Energy Planning & Resources Committee
of the Clean Power Alliance of Southern California
Regular Meeting
Wednesday, May 24, 2023
12:15 p.m.
Visit CPA’s YouTube Channel to watch a Live Stream of the Meeting *There may be a streaming delay of up to 90 seconds. This is a view-only live stream.
CPA Office
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Members of the public may also participate in this meeting remotely at the following locations:
Manhattan Beach City Hall
City Manager Conference Room
1400 Highland Avenue
Manhattan Beach, CA 90266
Alhambra City Hall
Conference Room A
111 S. First St.
Alhambra, CA 91801
Carson City Hall
Executive Conference Room
701 East Carson Street
Carson, CA 90745
West Hollywood City Hall
3rd Floor Conference Room
8300 Santa Monica Blvd.
West Hollywood, CA 90069
Thousand Oaks City Hall
Public Works Conference Room
2100 Thousand Oaks Blvd.
Thousand Oaks, CA 91362
City of Oxnard Service Center 1
East Conference Room
214 South C Street
Oxnard, CA 93030
PUBLIC COMMENT: Members of the public may submit their comments by one of the following options:
• Email Public Comment: Members of the public are encouraged to submit written comments on any agenda item to [email protected] up to four hours before the meeting. Written public comments will be announced at the meeting and become part of the meeting record. Public comments received in writing will not be read aloud at the meeting. • Provide Public Comment During the Meeting: The General Public Comment item is reserved for persons wishing to address the Committee on any Clean Power Alliance-related matters not on today’s agenda. Public comments on matters on today’s Consent Agenda and Regular Agenda shall be heard at the time the matter is called. Comments on items on the Consent Agenda are consolidated into one public comment period. Members of the public who wish to address the Committee at CPA’s Office are requested to complete a comment card and provide it to staff. If you are attending from a remote location, please identify yourself to a CPA representative when your item is called. Each speaker is limited to two (2) minutes (in whole-minute increments) per agenda item with a cumulative total of five 5 minutes to be allocated between the General Public Comment, Agenda Page 1
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CALL TO ORDER & ROLL CALL
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from April 26, 2023, Energy Committee Meeting
2. Receive and File April 2023 Risk Management Team Report
REGULAR AGENDA
3. Oral Update from Vice President, Power Supply
4. Provide Feedback on Net Energy Metering 3.0
5. Provide Feedback on the 2023 Clean Energy and Reliability RFO
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING JUNE 28, 2023
Public Records: Public records that relate to any item on the open session agenda for a Committee Meeting are available for public inspection. Those records that are distributed less than 72 hours prior to the meeting are available for public inspection at the same time they are distributed to all, or a majority of, the members of the Committee. Public records are available for inspection at CPA’s Office at 801 S. Grand Ave., Suite 400, Los Angeles, CA 90017, or online at www.cleanpoweralliance.org/agendas.
Agenda Page 2
Energy Committee Item 1
MINUTES
Energy Planning & Resources Committee
of the Clean Power Alliance of Southern California
Regular Meeting
Wednesday, April 26, 2023, 12:15 p.m.
Meeting videos are available on CPA’s YouTube Channel.
www.youtube.com/@CPApublicmeetings
Committee Members participated in this meeting from the following locations:
Manhattan Beach City Hall
City Manager Conference Room
1400 Highland Avenue
Manhattan Beach, CA 90266
CPA Office
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Alhambra City Hall
Conference Room A
111 S. First Street
Alhambra, CA 91802
Carson City Hall
Executive Conference Room
701 East Carson Street
Carson, CA 90745
Sierra Madre City Hall
Council Chambers
232 W. Sierra Madre Blvd.
Sierra Madre, CA 91024
Thousand Oaks City Hall
Public Works Conference Room
2100 Thousand Oaks Blvd.
Thousand Oaks, CA 91362
City of Oxnard Service Center 1
East Conference Room
214 South C Street
Oxnard, CA 93030
West Hollywood City Hall
3rd Floor Conference Room
8300 Santa Monica Blvd.
West Hollywood, CA 90069
CALL TO ORDER & ROLL CALL
Chair Parkhurst called the meeting to order at 12:15 p.m. and Gabriela Monzon, Board Clerk, conducted roll call.
ROLL CALL
Alhambra Jeff Maloney Committee Member Remote
Carson Reata Kulcsar Committee Member Remote
Manhattan Beach David Lesser Committee Member Remote
Oxnard Kathleen Mallory Committee Member Remote
Sierra Madre Robert Parkhurst Committee Chair Remote
South Pasadena Diana Mahmud Committee Member Remote
Thousand Oaks Helen Cox Committee Member Remote
West Hollywood Chelsea Byers Committee Member Remote
All votes are unanimous, unless otherwise stated.
