Peninsula Clean Energy
Board of Directors Regular Meeting
April 25, 2024
The meeting will begin shortly. Thank you!
Peninsula Clean Energy
Agenda
• Call to Order / Roll Call
• Public Comment (for items not on the Agenda)
o Please note, send any chats to Board Clerk, Nelly Wogberg • Closed Session
• Action to set the Agenda and Approve Consent Items 1-7 o Consent - Public Comment
• Regular Agenda
• Adjournment
Closed Session
The Board is currently in Closed Session.
We anticipate they will return by 6:50 p.m.
Peninsula Clean Energy
Agenda
• Call to Order / Roll Call
• Public Comment (for items not on the Agenda)
o Please note, send any chats to Board Clerk, Nelly Wogberg • Closed Session
• Action to set the Agenda and Approve Consent Items 1-7 o Consent - Public Comment
• Regular Agenda
• Adjournment
Chair Report (Discussion)
CEO Report (Discussion)
Peninsula Clean Energy
CalCCA Annual Conference
• Successful annual conference in San Jose!
• PCE was the recipient of the CalCCA Community Impact Award for our EV Ready Program in the Decarbonization Category
• A number of PCE Board Members attended the Elected Officials Luncheon and were able to connect with Board Members from our sister agencies
7 Peninsula Clean Energy 8
Peninsula Clean Energy
Programs Update
• Member Agency Energy Grants
o Los Banos – for heat pump HVAC systems across their facilities o San Bruno – for LED streetlight including ones with solar/storage backup • GovPV Update
o Intermountain Electric is experiencing significant financial difficulties; jointly agreed to terminate contract
o Remaining Round 1 projects have been transferred to our round 2 construction firm, McMillan Electric; key staff hired and materials have been transferred o The contract with McMillan has been executed and McMillan will begin work immediately, prioritizing the round 1 sites in construction; key terms and contract value remain consistent o McMillan is a local union firm selected through a competitive process and approved by the Board in January
| 9
Peninsula Clean Energy
Legislative Update
| 10
• CA Department of Housing and Community Development (HCD) Advisory Committee voted 8-1 to adopt PCE’s suggest language around Level 1 EV Chargers
• SB 1095 (Becker)
• SB 1130 (Bradford)
• AB 2815 (Petrie-Norris)
• Federal Community Funding request of $2M is now submitted to our entire delegation; should know more in about a month
Peninsula Clean Energy
PCE in the Community
• 4/26/2024 South San Francisco High School Assembly
• 4/27/2024 Foster City Earth Day
• 4/27/2024 Children's Day, Dia del Nino in San Bruno
• 4/30/2024 San Mateo County Sustainable Schools
Summit
• 5/5/2024 Peninsula Temple Sholom Presentation
• 5/5/2024 Cinco de Mayo Festival in East Palo Alto
• 5/8/2024 Burlingame Library Electrification Workshop
• 5/18/2024 Los Banos Home Fair 2024 5/23/2024
Pacheco High School Wax Museum
11 Peninsula Clean Energy
Upcoming Member Agency Briefings
• Menlo Park - May 7
• Atherton - May 15
• San Carlos - May 28
• East Palo Alto - June 4
• Foster City - July 15
• South San Francisco - August 14
• County of San Mateo - August 27
• Millbrae - September 10
• Portola Valley - September 25
12 Peninsula Clean Energy
Staffing Update
Welcome!
• KellyLew-Quintal, Risk Manager - April 16
• Melanie Jasper, Associate Programs Manager, EV - May 16 13 Peninsula Clean Energy
Currently Posted Positions
Please help us spread the word!
• Data Engineer/Analyst
• Analyst/Senior Analyst, Building Electrification Support • Senior Manager, Strategic Analysis and Rates
https://www.peninsulacleanenergy.com/join-our-team
Peninsula Clean Energy
Upcoming Meetings
• Citizens Advisory Committee:
o Thursday, May 9 at 6:30 p.m.
• Audit and Finance Committee:
o Monday, May 13 at 8:30 a.m.
• Executive Committee:
o Monday, May 13 at 10:00 a.m.
