HomeMy WebLinkAboutStaff Report 13641
City of Palo Alto (ID # 13641)
City Council Staff Report
Meeting Date: 12/6/2021
City of Palo Alto Page 1
Council Priority: Climate/Sustainability and Climate Action Plan
Title: Informational Report on the Annual Review of the City’s Renewable
Procurement Plan, Renewable Portfolio Standard Compliance, and Carbon
Neutral Electric Supplies for 2020
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 60% 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 (and
which was updated by Council in August 2020). In 2011, in compliance with state RPS
regulations, the Council also formally adopted an RPS Procurement Plan and an RPS
Enforcement Program that recognize certain elements of the state’s RPS law applicable to
publicly-owned utilities. The RPS Enforcement Program requires the City Manager, or their
designee, 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 compliance with the Carbon Neutral Plan. The City
continues to meet both its RPS and Carbon Neutral Plan objectives—even after selling over
348,000 MWh of renewable energy in 2020.
Background
The City currently has two independent procurement targets related to renewable and carbon
neutral electricity:
• RPS Procurement Plan (60% by 2030): The City’s official renewable electricity 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), December 2018 (Staff Report 9761, Resolution
9802), and December 2020 (Staff Report 11650, Resolution 9929). The last update to the
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RPS Procurement Plan brought it into alignment with the state’s 60% RPS requirement
(SB 100), which was signed into law in 2018. The RPS Procurement Plan and RPS
Enforcement Program complement each other: the Procurement Plan establishes
official 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 requirement in the current version of the City’s RPS Procurement Plan
is that the City acquire renewable electricity supplies equal to 60% of retail sales by
2030, which is in line with the state’s current RPS mandate. The RPS Procurement Plan
also contains an escalating set of targets for six interim Compliance Periods (2011-2013,
2014-2016, 2017-2020, 2021-2024, 2025-2027, and 2028-2030), as well as subsequent
3-year compliance periods beginning in 2031.
• Carbon Neutral Plan (100% Carbon Neutral Electricity by 2013): The Carbon Neutral Plan
was adopted in March 2013 (Staff Report 3550, Resolution 9322) and updated in August
2020 (Staff Report 11556, Resolution 9913), 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. However, when the City Council approved an update to the Carbon Neutral
Plan in August 2020, they also approved a new procurement strategy whereby the City
does not keep all of the output of its long-term, in-state PPAs, but instead exchanges
that output for less expensive out-of-state renewable generation (with the net proceeds
used to offset electric utility operational costs and fund local decarbonization
programs).
Discussion
The City continues to meet its objectives under the RPS Procurement Plan and the Carbon
Neutral Plan, and achieved an RPS level of 20.8% in 2020. Although this value fell short of the
state’s 33% RPS procurement “soft target” for the year, the City remained compliant with state
law because the RPS procurement mandate is evaluated over a multi-year horizon (2017-2020
in this case), and the City far exceeded the state’s soft target levels in the earlier years of the
four-year compliance period. Below is a summary of CPAU’s progress toward satisfying its
renewable energy and carbon neutral procurement targets, with additional detail provided in
Attachment A.
RPS Procurement Plan Compliance
In CY 2020, the City initially received 525,242 MWh of renewable energy through its long-term
contracts for wind, solar, landfill gas, and small hydro resources (which represents 64.5% of the
City’s total retail sales for that period). Additionally, the City received 410,885 MWh of large
hydroelectric generation (representing 50.4% of the City’s total retail sales), which is not
classified as eligible renewable generation by the state. Based on the Council’s decision in
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August 2020 to pursue the “REC Exchange Program” (Staff Report 11556, Resolution 9913) the
City sold 348,700 MWh of in-state renewable energy supplies, yielding $4.04 million in sales
revenue, while purchasing 325,186 MWh of out-of-state renewable energy, at a cost of $1.10
million. Figure 1 below depicts the City’s load and supply resources for CY 2020, before and
after the REC Exchanges described above. Accounting for these transactions, the City’s net
renewable energy supplies totaled 501,728 MWh, which represents 61.6% of the City’s total
retail sales for 2020. However, under the state’s RPS regulations the majority of the out-of-
state renewable energy purchases were not able to be applied to the City’s RPS requirement,
hence the City’s official RPS level was only 20.8%.
Figure 1: CY 2020 Electric Load and Supply Resources, With and Without REC Exchanges
For CY 2021, staff has contracted to sell about 287,000 MWh of in-state renewable generation,
and purchased about 339,000 MWh of out-of-state renewable generation (Figure 2 below
depicts the City’s load and supply resources for CY 2021, before and after the REC Exchanges
described above. Note that much of the decrease in REC sales volume and revenue, compared
to CY 2020, is due to the much lower volume of hydro generation the City expects to receive in
2021 due to the current drought.) Once these transactions are accounted for, they will yield a
total of about $2.25 million in net revenue, and an official RPS level of 35.75% (equal to the
state’s RPS soft target for 2021). However, if the additional out-of-state renewable supplies that
cannot be applied to the City’s RPS requirements are included, the City’s total renewable
electricity supplies are projected to be approximately 75% of retail sales.
