HomeMy WebLinkAboutStaff Report 14279
City of Palo Alto (ID # 14279)
Utilities Advisory Commission Staff Report
Meeting Date: 6/8/2022 Report Type:
City of Palo Alto Page 1
Title: Staff Request for UAC Feedback on the Development of the Electric
Utility’s Integrated Resource Plan
From: Director of Utilities
Lead Department: Utilities
REQUEST
Staff seeks UAC feedback on a proposed scope and work plan for the next update of the City’s
Integrated Resource Plan (the 2023 IRP) for the electric utility, which will be developed in compliance
with Senate Bill 350 (Clean Energy and Pollution Reduction Act). There is no recommended action.
EXECUTIVE SUMMARY
Integrated resource planning is an analysis-driven approach that utilities have long used to ensure that
they provide sufficient resources to reliably meet forecasted customer electrical energy and capacity
needs in the most cost-effective way, while considering a comprehensive set of supply and demand
resources (on equal footing) and satisfying environmental and other public policy objectives. In addition,
it provides the utility an opportunity to seek community input and incorporate that feedback into its
roadmap for the future.
The City is now beginning the process of updating its 2018 IRP, as required by state legislation (Senate
Bill 350). While this update will ensure that the City manages its electric resources consistent with state
and federal regulatory and legislative requirements, the City’s climate sustainability goals, and the
Utilities Department’s strategic planning objectives, it will also provide a basis for the following key
decisions and policies (among others) related to the electric portfolio in the 2024 to 2035 period, which
is the planning horizon for the new IRP:
1. Western Contract – Evaluate whether to renew the City’s hydroelectric contract with the
Western Area Power Administration (WAPA), which expires at the end of 2024, or replace this
contract with other carbon-free resources; and
2. California-Oregon Transmission Project (COTP) – Evaluate the best use for the City’s 51 MW
share of COTP after the City’s layoff of that asset expires at the end of 2023.
In addition to these key strategic decisions, the IRP will address Palo Alto’s long-term load forecast, giving
particular consideration to the City’s electrification efforts and aggressive climate and sustainability
goals. However, the IRP is not intended to be a forum for reconsidering the Utilities Strategic Plan; for
designing or developing new customer programs; for developing new initiatives to meet the City’s
Sustainability and Climate Action Plan (S/CAP) objectives; or for doing any significant distribution system
planning.
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Staff seeks UAC and community feedback on this analysis framework and process for developing the IRP
over the next 18 months. The UAC and the community will be provided subsequent updates and
opportunities to offer additional feedback as staff carries out the analysis.
BACKGROUND
An integrated resource plan (IRP) is a tool traditionally used by utilities to provide a roadmap for meeting
forecasted electricity demand through a combination of supply-side resources (i.e. local and remote
generation resources) and demand-side resources (e.g. customers installing energy storage systems or
energy-efficient equipment and appliances) over a specified future period. A comprehensive decision
analysis modeling tool is used to evaluate costs, benefits, and uncertainties related to various supply and
demand portfolio alternatives with the objective of identifying the least-cost, least-risk portfolio of
resources. Like all IRPs, this effort will take the following factors into account in identifying solutions:
1. Loading Order. Pursue all cost-effective energy efficiency and demand-side resources before
contracting for new supply-side resources.
2. Regulatory Compliance. Comply with state and federal regulatory requirements (e.g. Renewable
Portfolio Standards) and other standards as appropriate (e.g. CAISO capacity requirements).
3. Council-adopted Climate Goals and Carbon Neutral Plan objectives. Reduce carbon intensity of
the electric portfolio by utilizing 1) maximum procurement of long-term Renewable Portfolio
Standard (RPS)-eligible renewables; 2) existing large hydroelectric resources; and 3) Renewable
Energy Credits (REC) when long-term resources are not sufficient.
4. Customer Preferences. Facilitate customer preference for other resources (e.g. local solar or
storage) and facilitate the deployment in a cost-effective manner.
5. Cost. Identify the most cost-effective approach that addresses Council-adopted objectives.
Manage existing resources to maximize value.