• Board of Directors:
o Thursday, May 23 at 6:30 pm
CAC Report (Discussion)
Approval of Appointments to the Executive
Committee and the Audit and Finance
Committee (Action)
Peninsula Clean Energy
Proposed Committee Appointments
Executive Committee
1. Dave Pine, San Mateo County
2. Ray Mueller, San Mateo County
3. Rick DeGolia, Atherton
4. Coleen Mackin, Brisbane
5. Donna Colson, Burlingame, Chair
6. Betsy Nash, Menlo Park
7. Anders Fung, Millbrae
8. Jeff Aalfs, Portola Valley
9. Marty Medina, San Bruno, Vice Chair
18 Audit & Finance Committee
1. Tom McCune, Belmont
2. Donna Colson, Burlingame
3. Carlos Romero, East Palo Alto
4. Leslie Ragsdale, Hillsborough
5. Paul Llanez, Los Banos
Indicates New Members
Adjusting PCE's 24/7 Renewable Goal
Board of Directors Meeting
April 25, 2024
Peninsula Clean Energy
Recommendation
• Update Peninsula Clean Energy's Strategic Plan Organizational Priority #1 to:
“Deliver 100% renewable energy on an annual basis by 2030 through strategic and cost-effective procurement of resources that maximize PCE's 24/7 hourly matching of renewable energy and load”
20 Peninsula Clean Energy
Agenda
• Introduction
• Analysis – Assumptions
• Analysis - Results
• Options and Recommendation
21 Introduction
Peninsula Clean Energy
Background
• In June 2023, the Board updated the strategic priority to Delivering 100% renewable energy annually by 2025 and on a 99% time-coincident basis by 2027 • In November 2023, Staff discussed the status and challenges of meeting PCE's 24/7 goal with the Procurement Subcommittee and the Board
• In March 2024, the Board updated the strategic priority statement to Delivering 100% Renewable Energy Annually by 2030 Through Strategic Procurement of Resources to Maximize Peninsula Clean Energy's 24/7 Hourly Renewable Matching 23 Peninsula Clean Energy
Focuses since November 2023
• In November 2023, staff and the Procurement Subcommittee concluded that achieving a 99% time-coincident target by 2027 would be infeasible; • Staff was tasked to explore options to adjust the hourly matching goal and to bring the item back to the Board in Q1 of 2024;
• Since November, staff completed the following steps in the analysis:
o Refreshed modeling with new inputs and assumptions (i.e. new market price forecasts, new resource availability and pricing, and the ability to resell excess products) o Explored methods to maintain the time-coincident target after the initial year o Developed more flexible structures in meeting the goal while minimizing cost and risk 24 Peninsula Clean Energy
Recap of Current Challenges
• Lack of desirable resources (wind, geothermal, shaped) • Significant delays in development and commercial operation of new renewable projects
• Market conditions have drastically changed in the past two years resulting in record high Energy, RA, and REC prices
• No industry standard to account for hourly renewable matching • Planning target could be in conflict with operational strategy 25 Peninsula Clean Energy
Snapshot with Current Resource Portfolio
• PCE can achieve 86% annual
renewable and 77% hourly
matching by 2027.
o With no additional resource
procurement
26 Dash lines represent CA RPS requirement
• SB 100: 60% RPS by 2030
and 100% carbon-free by 2045
o PCE will meet the 60% target
5 years ahead of schedule
in 2025.
Analysis - Assumptions
Peninsula Clean Energy
Input Variables Considered in the Planning Analysis
• Variable 1: Availability of resources
o Realistic Case vs Optimistic Case
• Variable 2: Market Price Scenarios
o Low vs High Market Prices
• Variable 3: Resale Scenarios
o Assumptions around different structures to sell excess energy, RA, and REC NOTE: Analysis target year shifted from 2027 to 2030
28 Peninsula Clean Energy
Input Variable 1: Resource Availability
29 Legend
Not Available
Limited Availability
Potentially Available
Year Resource Realistic Case Optimistic Case
New Solar + Storage
New Wind
New Shaped
New Geothermal
Extend Existing Wind
New Solar + Storage
New Wind
New Shaped
New Geothermal
Extend Existing Wind
2027-2028
2029 - 2031
Staff expects to execute 1~2 more
new standalone storage resources
to optimize our portfolio, which are
available in the near-term.
