HomeMy WebLinkAbout2020-12-07 City Council Agendas (17)
City of Palo Alto (ID # 11677)
City Council Staff Report
Report Type: Informational Report Meeting Date: 12/7/2020
City of Palo Alto Page 1
Council Priority: Climate/Sustainability and Climate Action Plan
Summary Title: Informational Report on 2019 Renewable and Carbon Neutral
Electricity Supplies
Title: Annual Review of the City’s Renewable Procurement Plan, Renewable
Portfolio Standard Compliance, and Carbon Neutral Electric Supplies for 2019
From: City Manager
Lead Department: Utilities
Executive Summary
Like all electric utilities in California, Palo Alto is subject to the state’s Renewable Portfolio
Standard (RPS) mandate of 60% by 2030. The City has also adopted a Carbon Neutral Plan,
which led to the achievement of a carbon neutral electric supply portfolio starting in 2013 (and
which was updated by Council in August 2020). In 2011, in compliance with state RPS
regulations, the Council also formally adopted an RPS Procurement Plan and an RPS
Enforcement Program that recognize certain elements of the state’s RPS law applicable to
publicly owned utilities. The RPS Enforcement Program requires the City Manager, or their
designee, the Utilities Director, to conduct an annual review of the Electric Utility’s compliance
with the procurement targets set forth in the City’s RPS Procurement Plan.
This staff report satisfies the reporting requirements of the City’s RPS Enforcement Program,
while also providing an update on the City’s compliance with the Carbon Neutral Plan. The City
continues to meet both its RPS and carbon neutrality objectives—even after selling over
200,000 MWh of renewable energy in 2019.
Background
The City currently has two independent procurement targets related to renewable and carbon
neutral electricity:
• RPS Procurement Plan (60% by 2030): The City’s official renewable electricity goal is
contained in the RPS Procurement Plan that the City was required to adopt under
Section 399.30(a) of California’s Public Utilities Code. This was adopted in December
2011 (Staff Report 2225, Resolutions 9214 and 9215) and updated in November 2013
City of Palo Alto Page 2
(Staff Report 4168, Resolution 9381) and December 2018 (Staff Report 9761, Resolution
9802)—and is slated to be updated again in December 2020 (Staff Report 11650) . The
pending update to the RPS Procurement Plan is designed to bring it into alignment with
the state’s 60% RPS law (SB 100), which was signed into law in 2018.1 The RPS
Procurement Plan and RPS Enforcement Program complement each other: the
Procurement Plan establishes official procurement targets, while the Enforcement
Program specifies the reporting and monitoring that is required of the Utilities Director
while working to achieve those targets.
The procurement requirement in the version of the City’s RPS Procurement Plan being
considered by Council in December is that the City acquire renewable electricity supplies
equal to 60% of retail sales by 2030, which is in line with the state’s current RPS
mandate2. The RPS Procurement Plan also contains interim targets for six separate
periods (2011-2013, 2014-2016, 2017-2020, 2021-2024, 2025-2027, and 2028-2030).
• Carbon Neutral Plan (100% Carbon Neutral Electricity by 2013): The Carbon Neutral Plan
was adopted in March 2013 (Staff Report 3550, Resolution 9322) and updated in August
2020 (Staff Report 11556, Resolution 9913), and requires that the City procure a carbon
neutral electric supply portfolio starting in calendar year (CY) 2013. In general, this goal
is expected to be achieved primarily through purchases made under the City’s long-term
renewable power purchase agreements (PPAs) and output from its hydroelectric
resources. However, when the City Council approved an update to the Carbon Neutral
Plan in August 2020, they also approved a new procurement strategy whereby the City
does not keep all of the output of its long-term, in-state PPAs, but instead exchanges
that output for less expensive out-of-state renewable generation.
Discussion
The City continues to meet its objectives under the RPS Procurement Plan and the Carbon
Neutral Plan and achieved an RPS level of 37% in 2019—exceeding the state’s 31%
procurement mandate for the year. Below is a summary of CPAU’s progress toward satisfying
its renewable energy and carbon neutral procurement targets, with additional detail provided
in Attachment A.
