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Home My WebLink About2020-10-07 Utilities Advisory Commission Agenda PacketMATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE COMMISSION AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE UTILITIES DEPARTMENT AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. NOTICE IS POSTED IN ACCORDANCE WITH GOVERNMENT CODE SECTION 54954.2(a) OR 54956 ****BY VIRTUAL TELECONFERENCE ONLY*** Join Zoom Webinar Here Meeting ID: 966 9129 7246 Phone: 1 (669) 900-6833 Pursuant to the provisions of California Governor’s Executive Order N-29-20, issued on March 17, 2020, to prevent the spread of COVID-19, this meeting will be held by virtual teleconference only, with no physical location. The meeting will be broadcast on Cable TV Channel 26, live on Midpen Media Center at https://midpenmedia.org. Members of the public who wish to participate by computer or phone can find the instructions at the end of this agenda. I. ROLL CALL II. AGENDA REVIEW AND REVISIONS III. ORAL COMMUNICATIONS Members of the public are invited to address the Commission on any subject not on the agenda. A reasonable time restriction may be imposed at the discretion of the Chair. State law generally precludes the UAC from discussing or acting upon any topic initially presented during oral communication. IV. APPROVAL OF THE MINUTES Approval of the Minutes of the Utilities Advisory Commission Meeting held on September 2, 2020 V. UNFINISHED BUSINESS - None VI. UTILITIES DIRECTOR REPORT VII. NEW BUSINESS 1. Staff Recommendation That the Utilities Advisory Commission Recommend the City Council Action Adopt a Resolution Updating the City's Carbon Neutral Gas Plan to Continue to Achieve Carbon Neutrality for the City's Natural Gas Supply Portfolio 2. Discussion and Update on the Adoption and Integration of Distributed Energy Resources Discussion in Palo Alto VIII. COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS IX. FUTURE TOPICS FOR UPCOMING MEETINGS: November 04, 2020 SUPPLEMENTAL INFORMATION - The materials below are provided for informational purposes, not for action or discussion during UAC Meetings (Govt. Code Section 54954.2(a)(3)). Informational Reports 12-Month Rolling Calendar Public Letter(s) to the UAC UTILITIES ADVISORY COMMISSION – SPECIAL MEETING WEDNESDAY, October 7, 2020 – 4:00 P.M. ZOOM Webinar Chairman: Lisa Forssell  Vice Chair: Lauren Segal  Commissioners: Michael Danaher, Donald Jackson, A.C. Johnston, Greg Scharff, and Loren Smith  Council Liaison: Alison Cormack MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE COMMISSION AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE UTILITIES DEPARTMENT AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. PUBLIC COMMENT INSTRUCTIONS Members of the Public may provide public comments to teleconference meetings via email, teleconference, or by phone. 1. Written public comments may be submitted by email to UACPublicMeetings@CityofPaloAlto.org. 2. Spoken public comments using a computer will be accepted through the teleconference meeting. To address the Commission, click on the link below for the appropriate meeting to access a Zoom- based meeting. Please read the following instructions carefully. A. You may download the Zoom client or connect to the meeting in-browser. If using your browser, make sure you are using a current, up-to-date browser: Chrome 30+, Firefox 27+, Microsoft Edge 12+, Safari 7+. Certain functionality may be disabled in older browsers including Internet Explorer. B. You will be asked to enter an email address and name. We request that you identify yourself by name as this will be visible online and will be used to notify you that it is your turn to speak. C. When you wish to speak on an agenda item, click on “raise hand.” The Attendant will activate and unmute speakers in turn. Speakers will be notified shortly before they are called to speak. D. When called, please limit your remarks to the time limit allotted. E. A timer will be shown on the computer to help keep track of your comments. 3. Spoken public comments using a smart phone use the telephone number listed below. When you wish to speak on an agenda item hit *9 on your phone so we know that you wish to speak. You will be asked to provide your first and last name before addressing the Council. You will be advised how long you have to speak. When called please limit your remarks to the agenda item and time limit allotted. Join Zoom Webinar Here Meeting ID: 966-9129-7246 Utilities Advisory Commission Minutes Approved on: Page 1 of 6 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF SEPTEMBER 2, 2020 MEETING CALL TO ORDER Chair Forssell called the meeting of the Utilities Advisory Commission (UAC) to order at 4:01 p.m. Present: Chair Forssell, Vice Chair Segal, Commissioners Jackson, Johnston, Scharff, and Smith Absent: Commissioner Danaher ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES Commissioner Jackson moved to approve the minutes of the August 5, 2020 meeting as presented. Commissioner Scharff seconded the motion. The motion carried 5-0 with Chair Forssell, Vice Chair Segal, and Commissioners Jackson, Johnston, and Scharff voting yes, and Commissioners Danaher and Smith absent. AGENDA REVIEW AND REVISIONS None. REPORTS FROM COMMISSIONER MEETINGS/EVENTS Commissioner Scharff disclosed that he attended several Northern California Power Agency (NCPA) virtual meetings, which kicked off the 5-year Strategic Plan and would bring back reports to the Commission as the process moves forward. UTILITIES DIRECTOR REPORT Dean Batchelor, Utilities Director, delivered the Director's Report. American Public Gas Association Advocacy Concerns - Recently, the City has received a few inquiries through social media and comments to the UAC from advocates concerned about Palo Alto’s membership with the American Public Gas Association (APGA). In recent years, APGA has submitted comments to the California Energy Commission opposing building electrification mandates. Palo Alto has made its concerns about APGA’s advocacy known to APGA staff. City staff have communicated directly with executive management at APGA regarding legislation surrounding renewable energy, the fossil fuel industry, and electrification. In the past, APGA has extended us the courtesy of sharing their policy statements and comments to regulatory agencies on these matters. Through such correspondence, we have reiterated that Palo Alto is actively exploring electrification in our service territory and developing relevant policies and programs while carefully considering the operational implications for our gas utility operations. Specifically, we have communicated to APGA that Palo Alto’s position on this topic diverges from APGA, and we will continue to do so when corresponding about these issues. DRAFT Utilities Advisory Commission Minutes Approved on: Page 2 of 6 We have debated internally whether we should continue our membership. At this time, we believe the safety and reliability of the gas system needs to continue to be our priority. APGA primarily exists to help small publicly owned gas utilities ensure the safety of their gas systems and comply with Department of Transportation (DOT) safety regulations. It provides a wide variety of resources to its members that we rely on heavily in managing our gas system. As a result, we continue to maintain our membership with APGA while expressing our dissatisfaction about their advocacy positions. SFPUC Water System Health – The City of Palo Alto’s water supplier, the San Francisco Public Utilities Commission (SFPUC), has not reported any damage to the regional water system, nor known water quality impacts, due to recent regional wildfires. CPAU staff will provide updates on critical information if the agency reports any news during subsequent evaluations. Council member Cormack shared an article with us that was included in a recent Bay Area Water Supply and Conservation Agency (BAWSCA) correspondence packet that she thought might be helpful in reminding us to check in on our codes and practices with respect to backflow prevention devices and fire resistant meter boxes. CPAU staff have been working diligently for many years to ensure that appropriate backflow prevention measures are in place to protect the city’s main potable water supply distribution system. Rolling Power Outages – Over the past month, California and the western United States have experienced record-breaking heatwaves. This has caused a strain on the electric grid, and high electricity demand continues to put pressure on the state’s energy infrastructure. The agency that manages the state’s electric grid, the California Independent System Operator (ISO), issued a statewide call for voluntary electricity conservation, known as a Flex Alert, in an attempt to avert rolling power outages. Palo Alto experienced a power outage for about 4,500 customers on the evening of Friday, August 14, but due to concerted efforts from state and city community members, we were able to avoid additional power outages. Thank you to all who heeded our call to power down or eliminate unnecessary appliance and lighting usage! View helpful tips at cityofpaloalto.org/efficiency tips. • CEC – Enforcement Procedures for the Renewables Portfolio Standard for Local Publicly Owned Electric Utilities • CM Cormack – The article was included in the BAWSCA correspondence packet and she thought it would be a good idea to review the backflow devices and fire resistant meter boxes • Workforce COVID Update • Fiber Update – On August 5th the UAC discussed the importance of broadband service and FTTP given the shift to teleworking, telepresence and remote learning due to the pandemic. The UAC asked staff and Magellan to determine if it was feasible and effective to accelerate some FTTP analysis and tasks in Phase 3 to shorten the duration of the fiber network expansion plan and provide the UAC and Council more up to date information on cost protection and alternative approaches to build out the FTTP network In response to inquiries, Batchelor shared that email blasts and social media posts are sent out ahead of time to inform customers of potential blackouts and how they can help conserve energy. Most of the blackouts occur a night. Staff continues to explore more efficient ways to reach customers who may experience a blackout. Batchelor emphasized to ISO that they could not inform the department of last-minute load shedding and that advanced notification needed to happen. In reply to Council Member Cormack’s questions, Batchelor noted that the Utilities Department does keep track of areas that do have blackouts. Staff moves through the utility feeders to determine which areas may receive a blackout. Chair Forssell recommended that everyone download the CAISO Today App which sends out alerts if there is going to be a blackout. Utilities Advisory Commission Minutes Approved on: Page 3 of 6 COMMISSIONER COMMENTS None. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: DISCUSSION: Discussion and Presentation of Brown Act. Dean Batchelor, Utilities Director, introduced Aylin Bilir, Assistant City Attorney from the City Attorney’s Office, who gave a refresher course to the Commission on the Brown Act. Aylin Bilir, Assistant City Attorney, announced that several rules have changed due to the COVID-19 pandemic and then gave a brief recap of how to avoid serial meetings. The purpose of the Brown Act is to engage the community and to ensure that all meetings are open and transparent. The Brown Act did not apply to meetings between one Commissioner and the public, Commissioner and staff communications, and temporary Ad Hoc Committees. Care needs to be taken when Commissioners post to social media and serial meetings are reviewed on a case by case basis. If majority of Commissioners use direct communication to discussion or deliberate on items, that is considered a serial meeting. Under Executive Order N-29-20, suspended Brown Act rules include no physical public location for a meeting, no physical notice needs to be posted at each location, a Commissioner can teleconference in a place outside of Palo Alto, and the agenda can be posted on online only. In response to Chair Forssell’s question regarding what UAC business means when it comes to posts made by an individual Commissioner on social media, Bilir referred to the UAC’s Formation Statement which stated a broad overview of the UAC’s jurisdiction. In reply to Commissioner Jackson’s inquiry about if a Commissioner could publicly announce their personal position on a general topic, Bilir predicted that it was not a violation, but a Commissioner should not pre- decide on an issue without having a conversation with the public and the Commission as a whole. In answer to Commissioner Scharff’s comment regarding copying all UAC Commissioners on an email that advocates for a position, Bilir confirmed that a Commissioner cannot copy all UAC Commissioners onto an email that is sent to staff. The UAC recessed at 5:04 p.m. and returned at 5:15 p.m. Bilir continued her presentation which stated that the Brown Act prohibits sharing opinions with other members outside of the public meeting forum, but technical questions can be sent to Staff who will then present them to the public. Articles or links can be sent to all UAC Commissioners if no Commissioners express their opinion regarding the article. No Commissioner can email another Commissioner to solicit input regarding an item that is on the agenda. Bilir concurred with Commissioner Jackson’s statement that if a Commissioner sends an article to another Commissioner and that other Commissioner replies with an opinion on the article. That Commissioner is in violation, not