6. Risk Management. Structure the portfolio or add mitigations to manage known risks (e.g.
market price risk or hydroelectric variability) and build flexibility into the portfolio to address
other less quantifiable risks (e.g. regulatory uncertainty) through diversification of suppliers,
contract terms, and resources, and through the use of creditworthy counterparties when
appropriate.
The need to conduct a traditional IRP has been minimized significantly through California’s and the City’s
adoption of several legislative initiatives and policies which mandate how resources will be procured—
e.g. through loading order mandates, targets for roof-top solar installations, renewable portfolio
standards, and capacity planning reserves. However, in October 2015, Governor Jerry Brown signed
Senate Bill 350 (SB 350) into law, which among other things requires publicly owned utilities (POU)
serving loads greater than 700,000 megawatt hours per year to develop, adopt, and submit an IRP to the
California Energy Commission (CEC), and update it every 5 years. One of the main objectives of SB 350 is
to ensure that POUs are on track to help the State meet its greenhouse gas emission reduction target of
40% below 1990 levels by 2030.
The City adopted its first IRP under the SB 350 requirements on December 3, 2018 (Staff Report 9761).1
In addition to the IRP itself, the Council also approved:
1 Prior to the 2018 IRP, the City used a similar tool, referred to as the Long-term Electric Acquisition Plan (LEAP), as
a framework for its supply and demand resource policies and investment decisions. The LEAP was different than a
traditional IRP, in that its primary focus was on how to manage the electric portfolio consistent with RPS and other
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1) A set of four standardized tables that the CEC’s IRP regulations required POUs to submit with
their IRPs;
2) IRP Objective and Strategies (Attachment A) to guide future analysis and decisions; and
3) An IRP Work Plan (Attachment B) with a set of new initiatives and timelines for their completion,
which staff recommended undertaking in order to prepare the City’s electric supply portfolio for
the upcoming shifts in the electric utility industry.
Table 1 below lists the seven new initiatives proposed in the City’s 2018 IRP Work Plan, along with the
current status of each one.
Table 1: Summary of 2018 IRP Work Plan Initiatives
Work Plan Initiative Current Status
1. Evaluate the merits of committing to a new 30-year contract
with WAPA starting in 2025.
Ongoing—will be part of
2024 IRP.
2. Evaluate the merits of rebalancing the electric supply portfolio
to lower its seasonal and daily market price exposure, by more
closely balancing the City’s long-term supplies with its hourly
and monthly electric loads.
Ongoing—will be part of
2024 IRP.
3. Evaluate how to best utilize the City’s share of the California
Oregon Transmission Project (COTP), when the long-term layoff
of this asset ends in 2024.
Ongoing—will be part of
2024 IRP.
4. In addition to ensuring 100% of City’s annual electricity energy
needs are met with carbon neutral supplies (on a kWh basis),
evaluate the carbon content of the electric portfolio on an
hourly basis, and recommend the merits of buying carbon
offsets to ensure the carbon content of the cumulative hourly
portfolio is zero on an annual basis.
Completed—Carbon
Neutral Plan updated to
use an hourly carbon
accounting methodology in
August 2020 (Staff Report
11556).
5. Investigate the merits and economics of monetizing excess
renewable energy certificates to minimize the cost of
maintaining an RPS compliant and carbon neutral electricity
supply portfolio.
Completed—REC Exchange
Program approved in
August 2020 (Staff Report
11556).
6. Explore greater synergistic opportunities with NCPA and other
agencies – such as newly formed community choice
aggregators – to lower Palo Alto’s operating costs and
rebalance the supply portfolio.
Ongoing—staff has
engaged with new CCAs in
numerous transactions and
knowledge-exchange
efforts.
7. Undertake a competitive assessment for the electric utility
within the context of the large proliferation of customer-sited
DER technologies, electrification initiatives, changing customer
expectations, and potential regulatory changes. Develop
contingencies to address the potential for large changes in the
City’s load level or load profile.
Ongoing.
mandates rather than an exclusive focus on portfolio optimization. The City adopted its first LEAP in November
2001 (CMR: 425:01), with subsequent updates in 2002 (CMR: 398:02), 2007 (CMR: 158:07), and 2011 (Staff Report
1317).