Agenda Page 3
Clean Power Alliance Energy Planning & Resources Committee Page 2 of 4 April 26, 2023
GENERAL PUBLIC COMMENT
There was no public comment.
CONSENT AGENDA
1. Approve Minutes from March 22, 2023, Energy Committee Meeting
2. Receive and File March 2023 Risk Management Team Report Motion: Committee Member Byers, West Hollywood
Second: Committee Member Lesser, Manhattan Beach
Vote: The consent agenda was approved by a roll call vote.
REGULAR AGENDA
3. Provide Feedback on Expanding Energy Procurement Options Matthew Langer, Chief Operating Officer, provided a presentation on expanding energy procurement options. CPA will meet or exceed its long-term contracting requirements under the Renewable Portfolio Standard (RPS) and the Mid-Term Reliability (MTR) order. However, current market conditions will make short-term procurement of renewable energy and Resource Adequacy (RA) compliance challenging. Mr. Langer identified various reasons for the Renewable Energy Credit (REC) and RA availability and price increases. Fewer buyers have submitted offers in CPA’s long-term Request for Offers (RFOs) in recent years due to increased competition from the MTR requirements for new capacity. Staff is seeking ways to attract more offers in upcoming RFOs so CPA can add a significant amount of long-term resources to the portfolio and reduce dependence on the volatile short-term markets. Staff are exploring other options, such as more flexible contract durations, RA-only offers, and RA bundled with natural gas.
Committee Member Lesser asked several questions about the rate impact of the current RA shortage and the reception of proposers on the expansion of RFO requirements. Mr. Langer explained that staff’s priority is meeting the RA compliance requirement, and acquiring long-term contracts rather than short-term contracts has a more positive rate impact. Expansion ideas come from staff as well as feedback from developers; developers have provided positive feedback on the procurement options. Responding to Committee Member Mahmud’s comments regarding direct ownership of infrastructure, CEO Ted Bardacke noted that direct infrastructure ownership may yield a reduction in cost but prepay bond transactions are also generating higher savings than expected, making them more comparable to those of a model of direct ownership without CPA taking on asset ownership risk. Committee Member Mahmud asked questions regarding renegotiations with existing projects for RA, the California Public Utilities Commission’s (CPUC’s) RA policy, and Southern California Edison’s (SCE’s) RA availability. Mr. Langer explained that staff have added storage to projects with solar-only facilities and that staff continue to search for methods to optimize existing resources.
Concerning the CPUC’s RA policy, Mr. Langer indicated that the CPUC has rejected all of California Community Choice Association’s (CalCCA’s) attempts to include an allocation option for RA. CPA has exhausted all its options and the CPUC has decided that the IOUs should keep the capacity rather than share them with the other LSE’s whose customers paid for the capacity. Finally, SCE has a competitive advantage over CPA in their compliance position for various structural reasons; staff have made the CPUC aware of these inequities. Chair Parkhurst asked if the RA concern is centered more around reliability than rates. Mr. Langer shared that acquiring long-term contracts for new and/or existing resources allows Agenda Page 4
Clean Power Alliance Energy Planning & Resources Committee Page 3 of 4 April 26, 2023
CPA to achieve lower costs and a higher probability of meeting compliance targets, resulting in more competitive rates. Chair Parkhurst commented that CPA’s financial stability, despite climate and market challenges, is due to CPA’s healthy procurement levels.
Mr. Langer reviewed the possibility of procurement of natural gas bundled with RA also known as tolling agreements (tolls). Currently, CPA displays significant amounts of Unspecified Power on the Power Content Label (PCL) in the Lean and Clean Power products; unspecified power is generic system power that CPA purchases to meet the balance of customer needs that is not met by specified sources. Natural gas energy purchases would displace Unspecified Power on the PCL, but the emissions impact is unit specific. Staff will need to modify the evaluation criteria for natural gas tolling agreements. The standard Energy Committee and Board approval process would apply to any solicited long-term agreements with a natural gas resource.