the original sender. In response to Commissioner Jackson’s question regarding the UAC’s designated City email, Tabatha Boatwright reported that any email received from the public from that email goes into the public letters to the UAC and is posted online with the UAC Packet. UAC Commission Members do not respond to those Utilities Advisory Commission Minutes Approved on: Page 4 of 6 emails personally. Commissioner Jackson disclosed that the notification process regarding the UAC’s City email is not clear to him and will follow up with the City’s Attorney’s Office. In response to Chair Forssell’s inquiry regarding the discussion that took place earlier around blackouts, Bilir did not believe that conversation was in violation because no action was taken. ACTION: None ITEM 2: DISCUSSION: Discussion and Update on Program for Emerging Technologies. Jonathan Abendschein, Assistant Director of Utilities Resource Management, introduced Lena Perkins, Senior Resource Planner, who managed the program for Emerging Technologies. Lena Perkins, Senior Resource Planner, disclosed that the program has been a success, it has helped several research grants and early-stage companies, and it has allowed collaboration with neighboring load-serving entities. One change that staff recommended is to move the program to an annual application cycle. Abendschein added that staff was not seeking any action from the Commission and the report is informational. Commissioner Jackson fully appreciated the change to move the program to an annual application cycle and he looked forward to reading more about staff’s academic collaboration to evaluate the impact of the switch to all-electric residents. In reply to Commissioner Johnston’s query regarding the decline in applications, Perkins explained that staff has not been actively soliciting the program due to other priorities in the past years. The program will be promoted more now that staff has been able to reorganize. Commissioner Johnston wished to see the program promoted more and he supported the change staff recommended. Commissioner Scharff did not believe the program should be prioritized and take up more of staff’s time. It is a good program and that it should be left up to staff on how it is managed. In response to Vice Chair Segal’s question regarding potential funding from other sources, Perkins explained that staff’s approach is to solicit applications that are more in line with the City’s interests and programs that would require minimal staff time. Abendschein added that finding long term funding sources is a challenge and existing funding sources were already allocated to other projects. Vice Chair Segal supported the annual switch. In reply to Commissioner Smith’s query, Perkins proclaimed that all prior pilot programs provided a benefit the City. Any programs that may become permanent have a layer of commitment to them and staff resources needed to be evaluated before anything can become permanent. In answer to Chair Forssell’s questions, Perkins concurred that on the Emerging Technologies’ Website has a list of prior pilot projects that were accepted and executed. A lighthouse customer is a customer that first deploys the product. She advised that in her opinion pilot programs should be restricted to the Series A, B space and staff can provide letters of support and consultation for very early-stage projects. ACTION: None ITEM 3: DISCUSSION: Discussion on Scoping of Future Studies of the Potential Impacts of Building Electrification Efforts on the Electric and Gas Utilities Utilities Advisory Commission Minutes Approved on: Page 5 of 6 Bret Andersen proclaimed that the project is very important and is impressed that the City is moving forward with it. It is important that the City publicly announce that it is doing investigations and that the City is planning a managed transition from gas to electricity. He emphasized that American Public Gas Association (APGA) should not be using utility funds to solicit negative messages that go against the effort. Tom Kabat, a resident of the City of Menlo Park, expressed excitement that Palo Alto is following bold climate action changes in terms of combining the gas and electric utility. Jonathan Abendschein, Assistant Director of Utilities Resource Management, said his goal was to take feedback from the Commission on what information related to the utility impacts of building electrification Commissioners were interested in so it could be incorporated into studies staff was currently working on. He noted the Sustainability and Climate Action Plan (S/CAP) goal is to reduce emissions within the City by 80 percent by 2030, which will have significant impacts on the gas and electric utility financial positions and physical operations. Staff was working to quantify these impacts. Key questions to be answered included whether achieving the 80 percent by 2030 goal would result in a non-viable gas utility and a description of the physical impacts it would have on the gas as well as the electric utility. Staff is aiming to complete the studies by the end of 2020. He shared some early insights from the studies. While there was a strong likelihood that the gas utility would be eliminated at some point in the eventual future, eliminating the gas utility was not necessary to achieve the 80 percent by 2030 goal. A key potential barrier to achieving the S/CAP goals would likely be electric utility Engineering and Operations staffing. Positions and contractors in these areas were challenging to recruit for and many more employees and/or contractors would be needed to support the community in achieving the S/CAP goals. Commissioner Scharff wanted to know if the technologies existed to go fully electric for single-family homes (including large homes) without impacting quality of life? How much would the average homeowner’s bill go up, and what would be the range of cost to electrify different homes? Who would pay those costs? Would going fully electric cause more impacts to the City’s electric load during critical times and what is the cost of upgrading the grid so that it can handle the additional load? What would the impacts be to the broader electric grid and how would that factor into the potential for rolling blackouts? Finally, he said it was important that all questions and answers be transparent to the public and there was strong communication with the public about these goals. In reply to Commissioner Smith’s question about whether vehicle electrification was included in the study when evaluating electric distribution system impacts, Abendschein mentioned that a parallel study is taking place that explores the total electric vehicle (EV) charging infrastructure needed across the whole City to support the 80 percent by 2030 goal. All the studies will be combined and will represent the total impact of vehicle charging and electrification on the electric distribution system. In response to Commissioner Smith’s question about whether the City should be promoting solar as a carbon reduction strategy, Abendschein noted that solar does reduce carbon emissions on the wider CAISO grid, but the City calculates emissions differently when tracking S/CAP progress, and solar does not contribute reduction of emissions in that context. Staff continues to explore solar and storage solutions for its resiliency value. Commissioner Jackson asked how strategic the utility needed to be in withdrawing gas from specific areas in a specific order? Abendschein said staff was exploring those topics, and that there were definitely physical limitations on which gas lines had to be withdrawn first, Staff was not yet sure whether there were financial limitations. Commissioner Jackson said that people will be using copious amounts of electricity and that will have major impacts on the electric grid. He wanted to know what percentage of residential customers have 100-amp service, 200-amp service, or 400-amp service? What will the costs be for homeowners and utilities when the capacity of the electrical system must increase, and what potential financing options will the Utilities Department offer? He endorsed on-bill financing as a potential mechanism for facilitating electrification. Utilities Advisory Commission Minutes Approved on: Page 6 of 6 Vice Chair Segal recommended thinking through how peoples’ lifestyles may need to change due to building and vehicle electrification. Has staff considered the physical issues associated with building electrification? For example, how does a customer with tankless gas water heating in a small home find space for a heat pump water heater? When implementing electrification programs, will the City get involved with procurement? Lastly, she was glad to see staff would explore the question of whether it was legally required to serve gas to customers. Commissioner Johnston underlined the point that practical problems needed to be thought through and how to persuade people to electrify. Chair Forssell appreciated staff’s work so far and the questions raised by the other Commissioners. She emphasized that education and outreach needed to take place way in advance so that residents are not surprised. She highlighted the need to look at financing issues as well. Council Member Cormack acknowledged that there will be an impact to staff resources in terms of processing applications. She found it interesting to learn about the possibility of a gas utility transitional strategy addressing primarily multi-family / commercial to be interesting. She emphasized that customer education and outreach was critical. She advised staff to explore standardized ways to permit electrification projects, similar to the work being done to address Accessory Dwelling Units (ADU) permitting in Palo Alto and in other cities. Commissioner Scharff encouraged staff to look carefully at the requirements other City departments impose that can create additional costs to a project, and that are different from the requirements in other cities, and work with them to relieve those types of burdens. He gave an example related to ADUs – in Palo Alto the sewer main must be connected to the street instead of the line for the main house, unlike in some other jurisdictions. ACTION: None ITEM 4: ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting. Commissioner Jackson suggested a topic on undergrounding electricity and fiber. He had several questions regarding the topic and would email them to staff. Vice Chair Segal wanted more information regarding the rolling blackouts and notification for those blackouts. Commissioner Jackson supported that recommendation. ACTION: None NEXT SCHEDULED MEETING: October 7, 2020 Vice Chair Segal moved to adjourn. Commissioner Jackson seconded the motion. The motion carried 6-0 with Chair Forssell, Vice Chair Segal, and Commissioners Jackson, Johnston, Scharff and Smith voting yes, and Commissioner Danaher absent. Meeting adjourned at 6:43 p.m. Respectfully Submitted Tabatha Boatwright City of Palo Alto Utilities Utilities Advisory Commission Minutes Approved on: November 04, 2020 Page 1 of 6 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF October 7, 2020 SPECIAL MEETING CALL TO ORDER Chair Forssell called the meeting of the Utilities Advisory Commission (UAC) to order at 4:02 p.m. Present: Chair Forssell, Vice Chair Segal, Commissioners Danaher, Jackson, Johnston, Scharff and Smith Absent: ORAL COMMUNICATIONS None. APPROVAL OF THE MINUTES Vice Chair Segal moved to approve the minutes of the September 2, 2020 meeting as presented. Commissioner Jackson seconded the motion. The motion carried 6-0 with Chair Forssell, Vice Chair Segal, and Commissioners Danaher, Jackson, Johnston, and Smith voting yes, and Commissioner Scharff absent. AGENDA REVIEW AND REVISIONS Chair Forssell reported that Commissioner Comments would be heard after New Business items. REPORTS FROM COMMISSIONER MEETINGS/EVENTS None. UTILITIES DIRECTOR REPORT Dean Batchelor, Utilities Director, delivered the Director's Report. SunShares 2020 Solar Group-Buy Program - For the fifth year in a row, the City of Palo Alto is participating in Bay Area SunShares, a solar group-buy program administered by the Business Council for Climate Change (BC3). Three solar installers -- Solar Technologies, SkyTech Solar, and Infinity Energy -- have been vetted and selected through an RFP process. This year the program also includes discounts on battery storage. The program runs for a limited time: registration opened on September 1 and closes on November 30. CPAU will hold a free educational workshop on Tuesday, October 27. Contracts for PV installations must be signed by December 31, 2020. This year, electric vehicles are not part of the program. Refrigerator Recycling Program: City of Palo Alto Utilities (CPAU) has reached its goal of picking up 300 refrigerators and freezers through a program started in 2019 and run in part with grant funds from the Bay Area Air Quality Management District (BAAQMD). Customers were offered a $50 rebate to have their up old refrigerators and freezers picked up. Because of our customers’ participation in this program, these older, low-efficiency refrigerators will not go into landfills or be refurbished and sold in the secondhand market. In addition, 95% of parts and materials are recycled, including refrigerants, which are potent greenhouse gases. Utilities Advisory Commission Minutes Approved on: November 04, 2020 Page 2 of 6 Our customers have made a lasting, positive change that will benefit this community and the environment for many years to come. CALeVIP: We are encouraging commercial customers to prepare now to take advantage of financial incentives coming soon (December 16) for installing EV