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Figure 2: CY 2021 Electric Load and Supply Resources, With and Without REC Exchanges
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 a series of separate multi-year Compliance Periods. CPAU’s procurement targets, as well
as its actual/projected procurement volumes and RPS levels, for the first three Compliance
Periods are summarized in Table 1 below.
Table 1: RPS Compliance Period Procurement Targets and Actual Procurement
RPS
Compliance
Period
Years Retail Sales
(MWh)
Procurement
Target (MWh)
Actual
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 3,487,686 1,043,424 1,619,303 46.4%
TOTALS 9,126,515 2,216,928 3,053,898 33.5%
Carbon Neutral Plan
In CY 2020, CPAU achieved its goal, set forth in the Carbon Neutral Plan, of an electric supply
portfolio with zero net greenhouse (GHG) emissions for the sixth consecutive year. Carbon
neutrality was achieved in CY 2020 through existing hydro and renewable generation (wind,
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solar, and landfill gas). As discussed above, due to the Council’s adoption of the REC Exchange
Program in August 2020, the City sold 348,700 MWh of in-state renewable energy supplies,
yielding $4.04 million in sales revenue, while purchasing 325,186 MWh of out-of-state
renewable energy, at a cost of $1.10 million. Accounting for these transactions, the City’s net
renewable energy supplies totaled 501,728 MWh, which represents 61.6% of the City’s total
retail sales for 2020. The remainder of the City’s needs were supplied by large hydroelectric
resources.
When the City Council approved an update to the Carbon Neutral Plan in August 2020, the
primary change was to adopt an hourly carbon accounting methodology as the basis for
determining whether the City has met its carbon neutrality objective. Using an annual
accounting approach, the City had an overall surplus of 68,407 MWh of carbon neutral
generation compared to its load (equal to 8.1% total load), and thus substantially exceeded the
carbon neutrality standard. Meanwhile, under the hourly carbon accounting approach,1 the
City’s electric supply portfolio also exceeded the carbon neutrality standard, being responsible
for a net negative amount of GHG emissions: -25,104 metric tonnes of CO2 equivalent. See
Figure 3 below for a depiction of the City’s monthly total net CO2 emissions for 2020, as well as
the monthly average emissions intensity for the California electric grid.
Figure 3: CY 2020 Monthly Net Electric Supply Emissions and CAISO Emissions Intensity
1 The City’s hourly carbon accounting methodology entails calculating the City’s net surplus or deficit carbon
neutral supply position relative to its load in every hour of the year. The grid average electricity emissions intensity
for each hour is then applied to each of these hourly surpluses or deficits to yield a net emissions contribution (or
reduction) that the City’s electric supply portfolio is responsible for in that hour. These hourly emissions totals are
then summed across the entire year to yield the City’s annual emissions total for the year.
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For CY 2021, significantly below average hydro conditions are expected to result in about 30%
of the City’s electric supply needs being supplied by hydroelectric resources compared to an
annual average of about 55%, with the remainder coming from non-hydro renewable energy
resources (including purchases of out-of-state unbundled renewable energy certificates, or
RECs).
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:
• Attachment11.a: Attachment A: 2020 Renewable and Carbon Neutral Electricity
Supply Procurement Details
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Renewable and Carbon Neutral Electricity Supply Procurement Details
Renewable Energy Procurement Efforts
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 57.3 (0.041)
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 10.4 0.064
San Joaquin LFG Apr. 2014 Apr. 2034 27.5 0.127
Kettleman Solar Aug. 2015 Aug. 2040 53.5 0.099
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)
CLEAN Program Projects Varies Varies 5.0 0.027
Total Operating Resources 539.0 0.223
Golden Fields Solar III Jan. 2023 Dec. 2047 75.0 (0.056)
Total Non-Operating Resources 75.0 (0.056)
Total Committed Resources 614.0 0.168
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 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.
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.
ATTACHMENT A
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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 (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 RPS Procurement Details
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 RPS Procurement Details
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%
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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 applied 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.
Despite falling short of the soft target for 2020, CPAU easily exceeded 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.
Table 4: Compliance Period 3 RPS Procurement Details
Year Retail Sales
(MWh)
Procurement
Target (MWh)*
Actual/Projected
Procurement (MWh)
% of Retail
Sales
2017 912,623 246,408 554,206 60.7%
2018 888,033 257,530 574,475 64.7%
2019 861,561 267,084 319,035 37.0%
2020 825,469 272,405 171,587 20.8%
Total 3,487,686 1,043,426 1,619,303 46.4%
* 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.
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 2021.
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