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DISCUSSION
SB 350 required POUs to adopt their initial IRPs by January 1, 2019, with subsequent updates required
every five years thereafter. An update of the City’s last IRP is therefore needed by January 2024; an
updated IRP will also provide a basis for several key decisions and policies related to the electric portfolio
in the 2024 to 2035 planning horizon.
Objectives of the 2024 IRP
At a minimum, Section 9621 of the California Public Utilities Code requires that the City’s IRP:
1. Meet GHG emissions targets that reflect the electricity sector’s contribution to achieving the
economy-wide greenhouse gas emissions reductions of 40 percent from 1990 levels by 2030;
2. Ensure procurement of at least 60 percent eligible renewable energy resources by 2030;
3. Meet the following goals:
a. Minimize impacts on ratepayers’ bills;
b. Ensure system and local reliability;
c. Enter into long- and short-term contracts for electricity and RECs;
d. Strengthen the diversity, sustainability, and resilience of the bulk transmission and
distribution systems, and local communities;
e. Enhance distribution systems and demand-side energy management;
4. Include details of the utility’s rate design that support transportation electrification, and existing
or planned incentives to support transportation electrification, including rebates. The rate design
shall include details for all applicable transportation sectors, including, but not limited to, on-
road and off-road vehicles in the light-, medium-, and heavy-duty sectors. Each IRP shall also
include information about the utility’s customer education and outreach efforts to inform utility
customers of available incentives and decision-making tools, such as cost calculators or cost
estimates that can assist customers in predicting the cost of paying for electricity for these
vehicles; and
5. Consider the role of existing renewable generation, grid operational efficiencies, energy storage,
and distributed energy resources, including energy efficiency, in helping to meet energy and
reliability needs the hours of net peak demand, while reducing the need for new generation and
transmission resources in achieving the state’s energy goals at the least cost to ratepayers;2
6. Address the following procurement topics:
a. Energy efficiency and demand response resources;
b. Energy storage;
c. Transportation electrification;
d. A diversified procurement portfolio consisting of both short-term and long-term
electricity, electricity-related, and demand response products;
e. Resource adequacy requirements.
In addition to satisfying these obligations, staff intends to use this IRP process to help the City make two
major decisions regarding its supply portfolio (which were also listed in the City’s 2018 IRP Work Plan):
(a) whether to renew the City’s contract with the WAPA for hydroelectric resources from the Central
Valley Project (CVP), which expires at the end of 2024; and (b) what to do with the City’s share of the
California-Oregon Transmission Project (COTP) after the City’s layoff of that asset expires at the end of
2023.
2 Note that items 4 and 5 are new requirements adopted by the state after the 2018 IRP submission date.
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As staff undertakes this IRP effort, it will do so while maintaining consistency with the City of Palo Alto
Utilities (CPAU) 2018 Mission Statement: “To provide safe, reliable, environmentally sustainable and
cost-effective services.” In addition, staff will be mindful of CPAU’s supply portfolio management
principles:
1. Demand and Supply Resource Acquisition – Meet customer electricity needs through the
acquisition of least total cost energy and demand resources including an assessment of the
environmental costs and benefits.
2. Supply Cost Management – Manage supply portfolio cost uncertainty to meet rate and reserve
objectives.
3. Local Distributed Generation and Transmission – Enhance supply reliability to meet City and
customer needs by pursuing opportunities including transmission system upgrades and local
generation.
Finally, staff will use this IRP development process as an opportunity to engage the community and
solicit their input into these major strategic decisions that will be made along the way. Public
participation and feedback are valuable components of the IRP process. Outside of speaking at UAC and
Council meetings, customers rarely have an opportunity to weigh in directly on long-term portfolio
management decisions; however, during this process staff will make an effort to more broadly survey
customers about the direction they would like CPAU’s electric supply portfolio to go. For example, in
evaluating the WAPA and COTP decisions, staff’s primary focus will be on minimizing total portfolio cost
and risk (while adhering to existing Council-adopted policies and state mandates). However, staff seeks
feedback from the UAC and the community as to whether to give any weight to other factors in the
evaluation process—such as the geographic location of resources; technology diversification of the
supply portfolio; or matching the portfolio’s total output to the City’s load profile in order to minimize
load-balancing market transactions.
