Staff Report Item 10
Staff Report Item 10
To: Ava Community Energy Authority
From: Marie Fontenot; SVP of Power Resources
Subject: Accelerating Renewable Procurement (Informational Item) Date: April 16, 2025
__________________________________________________________________ Summary/Recommendation
Receive a presentation discussing Ava Community Energy’s path to a zero emission portfolio and the opportunities, challenges, and risks associated with changing the trajectory.
Background and Discussion
In December 2020, Ava Community Energy (“Ava”) first proposed a goal to deliver customers electricity from a portfolio of resources with zero net emissions by 2030, supported by the analysis from Ava’s 2020 Integrated Resource Plan (“IRP”) filing. The Board of Directors approved the ambitious goal, recognizing the result would be Ava’s service territory achieving its decarbonization goal 15 years ahead of the State.
In April, 2022, Ava developed its annual power procurement goals for renewable and carbon-free electricity purchases as a path to reach a zero-emission electricity portfolio by 2030. This trajectory was approved by the Board of Directors in the April 20 meeting of that year.
In the attached presentations, Staff present a discussion and preliminary analysis evaluating some of the costs to Ava customers associated with accelerating the goal of emission-free energy on an annual basis. Energy and Environmental Economics (“E3”) Consulting provides a discussion of the challenges and costs associated with providing emission free energy on an hourly basis.
Staff Report Item 10
Attachments
A. Accelerating Renewable Procurement presentation
B. Clean Energy Procurement and Carbon Reductions: Past Successes and Current Challenges presentation
Accelerating Renewable
Procurement
Marie Fontenot, SVP of Power Resources
and Arne Olson, Senior Partner of E3
April 16, 2025
Attachment Staff Report Item 10A
Agenda
2 Section 1:
• History of Ava’s decarbonization plans; current changes & challenges to clean energy deployment
Section 2:
• Cost, Risk & Carbon Impacts of Alternative Clean Energy Procurement Strategies
Attachment Staff Report Item 10A
Executive Summary
• Fall 2024: planned to present topic informed by
Ava’s strong balance sheet & successful record of
project execution & development
• Today: PCIA policy changes create financial risk;
tariffs & executive orders create project
development & cost risk.
• Ava’s path to 0 emission power in 2030 is on
track, but regulatory changes and federal policy
are challenges and increase costs
3 Attachment Staff Report Item 10A
Providing Affordable, Clean Energy is our Purpose
Ava’s Joint Power Authority, Recitals:
3. “… It is the intent of this Agreement to promote the development and use of a wide range of renewable energy sources and energy efficiency programs, including but not limited to State, regional, and local solar and wind energy production.”
4 Ava’s JPA, July 17, 2024: https://avaenergy.org/wp-content/uploads/2024/08/Ava-Joint-Powers-Authority-071724-Unincorporated-San-Joaquin-County.pdf https://avaenergy.org/about-ava/our-story/
Attachment Staff Report Item 10A
Context for Ava’s Clean Energy Procurement
• Bright Choice 2019 – 2020: compare Ava CO2-free to PG&E based on renewables (RPS) and large hydro/ACS.
