HomeMy WebLinkAboutStaff Report 13974
City of Palo Alto (ID # 13974)
Utilities Advisory Commission Staff Report
Meeting Date: 3/2/2022
City of Palo Alto Page 1
Title: Discussion and Update on REC Exchange Program Results for 2021 and
Projections for 2022-2027
From: Director of Utilities
Lead Department: Utilities
Executive Summary
In August 2020, the City Council approved amendments to the electric utility’s Carbon Neutral
Plan that clarified and modified policies regarding the sales and exchanges of renewable energy
credits (RECs) (Staff Report #11556). The amendments permitted the exchange of Bucket 1
(primarily in-state) RECs for Bucket 3 (primarily out-of-state) RECs, provided the City maintains
compliance with State Renewable Portfolio Standard (RPS) regulations. A portion of the
earnings from the program would be used to mitigate the economic impacts of the coronavirus
pandemic, and the remainder would be reserved for local decarbonization programs. The
amendments also adopted an hourly accounting methodology for managing the City’s electric
portfolio and permitted the use of Bucket 3 RECs for managing any emissions impacts identified
by the use of the hourly accounting methodology.
Since then, staff has purchased and sold RECs for Calendar Years (CYs) 2020 and 2021 in
accordance with the Carbon Neutral Plan amendments, resulting in net earnings of $5.1 million.
And at the time of writing this report, staff was in the process of planning to sell RECs for CY
2022. The attached presentation presents the program’s actual net earnings for CY 2021 and
staff’s projections for the program’s net earnings and its impacts on the City’s Power Content
Label for CYs 2022-2027.
For CY 2022, staff projects $0.77 million in net earnings from the program. This projection is
lower than the amount the City generated through the program in CYs 2020 and 2021 due to a
number of factors, including: (a) the extended drought leading to low hydroelectric projections
and thus large Bucket 3 REC purchase volumes, (b) the continued narrowing of the Bucket 1 vs
Bucket 3 price spread, and (c) lower Bucket 1 REC supplies in 2022 due to expiration of the
Shiloh wind contract.
In CY 2023 and CY 2024, staff projects that REC Exchange Program net revenue will rebound to
about $1.95 million annually, due to: (a) hydro projections gradually returning to long-term
average levels, and (b) the start of the Rosamond Solar contract adding to the City’s supply of
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City of Palo Alto Page 2
Bucket 1 RECs. Beyond 2024, REC Exchange program net revenue is projected to gradually
decline, due to: (a) the gradual ramping up of RPS requirement levels, which reduces the
volume of supplies the City is able to sell, and (b) some of the City’s older renewable energy
contracts expiring.
This is a discussion item, and no Utilities Advisory Commission action is requested.
Attachments:
• Attachment A: Presentation
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March 2, 2022 www.cityofpaloalto.org
REC EXCHANGE: CYs 2021 & 2022 UPDATE
Staff: Jim Stack •
CITY OF
PALO ALTO
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PART 1: CY 2021 REC EXCHANGE SUMMARY
March 2, 2022 www.cityofpaloalto.org
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REC EXCHANGE SUMMARY FOR CY 2021
Baseline
(No Sales)
REC Exchange
Projections
(May 2021)
REC Exchange
Actuals
Bucket 1 REC Sales Volume (MWh)--274,600 287,210
Bucket 3 REC Purchase Volume (MWh)--276,380 383,408
Bucket 1 REC Sales Revenue ($M)--$3.71 $4.01
Bucket 3 REC Purchase Cost ($M)--$1.24 $1.97
Net Revenue ($M)--$2.46 $2.04
Bucket 1 RPS Level 67%33%32%
Projected REC Prices: $13.50 for Bucket 1, $5.00 for Bucket 3
Actual REC Prices: $13.97 for Bucket 1, $5.13 for Bucket 3
~CITY OF
~PALO ALTO
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ELECTRIC SUPPLY PORTFOLIO IMPACT (CY 2021)
• .
CITY OF
PALO
ALTO
1,000,000
900,000
800,000
700,000 -..c
3: ~ 600,000
"'C nl _g 500,000
~
~
~ 400,000
:::I V)
u E 300,000 u a,
LLI
Total Load
-;-----------------------(823,000MWh)
Solar
Wind
✓ ---------------~4-
~~nspecified ~.--
t------~ Power" ~ ~ (Market Power+ ~
t---------~ Unbundled RECs)~----
Solar
200,000 -;-----
100,000
CY 2021 Baseline CY 2021 w/ REC Exchanges
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POWER CONTENT LABEL IMPACT (CY 2021)
Base Portfolio With REC Exchange
RPS Level: 67%
Emissions Intensity: 26 kg CO2/MWh
RPS Level: 32%
Emissions Intensity: 155 kg CO2/MWh
• .