Proposed 2024 IRP Scope
While an IRP is typically a lengthy report that provides a long-term roadmap for utility planners, it is
important to remember what its scope encompasses: Selecting a set of supply-side and demand-side
resources to meet forecasted customer demand, while minimizing cost, risk, and environmental impact.
While this scope is broad, it is also notable for what it excludes. This scope does not include updating the
Utilities Strategic Plan (which was approved in 2018); it does not include designing or developing new
customer programs; it does not involve developing new initiatives to meet the Sustainability and Climate
Action Plan (S/CAP) objectives; and it includes only a very limited focus on distribution system
planning (i.e., only to the extent that when evaluating resource portfolio mixes that involve a large
amount of distributed energy resources (DERs), the IRP analysis must account for the cost of investing in
the distribution system to enable these DERs to be adopted). Maintaining these limitations on the IRP’s
scope is critical to ensuring the community can focus on the important long-term supply portfolio
decisions that need to be made soon, and therefore critical to the success of the IRP process.
NEXT STEPS
The schedule and structure of the IRP process is guided in large part by requirements imposed by SB 350
and CEC guidelines to implement it.3 However, as noted earlier, the timing of the IRP process is also
dictated by the need to make long-term resource investment decisions around the City’s supply portfolio
3 SB 350 requires the development and submission of an updated IRP to the CEC no later than January 1, 2024.
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(related to the WAPA hydroelectric contract and the end of the COTP layoff). To help inform the analysis
around those decisions, staff has developed a detailed workplan (Attachment C) that includes:
• Acquiring electric portfolio modeling and optimization software;
• Issuing a renewable energy and storage request for proposals (RFP) to develop a set of
alternatives to compare the extended WAPA hydroelectric contract against;
• Conducting and sharing portfolio rebalancing and optimization analysis; and
• Researching options for the use of COTP after the current layoff ends, and meeting with other
COTP owners to explore these options.
In addition to this internal work, to address the City’s electric portfolio planning needs in a
comprehensive IRP update and meet SB 350’s requirements, staff proposes a series of public discussions
on a range of topics over the next 12 to 18 months. These discussions will enable the public to have a
better understanding of the issues and decisions facing the Electric Utility and to provide input and
direction early in the process. Table 2 below provides an overview of these proposed meetings and their
objectives.
Table 2: Proposed 2024 IRP Public Meetings
Meeting Topic Meeting Objectives/Goals Date / Forum
1. IRP Overview and
Work Plan
Provide a high-level overview of IRP requirements,
guiding principles, scope, and timeline.
June 2022
UAC
2. COTP and WAPA Base
Resource Discussion
Provide an overview of COTP and the WAPA
hydroelectric contract, and a high-level discussion of
the costs, benefits, and uncertainties around each.
November 2022
UAC
3. Load Forecast Scenario
Planning
Discuss the role of electrification, electric vehicles,
energy efficiency, local/distributed generation, and
storage on the City’s load forecast and distribution
system planning needs.
December 2022
UAC
4. Portfolio Optimization
Results and Feedback
Overview of electric load forecast, existing supply
resources, renewable RFP results, and initial results
of portfolio optimization analysis.
February 2023
UAC
5. Preliminary Long-term
Plan
Present refined portfolio optimization analysis
results and staff’s recommended supply portfolio.
June 2023
UAC
6. Proposed Final IRP Present draft IRP report and implementation plan. August 2023
UAC
7. Final IRP Seek approval of IRP report and implementation
plan.
November 2023
Council
Staff will incorporate the UAC’s input on the proposed IRP work plan and portfolio analysis process, and
will return to discuss the initial findings of the analysis in the future.