RPS Procurement Plan Compliance
In CY 2019, the City initially received 535,145 MWh of renewable energy through its long-term
contracts for wind, solar, landfill gas, and small hydro resources (which represents 62.1% of the
City’s total retail sales for that period). Additionally, the City received 665,359 MWh of large
1 Although SB 100 became law in 2018, the California Energy Commission (CEC) has yet to formally adopt
regulations implementing the new law. The pending update to the City’s RPS Procurement Plan is based on the
current RPS regulations, which CEC adopted on Oct. 14, 2015 with an effective date of April 12, 2016; however, it is
possible that the City will need to update its RPS Procurement Plan again in 2021 if the adopted RPS regulations
differ significantly from the draft version of the regulations.
2 CA Public Utilities Code Sec. 330.3(c)(2).
City of Palo Alto Page 3
hydroelectric generation (representing 77.2% of the City’s total retail sales), which is not
classified as eligible renewable generation by the state. Because of the favorable hydro
conditions for the year the City had a large surplus of carbon neutral generation overall, and,
based on feedback from the Utilities Advisory Commission, staff decided to sell the majority of
this surplus from the renewable energy supplies (because this generation is more valuable to
other utilities than the large hydro generation). Ultimately the City sold 216,110 MWh of
renewable energy supplies, yielding $3.34 million in sales revenue. Accounting for these sales,
the City’s net renewable energy supplies totaled 319,035 MWh, which represents 37.0% of the
City’s total retail sales for 2019.
For CY 2020, staff has currently contracted to sell about 324,000 MWh of renewable
generation, and projects that the City’s remaining renewable electricity supplies from in-state
resources will equal 26.0% of retail sales. However, after accounting for the purchase of out-of-
state renewable supplies, the City’s total renewable electricity supplies are projected to equal
55.4% of retail sales.
In accordance with the state’s RPS Program requirements, CPAU’s Procurement Plan develops a
renewable electric supply portfolio that balances environmental goals with system reliability
while maintaining stable and low retail electric rates. The state RPS program requires retail
electricity suppliers like CPAU to procure progressively larger renewable electricity supplies
across a series of separate multi-year Compliance Periods. CPAU’s procurement targets, as well
as its actual/projected procurement volumes and RPS levels, for the first three Compliance
Periods are summarized in Table 1 below. For these three compliance periods, the City has
increasingly purchased more renewable electricity supplies than the respective procurement
targets.
Table 1: RPS Compliance Period Procurement Targets and Actual/Projected Procurement
RPS
Compliance
Period
Years
Retail
Sales
(MWh)
Procurement
Target
(MWh)
Actual/Projected
Procurement*
(MWh)
Target % of
Retail Sales
Actual/Projected
% of Retail
Sales
1 2011-2013 2,837,773 567,555 607,740 20% 21.4%
2 2014-2016 2,801,056 605,949 826,855 21.7% 29.5%
3 2017-2020 3,458,925 1,033,933 1,667,716 30% 48.2%
TOTALS 9,097,754 2,207,437 3,102,311 34.1%
*Procurement totals for Compliance Periods 1 and 2 are actuals; procurement totals for Compliance
Period 3 are a combination of actual data (for 2017-2019) and projected data (for 2020), and account for
executed sales of 324,000 MWh of renewable supplies for 2020.
Carbon Neutral Plan
In CY 2019, CPAU achieved its goal, set forth in the Carbon Neutral Plan, of an electric supply
portfolio with zero net greenhouse (GHG) emissions for the sixth consecutive year, without the
need to purchase unbundled renewable energy certificates (RECs) in the market. Carbon
neutrality was achieved in CY 2019 through existing hydro and renewable generation (wind,
solar, and landfill gas). Due to favorable hydro conditions, the City had a large surplus of energy,
City of Palo Alto Page 4
allowing for the sale of 216,000 MWh of renewable energy while still maintaining a carbon
neutral supply portfolio (when evaluated using an annual carbon accounting framework).
When the City Council approved an update to the Carbon Neutral Plan in August 2020, the
primary change was to adopt an hourly carbon accounting methodology as the basis for
determining whether the City has met its carbon neutrality objective. Although this change did
not apply to the City’s electric supply portfolio for CY 2019, it is interesting to note how the
City’s supply portfolio would have fared under this accounting framework. Under the annual
accounting approach, the City had an overall surplus of 85,569 MWh of carbon neutral
generation compared to its load (equal to 9.4% total load), and thus substantially exceeded the
carbon neutrality standard. However, under the hourly carbon accounting approach,3 the City’s
electric supply portfolio is found to be responsible for a net positive amount of GHG emissions
for CY 2019: 8,085 metric tonnes of CO2 equivalent.
