HomeMy WebLinkAboutStaff Report 6463
City of Palo Alto (ID # 6463)
City Council Staff Report
Report Type: Informational Report Meeting Date: 1/25/2016
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
Request
This is an informational report and requires no Council action.
Executive Summary
Palo Alto’s City Council established a goal to provide at least 33% of the City’s electricity needs
from renewable energy resources by 2015, a goal that exceeds the interim annual procurement
requirements under California’s Renewable Portfolio Standard (RPS) mandate of 50% 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. In December 2011, the Council also formally
adopted an RPS Procurement Plan and Enforcement Program that recognizes certain elements
of the state’s RPS law applicable to publicly owned utilities. The RPS Enforcement Program
requires 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,
and also includes an update on the City’s renewable energy goals set forth in its Long-term
Electric Acquisition Plan (LEAP). The City is currently on track to meet its objectives under the
RPS Procurement Plan and the Carbon Neutral Plan, and will meet the LEAP RPS objective for
2015 so long as unbundled renewable energy certificates (RECs) are counted toward this goal.
However, with additional contracted renewable energy supplies coming on line in 2016, the
City’s RPS is expected to be over 42% in 2016 and 57% by 2017 with no use of RECs.
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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. LEAP was last updated in April 2012 (Staff Report 2710, Resolution
9241) to clarify that the 33% goal is a minimum and renewable energy supplies beyond
the 33% level should be pursued as long as the aggregate rate impact does not exceed
the 0.5 cent per kilowatt-hour (¢/kWh) limit.
RPS Procurement Plan (33% by 2020): The second 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 (Staff Report 4168,
Resolution 9381). The RPS Procurement Plan and Enforcement Program complement
each other: the Procurement Plan sets forth 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 requirements in the City’s 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 reason
the City adopted the less ambitious state-mandated levels for the official compliance
plan is because the City would face penalties for failing to meet the state targets, but
the City’s achievement of its more ambitions LEAP targets is not subject to state
enforcement procedures.
Carbon Neutral Plan (100% Carbon Neutral Electricity by 2013): The Carbon Neutral Plan
was adopted in March 2013 (Resolution 9322, Staff Report 3550), and requires that the
City procure a carbon neutral electric supply portfolio starting in calendar year (CY)
2013. In the long term, 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 until the contracted long-term renewable
resources are all constructed and operating (and in dry hydro years when hydroelectric
resources are lower than expected), carbon neutrality may be achieved through the
purchase of RECs to offset fossil fuel-based market power purchases.
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Discussion
LEAP Renewable Energy Goals
Due to delays in the development of the first two of the City’s long-term solar PPAs, staff
estimates that renewable electricity supplies from its long-term PPAs will fall slightly short of
meeting the LEAP RPS goal of at least 33% of retail sales by 2015. (Current estimates project
renewable electricity supplies from long-term resources equaling 28.2% of retail sales for 2015.)
However, the LEAP Renewable Energy Goal includes all supplies deemed “eligible” under the
state’s RPS eligibility criteria, not just generation from long-term resources. Therefore, the City
will far exceed LEAP’s 33% RPS target in 2015 if the RPS-eligible RECs that are procured under
the Carbon Neutral Plan are counted.
In CY 2016, when three more solar resources under long-term PPAs are expected to come on
line, staff projects that renewable electricity supplies will equal 40.1% of retail sales. Further, in
CY 2017, renewable supplies are projected to be 57.5% of retail sales (55.5% of total supply).
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
Annual Generation
(GWh)
Rate Impact
(¢/kWh)
Small Hydro Before 2000 10.0 0
High Winds Dec. 2004 48.2 0.013
Shiloh I Wind Jun. 2006 64.5 (0.043)
Santa Cruz Landfill Gas (LFG) Feb. 2006 9.9 0.003
Ox Mountain LFG Apr. 2009 43.9 (0.039)
Keller Canyon LFG Aug. 2009 14.9 (0.020)
Johnson Canyon LFG May 2013 10.4 0.061
San Joaquin LFG Apr. 2014 30.3 0.133
Kettleman Solar Jul. 2015 53.5 0.094
Hayworth Solar Dec. 2015 63.7 0.024
Total Operating Resources 349.3 0.225
Elevation Solar C Jul. 2016 100.8 (0.041)
W. Antelope Blue Sky Ranch B Solar Jul. 2016 50.4 (0.002)
Frontier Solar Jul. 2016 52.5 0.010
Palo Alto CLEAN Program @ 3 MW Cap TBD 5.1 0.027
Total Non-Operating Resources 208.8 (0.006)
Total Committed Resources 558.0 0.219
RPS Procurement Plan Compliance
Annually, the Utilities Director reviews the City of Palo Alto Utilities’ (CPAU’s) RPS Procurement
Plan to determine compliance with the state’s RPS Program. Under the state’s RPS Program, the
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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 RPS 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’s RPS program
requires retail electricity suppliers like CPAU to procure progressively larger amounts of
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 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.