RESOURCE IMPACT
There is no direct resource impact as a result of the proposed IRP work plan. Work will be performed
almost entirely by existing staff, who will collaborate with staff from NCPA and other municipal utilities in
this effort when possible. The cost of acquiring portfolio optimization software and a minimal amount of
support from consultants (estimated at about $100k) has already been accounted for in the annual
Utilities Department budget.
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POLICY IMPLICATIONS
There is no direct policy impact associated with the proposed work plan, but any changes made through
IRP will affect policy related to electric portfolio management. Staff will also update the IRP to ensure
consistency with the City’s sustainability goals as established in its Sustainability and Climate Action
Plan.
ENVIRONMENTAL REVIEW
The Utilities Advisory Commission’s discussion of the IRP work plan does not meet the definition of a
project under Public Resources Code 21065 and is therefore California Environmental Quality Act (CEQA)
review is not required.
Attachments:
• Attachment A: 2018 IRP Objective & Strategies
• Attachment B: 2018 IRP Work Plan Initiatives
• Attachment C: Proposed 2024 IRP Work Plan
• Attachment D: Presentation
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Attachment A
2018 Electric Integrated Resource Plan (EIRP)
Objective and Strategies
EIRP Objective
To provide safe, reliable, environmentally sustainable and cost-effective electric resources and
services to all customers.
EIRP Strategies
1. Pursue an Optimal Mix of Supply-side and Demand-side Resources: When procuring to
meet demand, pursue an optimal mix of resources that meets the EIRP Objective, with
cost-effective energy efficiency, distributed generation, and demand-side resources as
preferred resources. Consider portfolio fit and resource uncertainties when evaluating
cost-effectiveness.
2. Maintain a Carbon Neutral Supply: Maintain a carbon neutral electric supply portfolio
to meet the community’s greenhouse gas (GHG) emission reduction goals.
3. Actively Manage Portfolio Supply Cost Uncertainties: Structure the portfolio or add
mitigations to manage short-term risks (e.g. market price risk and hydroelectric
variability) and build flexibility into the portfolio to address long-term risks (e.g. resource
availability, customer load profile changes, and regulatory uncertainty) through
diversification of suppliers, contract terms, and resource types.
4. Manage Electric Portfolio to Ensure Lowest Possible Ratepayer Bills: Pursue resources
in a least-cost, best-fit approach in an effort to ensure ratepayer bills remain as low as
possible, while adhering to Council-adopted sustainability, rate, and financial objectives
and guidelines.
5. Partner with External Agencies to Implement Optimization Opportunities: Engage and
partner with external agencies to maximize resource value and optimize operations.
6. Maintain Flexible Supplies to Effectively Meet Changes in Customer Loads & Load
Profiles: Maintain electric supply resource flexibility in anticipation of potential changes
in customer loads due to distributed energy resources, efficiency, electrification, or for
other reasons.
7. Ensure Reliable and Low-Cost Transmission Services: Work with the transmission
system operator to receive reliable service in a least cost manner.
8. Support Local Electric Supply Resiliency: Coordinate supply portfolio planning with
utility-wide efforts to support local measures and programs that enhance community
electric supply resiliency.
9. Comply with State and Federal Laws and Regulations: Ensure compliance with all
statutory and regulatory requirements for energy, capacity, reserves, GHG emissions,
distributed energy resources, efficiency goals, resource planning, and related initiatives.
4.a
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Attachment B
2018 EIRP Strategies & Related New Initiatives
There are a number of new initiatives and numerous on-going tasks related to implementing
the EIRP Strategies. These activities are supported by about six to eight CPAU staff, both from
the supply side and demand-side (or customer) programs. In addition, CPAU relies on joint
action agencies and external service providers to implement programs and initiatives. Supply
and customer program staff also coordinates with retail rate development, distribution system
engineering, and operations staff to implement programs and investments in an integrated
manner.
Described below are the nine strategies and eight new initiatives that are expected to be
undertaken in the next three to six years. Work tasks related to on-going activities have not
been called out separately.
