2024 Clean Energy and
Reliability RFO
Shortlist and Waitlist
Approval
September 25, 2024
CPA received a robust response for the 2024 Clean Energy and Reliability RFO (RFO) with more bids submitted than any of CPAs past long-term RFOs. However, more than half of the bids were for early-stage Queue Cluster 15 (QC 15) projects or projects without Full Capacity Deliverability Status (FCDS).
Viable projects are being marketed in an extremely competitive environment. This is one reason for historically high prices. CPA must balance this price environment with the knowledge that projects with FCDS are expected to become more scarce beginning in 2025 due to limitations with grid interconnection.
CPA’s procurement targets for renewable energy and resource adequacy for this RFO are reduced relative to prior years RFOs, due to a refined approach to identifying CPA’s resource needs, recent procurement and concerns about costs, particularly for renewable energy.
On September 17, a Review Team composed of four Energy Committee members and CPA Staff including the CEO, COO, and VP of Power Supply met to produce a shortlist and waitlist recommendation. The purpose of today’s presentation is for the Energy Committee to consider the Review Team’s recommendation.
The recommended shortlist and waitlist each include 6 projects. This includes one bilateral geothermal project that was offered outside of the RFO and that is needed for compliance purposes. 2 Executive Summary
Requested Action
3 Approve the 2024 Clean Energy and Reliability RFO shortlist (Slide 22) and waitlist (Slide 23) as recommended by the RFO Review Team
Agenda
Background
Offer Overview
Valuation
Shortlist and Waitlist Proposal (Slides 22-23)
Next Steps
4 Background
5 2024 RFO Overview
The purpose of the 2024 Clean Energy and Reliability RFO is to solicit competitive proposals to fill a portion of CPA's portfolio needs with long-term contracts, reducing the need to procure products such as Resource Adequacy (RA) and renewable energy in volatile short-term markets.
Similar to the 2023 RFO, the 2024 RFO has a ‘fast-track’ path that has allowed CPA to start negotiations on high-value projects before CPA’s Energy Committee considers the Review Team’s shortlist recommendation.
CPA will also use this RFO to allocate QC 15 commercial interest points to early-stage projects. QC 15 projects must show commercial interest from a Load Serving Entity (LSE) to maximize the projects chances of being studied for interconnection.
Today’s discussion will not focus on QC 15 commercial points allocation, as that is less time-sensitive. The Review Team and Energy Committee will discuss a recommended shortlist of QC 15 projects later this fall.
6 2024 RFO Product Types and Eligibility
7 Product Types Description of Eligible Resources Term (Years) Size (MW) 3 Max Start Date4 Renewable Portfolio
Standard (RPS)
Generation Only
Solar, wind, geothermal, biomass, small hydro (bundled
with RA or energy-only) 10 to 201 15 to 500 December 31, 20302 RPS Generation +
Storage RPS generation paired with storage 10 to 20 15 to 500 December 31, 2030 Standalone Storage Standalone storage facilities with a minimum duration of at least 4 hours 10 to 20 15 to 500 December 31, 2030
Resource Adequacy
(RA) - Only Offers from any technology for RA capacity (no energy) 5 to 15 15 to 500 December 31, 2030 Blended or Hybrid
Tolls
Natural gas facilities that reduce emissions by converting to a blended fuel source and/or adding battery energy
storage
2 to 10 10 MW Minimum December 31, 2030
1 Term limits for Energy Only offers will be 5 to 20 years 2 Mid-Term Reliability (MTR) Eligible baseload projects can come online as late as 6/1/2031 3 The minimum size eligibility requirement for projects located within Los Angeles or Ventura county (excluding product type Blended or Hybrid Tolls) will remain at 5 MWs 4 There will be no limitation on the max start date for any QC 15 project bidding into the RFO Below are the targeted volumes for the 2024 RFO.
For the 2023 Clean Energy and Reliability RFO, Staff developed a 4-year ratable purchasing strategy for procuring Renewable Energy and RA. After deducting for PPAs executed in the 2023 RFO, has developed a “front-loaded” strategy where 50% of CPA’s remaining 3-year procurement target is done in this RFO. This strategy is practical when considering the likelihood of diminished opportunities for new projects over the coming years due FCDS scarcity and interconnection backlogs
8 Targeted Volumes
• Procurement Need is the volume of energy (in MWh) and RA (in MW) needed to have 95% of its renewable energy portfolio and 90% of its RA portfolio under long-term contracts and online by 2031 • Execution Target takes into account the possibility that executed projects may not be successful • Shortlist Target takes into account the possibility that not all shortlisted projects enter exclusivity or enter contracts with CPA Renewable Energy
Procurement Year Front Loaded
Procurement Need (MWh) 500,000
Execution Target (MWh) 700,000
Shortlist Target (MWh) 700,000
Resource Adequacy
Procurement Year Front Loaded
Procurement Need (MW) 510
Execution Target (MW) 700
Shortlist Target(MW) 1530
Shortlist and Waitlist Approach
In prior RFOs, due in part to the procurement environment and procurement need, CPA had a much higher shortlist target than procurement need for RPS.