infrastructure. As you may recall, CPAU has partnered with the California Electric Vehicle Infrastructure Project (also known as CALeVIP) to provide rebates for EV charger purchases and installation costs. CPAU was awarded $1M from the California Energy Commission and we have contributed $1M in matching funds to this project. We expect that over the next 2 years the program will result in 100 to 200 new Level 2 chargers and 10 to 20 new DC fast chargers in Palo Alto. To put this in perspective, we currently have about 800 Level 2 publicly accessible chargers and 30 DC fast chargers in town. Details are available at the CALeVIP, Peninsula- Silicon Valley Incentive Project webpage at CALeVIP.org We are also taking this opportunity to extend our EV Charging technical assistance services to our small to medium businesses to get them to consider taking advantage of opportunities like CALeVIP. Home Efficiency Genie, 2nd Webinar: City of Palo Alto Utilities Home Efficiency Genie’s next webinar will be held on Tuesday October 6th from 6 – 7 PM. The webinar will highlight ideas to help customers prepare their homes for fall and beyond. Since many of us are spending more time than ever inside our homes, the webinar will provide useful tips and suggestions to help residents be more comfortable, healthier, and safer, plus ideas to save energy and water and therefore reduce bills. Topics that will be covered in the webinar include: furnace filter replacement; chimney concerns; carbon monoxide and smoke detection devices; indoor air quality; windows, and other seasonal messages. The presentation will be led by Tony Jung – our expert Genie building science professional – who has performed over 350 in-home assessments in Palo Alto. Also presenting will be Emily Yarsinske from Valley Water with ideas for saving water. The Genie webinar will provide valuable takeaways to use now and to get you ready for the colder winter weather ahead. UNFINISHED BUSINESS None. NEW BUSINESS ITEM 1: ACTION: Staff Recommendation That the Utilities Advisory Commission Recommend the City Council Adopt a Resolution Updating the City's Carbon Neutral Gas Plan to Continue to Achieve Carbon Neutrality for the City's Natural Gas Supply Portfolio. Jonathan Abendschein, Assistant Director of Utilities, introduced Karla Dailey, a Senior Resource Planner and Micah Babbitt, Resource Planner, who presented to the item to the Commission. Karla Dailey, Senior Resource Planner, acknowledged that the program has been in place for a few years and now is the time to review and refine the program. Micah Babbitt, Resource Planner, commented that the two main objectives of the presentation are to review the Carbon Neutral Gas Plan to date, review carbon offsets, and recommend revisions and clarifications to the Carbon Neutral Gas Plan. In December 2017 Council adopted the Sustainability and Climate Action Plan which includes a goal to reduce emissions by 80 percent of year-1990 levels by year-2030. A Council- approved key action is to purchase carbon offsets and evaluate local offsets as an option. Carbon offset means the reduction of carbon equivalent emissions created to compensate for emissions made elsewhere. There is a robust carbon offset market already in place. Carbon offsets are not a direct reduction or substitute for reducing local emissions. Carbon offset concerns included additionality, double counting, not a scalable solution, and enabling buyers to continue to create emissions. Carbon offsets are a component in California’s Cap & Trade program, and the California Air Resources Board (CARB) has developed protocols to help mitigate Utilities Advisory Commission Minutes Approved on: November 04, 2020 Page 3 of 6 carbon offset concerns. Those protocols do not address the concerns regarding scalability and buyers still creating emissions. There are six project types that CARB currently allows which included U.S. Forest Projects, Urban Forest Projects, Livestock Projects, Ozone Depleting Substances Projects, Mine Methane Capture Projects, and Rice Cultivation Projects. The City’s plan is a 100 percent carbon-neutral gas portfolio with a rate impact of less than $0.10 per therm. The plan also included purchasing high-quality offsets with a preference for local and California projects, and spot purchases trailing 6-12 months of gas sales. The City has five Master Agreements with brokers from whom the City purchases carbon offsets. Regarding local City projects, the Ozone-Depleting Substance for refrigerator recycling program may provide less than 1 percent of offsets for the City. Staff is collaborating to identify a possible Urban Forestry projects, but any offsets generated would not be available for 15-20-years and would be a small amount. Staff’s recommended plan revisions included no changes to spot purchases, no change to CARB approved projects, mirroring CARB’s vintage requirements, and authorizing up to a 10 percent premium for California projects, and limiting individual carbon offset transactions to a maximum of $19 per ton. Commissioner Scharff opined that he did not feel that the concern regarding offsets running out was a valid concern because when the quantity of offsets gets low, the price goes up, and buyers stop buying carbon offsets. He emphasized that the City should be proud of the fact that it has a bridging strategy in place to reduce emissions and that the preference for California offsets did not make sense. In answer to Commissioner Scharff’s questions, Babbitt explained that there is a lot of inherent uncertainty around measuring CO2 removal from projects. There is no concrete answer of if it’s a true one to one ratio in terms of buying carbon offsets. Abendschein expressed confidence that offsets do reduce greenhouse gas emissions, and it is an appropriate bridging strategy. Dailey reported that California projects may offer co- benefits such as jobs, lifting communities, and air quality improvement. In reply to Commissioner Jackson’s inquiry of if the 10 percent increase is authorized what is the likelihood that offsets would be purchased, Babbitt answered it was a low probability. In response to Commissioner Johnston’s statement that the only change to the plan is authorizing the 10 percent premium, Babbitt remarked that there is also no restriction on vintages. Commissioner Johnston reported that there has not been much push back from the community in terms of rate increases. Vice Chair Segal requested that the objective of the plan be restated to say something about the goal to reduce gas consumption with a bridging strategy that includes carbon offsets. In response to Vice Chair Segal’s question on if more reforestation projects will be available because of the recent fires, Dailey answered that it’s possible, but the City does not invest in projects that will produce offsets in the future and that California reforestation projects have not presented themselves. In reply to Chair Forssell requesting clarification on the Cap and Trade market as well as vintage projects, Babbitt explained that the difference between the offsets the City purchases versus offsets that get put into the Cap and Trade Compliance Pool is there is an additional certification that developers have to go through. Once that takes place, those offsets cannot be sold in the Voluntary Market. The Cap and Trade Compliance Offsets sell for 10 to 20 percent more than those in the Voluntary Market. U.S. Forestry projects are the vast majority of offset projects that are developed, and that is where the market is. In terms of vintages, CARB picked the year of 2006, and Staff did not know the justification for that date. Dailey added that the confidence that the CARB protocols provide is superb and buying offsets from CARB approved projects types and vintages removes those offsets from the market so other buyers cannot buy them for compliance. Chair Forssell agreed that the purchase of California offsets at a premium did not make sense. Utilities Advisory Commission Minutes Approved on: November 04, 2020 Page 4 of 6 In response to Council Member Cormack’s inquires about the $20 per resident cost, Babbitt answered that it is based on per residential account. Commissioner Smith emphasized that the Commission agreed to hold rates flat and now revenues are being raised for Bucket 1 Renewable Energy Certificates (RECs). He did not support a 10 percent premium for California offsets. Commissioner Danaher stated the UAC had made the policy suggestion for the Carbon Natural Gas Plan, not the City Council. Chair Forssell noted that the UAC did not suggest there be a preference for buying California offsets. Several Commissioners supported Staff rewriting the objective. In answer to Commissioner Smith’s request for clarification regarding vintage projects, Dailey reported that it is to align with CARB’s rules so that any offsets that are purchased are in alignment with the protocols that are set forth and that nobody else can buy those offsets and use them for compliance. ACTION: Commissioner Scharff moved, seconded by Commissioner Johnston that the Utilities Advisory Commission recommend the Council adopt a Resolution updating the City’s Carbon Neutral Gas Plan, which includes the following key elements: · Continue the Carbon Neutral Gas Plan · Continue to restrict purchases to carbon offset projects that are accepted project types of California Air Resources Board (CARB) including U.S. Forest, U.S. Urban Forest, U.S. Livestock, U.S. Sourced and Destroyed Ozone Depleting Substances, U.S Mine Methane Capture, and U.S. Rice Cultivation; or any other Project Type subsequently approved by CARB · Restrict purchases to CARB’s vintage requirements · Authorize up to a 10% premium to be paid for offset projects developed in California · Continue to have a preference for California projects as long as it does not result in a price premium · Limit individual transactions to under $19 per ton of CO2e or 10₵/therm · Continue to limit transactions to spot purchases and · Continue to purchase offsets in quantities that match gas sales volumes. The motion carries 7-0 with Chair Forssell, Vice Chair Segal and Commissioner Danaher, Jackson, Johnston, Scharff, and Smith voting yes. ITEM 2: DISCUSSION: Discussion and Update on the Adoption and Integration of Distributed Energy Resources in Palo Alto Chair Forssell summarized that the item has been brought back for additional discussion around the other pieces of Distributed Energy Resources within the City. Jonathan Abendschein, Assistant Director of Utilities introduced Shiva Swaminathan, Senior Resource Planner, who was available for questions, but who did not have a presentation. In reply to Commissioner Jackson’s inquiries regarding the value of shifting electric consumption outside of peak times, Swaminathan noted that the City does care about time-shifting usage outside of peak times because energy is, more costly in the peak time, it impacts the distribution system, it is imperative for renewable resource integration in the grid and there are decarbonization benefits. Regarding Time of Use Rates, Time of Use Rates were tested as part of a broader pilot project called Customer Connect Pilot Project. The Customer Connect Pilot Project had several objectives and one was to provide AMI meters and hourly data for customers. The outcome of the Time of Use portion of the pilot project showed the savings to customers was relatively small due to electric rates already being low and the cost differential between peak and off peak being small at the time, resulting in a correspondingly small rate difference in those periods. Utilities Advisory Commission Minutes Approved on: November 04, 2020 Page 5 of 6 The cost differential has grown substantially since then. In regards to whether a future Time of Use rate would be a static rate or a dynamic rate, the City did not want to be at the forefront of dynamic pricing, but would look to implement it when it matured. In regards to Energy Storage Systems (ESS), there are no plans to incentivize the installation of ESS Systems, but the City support it because there are resiliency benefits for ESS Systems and the enable greater self-consumption of solar energy. Commissioner Jackson concluded that the City is investing a lot of time and resources for a Static Time of Use Rate that will not have a big impact. Dynamic Time of Use Rate is a lot more effective in driving behavior and that should be the focus for the City. In response to Vice Chair Segal’s question on why there is a Greenhouse Gas reduction from solar and whether Time of Use Rates were offered to businesses, Swaminathan explained that the Greenhouse Gas reductions were related to reductions in gas generation on the statewide electric grid. The Time of Use Rate was available to all commercial customers but only one commercial customer has used it. Vice Chair Segal commented that she’d like to see the economics associated with each system. In response to Commissioner Johnston’s questions about time of use and cost of service and about the planned competitive assessment, Abendschein confirmed the assumption that there is no legal restriction on Time of Use Rates if they conform to cost of service. Regarding the work item to complete a competitive assessment, Abendschein stated that as storage costs and solar costs decline the City needs to stay aware of its competitiveness relative to grid disconnection. Dave Yuan, Strategic Business Manager, responded to Commissioner Johnston’s question regarding the timeline for the AMI project, reporting that Staff is in the final evaluation stage and is hopeful that the progress on the evaluation and the selection process for the Request for Proposal (RFP) for the AMI