Chair Parkhurst inquired about the percent of Unspecified Power for the Lean and Clean products for FY 2022/23. The Unspecified Power accounted for roughly 58% of Lean power and just under 40% of Clean power. Committee Member Kulcsar asked several questions on the impact of contracting for natural gas resources on the PCL for different rate products. Staff clarified that purchasing energy with RA would impact the PCL, but the purchase of RA alone would not. Purchasing natural gas resources would displace Unspecified Power within the overall portfolio and would be broken out by rate product on the PCL, with no natural gas going to the 100% Green product because that product does not have any Unspecified Power in the PCL. Mr. Bardacke clarified that the PCL is measured over the course of an entire year and is not a measure of 24-hour energy being dispatched to the grid.
Committee Member Cox expressed a concern that CPA’s use of natural gas resources would keep peaker plants running longer than anticipated. Staff indicated that the impact of CPA contracts on the retirement of such plants would be considered during the evaluation process. Committee Member Mahmud noted that all existing natural gas plants have existing interconnections, which presents a significant advantage because it alleviates the need for new interconnection construction, which have recently experienced delays. In response to Committee Member Mahmud’s question about the Unspecified Power greenhouse gas calculations, Mr. Langer explained that staff must use an administratively set greenhouse gas value provide by the state for the calculation of Unspecified Power. Responding to Committee Member Mallory’s question about resources in Unspecified Power, staff clarified that it includes every resource on the grid, including coal and nuclear, but the amounts are unknown. Committee Member Kulcsar expressed concern about including natural gas resources in CPA’s RFOs and asked about the possibility of having a separate process. Chair Parkhurst commented that expanding the RFO would allow staff to explore options to help CPA meet the RA compliance requirements and avoid CPUC fines. Mr. Langer added that there is no obligation to sign any contracts, and a single RFO allows staff to determine CPA’s portfolio needs wholistically. Committee Member Mahmud expressed support for the RFO expansion options, adding that enhancing CPA’s ability to obtain its RA compliance has important political and economic ramifications. Committee Member Byers expressed support for including the new opportunities in the RFO as this would allow the committee and the full Board to make decisions with more complete information in hand.
COMMITTEE MEMBER COMMENTS
Agenda Page 5
Clean Power Alliance Energy Planning & Resources Committee Page 4 of 4 April 26, 2023
Committee Member Lesser shared that he will be meeting with the U.S. Assistant Secretary of Energy to discuss expansion initiatives to support electric infrastructure growth.
ADJOURN
Chair Parkhurst adjourned the meeting at 1:40 p.m.
Agenda Page 6
Staff Report – Agenda Item 2
To: Energy Committee
From: Geoff Ihle, Director, Energy Risk Management
Approved by: Ted Bardacke, Chief Executive Officer
David McNeil, Chief Financial Officer
Subject: Risk Management Team Report
Date: May 24, 2023
April 2023 RMT REPORT
Key Actions
• Reviewed current counterparty credit exposure
• Reviewed March 2023 market performance
• Reviewed March 2023 generation and storage performance • Reviewed energy positions and approved 2023-2027 hedges • Reviewed January 2023 day-ahead load forecast performance • Reviewed positions for RPS and carbon free products
• Reviewed Resource Adequacy (RA) positions, including CPA’s 2023 Month-Ahead and 2024 Year-Ahead open position and procurement strategy • Reviewed Energy Risk Management (ERMP) compliance
• Review April 2023 CRR Allocations and Auction and 2023 YTD performance Policy Compliance
Policy Deviation Required Action
Carbon Free Energy: As of December 1,
2022, carbon free energy under contract
for 2023 was above the ERMP maximum
of 100%
None. As previously reported, due to
scarcity of carbon free energy
(hydroelectric power), CPA procured
additional supply to ensure it meets its
energy product content targets.
Resource Adequacy: As of December 1,
2022, July, August and September 2023,
Resource Adequacy under contract was
below the ERMP Month-Ahead minimum
of 90%.
As a result of procurement activity, CPA
cured the July 2023 deviation. CPA is
running solicitations to buy August and
September 2023 Resource Adequacy.
ATTACHMENT
None.
Agenda Page 7
Staff Report – Agenda Item 3
To: Energy Committee
From: Lindsay Saxby, Vice President, Power Supply
Subject: Oral Update from Vice President, Power Supply
Date: May 24, 2023
The VP will provide an oral report on CPA energy procurement activities, including:
• Projects coming online in 2023
• Current negotiations
• Current Request for Offers
Agenda Page 8
Staff Report – Agenda Item 4
To: Energy Committee
From: Karen Schmidt, Director, Rates & Strategy
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Net Energy Metering 3.0
Date: May 24, 2023
RECOMMENDATION
Staff will provide a presentation on the item and request feedback from the Energy Committee.
