HomeMy WebLinkAboutStaff Report 8828
City of Palo Alto (ID # 8828)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 2/12/2018
City of Palo Alto Page 1
Council Priority: Environmental Sustainability
Summary Title: Annual Report on 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
From: City Manager
Lead Department: Utilities
Background
The City currently has three procurement targets related to renewable and carbon neutral
electricity contained in three different plans:
LEAP Renewable Energy Goal (33% by 2015): The City’s first renewable energy goal is
contained in LEAP: procuring renewable electricity supplies equal to at least 33% of
retail sales starting in 2015, with no more than a 0.5 cents per kilowatt-hour (¢/kWh)
impact on rates. This LEAP goal was last updated in April 2012 (Staff Report 2710,
Resolution 9241) to clarify that the 33% goal is a minimum and that renewable energy
supplies beyond the 33% level should be pursued as long as the aggregate rate impact
of these purchases does not exceed the 0.5 ¢/kWh limit. In 2018, staff plans to update
the LEAP renewable energy goal in the new Electric Integrated Resource Plan (EIRP),
aligning the City’s RPS goal with the state’s 50% by 2030 RPS mandate.
RPS Procurement Plan (33% by 2020): Like all electric utilities in California, Palo Alto is
subject to the state’s Renewable Portfolio Standard (RPS) mandate of 50% by 2030. In
December 2011 the City adopted an RPS Procurement Plan (Staff Report 2225,
Resolutions 9214 and 9215) and updated it in November 2013 (Staff Report 4168,
Resolution 9381) in compliance with this law (Section 399.30(a) of California’s Public
Utilities Code). Staff plans to update the RPS Procurement Plan again in the near future
to align with the 50% RPS law (SB 350), as the regulations implementing this law are in
the process of being finalized. The RPS Procurement Plan and Enforcement Program
complement each other: the Procurement Plan establishes official procurement targets,
while the Enforcement Program specifies the reporting and monitoring that is required
City of Palo Alto Page 2
of the Utilities General Manager while working to achieve those targets. (This staff
report satisfies the reporting requirements of the City’s RPS Enforcement Program: that
the Utilities General Manager to conduct an annual review of the Electric Utility’s
compliance with the procurement targets set forth in the City’s RPS Procurement Plan.)
The procurement requirements in the City’s current RPS Procurement Plan are that the
City achieve renewable supplies equal to 33% of retail sales by 2020, which is in line
with the state’s RPS mandate, but less ambitious than the City’s LEAP goals (33% by
2015). The RPS Procurement Plan also contains interim targets for three separate
periods (2011-2013, 2014-2016, and 2017-2020), which are not part of the City’s LEAP
goal. The City adopted the lower, but state-mandated, levels in its official compliance
plan to avoid the possibility of being subject to penalties if RPS Procurement Plan
targets are not met. In contrast, the City’s achievement of its more ambitions LEAP
targets is self-directed, and not subject to state enforcement procedures.
Carbon Neutral Plan (100% Carbon Neutral Electricity by 2013): The Carbon Neutral Plan
was adopted in March 2013 (Staff Report 3550, Resolution 9322), 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. But in dry hydro years when hydroelectric resources
are lower than expected, carbon neutrality may be achieved through the purchase of
renewable energy certificates (RECs) to offset fossil fuel-based market power purchases.
Discussion
The City continues to meet its objectives under LEAP, the RPS Procurement Plan, and the
Carbon Neutral Plan, and expects to achieve an RPS level of greater than 50% in 20171 –
thirteen years in advance of the state’s 2030 deadline. Below is a summary of CPAU’s progress
toward satisfying its three renewable energy and carbon neutral procurement targets, with
additional detail provided in Attachment A.
LEAP Renewable Energy Goals
In 2016, counting the RPS-eligible RECs purchased to satisfy the Carbon Neutral Plan, the City’s
overall RPS level was 60.2%, or almost twice as large as the LEAP renewable energy goal for
2016. Ignoring RECs and counting only renewable energy acquired through long-term contracts
for wind, solar, landfill gas, and small hydro resources, the City’s RPS level was 41.0% - which
still exceeds the LEAP RPS target for that period.
For CY 2017, staff projects that renewable electricity supplies will equal 58.9% of retail sales.
1 It generally takes a few months for generation meter data to be finalized and for renewable energy certificates to
be generated in recognition of renewable energy generation. Hence the City’s official 2017 RPS level may not be
known until the spring of 2018.