will be brought to the Commission by the end of 2020 or the beginning of 2021. Chair Forssell found it interesting that electric vehicles, Photovoltaic (PV) and energy efficiency are the dominant Distributed Energy Resources in the City. Also, adding a heat pump water heater or heat pump space heater per unit is comparable to half the CO2 reduction potential as getting an electric vehicle. In reply to Chair Forssell’s inquiries about the discontinued Commercial Demand Response Program, the new MyCPAU Portal, and what transactive markets meant, Swaminathan noted that because the Commercial Demand Response Program required a lot of resources, Staff decided to put the program on hold due to competing priorities. In response to Chair Forssell’s question about how the City had gotten commercial customers to reduce load during recent grid emergencies, Abendschein reported that the City had requested that several large customers during the summer run their backup generators to relax the load on the grid. The State had temporarily suspended its policy against running backup generation for demand response to enable that and Staff is trying to push the State to clarify what the policies will be in the long term regarding back up generations during tight grid situations. Yuan reported that the new MyCPAU Portal has about a 60 percent adoption rate and overall the feedback has been positive. Swaminathan reported that a transactive market meant enabling customers to trade energy among each other. Commissioner Jackson encouraged Staff to explore a machine to the machine communication mechanism that can inform a customer to reduce their load during peak hours. ACTION: None Utilities Advisory Commission Minutes Approved on: November 04, 2020 Page 6 of 6 COMMISSIONER COMMENTS Vice Chair Segal mentioned that it is great that Tesla stepped up and provided education for their customers when the state asked Californians to reduce usage to avoid Brown Outs or Black Outs. ITEM 3: ACTION: Selection of Potential Topic(s) for Discussion at Future UAC Meeting. Commissioner Danaher wanted an update on how the pandemic is affecting revenues, costs, and Staff. Also, he asked to invite the Development Center staff to provide a presentation on the permitting process for solar and electrification. Chair Forssell seconded that suggestion. Chair Forssell requested more information regarding the new customer portal and how it is being received and used. Commissioner Smith said he wanted an update on the Bucket 1 REC sales program recently approved by Council. ACTION: None NEXT SCHEDULED MEETING: November 4, 2020 Commissioner Scharff moved to adjourn. Commissioner Jackson seconded the motion. The motion carried 7-0 with Chair Forssell, Vice Chair Segal, and Commissioners Danaher, Jackson, Johnston, Scharff, and Smith voting yes. Meeting adjourned at 5:52 p.m. Respectfully Submitted Tabatha Boatwright City of Palo Alto Utilities City of Palo Alto (ID # 11577) Utilities Advisory Commission Staff Report Report Type: Agenda Items Meeting Date: 10/7/2020 City of Palo Alto Page 1 Summary Title: Carbon Neutral Gas Plan Review Title: Staff Recommendation That the Utilities Advisory Commission Recommend the City Council Adopt a Resolution Updating the City's Carbon Neutral Gas Plan to Continue to Achieve Carbon Neutrality for the City 's Natural Gas Supply Portfolio From: City Manager Lead Department: Utilities Recommendation Staff recommends the Utilities Advisory Commission (UAC) recommend that Council adopt a resolution updating the City’s Carbon Neutral Gas Plan, which includes the following key elements: •Continue the Carbon Neutral Gas Plan to offset carbon emissions from City natural gas sales; •Continue to restrict purchases to carbon offset project types which adhere to California Air Resources Board (CARB) cap and trade compliance protocols, including U.S. Forest, U.S. Urban Forest, U.S. Livestock, U.S. Sourced and Destroyed Ozone Depleting Substances, U.S Mine Methane Capture, and U.S. Rice Cultivation; or any other Project Type subsequently approved by CARB •Restrict purchases to CARB’s vintage requirements; •Continue to limit transactions to spot1 purchases; and •Rate impacts of individual offset transactions are limited to under $19 per ton of CO2e. This is consistent with the Council-approved maximum rate impact or 10₵/therm; •Authorize up to a 10% premium to be paid for offset projects developed in California; Executive Summary Palo Alto implemented a Carbon Neutral Gas Plan in FY 2018, staff report 75332 whereby carbon offsets are purchased to match the carbon emissions associated with all City of Palo Alto Utilities annual natural gas sales. Nearly four years into the plan, staff is revisiting the plan to 1 Staff identifies spot purchases as buying offsets that have already been created, verified, and are ready to be sold. 2 https://www.cityofpaloalto.org/civicax/filebank/documents/54882 CITY OF PALO ALTO Staff: Karla Dailey Micah Babbitt City of Palo Alto Page 2 clarify and refine plan parameters and update the community on the activities to date. The Carbon Neutral Gas Plan is provided as Attachment A. Implementation of the Carbon Neutral Gas Plan will be carried out by staff. Background Natural gas use by residents, businesses, and City facilities contributes about 150,000 tons CO2e annually, representing about 30% of the City’s total 500,000 tons CO2e footprint. This total does not include community greenhouse gas (GHG) emissions such as air travel, transportation, meat consumption, etc. In December 2016, Council adopted Resolution 96493, staff report 7533, approving a Carbon Neutral Gas Plan to achieve carbon neutrality for the gas supply portfolio by FY 2018 using high - quality carbon offsets with a cost cap of up to 10/₵/therm. Council also directed staff to develop a Carbon Neutral Gas Plan implementation plan. The Council-adopted Sustainability and Climate Action Plan (S/CAP) Framework4 established a goal to reduce Palo Alto’s greenhouse gas (GHG) emissions by 80% compared to 1990 levels by 2030. On December 11, 2017, Palo Alto City Council accepted a 2018-2020 Sustainability Implementation Plan5 that included a goal to mitigate the impacts of natural gas use through carbon offsets as a bridging strategy to electrification. Purchasing carbon offsets to mitigate natural gas emissions and evaluating local offsets is a Council-approved key action. Given the resolution was approved four years ago, staff is providing an update on the Plan implementation, performance to date, and proposing refinements to the Plan. Discussion Offsets Overview A carbon offset is a reduction in CO2e emissions to compensate for CO2e emitted elsewhere. Offsets enable buyers to balance out their emissions. By productizing carbon offsets, a market is created for buyers and sellers to reduce CO2e emissions, which in turn, incentivizes lower cost solutions to emission reductions. While carbon offsets are still a relatively young envir onmental product, the global market for carbon offsets has seen continued demand growth, and in 2018, the global voluntary market was estimated at approximately $300 million with cumulative volume over 1.2 billion metric tons transacted6. There is a robust marketplace for carbon offsets from both voluntary purchases, similar to our plan, as well as compliance purchases, similar to the California Cap and Trade Program. 3 https://www.cityofpaloalto.org/civicax/filebank/documents/55728 4 https://www.cityofpaloalto.org/civicax/filebank/documents/64814 5 https://www.cityofpaloalto.org/civicax/filebank/documents/63141 6 https://hubs.ly/H0m5qf60 City of Palo Alto Page 3 Offsets balance out pollution across geographies but do not stop emissions from occurring in Palo Alto. As such, in the hierarchy of climate actions, reducing one’s own sources of emissions is viewed as superior to carbon offsets created elsewhere. Further, there are inherent challenges in accurately measuring emission reductions from offsets, and there is greater certainty in measuring the impact of reducing one’s own emissions. Though, given that emissions are a global problem, carbon offsets still provide significant value as a tool in a broader portfolio of climate actions to reduce emissions. The most common offsets generated and sold into compliance and voluntary markets are those from forestry projects. These projects protect forests and sequester carbon through improved forest management, avoided conversion, or afforestation. Offset sales provide landowners an economic incentive to implement best forest management practices, avoid conversion of forest lands, or allow reforestation of trees, instead of cutting them down to sell lumber or develop the land for other revenue streams like commercial/residential real estate or agriculture use. It’s estimated that over $1 billion has been paid to U.S woodland owners7 not to cut forests. While forests sequester carbon, dairy digesters capture methane instead of allowing it to release into the atmosphere. Most dairy farms store manure in a lagoon; creating an anaerobic environment in which the manure produces methane that is released into the atmosphere as it breaks down. Over an extended period of time, methane can be about 85 times more potent compared to carbon dioxide. Capturing and putting the methane to productive use such as generating electricity prevents that methane from entering the atmosphere. Since the dairy farmer built a system above and beyond what is required to manage the manure, a carbon offset is produced and can be sold to recoup some of the farmer’s investment. Similar to dairy digesters, offsets may be generated by methane capture at coal mines. To operate a coal mine safely, methane must be drained from the coal seam. Voluntarily capturing the methane that would otherwise emit to the atmosphere and putting it to a beneficial use such as electricity generation generates an offset, and therefore, revenue to recoup some of that investment. “Additionality” is a key feature of all offsets, meaning actions taken to reduce emissions must be done on a voluntary basis without any requirement by federal, state, or local laws or regulations. Furthermore, offset projects must demonstrate that the project activity is not business-as-usual and that reductions would not have happened without the revenue from offset sales. Forestry, dairy digesters, and coal mine capture projects are three of the six project types approved by the California Air Resources Board and included in Palo Alto’s Carbon Neutral Gas Plan. Attachment C contains visual representations of coal mine methane capture and dairy digester projects. Attachment D provides detail on all six project types. Offset Concerns 7 https://www.wsj.com/articles/preserving-trees-becomes-big-business-driven-by-emissions-rules- 11598202541?mod=hp_lead_pos7 City of Palo Alto Page 4 Carbon offset markets gained momentum in 2005 as a result of the Kyoto Protocol which established the Clean Development Mechanism (CDM) as the method to measure and verify emission benefits. Over time, research highlighted flaws with CDM-issued offsets that involve the lack of robust additionality tests, poor accounting possibly resulting in double counting, inaccurate savings estimation, leakage (an increase in emissions in one location resulting from a decrease in another location), and permanence. Environmental activists and concerned citizens have criticized carbon offsets by questioning whether these projects would occur without the offset market and uncovered inaccuracies in actual emission reductions. Further, not enough offsets can be created to meet the total emission reduction targets needed to address global warming concerns. Finally, purchasing offsets enables buyers to continue creating emissions. All of these are points to be cognizant of when evaluating the role of carbon offsets as a climate action strategy. Mitigation of Offset Concerns While there is inherent uncertainty involved in estimating emission reductions that result from carbon offset projects, there are many ways these concerns have been addressed in today’s offset market including offsets developed for California’s Cap & Trade Program. The City does have a compliance obligation under California’s Cap & Trade program, the regulations limit the use of offset to 8% of the cap. The City’s Carbon Neutral Gas Plan is separate and distinct from the City’s Cap & Trade obligations. Under California’s Cap & Trade Program, CARB established protocols8 for six project types. 