ATTACHMENT
1. Presentation on Net Energy Metering 3.0
Agenda Page 9
Item 4 - NEM 3.0 Policy
Options
May 24, 2023
Agenda Page 10
Summary
The CPUC NEM 3.0 decision reduced overall compensation for roof-top solar for new solar customers. The reduced compensation primarily occurs on the delivery side of the bill and at a level that CPA cannot make up for with enhanced customer generation compensation
The CPUC NEM 3.0 decision increased the economic payback for battery storage and provided added compensation for low-income customers
This approach partially aligns with CPA policy goals but may be insufficient to overcome barriers to storage adoption in general and access for low-income customers Following meetings with the CAC NEM working group, the full CAC, and the Executive Committee, staff’s preliminary recommendation is that CPA follow the NEM 3.0 approach to export compensation, complemented by a broad-based storage rebate program with additional low-income incentives
Staff is requesting feedback from the Energy Committee on this preliminary recommendation prior to discussing with the full Board next week Agenda Page 11
Presentation Overview
Review CPA goals for implementing Net Energy Metering
Overview of CPUC’s final decision and impact to CPA customers CPA policy options
Next steps
Agenda Page 12
CPA NEM goals
4 Support grid reliability
Incentivize energy storage adoption
Expand access for low-income customers
Agenda Page 13
Existing customers already on NEM 1.0 and 2.0 tariffs
o CPA’s ~66,000 existing NEM customers will remain on their current NEM 1.0 or 2.0 tariff for the duration of their 20-year legacy period – no change o CPA will place new NEM customers on its existing NEM 2.0 tariff until the CPA Board adopts a new NEM policy
o Current NEM customers cost CPA $28 - $36 million per year*; that amount will slowly decline over time as 20-year legacy periods expire – see slide 17 for details Export compensation (payments for energy generated in excess of consumption) are now based on hourly Avoided Cost Calculator (ACC) values rather than retail rates o Incentivizes storage adoption through export values that reflect value of relieving grid stress o Reduced payback versus NEM 2.0 occurs primarily on the delivery side of customer bills o Adders (“ACC plus”) on the delivery side of residential bills for systems installed in years 1-5 Low-income customers receive a 2x incentive adder for systems installed in years 1-5 CPUC’s NEM 3.0 decision and CPA impacts
*Net financial costs to CPA, including payments to NEM customers for energy exported to the grid, avoided CPA market energy purchases and Resource Adequacy requirements, and avoided customer retail energy purchases. Does not include indirect environmental, grid, or customer benefits.
Agenda Page 14
CPA Policy Options
Agenda Page 15
CPA NEM Policy Options
Continue NEM 2.0 tariff –
compensate new customers at
retail rates
Follow CPUC NEM 3.0 –
compensate new customers at
ACC
Provide additional incentives for
storage and low-income
customers through rate design
and/or through customer
programs
Options
7 Impact on customer behavior
Impact on CPA policy goals
Financial impact to CPA
Considerations
Agenda Page 16
NEM 2.0 vs. 3.0: Value to Customers
8 Continuing to place new CPA solar customers on NEM 2.0 would not offset the reduction in system payback which is concentrated on the delivery side of customer bills *Non-CARE customer with average CPA NEM residential load (8,497 kWh/year), 6.2 kW PV,10 kWh/5 kW battery system, no adders.
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
NEM 2.0 (current) CPA @ NEM 2.0 CPA @ NEM 3.0
Annual Net Value
NEM Options – Impact to New Customers (example)*
Agenda Page 17
NEM 2.0 vs. 3.0: CPA Policy Goals
9 NEM 3.0 increases the incentive for storage compared to NEM 2.0 CPA remaining at NEM 2.0 would reduce incentive to adopt storage compared to NEM
3.0 because NEM 3.0 generation compensation is significantly higher for peak-demand hours
Low-income customer impact
o Generally NEM 3.0 pays customers less than NEM 2.0, even with low-income adders o NEM 3.0 reduces the disparity in NEM value to CARE versus non-CARE customers, but the adders are unlikely to be sufficient in overcoming economic and other barriers for low-income customers
NEM 3.0 Scenarios – Storage Premium (example)*
Scenario Added Value to
Customer ($/year) Storage Premium
NEM 2.0 (current) $596 17%
CPA @ NEM 2.0 $697 34%
CPA @ NEM 3.0 $906 60%
*Non-CARE customer with average CPA NEM residential load (8,497 kWh/year), 6.2 kW PV,10 kWh/5 kW battery system, no adders.