CITY OF
PALO
ALTO
39%
32"
32%
~
12% 22%
■ Large Hydro ■ Landfill Gas ■ Wind ■ Solar ~ Unspecified Power
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POWER CONTENT LABEL IMPACT (CY 2021)
Base
Portfolio
After REC
Exchange
Eligible Renewable 67%32%
Biomass 13%6%
Geothermal 0%0%
Small Hydro 1%0%
Solar 39%21%
Wind 12%6%
Coal 0%0%
Large Hydro 32%32%
Natural Gas 0%0%
Nuclear 0%0%
Unspecified Sources 4%34%
Emissions Intensity
(kg CO2/MWh)26.0 155.0 • .
CITY OF
PALO
ALTO
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PART 2: CY 2022 REC EXCHANGE PROJECTIONS
March 2, 2022 www.cityofpaloalto.org
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REC EXCHANGE PROJECTIONS FOR CY 2022
Projected REC Prices: $12.25 for Bucket 1, $6.25 for Bucket 3
Baseline
(No Sales)
REC Exchange
Projections
(Jan 2022)
Bucket 1 REC Sales Volume (MWh)--182,533
Bucket 3 REC Purchase Volume (MWh)--234,923
Bucket 1 REC Sales Revenue ($M)--$2.24
Bucket 3 REC Purchase Cost ($M)--$1.47
Net Revenue ($M)--$0.77
Bucket 1 RPS Level 57%35%
~CITY OF
~PALO ALTO
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ELECTRIC SUPPLY PORTFOLIO IMPACT (CY 2022)
• .
CITY OF
PALO
ALTO
1,000,000
900,000
800,000
700,000 -.c ~ ~ 600,000
"'C "' _g 500,000
~
~
~ 400,000
:J V)
u ·;:: .., 300,000 u ~ w
200,000
100,000
Total Load
(850,000 MWh) +----------------------✓/ ---
--y~;~;cifi~~~~;;0---------------~~-· --
~:'
1Unspecified ~
Solar
Wind
CY 2022 Baseline
~ Power" ~
t-----~(Market Power+~.-
~ Unbundled RECs) ~
Solar
CY 2022 w/ REC Exchanges
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POWER CONTENT LABEL IMPACT (CY 2022)
Base Portfolio With REC Exchange
RPS Level: 61%
Emissions Intensity: 34 kg CO2/MWh RPS Level: 34%
Emissions Intensity: 153 kg CO2/MWh
• .
CITY OF
PALO
ALTO
37%
24%
■ Landfill Gas ■ Wind ■ Solar
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POWER CONTENT LABEL IMPACT (CY 2022)
Base
Portfolio
After REC
Exchange
Eligible Renewable 55%33%
Biomass 12%6%
Geothermal 0%0%
Small Hydro 1%1%
Solar 37%24%
Wind 5%2%
Coal 0%0%
Large Hydro 40%40%
Natural Gas 0%0%
Nuclear 0%0%
Unspecified Sources 6%28%
Emissions Intensity
(kg CO2/MWh)34.0 153.0• .
CITY OF
PALO
ALTO
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PART 3: CY 2022-2027 REC EXCHANGE PROJECTIONS
March 2, 2022 www.cityofpaloalto.org
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REC EXCHANGE PROJECTIONS FOR CYs 2022-2027
2022 2023 2024 2025 2026 2027
Bucket 1 REC Sales Volume (MWh)182,533 232,503 197,640 183,674 147,939 133,448
Bucket 3 REC Purchase Volume (MWh)234,923 136,024 67,059 53,785 19,139 ---
Bucket 1 REC Sales Revenue ($M)$2.24 $2.79 $2.37 $2.20 $1.78 $1.60
Bucket 3 REC Purchase Cost ($M)$1.47 $0.85 $0.42 $0.34 $0.12 $---
Net Revenue ($M)$0.77 $1.94 $1.95 $1.87 $1.66 $1.60
Bucket 1 RPS Level 34.7%37.1%39.6%41.4%45.0%46.8%
~CITY OF
~PALO ALTO
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Jim Stack, Ph.D.
Senior Resource Planner
james.stack@cityofpaloalto.org
(650) 329-2314
CITY OF
PALO
ALTO
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