City of Palo Alto Page 3
RPS Procurement Plan Compliance
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. CPAU’s procurement targets, as well as its
actual/projected procurement volumes and RPS levels, for the three Compliance Periods are
summarized in Table 1 below.
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)
% of Retail
Sales
1 2011-2013 2,837,773 567,555 607,740 21.4%
2 2014-2016 2,801,056 605,949 826,855 29.5%
3 2017-2020 3,641,948 1,092,306 2,126,407 58.4%
TOTALS 9,280,777 2,265,810 3,561,002 38.4%
*Procurement totals for Compliance Periods 1 and 2 are actuals; procurement totals for Compliance
Period 3 are projected.
Carbon Neutral Plan
With the purchase of 175,300 unbundled RPS-eligible RECs in May 2017 to offset the market
power purchases made for CY 2016, CPAU achieved its goal, set forth in the Carbon Neutral
Plan, of an electric supply portfolio with zero net greenhouse (GHG) emissions for the fourth
consecutive year. Along with these RECs, carbon neutrality was achieved in CY 2016 via CPAU’s
existing hydro and renewable generation (wind, solar, and landfill gas).
For CY 2017, bountiful hydro conditions resulted in hydroelectric resources supplying roughly
87% of the City’s electric supply needs, with an additional 59% coming from non-hydro
renewable energy resources. As a result, the City sold a significant amount of surplus energy.
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: RPS and Carbon Neutral Supply Procurement Details
Attachment A: Renewable and Carbon Neutral Electricity Supply Procurement Details
LEAP Renewable Energy Goals
In 2016, the City received 375,343 MWh of renewable energy through its long-term contracts
for wind, solar, landfill gas, and small hydro resources. This volume represents 41.0% of the
City’s total retail sales for that period. In addition, to satisfy the Carbon Neutral Plan, the City
also purchased 175,300 RECs from RPS-eligible wind and biomass resources for 2016. Although
the City’s procurement of renewable energy from long-term resources alone exceeded the
LEAP Renewable Energy Goal of 33%, the language in LEAP does not state that only generation
from long-term resources can be counted toward the goal; it merely states that all supplies
must be deemed “eligible” under the state’s RPS eligibility criteria. Counting the RPS-eligible
RECs purchased to satisfy the Carbon Neutral Plan, the City’s overall RPS level in 2016 was
60.2%, or almost twice as large as the LEAP renewable energy goal for 2016.
For CY 2017, when three solar resources under long-term PPAs that began operating in 2016
will have been online for a full year, staff projects that renewable electricity supplies will equal
58.9% 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 55.6 (0.039)
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 9.2 0.057
San Joaquin LFG Apr. 2014 Apr. 2034 27.5 0.127
Kettleman Solar Aug. 2015 Aug. 2040 53.5 0.098
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)
Total Operating Resources 531.1 0.189
Wilsona Solar Jun. 2021 May 2046 75.0 (0.055)
CLEAN Program @ 3 MW Cap TBD TBD 5.1 0.027
Total Non-Operating Resources 80.1 (0.028)
Total Committed Resources 611.2 0.161
RPS Procurement Plan Compliance
Annually, the Utilities General Manager 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 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.
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 Procurement Results
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.
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 Procurement Target
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 will apply 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 58%
of retail sales for Compliance Period 3, and that all of these supplies will come from either
Portfolio Content Category 1 or “grandfathered” resources.
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 June 2017.
Carbon Neutral Plan
With the purchase of unbundled RECs in May 2017 to offset the market power purchases made
for CY 2016, CPAU achieved its goal, set forth in the Carbon Neutral Plan, of an electric supply
portfolio with zero net greenhouse (GHG) emissions for the fourth consecutive year. Along with
the purchase of RECs, carbon neutrality was achieved in CY 2016 through existing hydro and
renewable generation (wind, solar, and landfill gas). As in CYs 2013 through 2015, the amount
of carbon neutral generation from these long-term contracts was slightly lower than expected
due to drought conditions limiting hydroelectric output. This resulted in a higher volume of
purchases of market power and the offsetting RECs.
For CY 2017, bountiful hydro conditions resulted in hydroelectric resources supplying roughly
87% of the City’s electric supply needs, with an additional 59% coming from non-hydro
renewable energy resources. As a result, the City sold a significant amount of surplus energy.
Figure 1 below illustrates the City’s actual and projected purchases of carbon neutral electric
supplies that have been made to satisfy its objectives under LEAP, the RPS Procurement Plan,
and the Carbon Neutral Plan.
Figure 1: CPAU Carbon Neutral Supply Resources