HomeMy WebLinkAboutStaff Report 7444
City of Palo Alto (ID # 7444)
City Council Staff Report
Report Type: Informational Report Meeting Date: 12/12/2016
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
Executive Summary
Like all electric utilities in California, Palo Alto is subject to the state’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,
while also providing 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 LEAP,
the RPS Procurement Plan, and the Carbon Neutral Plan, and expects to satisfy the state RPS
mandate of 50% well in advance of the 2030 deadline.
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,
City of Palo Alto Page 2
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 ¢/kWh limit. In 2017, staff plans to update the LEAP renewable
energy goal to bring it in line with the state’s 50% by 2030 RPS mandate.
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). Staff plans to update the RPS Procurement Plan again in the near
future to bring it into conformance with the 50% RPS law (SB 350), after the regulations
implementing this law are finalized. 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 (Staff Report 3550, Resolution 9322), 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 renewable energy certificates (RECs) to offset fossil fuel-based market
power purchases.
Discussion
LEAP Renewable Energy Goals
In 2015, the City received 241,262 MWh of renewable energy through its long-term contracts
for wind, solar, landfill gas, and small hydro resources. This volume represents 25.9% of the
City’s total retail sales for 2015. To satisfy the Carbon Neutral Plan, the City also purchased
479,000 RECs from RPS-eligible wind resources for 2015. The LEAP Renewable Energy Goal
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states that all supplies must be deemed “eligible” under the state’s RPS eligibility criteria, and
does not limit eligible resources to generation-based resources only. Counting the 479,000 RPS-
eligible RECs along with the renewable energy from long-term contracts, the City’s overall RPS
level in 2015 was 77.2%, or more than twice as large as the LEAP renewable energy goal for
2015.
For CY 2016, when three more solar resources under long-term PPAs began operating, staff
projects that energy from long-term contracts for renewable electricity supplies will equal
39.4% of retail sales. In CY 2017, renewable supplies are projected to be 57.5% 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 48.2 0.013
Shiloh I Wind June 2006 Dec. 2021 64.5 (0.043)
Santa Cruz Landfill Gas (LFG) Feb. 2006 Feb. 2026 9.9 0.003
Ox Mountain LFG Apr. 2009 March 2029 43.9 (0.039)
Keller Canyon LFG Aug. 2009 July 2029 14.9 (0.020)
Johnson Canyon LFG May 2013 May 2033 10.4 0.061
San Joaquin LFG April 2014 April 2034 30.3 0.133
Kettleman Solar Aug. 2015 Aug. 2040 53.5 0.094
Hayworth Solar Dec. 2015 Dec. 2042 63.7 0.024
Frontier Solar July 2016 July 2046 52.5 0.010
Elevation Solar C Nov. 2016 Nov. 2041 100.8 (0.041)
W. Antelope Blue Sky Ranch B Nov. 2016 Nov. 2041 50.4 (0.002)
Total Operating Resources 553.0 0.192
Wilsona Solar June 2021 June 2046 75.0 (0.068)
CLEAN Program @ 3 MW Cap TBD TBD 5.1 0.027
Total Non-Operating Resources 80.1 (0.041)
Total Committed Resources 633.1 0.151
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
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determine the eligibility criteria for renewable resource products as determined by their
eligible Portfolio Content Categories1, found in the CEC RPS Enforcement Procedures for local
publicly owned utilities2
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 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:
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 CA Code of Regulations, Title 20, Chapter 13, Section 3203.
City of Palo Alto Page 5
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 29% 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 932,922 186,584 241,262 25.9%
2016 955,828 246,442 376,609 39.4%
TOTAL 2,842,136 616,219 828,121 29.1%
* 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 (all of which are classified as Portfolio
Content Category 1 resources) as shown in Table 1.
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 equations. 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 procurement
requirement, as well as the Portfolio Balancing Requirement that at least 75% of the renewable
City of Palo Alto Page 6
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 California Energy Commission in June
2016 (Attachment A).
Carbon Neutral Plan
With the purchase of unbundled RECs in May 2016 to offset the CY 2015 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 third year in a row. Along with the
purchase of RECs, carbon neutrality was achieved in CY 2015 through existing hydro and
renewable generation (wind, solar, and landfill gas). As in CYs 2013 and 2014, the amount of
carbon neutral generation from these long-term contracts 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 2015 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 2016 staff projects that roughly 80% of the City’s electric supply resources will be from
carbon-free generating sources, with the remainder being procured through market purchases.
In early 2017, staff will establish the actual carbon content of the 2016 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
as expected and the ongoing drought finally comes to an end, by 2018 CPAU’s entire electric
supply portfolio is expected to be sourced from carbon neutral resources under long-term
contracts (see Figure 1 below).
City of Palo Alto Page 7
Figure 1: CPAU Carbon Neutral Supply Resources
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 December 31, 2016
compliance obligation of 25% of retail sales with eligible renewable resources, consistent with
the CPAU RPS Procurement Plan.