▪ Ava procured to RPS compliance target + 5%
▪ During this time large hydro allocation from PG&E begins under PCIA • Bright Choice 2020 – 2022: compare Ava’s RPS % to PG&E’s target % for a given year, as reported a year prior; Ava would procure 5% above PG&E
▪ Challenge 1: PG&E’s annual RPS target was confidential within the year, Ava relied on an estimate that was outdated
▪ Challenge 2: Ava rejected PG&E’s initial “nuclear offering”; result PG&E carried lower emissions than Ava
• Bright Choice 2022 – 2025: Ava’s renewable & large hydro procurement
• Bright Choice Fall 2024 – present: Ava approved to incorporate nuclear allocation
▪ Staff will suggest changes to Ava:PG&E comparison; must hold Ava to high standard
5 Attachment Staff Report Item 10A
Previous Design: Comparing Emission-Free Portfolios
Source: April 20, 2022 Board Meeting: Board-approved “Path to Zero Emission Electricity in 2030”
6 Attachment Staff Report Item 10A
Ava Estimated Power Content 2024 & 2025
7 • 2024 and 2025 have an 81% CF target
• 2025 assumes no further increases to CF targets during budget planning • Currently has only 1% of the previous 2025 CF increase in renewables Attachment Staff Report Item 10A
Ava’s Long-Term Clean Portfolio
8 Project Developer Location Current Status Agreement Type Technology Products Actual / Forecasted COD Rosamond Central Clearway Kern County, CA Online PPA Solar Energy, REC, RA, Ancillary Services 12/21/2020 Altamont Greenbacker Alameda County, CA Online PPA Wind Energy, REC, RA, Ancillary Services 7/2/2021 Tecolote Pattern New Mexico Online PPA Wind Energy, REC, Ancillary Services 12/20/2021 Henrietta D Convergent Kings County, CA Online ESA Battery Storage Storage, RA, Ancillary Services 12/28/2021 Luciana Idemitisu Tulare County, CA Online PPA Solar Energy, REC, RA, Ancillary Services 4/29/2022 Daggett Clearway San Bernardino County,
CA Online PPA Solar + Storage Energy, Storage, REC, RA, Ancillary Services 9/5/2023 Oberon Intersect Riverside County, CA Online PPA Solar + Storage Energy title, REC, RA (Storage Only) 1/1/2024 Scarlet I EDP Renewables Fresno County, CA Online PPA Solar + Storage Energy, Storage, REC, RA, Ancillary Services 5/3/2024
Malaga - Hedge Middle River Power Fresno County, CA Online Confirmation Financial Financial Hedge 6/1/2024 Tumbleweed_4hr REV Renewables Kern County, CA Online ESA Battery Storage Storage, RA, Ancillary Services 7/16/2024 Malaga - BESS Middle River Power Fresno County, CA Development Confirmation RA Storage, Ancillary Services 3/7/2025 Kola Next Era San Joaquin County, CA Development ESA Battery Storage Storage, RA, Ancillary Services 7/7/2025 Oakland 2 Prologis Alameda County, CA Pre-Construction DAC PPA Solar Energy, REC 12/31/2025 Hayward I Prologis Alameda County, CA Pre-Construction DAC PPA Solar Energy, REC 4/1/2026 San Leandro 1 Prologis Alameda County, CA Pre-Construction DAC PPA Solar Energy, REC 4/1/2026 Sun Pond Longroad Energy Maricopa County, AZ Development PPA Solar + Storage Energy, Storage, REC, RA, Ancillary Services 4/1/2026
Tracy 16 Prologis San Joaquin County, CA Pre-Construction DAC PPA Solar Energy, REC 6/1/2026 Tracy 9 Prologis San Joaquin County, CA Pre-Construction DAC PPA Solar Energy, REC 6/1/2026 Tumbleweed_8hr REV Renewables Kern County, CA Pre-Construction ESA Battery Storage Storage, RA, Ancillary Services 6/1/2026 SunZia Pattern Lincoln County, NM Development PPA Wind Energy, REC, RA 9/30/2026 Easley I Intersect Riverside County, CA Pre-Construction PPA Solar Energy, REC 3/31/2027 Easley II Intersect Riverside County, CA Pre-Construction PPA Solar Energy, REC 3/31/2027 Imperial Sun Atlantica Imperial County, CA Pre-Construction PPA Solar + Storage Energy, Storage, REC, RA, Ancillary Services 3/31/2027
Gabriel BESS Aypa Power Los Angeles County, CA Pre-Construction ESA Battery Storage Storage, RA, Ancillary Services 6/1/2027 Zeta Solar Longroad Energy Merced County, CA Pre-Construction PPA Solar + Storage Energy, Storage, REC, RA, Ancillary Services 7/26/2027
Rosemary Longroad Energy Fresno County, CA Pre-Construction PPA Solar + Storage Energy, Storage, REC, RA, Ancillary Services 6/1/2028
Corsac Station Fervo Churchill County, NV Pre-Construction PPA Geothermal Energy, REC, RA, Ancillary Services 4/1/2030 Attachment Staff Report Item 10A
Challenge: Mitigate Emissions & Hedge Responsibly
Source: CAISO 2024 Summer Loads & Resource Assessment
https://www.caiso.com/documents/2024-summer-loads-and-resources-assessment.pdf 9 Ava Sept sample portfolio
Additional solar + storage will help meet peak
demand but is not most efficient way to meet
overnight demand
Attachment Staff Report Item 10A
Coming Soon: Hourly Emission Accounting
• Significant Challenge: upcoming changes to CEC emissions rules create risks on existing portfolio, including long-term contracted resources & previous financial hedge structures. ▪ SB 1158 passed in 2022; requires hourly counting in 2028 ▪ RA does not carry emissions
10 Additional capacity build required to meet 0
emissions annual accounting by 2027 instead of 2030
Additional costs required to meet 0 emissions annual
accounting by 2027 instead of 2030.