Peninsula Clean Energy
Input Variable 2: Market Price Scenarios
Two Scenarios: Low Market and High Market
Captures uncertainties around:
o Market prices for Energy, RA and RECs
o Ability to resell excess products (volume and
price)
30 * These scenarios don’t represent the extreme cases.
Variables High Market* Low Market*
% Excess Energy Sold 100% 50%
% Excess REC Sold 95% 50%
% Excess RA Sold 95% 80%
Low Market presents more challenges
in reselling PCE's excess products
to recover costs => More Risk!
Peninsula Clean Energy
Input Variable 3: Resale Scenarios
• Bundled Products: Long/mid-term sale of excess energy, RA, and REC as a bundled product
• Unbundled Products: Short term sale of excess Energy, RA, and REC as standalone products
31 Resale Scenarios Bundled
Sale
Unbundled
Sale
Conservative 100% 0%
Aggressive 0% 100%
Medium 60% 40%
• Achieving high time-coincident goal will result
in over-procurement, and the need to resell
any excess products
• There is no guarantee that all the excess
could be sold to recover costs, therefore
creating uncertainties on cost impacts
• To reduce the resale uncertainties,
staff recommends minimizing over-procurement by 1) finding best-fit resources, and 2) pursuing a more flexible goal
Analysis - Results
Peninsula Clean Energy
Additional Capacity Needed by 2030
• Under the Realistic case, PCE will
need to procure significant amount of
additional capacity to achieve higher
time-coincident targets.
• Under the Optimistic case, a more
desirable set of available resources
could significantly reduce over-procurement.
• In general, the Annual 100% Renewable
scenario could achieve:
o 85-90% hourly matching under Optimistic Case
o 80-85% hourly matching under Realistic Case
33 Peninsula Clean Energy
Maintaining Hourly Goal over Time
To maintain time-coincident %
over time, PCE will need to
procure additional resources to
address expiration of short/mid-term contracts, organic increase in load, new customers joining
PCE, and projects failing to
come online.
34 Hourly 90% Scenario
Peninsula Clean Energy
The Over-Procurement Issue
35 • Higher time-coincident targets
could result in more over-procurement, especially under the Realistic case.
• The Annual 100% Renewable
scenario will not create excess
generation relative to annual
load while maintaining
relatively high hourly matching
by default.
Peninsula Clean Energy
Cost Comparison of 24/7 Scenarios
36 $50 mil$50 mil
Peninsula Clean Energy
Summary of Results
• PCE could achieve ~77% time-coincident goal by 2027 with its current portfolio o Meeting any higher time-coincident target in 2027-2029 would be infeasible given current market conditions, project delays and lack of desirable resources; • PCE could achieve ~80-85% time-coincident by 2030 upon reaching 100% annual renewable;
o Meeting any higher time-coincident target by 2030 could be costly and risky to PCE; • Differences in emission and grid impacts between PCE's 85% and 95% time-coincident renewable target would be small given PCE’s load relative to the entire grid; • If/when best-fit resources become available in the market, cost-effectively achieving a time-coincident target above 90% would become possible. 37 Options and Recommendation
Peninsula Clean Energy
24/7 Goal - Options to Consider for 2030 and Beyond
1. Adjust time-coincident % and target year
o Lower time-coincident percentage and shift target year to beyond 2030
2. Use an average 24/7 target starting in 2030
o Set a time-coincident target averaged over a 5-year measurement period. This means the time-coincident percentage could fluctuate within the period, but the average time-coincident percentage over the 5-year period would meet the approved target.