Agenda Page 18
NEM 2.0 vs. 3.0: Projected CPA annual cost - New Customers 10 Scenario
Program Cost in 2030 ($M) % of Revenue
Low Growth
(5%)
Mid Growth
(10%)
High Growth
(15%)
Low Growth
(5%)
Mid Growth
(10%)
High Growth
(15%)
CPA @ NEM 2.0 $14.9 $29.8 $44.6 0.9% 1.9% 2.8%
CPA @ NEM 3.0 $5.7 $11.3 $17.0 0.4% 0.7% 1.1%
Total new NEM customers in 2030 22,627 45,254 67,880
NEM 3.0 – Estimated CPA Annual Cost in 2030
While the benefit to new solar customers of CPA staying on NEM 2.0 would be modest, the added cost to CPA would be significant
Actual costs will depend on multiple factors including customer adoption rates over time, battery sizing, and optimization of battery dispatch
Agenda Page 19
11 Rate adders
Scenario Estimated Incremental Cost to
CPA in 2030*
10% Adder $0.5M-$1.0M
10% Adder on-peak only $0.1M-$0.4M
CPA could adopt a rate adder – either a percentage increase or a flat cents per kilowatt-hour (c/kWh) adder to the ACC value – to increase the incentive for storage adoption and/or to increase compensation for low-income customers
A CPA rate adder could have marketing benefits. Industry partners believe that upfront incentives or rebates will have a much higher impact on customer decisions compared to rate adders
The cost to CPA of a rate adder over time is hard to predict. Costs could be contained by limiting the number of years the adder is offered, capping the adder value, and/or only applying the adder to certain hours (e.g., on peak)
*Assuming mid growth (10%) scenario, approximately 45,000 customers in 2030.
Agenda Page 20
12 Incentives and Programs for Storage Adoption
Incentives and other customer programs may provide a bigger boost to adoption of storage resources than rate adders
Via Power Response, CPA currently offers existing customers with storage a one-time $300-$400 enrollment payment and a $100-$300 annual participation incentive The Draft FY 2023/24 Budget includes funds for a rebate program to spur new battery installations:
o $750 battery rebates for residential customers; $1,000 battery rebates for low-income customers and a 20% low-income set-aside
o Proposed $812,500 incentive budget would provide rebates to ~1,028 residential customers
o Incentives could be layered on top of federal tax credits and state incentives Other battery incentives or programs CPA is exploring include:
o Discounted direct installation of storage for low-income customers o Partnering with storage providers to provide discounts to CPA customers o On-bill financing re-payment for storage
Agenda Page 21
13 Preliminary Recommendation
Set CPA’s export compensation rate consistent with Avoided Cost Calculator values adopted by CPUC’s NEM 3.0 decision
o Keeping new solar customers on NEM 2.0 will not offset NEM 3.0’s reduced compensation which occurs primarily on the delivery side of the bill and would come with significant costs to CPA
o Adopting ACC-based export compensation is consistent with CPA’s policy goals of supporting grid reliability and encouraging storage adoption o Consistency with new solar customer offerings across the state and SCE territory which will simplify CPA and installer communications and minimize customer confusion Adopt a broad-based storage incentive program, consistent with the Draft FY2023/24 Budget, in conjunction with implementation of the new NEM 3.0 tariff Agenda Page 22
14 Next Steps
Present NEM tariff options to Energy Committee in May and to the Board in June Conduct additional analysis on options and costs and draft detailed NEM tariff reflecting Board and CAC feedback
Present proposed NEM tariff and battery incentive program details to Board in July Agenda Page 23
Questions
Agenda Page 24
Appendix
Agenda Page 25
How much does NEM 2.0 cost CPA?
CPA has about 63,000 residential and 1,600 commercial existing NEM customers Annual costs will continue until existing customers’ 20-year legacy period expires 17 Category Estimated Annual CPA Cost
(excl. retail rev)
Estimated Annual CPA Cost
(incl. retail rev)
Retail energy sales avoided through customer
on-site generation* $3.7M $14.4M
CPA payments to customers for energy
exported to grid $27.8M $27.8M
CPA avoided market energy purchases ($3.3M) ($5.5M)
Reduction in CPA Resource Adequacy
requirement ($0.6M) ($0.6M)
Total $27.6M $36.1M
Total as % of Projected FY22-23 Revenue ~2.3% ~3.0%
*Includes allocation of CPA fixed costs.
Agenda Page 26
How much would NEM 3.0 cost CPA?