Result could be ~$500 million excess costs per year for 10-20 years.
Attachment Staff Report Item 10A
Ava Community Energy
April 16, 2025
Clean Energy Procurement
and Carbon Reductions: Past
Successes and Current
Challenges
Arne Olson, Senior Partner
Liz Mettetal, Director
Attachment Staff Report Item 10B
2 How has procurement contributed to achieving higher levels of clean energy penetration over the past 20 years?
What would be the impact of moving to more exacting clean energy accounting schemes such as “24x7 matching” for load-serving entities such as Ava Community Energy?
What is the current state of the clean energy industry and what are the implications for clean energy buyers?
Agenda
Attachment Staff Report Item 10B
The Role of Procurement in
Clean Energy Deployment
Attachment Staff Report Item 10B
4 Mandated and voluntary procurement have driven significant clean energy investment over the past 20 years
State-mandated and voluntary
procurement have helped
create a market for clean
energy, driving down costs
Supportive federal policy,
especially tax incentives such
as PTC/ITC, has also been
important
US Renewable Energy Production, 1990-2021
TWh
0 100
200
300
400
500
600
700
800
900
1990 1995 2000 2005 2010 2015 2020
Hydroelectric Biomass Geothermal Wind Solar
Source: NREL Source: EIA
Attachment Staff Report Item 10B
5 Specified energy purchases are contractual, not physical “Specified” energy purchases are not physically delivered to the off-taker on a networked power system
• Generators inject into the grid in one location, displacing other generators with higher operating costs
• Loads withdraw from the grid in
another location, served by a mix of
generators on the system
Hundreds of billions of
dollars have been invested
based on the premise of
contractual clean energy
supplies
https://www.rpc.senate.gov/policy-papers/infrastructure-cybersecurity-the-us-electric-grid Attachment Staff Report Item 10B
6 Most clean energy procurement strategies have relied on long-term PPAs, supplemented with short-term REC transactions Long-term PPAs provide the
revenue certainty needed for
project finance
Tradable RECs are the only way to
verify clean energy content
The creation, trade, and retirement
of RECs are certified and tracked
by independent organizations
Attachment Staff Report Item 10B
7 All state-mandated clean energy programs have annual or multi-year compliance periods Balancing over shorter time
periods is very challenging
• Both load and clean energy production
are uncertain and variable
This flexibility reduces RPS
compliance costs and is a
feature of all RPS programs
across US, including CA, ME,
MD, IL, WA and others
Multi-Year Compliance Periods in the California RPS Program Source: California Public Utilities Commission
Attachment Staff Report Item 10B
8 The ability to exchange surpluses and shortfalls in clean energy through the CAISO market is beneficial to all participants Neighboring systems can
exchange surpluses and deficits
Balancing on a market-wide basis
creates efficiencies that benefit all
market participants
Organized markets such as
CAISO have facilitated low-cost
integration of large quantities of
clean energy
Sell power
into market
when long
Buy power
from market
when short
Attachment Staff Report Item 10B
The Impacts of “24x7” vs.