Because CPA’s RPS need is relatively small this year, staff is recommending a shortlist that is closer to the procurement need.
For RA, the shortlist target is a 3x multiple of the procurement need as in past years.
Given the uncertain nature of contract negotiations, the Review Team also recommends a waitlist of projects to use as backup in case projects on the shortlist should become unavailable.
Overall, this means a shorter shortlist and longer waitlist for RPS than in previous years.
9 Offer Overview
10 RFO Offer Overview
Summary Stats
Number of conforming offers 172
Number of QC 15 offers 92
Number of conforming Non-QC 15 offers 80
Number of offers with FCDS 58
Number of sellers submitting offers 66
Counties spanned by submissions 34
States represented by offers AZ, CA, NV
Number of new facility offers 69
Number of existing facility offers 11
Local Projects 10
Bundled Offers 4
Fast-Track Requests 20
Earliest online date 7/1/2025
Latest online date 12/31/2030
Product Type
(Conforming Offers) Total Local
Standalone Storage 24 3
RA-only 15 4
RPS + Storage 22 0
RPS only 9 1
PCC1 Energy
(Fixed or Index Plus) 6 2
Tolls (Dispatchable Gas) 4 0
Total 80 10
12 Fast-Track Offer Negotiations are Underway
CPA allowed bidders to request fast-track consideration if the project’s circumstances and/or CPA’s procurement needs warrant quick action.
Staff initially identified four projects for fast-track including two large solar plus storage installations, one local RA-only energy storage offer and one “index plus REC” energy only offer.
After further internal analysis and discussion with developers of fast-track projects, CPA has proceeded with provisional negotiations with one solar plus storage project and one local RA-only project until the Energy Committee has approved the shortlist. These projects could come to the Board for consideration as early as November if they are approved as part of the shortlist.
Fast-track projects are at a mature stage of development with nearer-term CODs and FCDS.
Evaluation Criteria
Projects are ranked using CPA’s standard criteria (see Appendix for detailed descriptions) Natural Gas Tolling proposals have a modified evaluation criteria (see Appendix for detailed descriptions), however no Natural Gas Tolls are a part of either the recommended shortlist or waitlist. RA-Only agreements for Natural Gas Facilities are on the recommended shortlist but those are evaluated using CPA’s standard criteria
Environmental
Stewardship
Workforce
Development
Quantitative
Evaluation
(Value)
Development
Risk
Project
Location
Benefits to
DACs
13 Quantitative Valuation Approach
Since long-term procurement of both RECs and RA was targeted in this RFO, projects were valued using two metrics RA Normalized NPV: Net Present Value (NPV) per MW of Resource Adequacy (RA) Net Qualifying Capacity (NQC). This ranking metric is more appropriate for projects that provide capacity attributes such as standalone storage, RPS + storage, and thermal projects Energy Normalized NPV: NPV per MWh of generated energy. This ranking metric is more appropriate for generation only projects.
Offers were categorized into first through fourth quartiles based on their NPV rankings (Q1-Q4) • PPA Energy Cost ($/MWh)
Energy price CPA pays the counterparty
• Storage Only: PPA Storage Cost ($/kW-month)
Capacity price CPA pays the counterparty
Benefits Costs
• Energy Revenue ($/kWh)
Earnings from selling energy generation from facility
• Resource Adequacy ($/kW-month)
Replaces RA CPA would otherwise have to purchase
• Renewables Only: Renewable Energy Credit (REC) ($/kWh) Replaces RECs CPA would otherwise have to purchase
• Storage Only: Ancillary Services (AS) ($/kWh)
Earnings from selling ancillary services
• Storage Only: Energy Revenue ($/kWh)
Earnings from selling energy (from discharging the battery) Value (NPV) = Benefits – Costs
Valuation Was Relatively Flat Except at the Beginning
and End of the Quartiles
Renewable Generation + Storage is Overall the
Highest Value by Technology when Procuring RA
Renewable Generation + Storage is Overall the Highest
Value by Technology When Procuring Renewable Energy
17 300 MW Baseload RA
300 MW 4-hour Battery Storage RA
Recommended
Projects
20 Shortlist and Waitlist Summary
Shortlist
Project
Count NQC MWh
RA-Only 3 378 0
Renewable Generation +
Storage 1 278 545,000
Renewable Generation Only 1 16 118,000
Standalone Storage 1 100 0
Total 6 772 MW 663,000 MWh
Waitlist
Project
Count NQC MWh
Renewable Generation +
Storage 6 1,820 5,281,000
Total 6 1,820 MW 5,281,000 MWh
• The shortlist contains one solar + storage project, an out-of-state geothermal project, a standalone storage
project and three RA-only offers (two from thermal and
one from stand-alone storage)
• All but two of shortlist and waitlist projects are in either the first or second NPV quartile
• Two projects on the shortlist are in the 4th NPV
quartile but one is required for MTR Compliance and
the other has additional local benefits, including
converting an oil drilling site in LA County to a clean energy facility
• The six projects recommended for the waitlist are all solar plus storage
Shortlist Recommendation
22 Project
NPV
Qtr Online Project Type
MW Gen
Range
MW Storage
Range
Environmental
Stewardship
Benefits to
DACs
Workforce
Development
Project
Location
Development
Score County
A* 1 Q2 2029 Renewable Generation +
Storage 100-300 100-300 Medium High High Medium High Tulare B 4 Q2 2029 Renewable Generation