For CY 2020, slightly below average hydro conditions are expected to result in about 46% of the
City’s electric supply needs being supplied by hydroelectric resources, with the remainder
coming from non-hydro renewable energy resources (including purchases of out-of-state
unbundled RECs).
Policy Implications
This report implements Sections 4 and 5 of the City’s RPS Enforcement Program, which require
an annual review of the Electric Utility’s compliance with the CPAU RPS Procurement Plan to
ensure that CPAU is making reasonable progress toward meeting the compliance obligations
established in the CPAU RPS Procurement Plan.
Environmental Review
The Council’s review of this report does not meet the definition of a “project” pursuant to
Public Resources Code Section 21065, thus California Environmental Quality Act review is not
required.
Attachments:
• Attachment A: Renewable and Carbon Neutral Electricity Supply Procurement Details
3 The City’s hourly carbon accounting methodology entails calculating the City’s net surplus or deficit carbon
neutral supply position relative to its load in every hour of the year. The grid average electricity emissions intensity
for each hour is then applied to each of these hourly surpluses or deficits to yield a net emissions contribution (or
reduction) that the City’s electric supply portfolio is responsible for in that hour. These hourly emissions totals are
then summed across the entire year to yield the City’s annual emissions total for the year.
Renewable and Carbon Neutral Electricity Supply Procurement Details
Renewable Energy Goals
In CY 2019, the City initially received 535,145 MWh of renewable energy through its long-term
contracts for wind, solar, landfill gas, and small hydro resources (which represents 62.1% of the
City’s total retail sales for that period). After accounting for the sale of 216,110 MWh of this
generation, the City’s net renewable energy supplies totaled 319,035 MWh, which represents
37.0% of the City’s total retail sales for 2019.
For CY 2020, staff has currently contracted to sell about 324,000 MWh of renewable generation,
and projects that City’s remaining renewable electricity supplies from in-state resources will
equal 26.0% of retail sales. However, after accounting for the purchase of out-of-state renewable
supplies, the City’s total renewable electricity supplies are projected to equal 55.4% of retail
sales.
Table 1 shows the renewable resources currently under contract, the status of the projects,
their annual output in Gigawatt-hours (GWh), and the rate impact of each resource that was
calculated at the time it was added to the electric supply portfolio.
Table 1: Summary of Contracted Renewable Electricity Resources
Resource Delivery
Begins
Delivery
Ends
Annual Generation
(GWh)
Rate Impact
(¢/kWh)
Small Hydro Before 2000 N/A 10.0 0
High Winds Dec. 2004 Jun. 2028 42.7 0.012
Shiloh I Wind Jun. 2006 Dec. 2021 57.3 (0.041)
Santa Cruz Landfill Gas (LFG) Feb. 2006 Feb. 2026 9.0 0.003
Ox Mountain LFG Apr. 2009 Mar. 2029 42.5 (0.040)
Keller Canyon LFG Aug. 2009 Jul. 2029 13.8 (0.020)
Johnson Canyon LFG May 2013 May 2033 10.4 0.064
San Joaquin LFG Apr. 2014 Apr. 2034 27.5 0.127
Kettleman Solar Aug. 2015 Aug. 2040 53.5 0.099
Hayworth Solar Dec. 2015 Dec. 2042 63.7 0.026
Frontier Solar Jul. 2016 Jul. 2046 52.5 0.011
Elevation Solar C Dec. 2016 Dec. 2041 100.8 (0.044)
W. Antelope Blue Sky Ranch B Dec. 2016 Dec. 2041 50.4 (0.002)
CLEAN Program Projects Varies Varies 5.0 0.027
Total Operating Resources 539.0 0.223
Golden Fields Solar III Jan. 2023 Dec. 2047 75.0 (0.056)
Total Non-Operating Resources 75.0 (0.056)
Total Committed Resources 614.0 0.168
ATTACHMENT A
RPS Procurement Plan Compliance
Annually, the Utilities Director reviews CPAU’s RPS Procurement Plan to determine compliance
with the state’s RPS Program. Under the state RPS Program, the California Energy Commission
(CEC) developed portfolio balancing requirements, which dictate what percentage of renewable
procurement must come from resources interconnected to a California Balancing Area (as
opposed to an out-of-state transmission grid balancing area). These requirements also determine
the eligibility criteria for renewable resource products as determined by their eligible Portfolio
Content Categories1, found in the CEC Enforcement Procedure RPS (CA Code of Regulations, Title
20, Section 3203). The CEC Enforcement Procedures apply to publicly owned utilities (POUs), such
as CPAU.