3. Maintain 100% Annual goal with a flexible hourly goal o Maintain 100% annual renewable goal every year through strategic procurement of resources to maximize hourly matching
39 Peninsula Clean Energy
Comparing Options
40 Considerations
Option 1
Adjust Target to
2030
Option 2
Use Average
Target
Option 3
Flexible Hourly
Goal
Consistent with Current Strategy
Cost Containment and Risk Reduction
Flexibility to Address Load Increase and
Contract Expiration
Minimize Over-procurement
Maximize Operational Flexibility
Easy to Communicate to Public
With input from the Procurement Subcommittee, staff recommends pursuing Option 3 – Maintain 100% Annual Goal with a Flexible Hourly Target +
+
-
Peninsula Clean Energy
Recommendation
• Update Peninsula Clean Energy's Strategic Plan Organizational Priority #1 to:
“Deliver 100% renewable energy on an annual basis by 2030 through strategic and cost-effective procurement of resources that maximize PCE's 24/7 hourly matching of renewable energy and load”
41 Prepay Transaction
Board of Directors Meeting
April 25, 2024
Peninsula Clean Energy
Background
• Prepay is a long-term financial transaction available to tax-exempt entities, such as CCAs, that enable meaningful power procurement cost savings
o Savings based on spread between taxable and tax-exempt interest rates o Codified in US tax law
• Historically utilized for natural gas procurement, now being applied in renewable energy sector • To date, 11 CCA Prepay transactions generating ~$60 million annual savings (see next page) • Savings of 8-12% based on current market conditions
• Initial PCE transaction could generate $3.5 million of annual savings (assumes 3 existing PPAs; amount to be refined)
• Process will take 6-9 months and requires engagement of multiple advisors and membership in California Community Choice Finance Authority (CCCFA)
• Audit & Finance Committee has been briefed on the topic twice (June 2023 and February 2024), and the Executive Committee recently unanimously approved pursuing a possible transaction 45 Peninsula Clean Energy
CCCFA Pre-Pay Transactions
46 Date Project Participant(s) Par ($M)
Prepaid
Supplier
Annual
Savings ($M) Discount(1)
September 2021 East Bay Clean Energy/Silicon Valley Clean Energy $1,235 Morgan Stanley 4.2 7.3% November 2021 Marin Clean Energy 603 Goldman Sachs 3.2 10.0% July 2022 East Bay Clean Energy 931 Morgan Stanley 4.8 9.0% January 2023 Pioneer Community Energy 460 Goldman Sachs 2.4 n/a January 2023 Silicon Valley Clean Energy Authority 842 Morgan Stanley 4.7 9.5% February 2023 Clean Power Alliance 999 Goldman Sachs 8.3 13.6% June 2023 Clean Power Alliance 958 Goldman Sachs 6.4 12.0% August 2023 East Bay Community Energy Authority 998 Goldman Sachs 6.1 12.2% October 2023 Central Coast Community Energy 648 Morgan Stanley 5.0 12.2% December 2023 Marin Clean Energy 1,038 Goldman Sachs 6.8 12.0% January 2024 Silicon Valley Clean Energy 1,102 Morgan Stanley 7.7 13.1% $ 9,813 $59.6
1. Goldman and Morgan Stanley calculate discount differently, so hard to compare apples-to-apples San Jose Clean Energy, Clean Power Alliance, and San Diego Community Power are planning to proceed with transactions
Peninsula Clean Energy
Benefits and Rationale
1. Source of cost savings that can lower customer rates o 8-12% on power quantities delivered, or ~$3.5 million per year based on indicative terms on an initial transaction
o Savings fluctuate depending on market conditions and size of transaction o Can execute additional transactions over time to increase amount of savings (limitation based on investor demand, market conditions, and PCE forecasted load)
2. Service provider fees paid from bond proceeds on a contingency basis o If bonds are not issued, service providers are not paid o Only “sunk” costs are staff time, CCCFA membership ($50k), and rating agency (~$200k)
3. PCE not responsible for bond repayment / debt non-recourse to PCE 47 Peninsula Clean Energy
Risk/Considerations and Mitigations
48 Savings realized through termination