1. U.S. Forest Projects 2. Urban Forest Projects 3. Livestock Projects 4. Ozone Depleting Substances Projects 5. Mine Methane Capture projects 6. Rice Cultivation Projects CARB adopted these protocols and approved carbon offset registries via a rigorous rulemaking process detailed in CARB’s Process for the Review and Approval of Compliance Offset Protocols9 CARB developed each of these protocols to create real, additional, verifiable, and permanent emission reductions10. Though there are periodic studies that critique or recommend improvements, CARB’s protocols have addressed many of the earlier issues or critiques with carbon offsets which originated from the Clean Development Mechanism. Offsets purchased 8 httpshttps://ww2.arb.ca.gov/sites/default/files/classic//cc/capandtrade/ct_reg_unofficial.pdf://ww2.ar b.ca.gov/sites/default/files/classic//cc/capandtrade/ct_reg_unofficial.pdf 9 https://ww2.arb.ca.gov/sites/default/files/classic//cc/capandtrade/compliance-offset-protocol- process.pdf 10 https://govt.westlaw.com/calregs/Document/IAB809A46C9794E3EAA751C21B72AE536?viewType=FullT ext&originationContext=documenttoc&transitionType=CategoryPageItem&contextData=(sc.Default) City of Palo Alto Page 5 under Palo Alto’s Carbon Neutral Gas Plan are restricted to projects that are tracked by CARB approved registries and comply with CARB protocols. Attachment D contains detailed descriptions of each of the project types and the protocols. CARB protocols have strict additionality requirements, thorough verification processes, detailed monitoring and reporting to demonstrate permanence. Offsets can be part of a bridging strategy while technologies and policies evolve to accelerate the ability to directly reduce emissions in a cost-effective manner. Potential to use Carbon Offsets for Other City Emissions Carbon offsets can and have been used by cities, corporations and individuals to mitigate emissions from sources beyond those resulting from burning natural gas. This report only addresses carbon offset use in the context of the Carbon Neutral Gas Plan and does not contemplate an expanded role to achieve the other City sustainability goals. Carbon Neutral Gas Plan Overview to Date Since July 2017, the emission resulting from customers burning natural gas has been mitigated 100% by carbon offset purchases equal to CPAU’s natural gas sales. When the plan was established four years ago, staff limited the purchases of offsets to project types accepted by CARB-approved California Cap and Trade compliance protocols. Council approved five enabling agreements with brokers that sell carbon offsets. The standard form agreement was approved via staff report 871711 (Reso 970312), and the five enabling agreements were approved via staff report 8717, (Reso 970413), staff report 941814 (Reso 978715), staff report 979316 (Reso 979317), and staff report 970018, (Reso 979819). Staff executes approximately two transactions per year to buy offsets. A maximum rate impact of up to 10¢/therm ($19/ton CO2e) was approved, and to date the cost of offsets has averaged less than 3¢/therm ($6.25/ton CO2e). The figure below illustrates the project types represented in the offset purchases to date. 11 https://www.cityofpaloalto.org/civicax/filebank/documents/61081 12 https://www.cityofpaloalto.org/civicax/filebank/documents/62672 13 https://www.cityofpaloalto.org/civicax/filebank/documents/63428 14 https://www.cityofpaloalto.org/civicax/filebank/documents/66195 15 https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=65848.47&BlobID=66767 16 https://www.cityofpaloalto.org/civicax/filebank/documents/66733 17 https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=71268.52&BlobID=67695 18 https://www.cityofpaloalto.org/civicax/filebank/documents/67432 19 https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=68967.47&BlobID=68099 City of Palo Alto Page 6 Offsets used for Cap and Trade compliance must go through one final certification step by CARB. CARB-certified offsets may not be used for Palo Alto’s Carbon Neutral Gas Plan, however, the offsets the City purchases adhere to the same CARB protocols as do those that are sold in the compliance offset pool. Council also approved a purchase for about 10% of FY 2019 carbon offset needs from a forestry project near Palo Alto’s sister city, Oaxaca, Mexico (staff report 856420, Reso 972521) utilizing a protocol nearly identical to that applied to U.S. forestry projects. While the plan includes a preference for local and California located projects, there is no Council-approved premium for California projects. To date, none of the offset projects have originated in California. Attachment E shows details of all carbon offset transactions thus far. There are two potential opportunities for local projects. Palo Alto administers a refrigerator recycling program and may purchase offsets resulting from the destruction of the related ozone depleting substances. Pricing has not been determined, and the quantities represent less than 1% of Palo Alto’s offset needs. The second local project could be Urban Forestry which staff is exploring. Review of Carbon Neutral Gas Plan Parameters Spot Purchases versus Investing in Projects There are two ways to procure offsets. The first is to purchase offsets on the “spot market”. These offsets have already been created, verified, are ready to be sold, and are tracked by CARB approved registries. The other is to invest in projects that will generate offsets in the future. For example, an organization might provide capital to a dairy farmer so that t he dairy farmer can build a digester. The investor receives offsets over a period of time once the 20 https://www.cityofpaloalto.org/civicax/filebank/documents/62302 21 https://www.cityofpaloalto.org/civicax/filebank/documents/62688 City of Palo Alto Page 7 digester is operational. This is similar to investing in a power plant and receiving energy over a period of time. The Carbon Neutral Gas Plan is currently restricted to spot purchases. Because the plan is a bridge to electrification, and therefore a shorter-term strategy, and because project investment inherently carries more risk, staff recommends continuing to limit transactions to spot purchases. Approved Project Types and Vintages The plan currently restricts the purchase of offsets to project types that adhere to CARB protocols. These include U.S. forest, urban forest, livestock, ozone depleting substances, mine methane capture, and rice cultivation projects. CARB allows offsets generated in 2006 or later. Staff has reviewed the CARB protocols and is satisfied that CARB’s requirements and standards ensure projects are real, additional, accurate, and verifiable. Staff recommends continuing restricting offsets to project types which adhere to CARB protocols. In addition, staff recommends mirroring CARB’s vintage requirements for offset purchases for the Carbon Neutral Gas Plan in the future. This means that projects must have been completed in 2006 or later. CARB currently does not have a protocol for forestry projects outside of the U.S. Should another opportunity arise like the 2017 purchase from the forestry project in Oaxaca, staff will follow the same process by bringing it to Council for considerat ion. Approved Prices for Offset Transactions The Carbon Neutral Gas Plan includes an overall rate impact cap of up to 10¢/therm, approximately $19/ton CO2e. To provide clarity to plan implementation, staff recommends that no single transaction will exceed $19 per ton CO2e. Given Council’s stated preference for local California-based projects, staff recommends Council approval of a maximum 10% premium for projects developed in state. If approved, the $19 per ton cap will still apply. Basis for Offset Quantities Purchased Offsets are purchased in quantities that match CPAU’s natural gas sales. The plan covers natural gas sales and explicitly excludes any local distribution losses or other upstream emissions. Staff intends to cover this topic as part of a b roader S/CAP discussion. Resource Impact If the staff recommendation for a 10% premium to be paid for in state projects is approved, the cost of the plan could increase. Palo Alto has not been offered in-state offsets and does not anticipate a significant portion of the City's offset purchases to be from in -state projects in the future due to limited supply. In the very unlikely case that Palo Alto was able to purchase 100% City of Palo Alto Page 8 of its offset needs at a 10% premium, the total cost of the p lan would increase by about $130,000 per year. However, this premium would still be required to fall under the recommended $19 per ton limit. Since implementing the plan, the City has not received any offers of in-state offsets. In fact, staff has specifically sought California offsets from brokers and has been unsuccessful. A lack of available in-state offsets may mean that the premium will not lead to higher plan costs. Policy Implications The Carbon Neutral Gas Plan is consistent with the Council-adopted 2018-2020 Sustainability Implementation Plan22 which included a goal to mitigate the impacts of natural gas use through carbon offsets and key actions including purchasing carbon offsets to mitigate natural gas emissions. Next Steps If the Carbon Neutral Gas Plan modifications are approved by Council, staff will implement the changes immediately, beginning with offset purchases for the second half of FY20. Environmental Review The Council’s adoption of a resolution modifying the Carbon Neutral Gas Plan does not meet the definition of a project, pursuant to section 21065 of the California Environmental Quality Act (CEQA). Offset project developers are responsible for performing necessary environmental reviews and acquiring permits as offset projects are developed. Attachments: • Attachment A: Carbon Neutral Gas Plan • Attachment B : Presentation • Attachment C: Carbon Offset Project Visuals • Attachment D: CA Air Resources Board Carbon Offset Protocols • Attachment E: Carbon Neutral Gas Plan Implementation to Date 22 https://www.cityofpaloalto.org/civicax/filebank/documents/63141 ATTACHMENT A CITY OF PALO ALTO CARBON NEUTRAL GAS PLAN EXHIBIT A TO RESOLUTION NO.______ ADOPTED BY COUNCIL ON: _______ Carbon Neutral Gas Plan Objective: Originally adopted by the City Council on December 5, 2016 1, the objective of the City’s Carbon Neutral Gas Plan is to achieve carbon neutrality for the City’s gas supply portfolio through the purchase of high-quality carbon offsets which create verified emission reductions (VERs).2 Implementation of the Carbon Neutral Gas Plan will be carried out by staff. Carbon Neutral Gas Plan Elements: 1. The quantity of offsets purchased to meet the City’s Carbon Neutral Plan objectives will be matched to carbon emissions associated with the City’s natural gas sales volume; 2. Offset purchases must be from project types which adhere to California Air Resource Board (CARB)-approved cap and trade compliance protocols, currently including U.S. Forest, U.S. Urban Forest, U.S. Livestock, U.S. Sourced and Destroyed Ozone Depleting Substances, U.S Mine Methane Capture, and U.S. Rice Cultivation; or any other project type subsequently approved by CARB; 3. Offset purchases are restricted to CARB’s vintage requirements, which currently permit offsets generated in 2006 or later; 4. Offset transactions are limited to spot purchases, which are for offsets that have already been created, verified, and are ready to be sold; 5. Rate impacts of individual offset transactions are limited to under $19 per ton of CO2e. This is consistent with the Council-approved maximum rate impact of 10₵/therm. 6. Up to a 10% premium may be paid for offset projects developed in California; a. Individual offset transactions limited to under $19 per ton of CO2e. 1 Staff report 7533. 2 This Council-adopted policy is distinct from the City gas utility’s compliance obligation as a covered entity under the state’s cap and trade program. October 7, 2020 www.cityofpaloalto.org City of Palo Alto UtilitiesCarbon Neutral Gas Plan Review and Update Staff: Karla Dailey Micah Babbitt Attachment B 2 Objectives •Review the Carbon Neutral Gas Plan and Carbon Offsets •Recommend Revisions and Clarifications to the Carbon Neutral Gas Plan 3 Sustainability Goals •80% GHG reduction by 2030 •Mitigate the impacts of natural gas use through carbon offsets (in the short term) and electrification (in the mid-to long-term) •Purchase carbon offsets to match natural gas emissions as a transitional measure •Evaluate potential local offset purchases 4 Offsets •A carbon offset is a reduction in CO2-eq emissions created to compensate for emissions made elsewhere •Offsets do create a market for reducing GHG emissions •Offsets are not a substitute for eliminating local emissions in Palo Alto 5 Offset Concerns •Additionality –Would this have happened anyway? •Accounting –Double counting, permanence •Scalability –not a long-term solution for global emissions •Enable buyers to continue creating emissions 6 Mitigation of Offset Concerns •California Air Resource Board (CARB) protocols •Strict additionality requirement •Thorough verification process •Detailed monitoring reporting to demonstrate permanence •System in place to prevent double counting or resale •CARB protocols do not address •Scalability •Concern that offsets allow others to continue emitting 7 CARB Approved Project Types •U.S. Forest Projects •Urban Forest Projects •Livestock Projects •Ozone Depleting Substances Projects •Mine Methane Capture Projects •Rice Cultivation Projects CARB allows offset vintages back to 2006 8 Carbon Neutral Gas Plan Overview •Plan implemented in FY18 •100% carbon neutral gas portfolio •Based on gas sales to customers •Rate impact <10¢/therm ($19/ton CO2e) •High quality offsets (CARB-approved project types) •Preference for local and California projects (no Council-approved premium) •Spot purchases trailing 6-12 months of gas sales 9 Implementation •5 Master Agreements using PA Standard Form •Spot purchases (existing offsets vs investing capital in projects to be developed) •1 Mexican forestry transaction near Sister City Oaxaca •Average Cost = 4¢/therm 10 Local Palo Alto Projects •Ozone Depleting Substances from refrigerator recycling program •Small potential quantities •Pricing TBD •Urban Forestry •Small potential quantities •Collaborating with City staff 11 Recommended Plan Revisions •Spot Purchases vs Investing in Projects •No change, spot purchases consistent with bridging strategy and risk profile •Approved Project Types and Vintages •Continue to restrict purchases to carbon offset projects types that are accepted project types of CARB •Restrict purchases to CARB’s vintage requirements •Approved Prices for Offset Transactions •Authorize up to a 10% premium to be paid for CA offsets •Limit individual transactions to max of $19 per ton of CO2e •Basis for Offset Quantities Purchased •No change, purchases matched