In accordance with the state’s RPS Program requirements, CPAU’s Procurement Plan develops a
renewable electric supply portfolio that balances environmental goals with system reliability
while maintaining stable and low retail electric rates. The state RPS program requires retail
electricity suppliers like CPAU to procure progressively larger renewable electricity supplies
across three separate Compliance Periods, as outlined below.
1. Compliance Period 1 (2011 – 2013)
For Compliance Period 1 (2011-2013) retail electricity providers were required to procure
renewable electricity supplies equaling 20% of total retail sales, which CPAU did. In this period,
CPAU supplied 21.4% of the City’s retail electricity sales volumes from renewable energy sources.
The procurement results for Compliance Period 1 are displayed in Table 2 below:
Table 2: Compliance Period 1 RPS Procurement Details
Year Retail Sales
(MWh)
Procurement
Target (MWh)*
Actual Procurement
(MWh)
% of Retail
Sales
2011 949,517 189,903 207,974 21.9%
2012 935,021 187,004 200,621 21.5%
2013 953,235 190,647 199,145 20.9%
TOTAL 2,837,773 567,555 607,740 21.4%
* Annual procurement targets are “soft” targets. The RPS Procurement Plan requires that the
target be met for the compliance period as a whole, not in each year of the compliance period.
All of the renewable energy procured in Compliance Period 1 came from resources whose
contracts were executed before June 1, 2010. The RPS Procurement Plan considers these
contracts “grandfathered,” and since all of the renewable energy procurement for Compliance
Period 1 was from these types of contracts, there was no need to meet the Portfolio Balancing
Requirements included in Section B.4 of the RPS Procurement Plan.
1 RPS Portfolio Content Categories are defined as follows: Category 1 is energy and RECs delivered to a California
Balancing Authority (CBA) without substituting electricity from another source, Category 2 is energy and RECs that
cannot be delivered to a CBA without substituting electricity from another source, and Category 3 is unbundled RECs.
2. Compliance Period 2 (2014 – 2016)
In Compliance Period 2, renewable procurement must equal or exceed the sum of the three
annual RPS procurement targets described by the following equations:
2014 RPS Target = 20% × (Retail Sales in 2014)
2015 RPS Target = 20% × (Retail Sales in 2015)
2016 RPS Target = 25% × (Retail Sales in 2016)
As shown in Table 3 below, CPAU easily exceeded this mandated procurement level as well.
Renewable electricity procurement equaled 29.5% of retail sales for Compliance Period 2 overall.
Table 3: Compliance Period 2 RPS Procurement Details
Year Retail Sales
(MWh)
Procurement
Target (MWh)*
Actual Procurement
(MWh)
% of Retail
Sales
2014 953,386 190,677 210,250 22.1%
2015 932,922 186,584 241,262 25.9%
2016 914,748 228,687 375,343 41.0%
TOTAL 2,801,056 605,949 826,855 29.5%
* Annual procurement targets are “soft” targets. The RPS Procurement Plan requires that the
target be met for the compliance period as a whole, not in each year of the compliance period.
Also in Compliance Period 2, the RPS Portfolio Balancing Requirements applied to the
procurement levels described above. The specific requirements are: (1) CPAU must procure at
least 65% of its renewable supplies from Portfolio Content Category 1, and (2) no more than 15%
from Portfolio Content Category 3 (unbundled RECs). CPAU easily met the Compliance Period 2
overall procurement requirement and the RPS Portfolio Balancing Requirement, as five new solar
projects came online in 2015 and 2016, and all of these projects are considered Portfolio Content
Category 1 resources.
3. Compliance Period 3 (2017 – 2020)
For Compliance Period 3, CPAU is subject to “soft” targets to supply at least 27% of its retail sales
volume from renewable resources in 2017, with that level increasing by 2% each year until
reaching 33% in 2020, as described by the following four equations:
2017 RPS Target = 27% × (Retail Sales in 2017)
2018 RPS Target = 29% × (Retail Sales in 2018)
2019 RPS Target = 31% × (Retail Sales in 2019)
2020 RPS Target = 33% × (Retail Sales in 2020)
The overall Compliance Period 3 target is equal to the sum of these four annual soft targets. CPAU
is expected to easily comply with the Compliance Period 3 overall procurement requirement, as
well as the Portfolio Balancing Requirement that at least 75% of the renewable electricity
supplies come from Portfolio Content Category 1 and no more than 10% come from Portfolio
Content Category 3. Staff projects that renewable electricity supplies will satisfy nearly 50% of
retail sales for Compliance Period 3, even after accounting for the 540,000 MWh of RPS supplies
sold in 2019 and 2020, and that all of these supplies will come from either Portfolio Content
Category 1 or “grandfathered” resources.