Environmental Review
Staff’s preparation of this report does not meet the definition of a “project” pursuant to Public
Resources Code Sections 21065 and 21080(b)(8), and CEQA Guidelines Section 15378(b)(5), because
it is an administrative governmental activity which will not cause a direct or indirect physical change in
the environment, 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
2015 (PDF)
STATE OF CALIFORNIA
Compliance Report Form for Local Publicly Owned Electric Utilities
CEC-RPS-POU (Revised 04/2016)
CALIFORNIA ENERGY COMMISSION
CEC-RPS-POU April 2016
Energy Commission staff may request additional information from the POU to verify the generation and
RPS procurement claims of electricity products reported in this report. If requested, an authorized officer
or agent of the POU shall submit additional information.
Sacramento, CA 95814-5555
This report is due on July 1st of each year for retirements made for the previous reporting year.
Renewable Energy Office
California Energy Commission
e-mail: RPSTrack@energy.ca.gov
Attn: RPS Verification
California Energy Commission
1516 9th Street, MS-45
(TO BE COMPLETED BY PUBLICLY OWNED UTILITIES)
COMPLIANCE REPORT to the CALIFORNIA ENERGY COMMISSION
ON THE RENEWABLES PORTFOLIO STANDARD PROGRAM
POU
Reporting for the Renewables Portfolio Standard Program (RPS), by tab:
Reporting Year Covered in
Report 2015
Compliance Period Accounting: Complete at the end of each compliance period.
Palo Alto, City of
Annual Report Accounting: Complete and update annually for previous, current, and forecasted years.
Static Contract Information: Complete with information only from contracts, ownership agreements,
and amendments that were executed in the previous calendar year or that were not previously reported.
Enter the name of the Local Publicly Owned Electric Utility (POU) submitting this report and the
Reporting Year covered by the report.
E-mail the electronic file of the completed report to the address shown below, with all supporting
documentation. Then print and sign the attestation page of the report, and either email or mail
the signed attestation to the address shown below:
Contracted RPS Facilities Information: Complete with information for facilities associated with
reported contracts.
The Energy Commission’s Enforcement Procedures for the Renewables Portfolio Standard for Local
Publicly Owned Electric Utilities are codified in Title 20, California Code of Regulations, sections 1240
and 3200 - 3208, may be referred to this form as the “RPS POU Regulations.”
ATTACHMENT A
STATE OF CALIFORNIA
Compliance Report Form for Local Publicly Owned Electric Utilities
CEC-RPS-POU (Revised 04/2016)
CALIFORNIA ENERGY COMMISSION
CEC-RPS-POU April 2016
Annual RPS Report: Accounting
To be completed annually.
Input Required
Actual Data
Forecasted Data
Forecasted
Annual RPS Procurement and Percentages
(MWh)2014 2015 2016
Annual Retail Sales 953,386.000 932,922.151 955,828.000
Annual RPS Procurement Retired 210,250.000 241,262.000 376,609.000
Soft Targets 20.00%20.00%25.00%
Procurement Target (MWh)2014 2015 2016
Procurement Target
Category 0 RECs Retired 210,250.000 216,058.000 227,530.000
Category 1 RECs Retired 0.000 25,204.000 149,079.000
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)
616,218.630
828,121.0000
Compliance Period 2
Compliance Period 2
Actual
STATE OF CALIFORNIA
Compliance Report Form for Local Publicly Owned Electric Utilities
CEC-RPS-POU (Revised 04/2016)
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 April 2016
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 953,386.000 932,922.151 955,828.000
Annual RPS Procurement Retired 210,250.000 241,262.000 376,609.000
Soft Targets 20.00%20.00%25.00%
Procurement Target (MWh)2014 2015 2016
Procurement Target
Category 0 RECs Retired 210,250.000 216,058.000 227,530.000
Category 1 RECs Retired 0.000 25,204.000 149,079.000
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 828,121.000
828,121.000
Compliance Period 2
Compliance Period 2
Actual
0.000
616,218.630
STATE OF CALIFORNIA
Compliance Report Form for Local Publicly Owned Electric Utilities
CEC-RPS-POU (Revised 04/2016)
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 April 2016
Portfolio Balance Requirements (MWh)Total Retired Applied to Target2 Potential Excess
Category 0 RECs Retired 653,838.000 0.000 653,838.000
Historic Carryover Applied 0.000 0.000 n/a
Category 1 RECs Retired 174,283.000 0.000 174,283.000
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 0.000 828,121.000 828,121.000
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 0.000 0.000 n/a 0.000
92,432.795
Compliance Period 2
0.000
0.000
400,542.110
STATE OF CALIFORNIA
Compliance Report Form for Local Publicly Owned Electric Utilities
CEC-RPS-POU (Revised 04/2016)
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 April 2016
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 3 828,121.000 Cost Limitations No
Procurement Target 616,218.630 Delay of Timely Compliance No
Potential Excess 828,121.000 Reduction of PCC 1 No
Short-Term RECs8 0.000
Excess RECs Eligible 828,121.000
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
400,542.110
616,218.630
Compliance Period 2