State Gov't $165K RPS Savings
About Renewable Portfolio Standards
Renewable Portfolio Standards (RPS) are regulations that require electricity providers to incorporate a minimum percentage of renewable energy into their energy mix. Enacted in 29 states, Washington DC, and three US territories over the past 20 years, these standards have been instrumental in driving renewable energy adoption across the country.
As US states aim to hit escalating renewable energy targets set by their RPS, they pass regulations that require electricity providers (suppliers and utilities) to purchase additional renewable energy. Once these regulations are recognized as “Changes in Law,” electricity providers are able to pass any additional costs on to retail consumers.
The State Government (“State”) ranks among the top 15 US states in total population, GDP, and the number of government employees. The State also ranks in the top 10 in terms of energy efficiency and management policies.
Enel X, a leading provider of software-enabled energy procurement and advisory services, began its relationship with the State in 2005, when Enel X (formerly known as World Energy) was awarded a contract for energy procurement and contract management services. Since then, Enel X has continued to work with the State to competitively source electricity and manage energy supply contracts. In the run-up to an auction for a new electricity supply contract in 2016, Enel X worked with multiple state agencies to review a number of alternate pricing products, including fully-indexed and block-and-index contracts. Ultimately, the state agencies opted for a fixed-price product to achieve maximum budget certainty. Then in May 2016, Enel X ran an open auction for the State to source electricity for more than 200 accounts across 18 agencies, totaling more than 350,000,000 annual kWh. Post auction, Enel X helped the State’s sourcing team select the contract that provided the best value: a 36-month, fixed-price contract.
Before the contract was set to begin, however, the State’s energy department released regulatory changes (see “About Renewable Portfolio Standards”) that required electricity providers to purchase significantly more solar power than they had in the previous year. The new solar energy regulation did three things:
- Increased the total amount of solar energy that electricity providers would need to purchase.
- Decreased the amount of existing solar energy that providers would need to purchase. 3. Decreased the cost of new solar energy that generators could charge providers.
These new mandates on solar energy, coupled with price changes for new solar generation, made RPS accounting even more complicated for many—including the State.
When Enel X Advisors reviewed a newly adjusted contract issued by the State’s electricity provider, they noticed that the State was absorbing the cost of the increased solar requirements, but was not receiving credit for lower obligations to buy (more expensive) existing solar generation.
Working on behalf of the State, Enel X contacted the electricity provider to correct the accounting error. Enel X Advisors also negotiated with the provider to quote current market prices for the solar renewable energy credits, as opposed to the higher prices found on the market at the time of the regulatory changes. By continuing to act on behalf of the State to identify and correct the error, Enel X helped deliver value beyond the original sourcing contract. Enel X helped the state government achieve cost savings of $0.47/MWh, or approximately $165K in FY17.