EIRP Strategies & Related New Initiatives
1. Pursue an Optimal Mix of Supply-side and Demand-side Resources: When procuring to
meet demand, pursue an optimal mix of resources that meets the EIRP Objective, with
cost-effective energy efficiency, distributed generation, and demand-side resources as
preferred resources. Consider portfolio fit and resource uncertainties when evaluating
cost-effectiveness.
a. Initiative #1: Evaluate the merits of committing to a new 30-year contract with
Western starting in 2025. [Recommendation on initial commitment to the UAC in
early 2020; recommendation on final commitment in early 2024.]
b. Initiative #2: Evaluate the merits of rebalancing the electric supply portfolio to
lower its seasonal and daily market price exposure, by more closely balancing the
City’s long-term supplies with its hourly and monthly electric loads. [Initial
scoping assessment report to the UAC by December 2019.]
c. Initiative #3: Evaluate how to best utilize the City’s share of the California-
Oregon Transmission Project (COTP), when the long-term layoff of this asset
ends in 2024. [Initial assessment report to UAC by December 2019, in tandem
with Initiative #2 initial scoping assessment report.]
d. Continue ongoing evaluation of all cost-effective distributed energy resources
(DERs), such as energy efficiency, distributed generation, energy storage, and
demand response. Update forecasts of DER impacts on retail sales and load
shapes for use in strategic planning, rate-making, and budget forecasting. [Initial
assessment to be completed in Distributed Energy Resource (DER) and Customer
Program Plan for Council approval by June 2019.]
2. Maintain a Carbon Neutral Supply: Maintain a carbon neutral electric supply portfolio
to meet the community’s greenhouse gas (GHG) emission reduction goals.
a. Initiative #4: In addition to ensuring 100% of City’s annual electricity energy
needs are met with carbon neutral supplies (on a kWh basis), evaluate the
carbon content of the electric portfolio on an hourly basis, and recommend the
merits of buying carbon offsets to ensure the carbon content of the cumulative
4.b
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Attachment B
hourly portfolio is zero on an annual basis. Also evaluate the manner in which the
City communicates with customers about the carbon content of the electric
portfolio. [Initial staff recommendation to the UAC by December 2019.]
3. Actively Manage Portfolio Supply Cost Uncertainties: Structure the portfolio or add
mitigations to manage short-term risks (e.g. market price risk and hydroelectric
variability) and build flexibility into the portfolio to address long-term risks (e.g. resource
availability, customer load profile changes, and regulatory uncertainty) through
diversification of suppliers, contract terms, and resource types.
a. This is an on-going active management strategy; no new initiatives are planned.
4. Manage Electric Portfolio to Ensure Lowest Possible Ratepayer Bills: Pursue resources
in a least-cost, best-fit approach in an effort to ensure ratepayer bills remain as low as
possible, while achieving other Council-adopted sustainability, rate, and financial
objectives.
a. Initiative #5: Investigate the merits and economics of monetizing excess
renewable energy certificates to minimize the cost of maintaining an RPS
compliant and carbon neutral electricity supply portfolio. [Initial staff
recommendation to the UAC by December 2019.]
5. Partner with External Agencies to Implement Optimization Opportunities: Actively
engage and partner with external agencies to maximize resource value and optimize
operations.
a. Initiative #6: Explore greater synergistic opportunities with NCPA and other
agencies – such as newly formed community choice aggregators – to lower Palo
Alto’s operating costs and rebalance the supply portfolio. [Initial assessment to
UAC by December 2019.]
6. Manage Supplies to Meet Changing Customer Loads and Load Profiles: Maintain
electric supply resource flexibility in anticipation of potential changes in customer loads
due to distributed energy resources, efficiency, electrification, or for other reasons. At
the same time, use retail rates and other available tools to influence customer load
changes in a manner that minimizes overall costs and achieves other Council objectives.
a. Initiative #7: Implement 2018 Utilities Strategic Plan Priority 4, Strategy 4,
Action 2 by undertaking a competitive assessment for the electric utility within
the context of the large proliferation of customer-sited DER technologies,
electrification initiatives, changing customer expectations, and potential
regulatory changes. Develop contingencies to address the potential for large
changes in the City’s load level or load profile. [Initial assessment to UAC in
December 2020.]