to natural gas sales •Upstream emissions considered in S/CAP 12 Recommended Motion The Utilities Advisory Commission recommends that Council: •Continue the Carbon Neutral Gas Plan; •Continue to restrict purchases to carbon offset projects that are accepted project types of California Air Resources Board (CARB) including U.S. Forest, U.S. Urban Forest, U.S. Livestock, U.S. Sourced and Destroyed Ozone Depleting Substances, U.S Mine Methane Capture, and U.S. Rice Cultivation; or any other Project Type subsequently approved by ARB •Restrict purchases to CARB’s vintage requirements; •Authorize up to a 10% premium to be paid for offset projects developed in California; •Limit individual transactions to under $19 per ton of CO2e or 10₵/therm; •Continue to limit transactions to spot purchases; and •Continue to purchase offsets in quantities that match gas sales volumes. Karla Dailey & Micah Babbitt Senior Resource Planner, Resource Planner Karla.dailey@cityofpaloalto.org, micah.babbitt@cityofpaloalto.org ATTACHMENT C: Carbon Offset Project Visuals Mine Methane Capture Dairy Digester ATTACHMENT D: California Air Resources Board Compliance Offset Protocols1 1. Livestock Projects: Capturing and Destroying Methane from Manure Management Systems This protocol defines a set of activities designed to reduce GHG emissions that result from anaerobic manure treatment at dairy cattle and swine farms. Projects that install a biogas control system (BCS) that captures and destroys methane gas from anaerobic manure treatment and/or storage facilities on livestock operations are eligible. Project Definition: (a) The BCS must destroy methane gas that would otherwise have been emitted to the atmosphere in the absence of the offset project from uncontrolled anaerobic treatment and/or storage of manure. (b) Captured biogas can be destroyed on-site, transported for off-site use (e.g. through gas distribution or transmission pipeline), or used to power vehicles. (c) A centralized digester that integrates waste from more than one livestock operation meets the definition of an offset project. CARB Livestock Protocol2 2. Mine Methane Capture Projects: Capturing and Destroying Methane From U.S. Coal and Trona Mines This protocol includes four mine methane capture activities designed to reduce GHG emissions that result from the mining process at active underground mines, active surface mines, and abandoned underground mines. The following types of mine methane capture activities are eligible: (a) Active Underground Mine Ventilation Air Methane Activities are projects that install a ventilation air methane (VAM) collection system and qualifying device to destroy the methane in ventilation air otherwise vented into the atmosphere through the return air shaft(s) as a result of underground coal or trona (sodium carbonate compound used to make baking soda) mining operations. (b) Active Underground Mine Methane Drainage Activities are projects that install equipment to capture and destroy methane extracted through a methane drainage system that would otherwise be vented into the atmosphere as a result of underground coal or trona mining operations. (c) Active Surface Mine Methane Drainage Activities are projects that install equipment to capture and destroy methane extracted through a methane drainage system that would otherwise be vented into the atmosphere as a result of surface coal or trona mining operations. 1 https://ww2.arb.ca.gov/our-work/programs/compliance-offset-program/compliance-offset-protocols 2 https://ww3.arb.ca.gov/regact/2014/capandtrade14/ctlivestockprotocol.pdf (d) Abandoned Underground Mine Methane Recovery Activities are projects that install equipment to capture and destroy methane extracted through a methane drainage system that would otherwise be vented into the atmosphere as a result of previous underground coal mining operations. CARB Mine Methane Capture Protocol 3 3. Ozone Depleting Substances Projects: Destruction of U.S. Ozone Depleting Substances Banks This protocol defines a set of activities designed to reduce GHG emissions by the destruction of eligible Ozone Depleting Substances (ODS) at a single qualifying destruction facility. ODS destroyed under this protocol must be from one or more of the eligible sources listed below: (a) Refrigerants from industrial, commercial or residential equipment, systems, and appliances or stockpiles; (b) ODS blowing agents extracted and concentrated from appliance foams; or (c) Intact foam sourced from building insulation. CARB Ozone Depleting Substances Protocol 4 4. Rice Cultivation Projects This protocol includes three rice cultivation project activities designed to reduce GHG emissions that result from rice cultivation on fields in the California and Mid-South Rice Growing Regions. The following types of rice cultivation activities are eligible: (a) Dry Seeding Activities are projects that sow seeds into a dry or moist, but not flooded, seedbed by drilling or broadcasting seeds onto rice fields, resulting in the reduction of methane that would otherwise be released into the atmosphere if the seeds were wet- seeded. (b) Early Drainage in Preparation for Harvest Activities are projects that drain or dry standing water, while the soil is still saturated, from rice fields earlier during the rice growing season in preparation for harvest, resulting in the reduction of methane that would otherwise be released into the atmosphere if the rice fields were drained or dried on the customary date. (c) Alternate Wetting and Drying Activities are projects that cyclically wet and dry the rice fields during the growing season to reduce methane emissions that would otherwise be released into the atmosphere if the project employed continuous flooding. CARB Rice Cultivation Protocol 5 3 https://ww3.arb.ca.gov/regact/2013/capandtrade13/ctmmcprotocol.pdf 4 https://ww3.arb.ca.gov/regact/2014/capandtrade14/ctodsprotocol.pdf 5 https://ww2.arb.ca.gov/sites/default/files/classic/cc/capandtrade/protocols/rice/riceprotocol2015.pdf 5. U.S. Forest Projects: Sequestered Carbon on Forestland. The protocol provides offset project eligibility rules; methods to calculate an offset project’s net effects on greenhouse gas (GHG) emissions and removals of CO2 from the atmosphere (removals); procedures for assessing the risk that carbon sequestered by a project may be reversed (i.e. released back to the atmosphere); and approaches for long-term project monitoring and reporting. The protocol is designed to ensure that the net GHG reductions and GHG removal enhancements caused by an offset project are accounted for in a complete, consistent, transparent, accurate, and conservative manner and may therefore be reported as the basis for issuing ARB or registry offset credits. U.S. Forest Projects include reforestation, conversion avoidance and forest management. Forest management practices may include increasing time between harvest, increasing productivity by thinning diseased and suppressed trees, increasing productivity by managing brush and short-lived forest species, and planting more trees. CARB Resource Page for US Forest Protocol6 6. Urban Forest Projects: Sequestered Carbon in Urban Canopy This protocol applies to a planned set of urban tree planting and maintenance activities that permanently increase carbon storage, taking into account GHG emissions associated with planting and maintenance of project trees. Only offset projects located in the United States and its territories are eligible under this protocol. CARB Urban Forest Protocol 7 6 https://ww2.arb.ca.gov/our-work/programs/compliance-offset-program/compliance-offset- protocols/us-forest-projects/2015 7 https://ww3.arb.ca.gov/regact/2010/capandtrade10/copurbanforestfin.pdf ATTACHMENT E: Carbon Neutral Gas Plan Implementation to Data Deal # Counterparty Project Date Purchased Offset Purchased (Tons) Offset Purchase Rate ($/ton) Cost ($) Protocol Vintage 1 3Degrees Grotegut Dairy 9/25/2017 1,408 7.50 10,560 Livestock 2009 2 3Degrees Grotegut Dairy 9/25/2017 3,852 7.50 28,890 Livestock 2010 3 3Degrees Grotegut Dairy 9/25/2017 655 7.50 4,913 Livestock 2011 4 Element Markets Green Trees 9/27/2017 148,000 7.70 1,139,600 U.S. Forest 2012, 2013, 2014, 2015 5 ICICO San Juan Lachao 12/13/2017 17,000 8.00 136,000 Mexican Forest 2016 6 3Degrees Grotegut Dairy 9/25/2018 16,057 6.15 98,751 Livestock 2011, 2012, 2013 7 3Degrees Blandin Forest 9/25/2018 33,943 6.25 212,144 U.S. Forest 2013, 2014 8 ACT Pocosin+ 12/20/2018 23,903 2.75 65,733 U.S. Forest 2002, 2003, 2004 9 Element Markets Refex ODS 12/20/2018 21,418 4.95 106,019 Ozone Depleting Substance 2011 10 3Degrees Blandin Forest 12/20/2018 29,679 5.70 169,170 U.S. Forest 2013, 2014 11 Element Markets Methane Capture 9/12/2019 80,000 4.70 376,000 Mine Methane Capture 2007 Project Protocol Description Grotegut Dairy Livestock Grotegut Dairy is a 3,900 milk-cow operation in Newton, Wisconsin with a methane capture system. Green Trees U.S. Forest GreenTrees Advanced Carbon Restored Ecosystem is reforestation of agricultural lands into native hardwood forest in Mississippi, Louisiana, Arkansas, and Illinois San Juan Lachao Mexican Forest Protection of forests located in High Biological Value Zones which contain flora and fauna listed in the Mexican Endangered Species List and the International Union for Conservation of Nature’s Red List of Threatened Species. Project in San juan Lachao near Palo Alto's Sister City of Oaxaca. Blandin Forest U.S. Forest Blandin Native American Hardwoods Conservation and Carbon Sequestration project in Minnesota. Pocosin+ U.S. Forest These projects are all forested land that will not be disturbed by human development. Without this protection, the forests would be converted to grow wheat or corn. Forest conservation plays a vital role in protecting freshwater systems like lakes. The forests around the lakes act as natural water filters and purify the water for all who use it. The projects also support healthy populations of red wolf, bald eagle, black bear, and various bird species. Refex ODS Ozone Depleting Substance The RemTec facility in Bowling Green, Ohio uses an argon arc plasma destruction device to achieve 99.99 percent removal. The majority of refrigerants originated in California, and all were sourced within the United States. The RemTec facility uses an argon arc plasma destruction device to achieve the required destruction and removal efficiency of 99.99 percent. The majority of ODS refrigerants originated in California, and all were sourced within the United States. Methane Capture Mine Methane Capture This project is the first of its kind. Peabody Natural Gas, LLC removed methane from the North Antelope Rochelle Coal Mine before mining. The methane was compressed and transported to a natural gas pipeline and distributed to a national gas grid for use as fuel. Before implementation of the project, all the methane was vented to the atmosphere. Protocol Sum of Offset Purchased (Tons) Percentage of Offset Purchased Sum of Cost ($) Average of Offset Purchase Rate ($/ton) Livestock 21,972 6% $143,113 $7.16 Mexican Forest 17,000 5% $136,000 $8.00 Mine Methane Capture 80,000 21% $376,000 $4.70 Ozone Depleting Substance 21,418 6% $106,019 $4.95 U.S. Forest 235,525 63% $1,586,647 $5.60 Grand Total 375,915 100% $2,347,779 $6.25 Year Sum of Offset Purchased (Tons) Sum of Cost ($) Average of Offset Purchase Rate ($/ton) 2017 170,915 $1,319,963 $7.64 2018 125,000 $651,817 $5.16 2019 80,000 $376,000 $4.70 Grand Total 375,915 $2,347,779 $6.25 6%4% 21% 6%63% Offsets Purchased by Project Type Livestock Mexican Forest Mine Methane Capture Ozone Depleting Substance U.S. Forest City of Palo Alto (ID # 11563) Utilities Advisory Commission Staff Report Report Type: Meeting Date: 10/7/2020 City of Palo Alto Page 1 Summary Title: Integration of DERs in Palo Alto Title: Discussion and Update on the Adoption and Integration of Distributed Energy Resources in Palo Alto From: City Manager Lead Department: Utilities Recommendation This report provides information to facilitate the Commission discussion and feedback on the City’s activities to facilitate customer adoption of distributed energy resource (DER) technology, and initiatives to optimally integrate DERs into the City’s electric supply and distribution system for the benefit of all residents and businesses in Palo Alto. No action is required at this time. Executive Summary In January 2019, the Utility Advisory Commission (UAC) discussed DER1 related activities and the staff’s work plan for the three-year period 2019-2021. These workplan areas were: a) business strategic and operational planning, b) electric supply planning and operations, c) distribution system planning and operations, d) customer retail rate design, and e) customer program design. Considerable progress has been made under these work areas. The activities include: a) evaluation of advanced metering infrastructure (AMI vendor proposal with expectation to begin AMI implementation in Q3 2021, b) implementation of MyCPAU customer portal, c) formulation of customer programs to facilitate DER adoption, including launch of technical assistance program to assist multi-family, non-profits and mixed use properties to install electric vehicle (EV) chargers, d) coordinate the integration and optimization of a large solar photovoltaic (PV) + Energy Storage System (ESS) based microgrid system at a commercial campus to improve resiliency, and e) evaluate distribution transformer loading at four locations with high penetration of EV registrations. The report further details the progress and future activities planned. 