Annual Clean Energy
Accounting
Attachment Staff Report Item 10B
10 The push for “24x7” clean energy matching
Some large tech companies such as Google and Microsoft have been advocating policies to achieve hourly or “24x7” matching Multiple arguments are put forward:
• 24x7 matching will help transform the market for “clean firm” technologies • More precise (but not necessarily more accurate) accounting of carbon reductions from clean energy procurement
24x7 matching in effect requires LSEs to
become “electrical islands”, forgoing the
benefits of wholesale electricity markets
Google has set 2030 as a target for
achieving 24x7 matching
https://www.utilitydive.com/news/hourly-matching-clean-electricity-renewable-energy-purchases-e3/692099/ Attachment Staff Report Item 10B
11 LSEs must buy
enough clean energy
to match their load
during the most
difficult hour
This requires “over-procurement” during
every other hour
“Hourly matching”
only occurs in small
handful of hours
Hourly matching can be very expensive and exposes the LSEs to significant market risks from over-procurement
-10
-5
0 5
10 15
20 25
0 2000 4000 6000 8000 Hour
(GW)
Many hours with over-procured energy by C&I
customer adds to systemwide risk
(~400% of matching load in hours with highest
incremental risk)
Excess Clean Procurement by C&I Load Adds Incremental Risk C&I Excess Clean Energy Sales plus Incremental WECC-Wide Curtailment In a few hours, lower curtailment in
the matching case
Hours with exact
matching and no
incremental
curtailment in WECC
E3 Study partially funded by Meta: https://www.ethree.com/meta-voluntary-clean-energy/ Hourly Matching Requires Over-procurement During Most Hours of the Year Attachment Staff Report Item 10B
12 E3 study for SVCE demonstrates that hourly matching would require significant over-procurement throughout the year Under “Net zero” or “100% annual
matching”, SVCE-contracted
resources produce clean energy
equal to 100% of annual need
Under “Absolute zero” or “100%
hourly matching”, SVCE must
procure energy equal to 181% of
their annual need
Annual and hourly matching achieve
similar levels of carbon abatement
Attachment Staff Report Item 10B
13 High Cost
Low Cost
Achieving absolute zero carbon emissions with just wind, solar and batteries would be prohibitively expensive, even on large grids Low renewables, storage and gas
prices enable significant carbon
reductions at very low cost
Image source: Resource Adequacy in the Pacific Northwest (Various utilities, 2019) E3 studies in the Pacific Northwest, California, New England and elsewhere show the very high cost of trying to achieve zero carbon with only wind, solar, hydro and storage Attachment Staff Report Item 10B
Current Challenges in the
Clean Energy Industry
Attachment Staff Report Item 10B
15 Solar and wind PPAs
are now $50-60/MWh
More than double pre-pandemic levels
Price pressures will
continue due to:
• Competition from tech
industry
• Land, labor, equipment,
interconnection
• Tariffs and supply chain
issues
Clean energy development industry is facing significant headwinds
Source: LevelTen Energy (www.leveltenenergy.com/ppa)
Solar and Wind PPA Price Index: North America (LevelTen) Attachment Staff Report Item 10B
16 There were over 1000 hours of curtailment
and negative prices in Southern California
in 2024
Generators are paying up to -$67/MWh at
for buyers to take their power
Curtailment and negative pricing will be
widespread in California for the
foreseeable future
The California market will be trickier to navigate in the future due to solar saturation
Average prices in 2023 and forecast for 2035
CAISO SP15 zone
Attachment Staff Report Item 10B
Key Takeaways
Attachment Staff Report Item 10B
18 Clean energy procurement has played a pivotal role in driving investment in clean energy
Moving to more exacting clean energy accounting schemes such as “24x7” would create significant costs and risks for load-serving entities The clean energy industry is currently facing higher costs and tremendous uncertainty, arguing for a cautious approach Key Takeaways
Attachment Staff Report Item 10B
Thank you!
Arne Olson, Senior Partner ([email protected])
Attachment Staff Report Item 10B