Only 10-50 NA Neutral Neutral Medium Medium Low Beaver, UT C 2 Q1 2027 RA-Only NA 100-300 Neutral Neutral Medium Medium High San Bernardino
D 2 Q1 2027 RA-Only NA 100-300 Neutral Neutral High Medium High Riverside E* 4 Q2 2027 RA-Only N/A 100-300 Medium High High High High Los Angeles
F 2 Q4 2030 Standalone Storage N/A 100-300 Medium High High Medium High San Bernardino
*Indicates a fast-tracked project
Waitlist Recommendation
23 Project
NPV
Qtr Online Project Type
MW Gen
Range
MW
Storage
Range
Environmental
Stewardship Benefits to DACs
Workforce
Development Project Location
Development
Score County
A 1 Q1 2029 Renewable Generation +
Storage 100-300 100-300 Neutral High High Medium Medium Kern B 1 Q2 2029 Renewable Generation +
Storage 300-500 300-500 Neutral High Medium Medium Medium Inyo C 1 Q1 2029 Renewable Generation +
Storage 300-500 300-500 Neutral High High Medium High Kern D 2 Q1 2031 Renewable Generation +
Storage 100-300 100-300 Neutral Medium High Medium Medium San Benito E 2 Q1 2027 Renewable Generation +
Storage 100-300 100-300 Neutral High High Medium High Merced F 2 Q4 2026 Renewable Generation +
Storage 300-500 100-300 Neutral Medium High Medium High La Paz, AZ Next Steps
24 Next Steps
25 Item Date
Energy Committee shortlist and waitlist consideration September 25, 2024 Proposer notified of shortlist status September 27, 2024 Power Purchase Agreement (PPA) and Energy Storage
Agreement (ESA) brought to the Board for approval
November 2024 – February 2025
APPENDIX:
RFO Offer Set
26 Offers by Product and Technology Type
No wind or geothermal projects were offered in 2024, solar and storage are the dominant technologies
Offer Locations are Concentrated
Offers by County
Kern, San Bernardino, Riverside and Los Angeles Counties continue to be the dominant regions for renewable project development; stand alone storage is more dispersed Near-Term Commercial Online Dates Remain Scarce
Projects with early CODs remain scarce, most online dates are in 2027 to 2028 and many projects were offered at the latest eligible COD 30 Large Scale Projects Are Popular
0 100
200
300
400
500
600
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 Renewable Generation Power (MW) Storage Power (MW) RA-Only Power (MW) Thermal Power (MW) The industry trend is towards offering larger projects
QC 15 offers are excluded from this slide
Solar and Storage Pricing is Less Volatile
Average prices continue to increase year over year since 2021 except for standalone storage, which is now slightly lower than 2022 and 2023 QC 15 offers are excluded from this slide
$/kWh $/kW-mo $/kW-mo
Reduced Emissions Thermal Toll Offer Overview
CPA received bids from three Sellers for 4 total thermal toll offers Projects are located in Riverside, Solano, and San Joaquin counties None of the projects are located in Disadvantaged Communities (DACs) No bidders indicated accelerated decommissioning in their bids Gas Toll Product Type Count
Existing dispatchable gas with storage 3
Existing dispatchable gas with blended fuels
(renewable biogas)
1 APPENDIX:
Qualitative
Scoring for
Renewable
Resources
33 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
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 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
Benefits to Disadvantaged Communities
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
Project Location
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:
APPENDIX:
Natural Gas Tolls
Evaluation Criteria
39 • CPA received three offers for existing dispatchable thermal resources with energy storage added
• Adding storage to existing thermal resources can reduce the amount that the thermal resources are dispatched, leading to lower GHG and emissions that impact local air quality
• Thermal ”peaker” plants are typically used infrequently (< 3% of hours in a year) in stressed system times, and often are needed for less than 1 hour at a time.
• A one-hour battery can run instead of the peaker during the shortest dispatches, providing the same reliability benefit with fewer emissions • Another benefit is that in peak summer demand hours, hot weather can force “de-rating” of the capacity of thermal resources, while augmenting with an on- site battery can ensure full plant capacity remains available, thus increasing RA value
40 Tolls with Energy Storage Added
• In the 2024 Clean Energy and Reliability RFO, CPA solicited bids for existing dispatchable gas projects running on blended fuels, i.e. green hydrogen or renewable biogas.
• CPA received 1 bid for renewable biogas blending.
• Blending of renewable biogas could be considered a pathway to transition to cleaner operations. The developer states that blending could provide the most near-term carbon intensity reduction with the least incremental fixed cost. • Adding biogas to the system would not result in capex spend or additional technology at the plant and the biogas would be injected into the gas pipeline system, not on site at the facility, utilizing a standard book and claim approach. 41 Tolls with Blended Fuel
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
42 GHG
Emissions
Transition to Cleaner Operations
43 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
GHG Emissions
44 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 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 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