18 Assuming CPA mirrors CPUC/SCE approach and CPA NEM load grows 10% per year from 2023 to 2030 (about 7,900 customers per year or 59,000 customers in total) Actual costs will depend on multiple factors including customer adoption rates over time and optimization of battery storage and dispatch
Category Estimated Annual CPA Cost in
2030 (excl. retail rev)
Estimated Annual CPA Cost in
2030 (incl. retail rev)
Retail energy sales avoided through
customer on-site generation $3.1M $11.8M
CPA payments to customers for energy
exported to grid $4.4M $4.4M
CPA avoided market energy purchases ($2.7M) ($4.5M)
Reduction in CPA Resource Adequacy
requirement ($0.4M) ($0.4M)
Total $4.3M $11.3M
Total as % of Projected FY23-24 Revenue ~0.4% ~0.9%
Agenda Page 27
NEM 2.0 vs. 3.0: Customer Value
19 NEM 3.0 Scenarios – Storage Premium (examples)*
Scenario
Low Scenario Mid Scenario Mid Scenario (2X storage)
Added Value to
Customer ($/year) Storage Premium Added Value to Customer ($/year) Storage Premium Added Value to Customer ($/year) Storage Premium NEM 2.0 (current) $542 23% $596 17% $1,118 31%
CPA @ NEM 2.0 $632 46% $697 34% $1,297 64%
CPA @ NEM 3.0 $822 78% $906 60% $1,728 114%
*Low Scenario: average CPA non-NEM residential customer load (6,152 kWh/year), 4.1 kW PV, 9.3 kWh/5 kW battery. Mid Scenario: average CPA NEM residential customer load (8,497 kWh/year), 6.2 kW PV, 10 kWh/5 kW battery. Mid Scenario (2X storage): same as Mid Scenario with 20 kWh/10 kW battery system.
Agenda Page 28
Staff Report – Agenda Item 5
To: Energy Committee
From: Lindsay Saxby, Vice President, Power Supply
Approved by: Ted Bardacke, Chief Executive Officer
Subject: 2023 Clean Energy and Reliability RFO Launch
Date: May 24, 2023
RECOMMENDATION
Staff will provide a presentation on the item and request feedback from the Energy Committee.
ATTACHMENT
1. Presentation on 2023 Clean Energy and Reliability RFO Launch Agenda Page 29
2023 Clean Energy and
Reliability RFO Launch
May 24, 2023
Agenda Page 30
CPA intends to launch the 2023 Clean Energy and Reliability Request for Offers (RFO) in June In an April 2023 presentation to Energy Committee, staff detailed the challenges CPA is facing in procuring short-term Resource Adequacy (RA) and renewable energy and the potential benefits of increasing long-term procurement to fill a larger portion of portfolio needs Staff received feedback from Energy Committee on modifying the upcoming RFO design to attract more competitive long-term renewable energy and RA offers, including soliciting offers for natural gas tolling agreements (tolls)
Staff has developed more detailed criteria which will be used to evaluate tolls in the upcoming RFO 2 Executive Summary
*D.21-06-035 under Rulemaking 20-05-003
The purpose of this meeting is to give an overview of the 2023 Clean Energy and Reliability RFO design for Energy Committee’s feedback
Agenda Page 31
Agenda
RFO Overview
Tolls Qualitative
Scoring Criteria
Next Steps
Agenda Page 32
3 RFO Overview
Agenda Page 33
4 RFO Overview and Goals
In June, CPA is seeking to launch the 2023 Clean Energy and Reliability RFO Traditionally CPA has launched RFO's to meet compliance requirements, however, CPA is on track to meet or exceed its long-term contracting requirements under the Renewable Portfolio Standard (RPS) and the Mid-Term Reliability (MTR) order over the next several years The purpose of the 2023 Clean Energy and Reliability RFO is to satisfy CPA's remaining MTR compliance requirements and fill a larger portion of its portfolio needs, including Resource Adequacy (RA) requirements, with long-term contracts and reduce CPA's need to procure in short-term markets Agenda Page 34
5 Mid-Term Reliability Compliance
On June 24, 2021, the CPUC issued its Decision Requiring Procurement to Address Mid-Term Reliability (MTR) (2023- 2026), which ordered CPA to procure a total of 679 MW of new compliant capacity between 2023-2026 On February 28, 2023, the CPUC issued Decision 23-02-040 which added new procurement requirements while delaying others and providing additional compliance flexibility; this should allow CPA to meet its near-term MTR compliance obligations and add capacity obligations to future years CPA has procured the majority of its MTR requirements and needs just 76 MWs of generic capacity in 2027 for compliance
Online Date
Category Description 8/1/2023 6/1/2024 6/1/2025 6/1/2026 6/1/2027 6/1/2028 1 Cumulative CPA Procurement Need - Generic Capacity (MW) 118 472 646 763 880 CPA's Eligible Executed Contracts to Date (MW) 118 472 804 804 804 Compliance Long / (Short) (MW) 0 0 158 41 (76)
2 CPA Procurement Need – Baseload Renewables (MW) 59 59 59 CPA's Executed and Under Negotiation Contracts1 (MW) 58 58 58 Compliance Long / (Short) (MW) (1) (1) (1)
3 CPA Procurement Need – Long-Duration Storage (MW) 59 59 59 CPA’s Executed and Under Negotiation Contracts (MW) 63 63 63 Compliance Long / (Short) (MW) 4 4 4