7. Ensure Reliable and Low-cost Transmission Services: Work with the transmission
system operator to receive reliable service in a least-cost manner.
a. This is an on-going activity; no new initiatives are planned.
4.b
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Attachment B
8. Support Local Electric Supply Resiliency: Coordinate supply portfolio planning with
utility-wide efforts to support local measures and programs that enhance community
electric supply resiliency.
a. On-going supporting role in utility-wide efforts.
9. Comply with State and Federal Laws and Regulations: Ensure compliance with all
statutory and regulatory requirements for energy, capacity, reserves, GHG emissions,
distributed energy resources, efficiency goals, resource planning, and related initiatives.
a. Ongoing activities in collaboration with NCPA, CMUA and other joint action
agencies.
4.b
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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Integrated Resource Plan
Review IRP requirements
Review other utilities' IRPs
RFP for portfolio optimization software
Research COTP post-layoff options
Issue Renewable/Storage RFP
UAC - Kickoff/Scoping meeting X
COTP post-layoff options analysis
Evaluate Renewable RFP responses
Perform portfolio optimization analysis
UAC - COTP & Western discussion X
UAC - Load forecasting discussion X
UAC - Portfolio optimization results X
UAC - Preliminary long-term plan X
UAC - Final IRP report X
Finance - Final IRP report X
Council - Final IRP report X
2022 2023PROJECT / ACTIVITY
4.c
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June 8, 2022 www.cityofpaloalto.org
Electric Integrated Resource Plan Kickoff Discussion
Staff: James Stack
4.d
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2
PURPOSE OF PRESENTATION
•Provide a refresher course on Integrated Resource Planning
•Palo Alto’s resource planning history
•California IRP requirements
•Introduce key policy questions:
•Western Base Resource contract renewal vs. replacement
•California-Oregon Transmission Project (COTP) usage
•Propose an approach to develop a new IRP for the 2024-2035 planning
horizon
•Get UAC feedback on the proposed Work Plan including future
discussion items and timeline
2
4.d
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PART 1: INTEGRATED RESOURCE PLANNING OVERVIEW
June 8, 2022 www.cityofpaloalto.org
4.d
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WHAT IS AN INTEGRATED RESOURCE PLAN?
•A roadmap for meeting forecasted demand through a combination of
supply-side (i.e. generation) and demand-side (e.g. efficiency,
demand response, storage) resources
•Analysis framework for identifying the most cost-effective, least-risk
portfolio of resources
4.d
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5
FACTORS CONSIDERED IN AN IRP
•Loading Order –Pursue all cost-effective energy efficiency and demand-
side resources
•Regulatory Compliance –Comply with all regulatory requirements
•Climate Goals –Maintain a carbon neutral electric portfolio
•Customer Preferences –Facilitate individual customer preferences for
alternative resources
•Cost –Identify the most cost-effective approach to meet policy directives
•Risk Management –Structure the portfolio or add mitigations to manage
known risks
4.d
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6
HISTORY OF CPAU PLANNING INITIATIVES (1992-Present)
•1992: City’s first ten-year Electric Integrated Resource Plan (IRP)
•2001: City’s first Long-term Electric Acquisition Plan (LEAP)
•2002: California and Palo Alto adopts first Renewable Portfolio Standard
•2006: California adopts Global Warming Act –(1990 levels by 2020 –15%)
•2007: City’s Climate Protection Plan –sets GHG reduction goals
•2007: LEAP Updated –focus on loading order and RPS update
•2007: First 10-year Energy Efficiency Plan (last updated in 2017)
•2010-11: LEAP Updated –focus on carbon reduction goals
•2017-18: City completes first IRP under SB 350 requirements (through 2030)
4.d
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CALIFORNIA’S IRP REQUIREMENTS (SB 350)
•Help the state meet its GHG reduction targets (40% below 1990 levels by
2030)
•Ensure procurement of at least 60 percent eligible renewable energy
resources by 2030
•Minimize impacts on ratepayers’ bills
•Ensure system and local reliability
•Enter into long-and short-term contracts for electricity and RECs
•Strengthen the diversity, sustainability, and resilience of the bulk transmission
and distribution systems, and local communities
•Enhance distribution systems and demand-side energy management
4.d
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CALIFORNIA’S IRP REQUIREMENTS (SB 350), cont.
