Innovative Clean Energy Program Drives Down Cost of Clean Electricity

Sep 25th, 2012 | By | Category: Energy

 

First Results of the ZREC/LREC Program Show Success in Deploying Lower Cost Clean Electricity for the State of Connecticut

Connecticut’s push for cleaner, cheaper, and more reliable electricity has taken a major step forward with the release by United Illuminating (UI) of the results of the state’s innovative Zero Emissions Renewable Energy Credit (ZREC) and Low Emissions Renewable Energy Credit (LREC) programs. These clean energy programs aim to promote alternative power generation at ever more competitive rates.

The program resulted in 21 projects totaling 6.2 MW of solar and fuel cell generation being selected for deployment at locations across UI service territory (including in Orange, Hamden, Stratford, New Haven, Trumbull, Fairfield, Shelton, Ansonia, West Haven, Milford, and Bridgeport).  The weighted average of payments for Renewable Energy Credits (RECs) to these 19 solar projects and 2 fuel cell projects is 8.6 cents per kilowatt hour (c/kWh) compared to solar programs in other states that often have resulted in payments of around 20 c/kWh per REC.
“This program is a key element of my Administration’s efforts to deliver cheaper, cleaner, and more reliable energy to Connecticut residents and businesses,” said Governor Dannel P. Malloy.  “Connecticut must be a leader in clean energy, but we must also work to drive renewable energy costs down to a level that is competitive with existing electricity rates.  I am pleased that Connecticut’s baseline electricity rates have dropped by 14% since 2010, and we will continue working to integrate renewable sources into our grid while bringing the cost of power down.”
“By harnessing market forces and leveraging economic incentives, we are creating a new energy future for our state,” said Daniel C. Esty, Commissioner of the Department of Energy and Environmental Protection.  “Through Governor Malloy’s energy agenda, Connecticut is emerging as a national leader in the effort to bring down energy prices while moving to a greater reliance on cleaner sources of power.”
The results of the ZREC/LREC bidding, which represent roughly 20% of the total program (Connecticut Light & Power will be filing their results for the remainder of the program in the coming weeks), show that the program design has successfully driven down the cost of producing clean electricity in the state. These lower costs were accomplished by harnessing marketplace competition to drive down the level of financial assistance needed from ratepayers.
Under the ZREC/LREC program, CL&P and UI accepted bids from renewable energy project developers.  The projects that required the least amount of subsidy from the program were selected for funding.  Stringent criteria for selection of projects also ensure the quality of the projects submitted to the program.  Winning bidders receive 15-year contracts for the payment of a set price per megawatt hour (MWh) of output in the form of renewable energy credits (RECs).  By selecting quality projects that have lower costs, the ZREC/LREC program maximizes the amount of in-state economic activity generated by the program and procures the lowest priced renewable electricity possible.
The program also requires that project developers post a “performance assurance that will be forfeited if the project is unable to produce electricity within 12-months of the contract’s delivery term start date.  This provision ensures that projects selected for the program are up and running in a timely fashion, and is a major change from past energy initiatives.   This approach is designed to minimize speculators and potential line-sitters who would otherwise clog up the pipeline of projects coming out of the program.  This results in some dropouts early in the bid and contracting process, but will produce better program results than those seen in the past.
The ZREC/LREC program is a part of landmark energy reform legislation (Public Act 11-80) that created the DEEP.  The program is a collaborative process between the state, Connecticut Light & Power, and United Illuminating.

For more on this story, visit: deep: Innovative Clean Energy Program Drives Down Cost of Clean Electricity.

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