1 California Public Utilities Code 769 defines “distributed energy resources” as distributed renewable generation resources such as solar photovoltaics (PV), energy efficiency (EE), energy storage (ES), electric vehicles (EV), and demand response (DR) technologies. CITY OF PALO ALTO Staff: Shiva Swaminathan City of Palo Alto Page 2 Background DERs are electrical energy resources connected to the City of Palo Alto Utilities (CPAU) electric distribution grid that can significantly change the location, timing, and magnitude of C PAU’s electric loads. These resources are primarily sited at customer premises, behind the utility electric meter, and include solar photovoltaic (PV), energy efficiency (EE), energy storage systems (ESS), electric vehicles (EVs), demand response (DR) technologies, heat pump water heaters (HPWH), and heat pump space heating (HPSH) systems. The goal of the DER related activities and workplan,2 as discussed with the UAC in January 2019, is to facilitate customer adoption of DERs and to enhance the value of customer sited DERs to all members of the Palo Alto community by using DERs to lower overall cost, lower greenhouse gas emissions, and increase the resiliency of the community while avoiding or mitigating any potential negative impacts from DER growth. Attachment A provides an overview of the impact of DER technologies have on different facets of CPAU operations and related work planning documents.3 Attachment B provides a summary of initiatives being considered to integrate DERs into the distribution system and the electric supply portfolio. Table 1 below summarizes the estimated number of DERs and magnitude of DERs loads in Palo Alto at the end of 2019. Detailed assumptions made to estimate the energy and capacity impacts of these systems are listed in Attachment C. 2 https://www.cityofpaloalto.org/civicax/filebank/documents/68309 3 These work plan documents include the Electric Integrated Resources Plan (2018), Distribution System Assessment (2018), and the updated Customer Programs Work Plan (2019) currently being implemented. City of Palo Alto Page 3 Table 1: Overview of Estimated Number of DERs and Associated Impact on Electrical Load in 20194 DER System Approximate # of DER Systems5 Impact on Electrical Load Impact on Total Electrical Load (% of total load) Energy6 (MWh) Capacity (MW) (connected) 7 Energy8 Peak Demand Reduction9 EV 4,000-4,500 +13,000 +10 to +15 +1.4% +0.5% to +2% (summer) +1% to +4% (winter) PV 1,223 -24,000 -15 -2.6% -3% to -6% (Summer) 0% (Winter) EE > 40,000 -64,000 -7 to -15 -7.3% -4% to -8% DR none - - - - ESS 20 - +/- 0.21 - - HPWH 44 +40 +0.06 - - HPSH 30-50 not estimated not estimated - - The estimated greenhouse gas (GHG) reduction potential for each DER unit is currently estimated to be as outlined below10. Estimates of GHG Reduction Potential of Each DER Systems 4 These estimates are calculated based on technologies deployed primarily since 2007, and reflect the total impact observed through the end of 2019. 5 The estimated numbers for PV and ESS are based on city/permitting records; the EE and HPWH estimates are based on rebates processed by CPAU, with EE measures varying widely from LED light bulbs to commercial HVAC upgrades; the EV estimate is based on DMV data for registered EVs in Palo Alto. 6 EVs and HPWHs increase the electrical loads on the distribution system and the energy supply needs, while PV, and EE will lower the electrical loads. DR programs tend not to have any net impact on energy consumption. 7 For PV the capacity is the addition of inverter capacity of each connected system, with a degradation factor applied to account for the age of the system. For ESS it is the estimated capacity of all 20 systems. The capacity impact of EE is harder to estimate. The capacity of the HPWH could range from 0.5 kW to 5 kW depending on the mode of operation; the average is assumed to be 1.4kW making the total capacity for the 44 systems to be 60 kW. For EV, the charging capacity at home could range from 1kW to 15kW, for this estimate it is assumed to be 2 to 3kW per EV registered in Palo Alto. 8 The fraction of the energy impact associated with each DER was computed by dividing Palo Alto’s annual electricity consumption in 2019, which was 908,851 MWh. 9 Impact on peak demand is based on “coincident demand,” which is the largest electric demand in MW during the 15-minute period of a given year when the entire Palo Alto electric load peaks – a peak of 140 to 180 MW depending on the season. 10 Though Palo Alto’s electric supply is carbon neutral, in the margins, any hourly energy consumption changes in Palo Alto rely on California-wide grid electricity which has a carbon content. This estimate assumes the marginal carbon content of electricity in the CAISO grid to 0.15 to 0.6 MT/MWh in any given hour, and 0.15 to 0.3 MT/MWh for solar production hours. These are direct emissions and do not include losses in the system or upstream emissions related to fossil fuel production and distribution. City of Palo Alto Page 4 DER System Estimates of GHG Reduction Potential (CO2e Metric Tons) Notes/Assumptions EV 1.5 to 3 MT/EV/year Depends on miles travelled in a year PV 1 to 2 MT/year Assumes a 5kW south facing home PV system EE 0.15 to 0.6 MT/MWh conserved Depends on time of day and season DR 0.1 to 0.4MT/MWh For a load shifting program; from solar production period to non-solar production period ESS 0 to 2MT/year Depending on operating mode for 13kWh unit; back- up mode, to daily cycling to maximize GHG reduction HPWH 0.6 to 1.2 MT/year For a residential unit, depending on extent of use HPSH ~1MT/year Residential central unit In 2021, staff will provide an update of the impacts of DERs on the long term electrical loads and the community’s GHG reduction goals (through 2030); the assessment will incorporate impacts of COVID-19, customer resiliency needs triggered by wildfire risk perceptions, and progress in meeting community’s greenhouse gas reduction goals. A prior long term assessment was discussed by the Commission in November 2017.11 Discussion This report will discuss progress on the following five DER planning focus areas and thirteen associated actions under them, as discussed with the UAC in January 2019. A. Business Strategic and Operational Planning B. Electric Supply Planning and Operations C. Distribution Planning and Operations D. Customer Retail Rate Design E. Customer Program Design To effectively manage DER growth, CPAU’s planning and operational activities related to electricity supply, the distribution system, and customer programs are closely coordinated. In addition, retail rates must be designed to remain cost-based while sending economically efficient price signals to customers who are considering DER investment and to collect sufficient revenues to maintain a reliable utility system. Overall utility business strategies must also be aligned to effectively integrate DERs. The report discusses the progress made on each of these five areas over the past 18 months. A. Business Strategic and Operational Planning To effectively take advantage of the opportunities created by DER adopti on, and to avoid potential negative impacts, CPAU needs to put certain fundamental technologies in place, most 11 https://www.cityofpaloalto.org/civicax/filebank/documents/61748 City of Palo Alto Page 5 importantly Advanced Metering Infrastructure (AMI). There are also potential opportunities and impacts related to the way DERs could affect utility loads and utility finances. CPAU needs to evaluate these opportunities and impacts to effectively take advantage of them or mitigate them, as applicable. Actions Planned Progress To date • Begin planning to implement an AMI system as described in the Utilities Smart Grid Assessment and Utilities Technology Implementation Plan. • Request for Proposals (RFP) for AMI system issued, and responses were received on 6/9/2020. Progress on evaluations and selection process will be discussed with the UAC in the Fall. Final selection planned for Q1 2021, implementation of AMI and other related projects planned for 2021-2024. See June 2020 report for details.12 • The AMI meter data management system vendor selection will ensure customers are aware and have access to high quality utility consumption information and associated analytical tools and enable customers to share their data. • Single-sign-on feature for customer portal to be implemented in Q4 2020. Implementation of additional customer engagement features using single sign-on is in progress (improved consumption dashboards and home energy and water reports). • In the process of finalizing specifications to implement a new customer information system (CIS). Implementation planned for 2021-2024, in coordination with AMI implementation. • Implementation of advanced utility rates (time of use) to more fully integrate DERs is not planned until 2025. A pilot all-electric home rate will be implemented earlier. • Undertake a competitive assessment of the impact of DERs on the electric utility finances and competitiveness • Preliminary research work done, timeline for completion of project depends on staff time availability but is tentatively planned to be completed in mid-2021. B. Electricity Supply Planning and Operations The Electric Integrated Resource Plan (EIRP) considers the electric supply provided by customer- sited DERs and supply from central resources located outside Palo Alto. In accordance with the EIRP, staff will continue to use the ‘avoided cost’ methodology13 to compare the economic merits of electric supply options from DER resources within Palo Alto and from resources outside Palo Alto on an equal basis.14 The current estimated avoided cost of CPAU’s energy 12 http://cityofpaloalto.org/civicax/filebank/documents/77113 13 The EIRP contemplates pursuing an optimal mix of supply and demand resources (Strategy #2) and procuring flexible utility scale resource supplies to effectively meet changes in customer loads due to DER adoption (Strategy #6) 14 The avoided cost methodology computes the cost of meeting customer loads from outside energy resources (supply resources), and then uses this cost benchmark to evaluate the economics of DER resources (demand side resources) –with DER resources preferred when the cost of DER resources is at or below the avoided cost benchmark. This methodology to compare supply and demand resources ensures energy is economically sourced City of Palo Alto Page 6 supply in FY 2021 is 10.4 cents/kWh, and it is 13 to 15 cents/kWh for energy supply from a PV system based within Palo Alto15. Large commercial scale DERs (PV, ESS and DR systems) will also impact day-to-day operations to optimally meet the community’s hourly loads. Any large variation in DER operations at a customer sites16 will require coordination with CPAU as well as the NCPA, the City’s scheduling coordinator, and CAISO, the state’s grid operator. Except for the planned VMWare community microgrid project17 staff is not aware of any other large project that could have such impacts in the next few years. Attachment D provides details of the VMware project. Actions Planned Progress To date • Continue to update electrical load forecast based on anticipated growth of DERs and incorporate it into supply resource plans. • On-going annual activity for budgeting, rates and supply planning purposes. Long term (10 year) forecast will be updated again in 2021. • Continue to evaluate DERs as an alternative to supply resources from outside the City. • On-going activity when facilitating DER adoption by customers. ‘Avoided cost’ methodology for energy and capacity is used to compare external supplies with DER supplies. These methodologies are being used to coordinate and optimize the PV+ESS at the VMware campus. C. Electric Distribution Planning and Operations The Assessment of Distribution System to Integrate DERs discussed with the UAC in April 2018 found the following: for all CPAU customers. Resiliency and other local benefits are also considered for DERs. 15 Under CPAU’s CLEAN (Clean Local Energy Assessible Now) program PV projects could be developed and output sold to CPAU at a fixed prices over a long term contract. CPAU also compensates for the excess electricity generated by customer PV systems and exported to the distribution grid at the Net Energy Metering 2 (NEM2) rate. 16 For a 180MW load like Palo Alto, DER resources such as Demand Response or Energy Storage systems in the order of 3MW+ are considered a large variation and will require operational coordination with Northern California Power Agency (NCPA), CPAU’s scheduling coordinator with the CAISO transmission operator. 