date and PCE no worse off Prepay terminates earlier than expected Possibility of multiple Prepays hedges
timing risk Market timing
Leverage prior CCCFA transactions
and support from Financial Advisor Staff time
Potentially hire additional back-office
staff Increased settlement complexity
Peninsula Clean Energy
Assembling the Pre-Pay Deal Team
Municipal Advisor Prepay Counsel Conduit Issuer Prepaid Supplier Custodian / Trustee Rating Agency Bond / Tax Counsel
Peninsula Clean Energy
Entities selected
by PCE
Other Entities
in Prepay
Deal • Financial advisory
• Advice on structure,
timing and terms
• Fiduciary responsibility to
CCA
• PFM(1)
• Legal advisory
• Represents CCA’s
interests
• Chapman and Cutler (1)
• Issuer of tax-exempt
bonds
• CCCFA
• Structures transaction
• Markets and underwrites
bonds
• Morgan Stanley,
Goldman or RBC (1)
• Legal services
• Affirms tax-exempt bond
status and validity of
bond offering
• Orrick(1)
• Rates bonds
• Moody’s
• Manges prepay estate
• Bond interest payments
• US Bank or Wells Fargo (1)
49 Green Font = potential service providers
(1) Fees paid on contingency from Bond proceeds
Peninsula Clean Energy
Preliminary Timeline
Contract with
Service
Providers
Structure
Prepay Deal
Prepare for
Transaction
Launch
Mar Apr May Jun Jul Aug Sep Oct Nov………
RFP for Financial Advisor
and Engage Counsel
RFP for Investment
Bank
Join CCCFA
Structure prepay transaction
Engage ratings
agency
Confirm PPA
assignments
Finalize deal
documents
Prepare “form of” deal
documents
Feb
Board approval of transaction 50
Peninsula Clean Energy
Recommendations and Next Steps
• Approval to continue evaluation and preparation for a possible Prepay transaction o Savings are material, risks are negligible, and upfront costs are minimal o Can pause process at any time
• Approval to engage selected advisors (paid on contingency) o PFM Financial Advisors as Financial Advisor
o Chapman and Cutler as Prepay Counsel
o Orrick, Herrington & Sutcliffe as Bond and Tax Counsel (engaged by CCCFA) • Approval to join CCCFA as an associate member at the appropriate time (late summer or early Fall)
• Staff will return to the Audit & Finance Committee and Executive Committee with periodic updates and will seek Board approval of a transaction prior to launch 51 Appendix
Peninsula Clean Energy
Why Now?
53 Elevated Interest Rate Environment:
Tax-exempt bonds’ yield advantage versus
corporate rates is the greatest in over a
decade
Procurement of Renewables with PPAs is
Commonplace: PCE has a portfolio of
PPAs suitable for one or more Prepay
transaction
Prepay Documentation is Tried and True:
Structure has evolved over the years so that
current documents optimize savings,
minimize participant risks, and provide for
seamless monthly settlements
Peninsula Clean Energy
Indicative PCE Prepay Transaction Terms
• Initial bond offering (pre-payment amount) of $550 million o Assumes assignment of three operating PPAs, representing 1 million MWh annually o Notional value of assigned contracts over 30-years ~$1 billion o PCE can assign additional PPAs to increase size of transaction or execute subsequent transactions
• Initial savings of ~$3.5 million per year, or ~10% of contracted PPA payments • Savings locked-in for 6-8 years, after which bonds are reissued with a minimum discount of 5% (to be negotiated)
o If minimum savings not met at reissuance date, PCE can walk away from transaction and assigned PPAs are put back to PCE; PCE forgoes future savings • Transaction fees, including advisors, payable from proceeds of the bond offering and included in savings analysis
54 Peninsula Clean Energy
Maximizing Savings
55 • Savings driven by the “spread” between tax-exempt and taxable interest rates • Recent transactions, on average, have priced with 6-8 year initial periods to strike a balance between savings and length of initial term
Peninsula Clean Energy
Transaction Diagram
Initial Issuance and Cash Flows
1. Debt Issuance – CCCFA issues tax-exempt bonds
2. Prepayment – CCCFA remits bond proceeds to Prepay