1. Assumes CPA executes a 11.5 MW biomass power purchase agreement that has entered into exclusivity with CPA.
Agenda Page 35
New Features in the 2023 Clean Energy
and Reliability RFO
CPA will expand procurement options to attract more offers in this upcoming RFO which includes:
o Flexible Contract Duration: Historically, CPA has requested conforming offers with 15-year duration (“term”) but will now allow counterparties to bid terms anywhere from 10 to 20 years in most product categories
o Package Deals: CPA will allow for inclusive offers so bidders may bid a portfolio of resources at a lower price relative to individual offers for each resource o Resource Adequacy-only: Historically, CPA has not considered RA-only offers in long-term solicitations, but will consider them in this solicitation to attract more offers o Tolls for RA with Natural Gas: CPA will allow offers for natural gas energy bundled with RA to access RA from existing facilities that might not otherwise be eligible for the solicitation o Updates to Qualitative Scoring: CPA has refined its project location qualitative scoring criteria and created new qualitative scoring criteria for tolling agreements Agenda Page 36
7 Product Types and Eligibility
8 Product Types Description of Eligible Resources Term (Years) Size Max Start Date Renewable Portfolio
Standard (RPS)
Generation Only
Solar, wind, geothermal, biomass, small hydro 10 to 20 5 MW to 500 MW June 1, 2028 RPS Generation +
Storage RPS generation paired with storage 10 to 20 5 MW to 500 MW June 1, 2028 Standalone Storage Standalone storage facilities with a minimum duration of at least 4 hours 10 to 20 5 MW to 500 MW June 1, 2028 Resource Adequacy
(RA) - Only
Offers from any technology for RA capacity (no
energy) 5 to 15 5 MW to 500 MW June 1, 2028
Tolls Resources that use natural gas and/or other
preferable fuel sources 2 to 10 10 MW Minimum January 1, 2027 Agenda Page 37
Evaluation Criteria
With the exception of tolls, projects will be ranked using CPA’s traditional criteria (see Appendix for detailed
descriptions):
Environmental
Stewardship
Workforce
Development
Quantitative
Evaluation
(Value)
Development
Risk
Project
Location
Benefits to
DACs
Agenda Page 38
9 Update to Project Location Scoring
HIGH In Los Angeles and Ventura counties
Other counties within California
Projects located within a Federally-designated energy community or on tribal lands with demonstrated community support (including outside of California)
MEDIUM
Projects outside of California not located in a Federally-designated energy community or on tribal lands without demonstrated community support LOW Agenda Page 39
Tolls
Qualitative
Scoring Criteria
Agenda Page 40
11 Toll Evaluation Criteria
CPA could receive offers ranging from traditional natural gas tolling agreements to hybrid facilities that incorporate battery energy storage or a conversion to a green hydrogen fuel source
Offers that extend the scheduled retirement date of an existing natural gas facility without providing a transition to a cleaner alternative will be ineligible for participation in the RFO
CPA will use new criteria when evaluating natural gas offers:
Workforce
Development
Quantitative
Evaluation
(Value)
Transition to
Cleaner
Operations
Benefits to
DACs
12 GHG
Emissions
Agenda Page 41
Transition to Cleaner Operations
13 CPA will rank toll projects according to the following criteria:
HIGH
MEDIUM
LOW
Offers that include a plan to transition to cleaner operations and/or reduce emissions within the contract term, examples include:
Tolls paired with energy storage
Tolls that can run fully or partially on renewable fuels and/or green hydrogen If this option is pursued, CPA will be requesting detailed information on fuel production and impacts on GHG emissions and local air quality
Offers that include a plan to transition cleaner operations and/or reduce emissions afterthe contract term, examples include:
Tolls that will either shutdown the facility at the end of the contract term or give CPA the right to direct the Seller to decommission the facility
Tolls that will convert the facility to a cleaner fuel source after the end of the contract term and will give CPA a right of first offer on the new facility
Tolls that do not meet the above criteria
Agenda Page 42
GHG Emissions
14 CPA will forecast the expected generation and associated GHG emissions at a natural gas facility
CPA may receive offers from facilities that are very efficient and are expected to run frequently and offers from facilities that are less efficient and expected to run infrequently
