April 1, 2013, a developer seeking to build a renewable energy project under a standard offer contract will need to respond to a Request for Proposal (“RFP”) to be issued by the SPEED Program Facilitator. Projects will be ranked from lowest to highest based upon the prices offered by each proposed project, with the lowest price projects receiving first priority in the “queue” towards a given year’s programmic capacity (5 MW in 2013). In no event can a project receive more than the avoided cost set by the Board for the particular technology class, as reflected in the Board’s Order.
Should the last-selected project in the bid list exceed the annual plant capacity cap for a given year, that project will simply take some space in the next year’s capacity. The Board also established a 4.5 MW reserve capacity for projects that were not selected within the annual cap. This will create a de facto waiting list that will allow unselected projects to take the place of selected projects should any drop out of the process. To ensure that bidders have done their due diligence in putting forth their proposals, the Board will now require bidders to provide “proposal security” (a deposit) of $10/kWh, which is only refundable upon commissioning of the project to incent developers to make realistic bids for projects that can actually be built. Thus, a project that is selected but doesn’t move forward to completion will lose its deposit. And, developers must demonstrate control of the proposed site at the time they respond to the RFP, rather than making such a showing at the time the contract is signed, as was formerly allowed.
The Board directed the SPEED facilitator to issue the RFP at 9 A.M. on April 1, 2013.
The Board also directed the SPEED Facilitator to eliminate the current waiting list of projects that were not selected in the inital lottery and have not yet signed a standard-offer contract as of March 1, 2013; projects that were in the old queue will have the opportunity to respond to the April 1, 2013 RFP, and any additional capacity that opens up between March 1 and April 1, 2013 will be added to the April 1, 2013 RFP.
To recap, here’s what you need to know about the biggest changes to the standard-offer program:
- Projects will be selected pursuant to a market-based approach; developers will now have to submit a proposal pursuant to an RFP process, lowest cost projects are given priority (other value factors were expressly rejected by the Board);
- The SPEED waiting list as it existed on February 28, 2013 is gone; those who were on the waiting list (and anyone else, for that matter) can respond to the RFP issued by the SPEED Facilitator; and
- The Speed Facilitator will issue an RFP to fill the 2013 capacity on April 1, 2013; developers will have until 3 p.m. on May 1, 2013 to submit their proposals.
To see the RFP, click here.
Here is the RFP Schedule:
*This blog post was co-written by Erik Nielsen and Andy Raubvogel.