How do we design and implement policy so that it drives clean energy investment?

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INVESTMENT-
GRADE POLICY
HAL HARVEY

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SOME AMAZING PROGRESS
Clean energy costs are falling…

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SOME AMAZING PROGRESS
…While capacity is rising and replacing fossil fuels

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SOME AMAZING PROGRESS
Global clean energy investment is at an all-time high
$329 billion in 2015

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DRIVEN BY POWERFUL POLICY
RENEWABLE PORTFOLIO STANDARDS
CA: 50%
by 2030
HI: 100%
by 2045
VT: 75%
by 2032
ME: 40%
by 2017

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DRIVEN BY POWERFUL POLICY
RENEWABLE PORTFOLIO STANDARDS
EU
 20% renewables by 2020
Denmark
 100% renewables by 2050
Sweden
 49% renewables by 2020
(already met)

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DRIVEN BY POWERFUL POLICY
Chinese mandates
 20% renewables by 2030
 Cap-and-trade
 Peak coal
 700 GW renewables
installed by 2030

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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Generation(MW)
Time of Day
CA High Load Case Profiles
January 2020
Load
CONCERNS
THE POWER SYSTEM
 Variability

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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Generation(MW)
Time of Day
CA High Load Case Profiles
January 2020
Load
Wind
CONCERNS
THE POWER SYSTEM
 Variability

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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Generation(MW)
Time of Day
CA High Load Case Profiles
January 2020
Load
Wind
Solar
CONCERNS
THE POWER SYSTEM
 Variability

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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Generation(MW)
Time of Day
CA High Load Case Profiles
January 2020
Load
Net Load
Wind
Solar
CONCERNS
THE POWER SYSTEM
 Variability

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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Generation(MW)
Time of Day
CA High Load Case Profiles
January 2020
Load
Net Load
Wind
Solar
6,300
MW in 2
hours
13,500
MW in 2
hours
CONCERNS
THE POWER SYSTEM
SOLUTIONS
 Energy Efficiency
 Demand response
 Fast-ramping natural gas
 Storage technologies
 System optimization

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POWER SYSTEM PROBLEMS
Physical: System balancing
Economic: Utility reward systems
Policy: Both of the above, plus
creating certainty

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FUTURE OF UTILITY POLICY
EXAMPLE: STAIRSTEP CAPABILITIES MARKET
 Value capability, not energy
 Make time horizons comport with
investment horizons
Years
Energy
Minutes
Capability
VS

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FUTURE OF UTILITY POLICY
SOFT COSTS
U.S. soft costs are 2X higher
than Australia’s, and 4X
higher than Germany’s

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WHAT IS INVESTMENT-GRADE POLICY?
 Reward performance (e.g. RPS)
 Continuous improvement
 Long time horizon
 Siting certainty
 Pre-cooked PPAs
 Contract sanctity
 Minimize soft costs
 This is the formula for
Investment-Grade
Policy
 This will slash costs
and volumes will
explode

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IF YOU REDUCE RISKS, YOU SLASH COSTS
LCOE of solar doubles when interest rates increase from1% to 11%
Effect of WACC
on LCOE,
constant GHI

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WHAT INVESTORS NEED TO DO
 Communicate, clearly and emphatically, that they are ready to
invest, given good policy
 Enunciate the precepts of good policy: Long-term, continuous
improvement, contract certainty, siting certainty
 Deliver that message to key venues:
 Governors, PUCs, Energy Ministers

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THANK YOU
@HAL_HARVEY
@ENERGYINNOVLLC
HAL HARVEY
WWW.ENERGYINNOVATION.ORG