LLC in return for 30 years of assigned electricity deliveries
3. Unsecured Loan – Prepay LLC loans bond proceeds to
Intermediary Bank. Bank makes fixed monthly payments
to Prepay LLC equal to assigned electricity multiplied by PPA price
Monthly Cash / Energy Flows
4. Assigned PPAs – PCE assigns to Prepaid Supplier certain rights and obligations as Buyer; Prepaid Supplier makes monthly payments to PPA counterparties for assigned
delivered energy
5. Electricity Supply – Prepay LLC enters into long-term agreement to purchase electricity from Prepaid Supplier to match assigned electricity quantities/terms
6. Project Participant – CCCFA sells PCE all assigned
electricity delivered by Prepay LLC at the discounted
prepay price
56 Peninsula Clean Energy
PPA Assignment Concept
57 PPA Seller Prepaid Supplier
(GS, MS or RBC)
Status Quo
PPA Seller
PCE enters into a PPA with
PPA Seller
PPA Seller delivers as generated
power/attributes
PCE pays monthly for as-generated
power and attributes
Power +
Attributes
Contract Price
Proposal
Power +
Attributes
Structures remains the same, but instead
of facing PCE, the PPA Seller faces
Goldman Sachs, Morgan Stanley or RBC
If the Prepaid Supplier fails to pay, PCE
guarantees payments (which it is able to
recoup from the Prepay Trust Estate)
Under certain scenarios,
assignment can be terminated,
and PPA Seller goes back to
facing PCE
The existing Scheduling Coordinator
will remain the Scheduling
Coordinator; only change is that the
Prepaid Supplier is copied on bills
Contract Price Contract Price
In event the Prepaid Supplier fails to
perform, PCE guarantees payment
Power +
Attributes
Zero-CI Low Carbon Fuel
Standard Green Tariff
Board of Directors
April 25, 2024
Peninsula Clean Energy
Agenda
• Background
• Low Carbon Fuel Standard
• Zero-CI Green Tariff
• Staff Recommendation
59 Peninsula Clean Energy
Background
• Caltrain electric passenger service expected for
September 2024
o Fuel costs forecast to increase 100%, from $15MM in FY24 to $30MM in FY26 (10-15% of Caltrain budget)
o Annual revenue to PCE ~$7M
• SamTrans has ordered both Battery Electric Buses
(qty 37) and Fuel Cell Electric Buses (qty 10) for its
North and South Bays
60 Peninsula Clean Energy
Low Carbon Fuel Standard
• Program administered by California Air Resources Board (CARB) • Establishes an annual, declining carbon intensity (CI) target for transportation fuels used in California
• Each alternative fuel is given a CI score - the lower carbon a fuel is compared to the target, the more credits can be generated • Regulated entities that generate a deficit must buy credits to meet target CI
61 Peninsula Clean Energy
Electricity as a LCFS Fuel Pathway
• Default Grid Carbon Intensity
o Customer loses value of PCE clean energy products
• Low-Carbon Intensity
o ECOplus could qualify as a low-CI product, but would require annual 3rd party certification of each geothermal and large hydro resource o Considerable administrative burden and cost
• Book and Claim Zero-Carbon Intensity
o Easily verified through WREGIS accounting
o Provides approximately 35% more value than default grid CI 62 Peninsula Clean Energy
Zero-CI LCFS Fuel Pathway
• Pathway Requirements
o Eligible renewable energy resources as defined in California Public Utilities Code sections 399.11-399.36, excluding biomass, biomethane, geothermal, and municipal solid waste
o Must meet deliverability requirements of a PCC1 REC
• Pathway Administration
o Stand up “Green Tariff”
o Retire RECs to LCFS subaccount in WREGIS
o Provide quarterly reporting from WREGIS demonstrating REC retirement 63 Peninsula Clean Energy
Staff Recommendation
Approve a new Zero-CI Low Carbon Fuel Standard Green Tariff to support the electrification of public transit in the Peninsula Clean Energy service area.
64 Thank you
Justin Pine
Strategic Accounts Manager
Appendix
Peninsula Clean Energy 67
From CARB’s Community Meeting 2023: https://ww2.arb.ca.gov/sites/default/files/2023-05/CARB%20Presentation.pdf Committee Members’ Reports
Peninsula Clean Energy
Adjournment
Peninsula Clean Energy