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.
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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 is projected to easily exceed this mandated procurement level
as well. Renewable electricity procurement is projected to equal 31% of retail sales for
Compliance Period 2.
Table 3: Compliance Period 2 Procurement Target
Year Retail Sales
(MWh)
Procurement
Target (MWh)*
Actual/Projected
Procurement (MWh)
% of Retail
Sales
2014 953,386 190,677 210,250 22.1%
2015 967,261 193,452 273,887 28.3%
2016 985,766 246,442 421,501 42.8%
TOTAL 2,906,413 630,571 905,638 31.2%
* 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). Staff projects that CPAU will easily
meet the Compliance Period 2 overall procurement requirement and the RPS Portfolio
Balancing Requirement with existing renewable energy supplies, combined with the output
from the five solar projects coming online before 2017, as shown in Table 1.
3. Compliance Period 3 (2017 – 2020)
For Compliance Period 3, CPAU is required 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 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)
With all five of the City’s solar contracts expected to come online by the end of 2016, as, shown
in Table 1, CPAU is expected to easily comply with the Compliance Period 3 overall
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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 57% of retail sales for Compliance Period 3, and that all of these supplies will come
from either Portfolio Content Category 1 or “grandfathered” resources.
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 CEC in May 2015 (Attachment A).
Carbon Neutral Plan
With the purchase of unbundled RECs in June 2015 to offset the CY 2014 market power
purchases, CPAU achieved its goal, set forth in the Carbon Neutral Plan, of an electric supply
portfolio with zero net greenhouse (GHG) emissions for the second year in a row. Along with
the purchase of RECs, carbon neutrality was achieved in CY 2014 through existing hydro and
renewable generation (landfill gas and wind). As in CY 2013, the amount of carbon neutral
generation was lower than expected due to the ongoing severe drought limiting hydroelectric
output. This resulted in a higher volume of purchases of market power and the offsetting RECs.
The carbon content of CPAU’s electric supply portfolio for CY 2014 is undergoing a formal
verification process at this time. Third-party verification is not a state requirement, but is good
practice to maintain public confidence in the City’s claims of carbon neutrality.
For CY 2015 staff projects that roughly 51% of the City’s electric supply resources will be from
carbon-free generating sources, with the remainder being procured through market purchases.
In early 2016, staff will establish the actual carbon content of the 2015 supply portfolio, and will
procure RECs to offset the remainder of the portfolio’s emissions, in accordance with the City’s
adopted emissions calculation protocol (Staff Report 3194).
Assuming that the projects listed in Table 1 that are still being developed come online in 2016
and the ongoing drought finally comes to an end, by 2017 CPAU’s entire electric supply
portfolio is expected to be sourced from carbon neutral resources under the City’s long-term
contracts (see Figure 1 below).
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Figure 1: CPAU Carbon Neutral Supply Resources
Next Steps
In October 2015, Governor Brown signed Senate Bill 350 (SB 350), the "Clean Energy and
Pollution Reduction Act of 2015" which establishes targets to increase retail sales of renewable
electricity to 50% by 2030. Specifically, SB 350 establishes an RPS target of 50% by December
31, 2030, and thereafter, including interim targets of 40% by the end of the 2021 to 2024
compliance period, 45% by the end of the 2025 to 2027 compliance period, and 50% by the end
of the 2028 to 2030 compliance period.
CPAU will need to update its RPS Procurement Plan and Enforcement Program to be consistent
with the new state requirements.
Policy Implications
This report implements 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 December 31, 2016 compliance obligation of
25% of retail sales with eligible renewable resources, consistent with the CPAU RPS
Procurement Plan.
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Environmental Review
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: City of Palo Alto Report to CEC on RPS Compliance for Calendar Year
2014 (PDF)
STATE OF CALIFORNIA
Compliance Report Form for Local Publicly Owned Electric Utilities
CEC-RPS-POU (Revised 05/2015)
CALIFORNIA ENERGY COMMISSION
CEC-RPS-POU May 2015
Annual RPS Report: Accounting
To be completed annually.
Input Required
Actual Data
Forecasted Data
Actual
Annual RPS Procurement and Percentages
(MWh)2014 2015 2016
Annual Retail Sales 953,386.000 967,261.000 985,766.000
Annual RPS Procurement Retired 210,250.000 273,887.000 421,501.000
Soft Targets 20.00%20.00%25.00%
Procurement Target (MWh)2014 2015 2016
Procurement Target
Category 0 RECs Retired 210,250.000 222,086.000 222,542.000
Category 1 RECs Retired 0.000 51,801.000 198,959.000
Pre-June 1, 2010 Category 1 RECs Retired1 0.000 0.000 0.000
Category 2 RECs Retired 0.000 0.000 0.000
Pre-June 1, 2010 Category 2 RECs Retired2 0.000 0.000 0.000
Category 3 RECs Retired 0.000 0.000 0.000
Pre-June 1, 2010 Category 3 RECs Retired3 0.000 0.000 0.000
Total RECs Retired (Compliance Period)
630,570.900
905,638.0000
Compliance Period 2
Compliance Period 2
Forecasted
ATTACHMENT A
STATE OF CALIFORNIA
Compliance Report Form for Local Publicly Owned Electric Utilities
CEC-RPS-POU (Revised 05/2015)
C A L IF O R N IA E N E R G Y C O M M IS S IO N
CEC-RPS-POU May 2015
RPS Compliance Period Report: Accounting
To be completed at the end of each compliance period.