17 VMware’s proof of concept (PoC) community microgrid project contemplates the installation of two battery ESSs at two separate buildings on campus that currently have solar PV systems on their roofs. Each of the battery systems will be 500kW/1MWh in size and will be coupled with two existing PV systems (120kW and 130kW) to provide improved supply reliability for the campus. In addition, two separate connection spots and receptacles will be reserved for the City’s emergency operating vehicles to be set-up and powered in the event of an emergency/power outage situation. The PV+ESS system could also potentially help shift energy from the less valuable solar production period of 10am to 2pm to more valuable periods between 4 and 9pm. The system will furthermore be tested for its technical capability to inject reactive power into the distribution system to improve the system’s power factor. Upon successful implementation of this PoC system, feasibility of a campus- wide microgrid system is also being evaluated by VMware. City of Palo Alto Page 7 • The nine electric substations and 68 high voltage feeders have sufficient capacity to accommodate PV and EV growth in the residential sector through 2030 (this 2018 conclusion will be re-evaluated in 2021) • Staff should closely monitor distribution transformer loadings in residential neighborhoods which have a very high penetration of EVs. • Sufficient feeder capacity exists in the commercial sector to accommodate EV load growth. • Development of large PV systems (>500 kW) may have system impacts related to ‘reverse flow’ on lightly loaded distribution feeders. As such, each of the larger projects are evaluated on a case-by-case basis. In addition to evaluating DER options as alternatives to electric supply purchases, DERs sited at a specific location on the distribution system may have the potential to avoid additional distribution system investment by CPAU. This would be dependent on the amount, type, reliability, and operational characteristics of the DER, and the customer ’s load response should the DER capacity not be available. In light of CPAU’s responsibility to serve customer loads even if the DER is offline, and the technical and economic potential for such opportunities using the corresponding avoided costs, no such economically prudent opportunities to reduce distribution system investments via DER investments were found or anticipated in the near future. Actions Planned Progress To date • Update mapping of customer meters to distribution transformers serving customers to assess transformer loading • On-going process to ensure accuracy of electric meter to transformer connectivity maps. • Identify distribution transformers that have the potential to overload • On-going, with existing analytical tools that have proven well to date, with no transformer failures due to overloading. • Initial assessment underway with four transformers to refine the tools for customer EV charging patterns (see Attachment B for details). • Evaluate a standardized policy and connection fee for residential customers requesting electrical panels larger than 200 Amperes and implement if feasible; similar initiative to aid commercial customers • Evaluation planned, but no progress in the last year due to lack of staff availability. Currently planned for 2021 • Explore the potential to integrate smart inverter capability to meet the operational needs of the distribution systems • Plan to test the capability of the VMware microgrid ESS to inject reactive power into the distribution system to improve system power factor during times of need. • Facilitate the implementation of customer- initiated and owned microgrid projects • An estimated ~20 residential customers have PV+ESS based microgrids in their homes, with a equivalent number of projects in the permitting phase. • Facilitating VMware microgrid project. City of Palo Alto Page 8 D. Customer Retail Rate Design The most important DER-related rate design task will be time-of-use (TOU) rate implementation once AMI meters become available, currently planned for 2021-24. TOU rates enable CPAU to send economically efficient price signals to customers who are contemplating DER investments to optimally meet their electricity needs18. Actions Planned Progress To date • Evaluate an all-electric home or building electrification friendly retail rate • Initial assessment underway – recommendation for implementation of a pilot scale program under consideration. Implementation will depend on staffing priorities and rate design issues. • Evaluate utility bill discounts for EV customers • A number of programs are under consideration. Bill discount for income qualified customers and DC fast charger locations under consideration for 2021. Low Carbon Fuel Standard (LCFS) funds would be utilized for such discounts. • Analyze, forecast, and monitor the impact of DER adoption on rate design, in order to fairly treat all customers and to maintain the financial health of the utility • On-going evaluation, with major long-term evaluation update planned for late 2021. • A preliminary evaluation of standby rates for large solar PV and ESS is underway within the context of the VMware microgrid project. Evaluation finalization and discussion with UAC planned in 2021 depending on staff availability. • Minimum bill rate design and implementation in progress. E. Planning & Implementing Customer Programs & Communications In October 2019 the Commission discussed the planning and implementation framework for customer programs. As discussed in that report, the goals of customer programs have shifted in recent years, with the focus on traditional energy efficiency and renewable energy expanding to include sustainability and carbon reduction programs. This shift includes a major focus on DERs such as electric vehicles and building electrification technologies to achieve sustainability goals and ESS to meet reliability/resiliency needs of individual customers19. 18 CPAU had a pilot-scale residential TOU rate from 2015-2019 to serve interested customers, as part of the CustomerConnect advanced meter pilot. Approximately 100 customers participated and save an average $1 to $2/month of their electricity bill. An expansion of CPAU’s residential TOU rate is not contemplated until 2025. Medium and large commercial customers currently do have the option to elect to be on TOU rates; one customer is on the TOU rate. 19 All customer programs prioritized for implementation are evaluated based on the following criteria. 1) customer satisfaction, 2) equity among customers, 3) GHG emission reduction, 4) efficiency sa ving, 5) cost effectiveness. Customer satisfaction means that customer interests unrelated to efficiency and carbon (such as resiliency) are also taken into account. The availability of dedicated funding sources and the existence of regulatory mandates can also drive program prioritization. City of Palo Alto Page 9 Progress on the EV customer programs and the full portfolio of customer programs was presented to the Commission in in July 2020 (Demand Side Managment (DSM) Customer Programs, Update on EV Customer Programs). Actions Planned Progress To date • Revise and update the portfolio of customer programs • Broadly completed as discussed with the Commission in October 2019. The pace of implementing the sustainability programs is currently under discussion with Council. • A number of DER related customer pilot projects are being evaluated, a list of projects is provided in Attachment B. Attachment B outlines potential DER related customer programs that would help facilitate and integrate DERs. The implementation of pilot project(s) will be highly dependent on the project value and staffing resources needed for implementation. NEXT STEPS Staff will continue to take a comprehensive approach to integrating customer-sited DERs to lower overall cost, reduce greenhouse gas emissions, and increase the resiliency of the community. As illustrated below, as Palo Alto implements AMI and the level of DER penetration increases, greater focus and resources would be devoted to more fully integrat ing DERs in to the electric supply and distribution system to optimally serve all CPAU customers. Illustrative Phases of DER Integration within the Context of DER Adoption Curve Source: Adopted from CAISO presentation Resource Impact Staff’s main role related to programs on customer premises in the past has been related to energy efficiency and solar PV. Expansion of staff’s role in implementing customer programs City of Palo Alto Page 10 related to EVs, building electrification, and energy storage resulted in internal evaluation of priorities in 2019. Staffing changes and de-prioritization of projects (such as discontinuing commercial DR program and delaying the implementation of an ESS pilot project) were made in 2019 and will be re-evaluated regularly. Staffing for program implementation has been a limiting factor in implementation of building electrification programs and will continue to be a limiting factor for expansion of programs related to most other DERs as well, with the exception of EV programs, which staff has prioritized. Any acceleration of EV related customer programs/plans or building electrification programs to meet the community’s 80% by 2030 greenhouse gas reduction goals will require additional staffing. Policy Impacts The policies referenced here are part of various plans, including the Utilities Strategic Plan, the Sustainability and Climate Action Plan (S/CAP), and the Electric Integrated Resource Plan (EIRP). Environmental Review The Utilities Advisory Commission’s discussion of this informational report does not meet the definition of a project under Public Resources Code 21065 and therefore California Environmental Quality Act (CEQA) review is not required. Attachments: • Attachment D: VMWare Presentation • Attachment E: Staff Presentation Confidential │©2020 VMware, Inc. Community Microgrid Project Overview Nicola Acutt VP Sustainability July 16, 2020 Attachment D Confidential │ ©2020 VMware, Inc. Presentation Outline 2 Vision Objectives Scope Status Use Cases Timeline Next Steps Confidential │ ©2020 VMware, Inc.3 Designed to serve both VMware and the Palo Alto community Vision: Build the First Community Microgrid in Silicon Valley Sustainability & Innovation Efficiency & Resilience Community Stewardship Edge Technology Leadership •GHG emission reductions •Local renewables •True additionality in renewables •Innovation in system design and operation •Optimize energy management •Increase resiliency in case of outages •Potential for Demand Response and other opportunities •Lead integration of renewables, batteries, & microgrids into regional grid •Provide emergency response capabilities and community support •Integrate Edge technology into microgrid •Explore open source applications •Learning system to capture and use data at Edge Confidential │ ©2020 VMware, Inc.4 “Force for Good” •The future requires innovation for our people, planet, and products •In alignment with 2030 Sustainability Strategy goals and initiatives Increasing Need for Resiliency •CA power outages •Projected rolling blackouts •Greater impacts/losses projected Collaboration and Partnerships •CPAU’s awareness on the need for innovation •Mobile Emergency Operations Center connecting to the Microgrid Proof of Concept (PoC) •Stanford’s interest and commitment •Share “playbook” statewide and nationwide for increased adoption of microgrids VMW’s Expertise •Resolving network infrastructure & congestion challenges •Edge technology initiatives •Continuous learnings from the Microgrid PoC Leveraging technology to produce positive environmental, community, & business results Objectives Sustainability Innovation Efficiency & Resilience Community Stewardship Edge Technology Leadership Objectives Confidential │ ©2020 VMware, Inc.5 1.Creekside G Building –Existing Borrego solar installation •132kW(ac) •223.59 MWh/year –New battery •500kW(ac) inverter •1.02 MWh –New MEOC Connection 2.Hilltop G Building –Existing Borrego solar installation •120kW(ac) •240.55 MWh/year –New battery •500kW(ac) inverter •1.02 MWh –New MEOC Connection Microgrid PoC will encompass two buildings supported by two batteries PoC Scope: Designed to Test Business Capabilities Equipment NOTE: Solar generation data based on PVSYST calculation before COD. Generation & storage data subject to change. Rooftop Solar Battery Storage Legend: MEOC Connectivity Confidential │ ©2020 VMware, Inc.6 CSG permits received, HTG permits expected in July Status: Construction Now Underway Battery DesignConstruction Site Updates •Battery container made in the USA. •Container dimensions: L x W x H = 32’ x 9’8” x 9’7” * Confidential │ ©2020 VMware, Inc.7 4-hour resiliency full building Islanding of critical load Islanding of critical load and ancillary connectivity (e.g. MEOC) Peak shifting mode Demand Response Operating Mode Grid Services Interaction with VMware Building Management System Potential Microgrid Use Cases Confidential │ ©2020 VMware, Inc.8 OCT 15: Battery installation complete; begin testing & commissioning JUL 31: HTG permit response expected Upcoming Milestones Q2 FY’21 Q3 FY’21 Q4 FY’21 May June July August September October November JUL 13: CSG permits received; construction begins AUG 24: Begin battery installation NOV 30: Substantial Completion Date MAY 14: Utility relocation permit received * Pending COVID-related excusable delays Confidential │ ©2020 VMware, Inc.9 Next Steps •Continue collaboration with CPAU on Microgrid PoC use cases •Capture learnings from PoC to plan for next phase of Community Microgrid •Continue development of innovative microgrid control technology Confidential │ ©2020 VMware, Inc. Thank You AUGUST 5, 2020 www.cityofpaloalto.org/ev Update on Distributed Energy Resources in Palo Alto 1 Demand Response Attachment E 2 DER PLANNING FOCUS AREAS •Business Strategy & Operational Planning •Electric Supply Planning & Operations •Distribution Planning & Operations •Customer Retail Rate Design •Customer Program Design 3 Estimated Number of DERs & Associated Impacts on Electrical Loads in 2019 3 4 2019-20 PROGRESS HIGHLIGHTS •RFP for AMI system implementation issued and proposals being evaluated •Implemented MyCPAU customer portal –Phase I •Technical Assistance Program to assist customers install EV chargers + cash rebates •Facilitating community microgrid at VMware •Analyzing impact of DERs on distribution transformer loading 5 IMPLEMENTATION PLANS 2020-22 •Implement MyCPAU Customer Portal –Phase II (single sign on with customer engagement tools from WaterSmart and Uplight) •Continue to implement existing customer programs, particularly EV chargers for multi-family homes •Further enhancement to DER customer programs – particular focus on income qualified customers •Pilot building electrification friendly retail rates •AMI system implementation Questions? Input? 6