•Address the following procurement topics:
•Energy efficiency and demand response resources
•Energy storage
•Transportation electrification
•A diversified procurement portfolio
•Resource adequacy requirements
•Include details of the utility’s rate design that support transportation
electrification
•Consider the role of various demand and supply resources in meeting energy
and reliability needs in the hours of net peak demand, while reducing the
need for new resources
4.d
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PART 2: KEY POLICY QUESTIONS
June 8, 2022 www.cityofpaloalto.org
4.d
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WESTERN BASE RESOURCE CONTRACT DECISION
•Central Valley Project (CVP) is owned and operated by the U.S. Bureau of Reclamation
•CVP’s electric output is marketed by the Western Area Power Administration (WAPA) under the Western Base Resource contract (2005-2024)
•Total CVP Capacity: 2,112 MW
•Palo Alto’s allocation: 12.3%
•~360 GWh in an average year
•~40% of City’s supply
•Annual WBR contract cost: ~$12 million
•Palo Alto has the option to renew the WBR contract for 2025-2054
•Deadline of June 30, 2024 to reduce/terminate the renewed WBR contract
4.d
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PALO ALTO’S ELECTRIC LOAD & SUPPLY PORTFOLIO
4.d
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CALIFORNIA-OREGON TRANSMISSION PROJECT DECISION
•COTP is a 340-mile long, 1,600 MW, 500 kV transmission power project between Southern Oregon and Central California
•Owned by the Transmission Association of Northern California (a joint powers agency of which Palo Alto is a member), along with the City of Redding, WAPA, two California water districts, and PG&E
•Palo Alto’s share is 51 MW (4% of the TANC portion of COTP)
•Due to low utilization, Palo Alto laid off its share of COTP (for 2008-2023) to SMUD, TID, and MID
•The layoff recipients are covering Palo Alto’s debt costs during the layoff period, but Palo Alto will owe a large payment to them at the end of the layoff for long-term improvements made to the project during the layoff
4.d
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PART 3: PROPOSED 2023 IRP OBJECTIVES & WORK PLAN
June 8, 2022 www.cityofpaloalto.org
4.d
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OBJECTIVES OF THE IRP DEVELOPMENT PROCESS
•SB 350 Compliance –Fully comply with all IRP requirements
•Western Decision –Evaluate whether to renew the WBR contract for
2025+, or reduce/terminate it and replace it with other resources
•COTP Decision –Evaluate what to do with COTP when the layoff ends
in 2024: use it ourselves, negotiate a new layoff, or let CAISO use it
•Community Engagement –Solicit public input into strategic decisions
about the supply portfolio
4.d
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OUTSIDE THE IRP SCOPE
•The IRP is not going to:
•Update the Utilities Strategic Plan
•Design new customer programs
•Design new S/CAP initiatives
•Provide any serious distribution system planning
4.d
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NEXT STEPS
•Issue a renewable energy / storage RFP, so we have alternative
options to compare the renewed WAPA contract against
•RFP will seek local generation offers, but these are expected to be limited
•Contract for supply portfolio modeling and optimization software
•Use software to perform portfolio optimization analysis, including
comparison of WAPA contract and other alternatives
•Work with a consultant to analyze post-layoff uses of COTP, and
discuss a potential new layoff with other COTP owners
•Solicit public input on the direction of the supply portfolio
4.d
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PROPOSED IRP WORK PLAN
Meeting Topic Date / Forum
IRP Overview and Work Plan June 2022 / UAC
COTP and Western Base Resource Discussion November 2022 / UAC
Load Forecast Scenario Planning December 2022 / UAC
Portfolio Optimization Results and Feedback February 2023 / UAC
Preliminary Long-term Plan June 2023 / UAC
Proposed Final IRP August 2023 / UAC
Final IRP November 2023 / Council
4.d
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Jim Stack, Ph.D.
Senior Resource Planner
james.stack@cityofpaloalto.org
(650) 329-2314
4.d
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