Table 4: Compliance Period 3 RPS Procurement Details
Year Retail Sales
(MWh)
Procurement
Target (MWh)*
Actual/Projected
Procurement (MWh)
% of Retail
Sales
2017 884,422 238,794 554,206 62.7%
2018 888,033 257,530 574,475 64.7%
2019 861,561 267,084 319,035 37.0%
2020** 797,589 263,204 220,000 27.6%
Total 3,431,605 1,026,612 1,667,716 48.6%
* Annual procurement targets are “soft” targets. The RPS Procurement Plan requires that the
target be met for the compliance period as a whole, not in each year of the compliance period.
** Projected annual 2020 data: reflects executed sales of 324,000 MWh.
Finally, as required by the CEC RPS Enforcement Procedures and Section D of the City’s
Procurement Plan, staff reported all of the above information to the California Energy
Commission in August 2020.
Carbon Neutral Plan
In CY 2019, CPAU achieved its goal, set forth in the Carbon Neutral Plan, of an electric supply
portfolio with zero net greenhouse (GHG) emissions for the sixth consecutive year, without the
need to purchase unbundled renewable energy certificates (RECs) in the market. Carbon
neutrality was achieved in CY 2019 through existing hydro and renewable generation (wind, solar,
and landfill gas). Due to favorable hydro conditions, the City had a large surplus of energy,
allowing for the sale of 216,000 MWh of renewable energy while still maintaining a carbon
neutral supply portfolio (when evaluated using an annual carbon accounting framework).
When the City Council approved an update to the Carbon Neutral Plan in August 2020, the
primary change was to adopt an hourly carbon accounting methodology as the basis for
determining whether the City has met its carbon neutrality objective. Although this change did
not apply to the City’s electric supply portfolio for CY 2020, it is interesting to note how the City’s
supply portfolio would have fared under this accounting framework. Under the annual
accounting approach, the City had an overall surplus of 85,569 MWh of carbon neutral generation
compared to its load (equal to 9.4% total load), and thus substantially exceeded the carbon
neutrality standard. However, under the hourly carbon accounting approach, the City’s electric
supply portfolio is found to be responsible for a net positive amount of GHG emissions: 8,085
metric tonnes of CO2 equivalent.
Figure 1 below illustrates the City’s average monthly gross load (total electric consumption as
measured at Citygate) and net load (Citygate load less generation from carbon neutral supply
resources) for 2019.
Figure 1: CPAU Monthly Average Gross & Net Load for 2019
Figure 2 below depicts the average monthly emissions intensities for the California Independent
System Operator (CAISO) grid, as well as the City’s average monthly net electric emissions totals
for 2019. The emissions totals are the result of applying the hourly average CAISO emissions
intensity values to the City’s hourly net load (the monthly average of which is depicted in Figure
1 above).
s: ~
"C "' _g .,
~ .,
~
.2:-
150
100
so
0
..c: ... C:
0 ~
0 ~
<C (50)
(100}
(150)
Jan
-Gross Load
-Net Load (Load Less Carbon Neutral Generation)
Mar Apr May Jun Jul Sep Oct Nov Dec
Figure 2: Monthly Average CAISO Emissions Intensity & CPAU Net Emissions for 2019
For CY 2020, slightly below average hydro conditions are expected to result in about 46% of the
City’s electric supply needs being supplied by hydroelectric resources, with the remainder coming
from non-hydro renewable energy resources (including purchases of out-of-state unbundled
RECs).
800 80
700 70
:c-s 600 60
:E
~ Qj 500 so Q. ;::. N 0 0 u u
@. 400 40 I-
> ~ -~ "' "' C C 300 30 0 ! -CAISO Emissions Intensity (lb CO2/MWh) ·;;;
C "'
"' -Palo Alto Net Emissions (MT CO2}
·e
C 200 20 w
0 ... ·;;; Qj
"' z ·e 0
w 100 10 ~ Qj 0 Ill)
~ ~ Qj
~ 0 0
0 VI Jan Apr May Jun Sep Oct Nov Dec
ci: u -100 -10
-200 -20
-300 -30