Input Required
Actual Data
Annual RPS Procurement and
Percentages (MWh)2014 2015 2016
Annual Retail Sales 953,386.000 967,261.000 985,766.000
Annual RPS Procurement Retired 210,250.000 273,887.000 421,501.000
Soft Targets 20.00%20.00%25.00%
Procurement Target (MWh)2014 2015 2016
Procurement Target
Category 0 RECs Retired 210,250.000 222,086.000 222,542.000
Category 1 RECs Retired 0.000 51,801.000 198,959.000
Pre-June 1, 2010 Category 1 RECs Retired 0.000 0.000 0.000
Category 2 RECs Retired 0.000 0.000 0.000
Pre-June 1, 2010 Category 2 RECs Retired 0.000 0.000 0.000
Category 3 RECs Retired 0.000 0.000 0.000
Pre-June 1, 2010 Category 3 RECs Retired 0.000 0.000 0.000
Historic Carryover (HCO) Applied1
Total RECs Retired Including HCO
Total RECs Retired for the Compliance
Period 905,638.000
905,638.000
Compliance Period 2
Compliance Period 2
Actual
0.000
630,570.900
STATE OF CALIFORNIA
Compliance Report Form for Local Publicly Owned Electric Utilities
CEC-RPS-POU (Revised 05/2015)
C A L IF O R N IA E N E R G Y C O M M IS S IO N
CEC-RPS-POU May 2015
Portfolio Balance Requirements (MWh)Total Retired Applied to Target2 Potential Excess
Category 0 RECs Retired 654,878.000 654,867.000 11.000
Historic Carryover Applied 0.000 0.000 n/a
Category 1 RECs Retired 250,760.000 250,760.000 0.000
Pre-June 1, 2010 Category 1 RECs Retired 0.000 0.000 0.000
Category 2 RECs Retired 0.000 0.000 0.000
Pre-June 1, 2010 Category 2 RECs Retired 0.000 0.000 0.000
Category 3 RECs Retired 0.000 0.000 n/a
Pre-June 1, 2010 Category 3 RECs Retired 0.000 0.000 n/a
Total RECs applied to the Target
Category 1 Balance Requirement
Category 3 Balance Limitation
Disallowed Category 3 RECs
Additional Procurement (MWh)Starting Balance Applied to Current
Compliance Period
Accumulated in Current
Compliance Period Remaining Balance
Total Excess Procurement 0.000 0.000 11.000 11.000
Excess Category 0 RECs 0.000 0.000 0.000 0.000
Excess Category 1 RECs 0.000 0.000 0.000 0.000
Excess Pre-June 1, 2010 Cat. 1 RECs 0.000 0.000 0.000 0.000
Excess Category 2 RECs 0.000 0.000 0.000 0.000
Excess Pre-June 1, 2010 Cat. 2 RECs 0.000 0.000 0.000 0.000
Total Historic Carryover6 368,756.957 0.000 n/a 368,756.957
0.000
Compliance Period 2
905,627.000
0.000
0.000
STATE OF CALIFORNIA
Compliance Report Form for Local Publicly Owned Electric Utilities
CEC-RPS-POU (Revised 05/2015)
C A L IF O R N IA E N E R G Y C O M M IS S IO N
CEC-RPS-POU May 2015
RPS Procurement Enforcement (MWh)2014 2015 2016
Deficit of RECs Necessary to Meet Target
Deficit of RECs Necessary to Meet PCC 1
Portfolio Balance Requirement
Total RECS retired, less disallowed PCC 3 905,638.000 Cost Limitations No
Procurement Target 630,570.900 Delay of Timely Compliance No
Potential Excess 11.000 Reduction of PCC 1 No
Short-Term RECs8 0.000
Excess RECs Eligible 11.000
Excess Category 0 RECs 0.000
Excess Category 1 RECs 0.000
Excess Pre-June 1, 2010 Category 1 RECs 0.000
Excess Category 2 RECs 0.000
Excess Pre-June 1, 2010 Category 2 RECs 0.000
Other Optional Compliance
Measures Applied Yes/NoExcess Procurement Calculation (MWh)7 Compliance Period 2
0.000
0.000
Compliance Period 2