CPA will use forecasted data to analyze a facility’s total GHG output and the facility’s efficiency and determine the effects such facility will have on CPA's Product Content Label and GHG emissions profile
This will be a quantitative measure, not ranked High, Medium, Low Agenda Page 43
Disadvantaged Community Impacts
Natural Gas resources will have differing impacts on DACs than renewable resources. Impacts to DACs will be assessed in conjunction with scoring in the three qualitative evaluation criteria; 1) impacts of the agreement on a transition to cleaner operations, 2) workforce development, and 3) GHG emissions Demonstrates DAC benefits, including transition to cleaner operations or retirement at the end of the contract term
HIGH
Project does not demonstrate additional DAC benefits, or is not located in a DAC
NEUTRAL
LOW Project is harmful or inconsistent with community priorities Agenda Page 44
Workforce Development
• CPA will use its traditional workforce development criteria with a slight modification to address existing facilities
The project is a union site or will use targeted-hire, union labor, or multi-trade project labor agreements (including requirements for state-apprenticeship graduates) HIGH
The project is not a union site or does not have a labor agreement, but can demonstrate prevailing wage, union labor, and targeted hire commitments MEDIUM
The project does not demonstrate prevailing wage, union labor, and targeted hire commitments
LOW
Agenda Page 45
NEXT STEPS
Agenda Page 46
17 RFO Process
• Staff presents confidential valuation results to RFO Review Team • Review Team meets to develop shortlisting approach and recommended shortlist for Energy Committee consideration • Shortlisted bidders are invited to enter exclusivity
• Negotiations begin for bidders in exclusivity
• Intake all offers in partnership with Ascend Analytics • Perform quality control (QC) on all offers
• Perform valuation
• PPAs brought to full Board for approval on a rolling basis • Announce RFO to market
• Recommended shortlist presented to Energy Committee for approval • Confidential information is removed
Agenda Page 47
APPENDIX:
Qualitative
Scoring for
Renewable
Resources
Agenda Page 48
19 Development Score
Projects will be ranked from high (good) to low (bad)
The development risk metric is a composite rank based on a number of factors impacting project risk:
o Site control
o Interconnection status
o Environmental screens
o Land use and permits
o Project financing
o Developer experience
Agenda Page 49
Environmental Stewardship
Projects are ranked high, medium, neutral, and low based on the following prioritization:
Demonstrates multiple benefits (provides additional societal, health, economic, water saving, or environmental benefits beyond the climate and GHG reduction benefits of renewable energy)
HIGH
Located in an area designated as a preferred renewable energy zone and received required land use entitlement permits
MEDIUM
LOW Project is located in a high conflict area
NEUTRAL Project does not demonstrate either preference or avoidance criteria Agenda Page 50
Workforce Development
Projects are ranked high, medium, and low based on the following prioritization:
The project will use targeted-hire, union labor, or multi-trade project labor agreements (including requirements for state-apprenticeship graduates) HIGH The project does not have a labor agreement, but can demonstrate prevailing wage, union labor, and targeted hire commitments MEDIUM The project does not demonstrate prevailing wage, union labor, and targeted hire commitments
LOW
Agenda Page 51
Benefits to Disadvantaged Communities
(excluding tolls)
Projects are ranked high, medium, neutral, and low based on the following prioritization:
Located within a DAC and demonstrates DAC workforce and community development benefits HIGH
Project not located within a DAC but can demonstrate DAC benefits and has completed community outreach MEDIUM
LOW Project is inconsistent with community priorities
NEUTRAL Project does not demonstrate DAC benefits
Agenda Page 52
Project Location (excluding tolls)
HIGH In Los Angeles and Ventura counties
Other counties within California
Projects located within a Federally-designated energy community or on tribal lands with demonstrated community support (including outside of California)
MEDIUM
Projects outside of California not located in a Federally-designated energy community or on tribal lands without demonstrated community support LOW
Projects are ranked high, medium, and low based on the following prioritization:
Agenda Page 53