Valley Clean Energy Board Meeting – July 11, 2024
Item 14 – 2024 Summer Preparedness 1
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3 CAISO and VCE Summer Readiness
o Present summer weather outlooks suggest hotter forecast than 2023 o Generally average to above average temperatures
o CAISO reports a surplus of 2.5 GW above forecasted 2024 peak summer needs o Surplus includes estimates of imports from other states o VCE is over 100% hedged on average for Summer 2024
o Fully compliant with Wholesale Energy Procurement Risk Management Policy hedging requirements for the summer (80% to 130% in Q3, at least 100% in Heavy Load Hours, meet hedging procurement requirements by June 15th)
o Currently considering a “final layer” of Q3 energy hedge procurement o VCE commercially agreed on all RA procurement for Q3 to reach 100% compliance o VCE has multiple years of summer operating history, including both challenging and relatively mild summers, to inform decisions
o TEA currently running a drill on its “Volatile Incoming Pricing Event Response” process to ensure alignment between TEA and VCE on CAISO market operations and reporting in the case of a summer heat event
4 July Short-Term Weather Forecast
• We had expected some July heat, and the early part of the month lived up to it • Sacramento area expected to cool off somewhat in the middle of the month 5 August Weather Forecast
6 September Weather Forecast
7 Q3 CAISO Historical Population Weighted CDDs
8 California Seasonal Water Storage
Mid-June Data
Current Level
Historical Median
9 CAISO 2024 September Peak Analysis
10 VCE Summer Energy Position
0 20
40 60
80 100
120
140
160 Jul-24 Aug-24 Sep-24
MW
Jul-24 Aug-24 Sep-24
HLH Hedge 15 15 15
HLH PPA 135 126 111
HLH Load 131 123 109
HLH % Hedged 115% 115% 115%
VCE Monthly Energy Position (Total HLH)
Valley Clean Energy Board Meeting – July 11, 2024
Item 15 – Renewable Energy Credit Optimization 11
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PUBLIC COMMENTS
12 To Provide Public Comment on any agenda item please:
➢ E-mail 300 words or less to: [email protected] OR
Join the Public Comment Queue by
➢ “Raising Hand” on Zoom Meeting
OR
➢ Press *9 if joining by phone
Emailed comments received before the item has concluded will be read into the record.
Emailed comments received after the item has concluded but before the end of the meeting will not be read but will be included in the meeting record.
o California requires entities that serve retail electric load to procure a minimum percentage of eligible renewable energy
o There are multiple bills that have shaped this program; but, most recently, SB 100 increased the RPS target to 60% by 2030
o There are multiple eligible renewable fuel types: wind, solar, biomass, small hydro (</= 20MW), etc. o An instrument called a REC is used to capture this eligibility and is “retired” to show compliance o A REC contains the “Green Attributes” of a unit of energy and represents that the energy was generated with an eligible renewable fuel type
o VCE’s power purchase agreements are all with eligible renewable resources 13 WHAT IS THE RENEWABLE PORTFOLIO STANDARD?
o RPS compliance happens over multi-year periods: “Compliance Period X/CPX” o It is currently Compliance Period 4 (CP4),
which goes from 2021-2024.
o VCE’s total RPS requirement during CP4 is
~40% of its retail load
o Targets increase over time, and
compliance periods shorten to three
years starting in 2025 (CP5)
o VCE’s total RPS requirement during CP5 is
~50% of its retail load
14 WHAT ARE THE TARGETS?
*VCE's 2025 Linear RPS Requirement is 47%
o California has “Portfolio Content Categories” (PCC) of RECs defined in state law:
o PCC 1: Eligible renewable resources directly connected to California’s grid o PCC 2: Out of state eligible renewable resources imported into California’s grid o PCC 3: Eligible renewable resources not brought to California’s grid (REC only) o Beginning in Compliance Period 4, as a percentage of VCE’s RPS requirement:
o 75% of RECs used must be from PCC 1
o 65% of RECs used must be from contracts that are at least 10 years in duration (Long-Term) o No more than 10% of RECs used can be from PCC 3
15 PCC & CONTRACTING REQUIREMENTS IN THE RPS
o VCE has long-term offtake contracts for large volumes of renewable energy resources inside California
o These resources will continue to produce and be associated with VCE’s portfolio for the life of its offtake contracts
o Selling surplus attributes from these projects to other parties helps them meet their environmental goals while VCE gains greater financial security o Overall emissions in California are unchanged, VCE simply can not “count” the attributes it sells any longer in compliance filings – the buyer is paying for that right thus the buyer would reflect the RECs on their power content label (PCL) 7/8/2024 16
ENVIRONMENTAL ACCOUNTING CONSIDERATIONS
o REC prices have risen substantially since VCE’s launch o All types display upward trends with PCC 1 and PCC 2 exhibiting the greatest year-over-year increases
o The penalty for any shortfall is $50/REC for each “missing” REC o 2025 PCC 1 bids observed in $80-85 range presently
17 REC PRICING
Portfolio
Content
Category
2018
Average
Price
2023
Average
Price
2024 Forward
Price
2025
Forward
Price
PCC 1 $16.50/REC $52.00/REC $73.00/REC $83.00/REC
PCC 2 $6.50/REC $38.00/REC $67.00/REC $70.00/REC
PCC 3 $1.50/REC $7.00/REC $7.00/REC $8.00/REC
o VCE’s renewable project offtake provides attributes well above its needs for compliance
o Examples:
o Option A: VCE maintains compliance with Linear RPS Compliance of 47% in 2025
o Sell 160,000 PCC 1 RECs at $83.00/REC = $13.28MM in portfolio optimization o Option B: VCE targets RPS percentage of 53% in 2025
o Sell 120,000 PCC 1 RECs at $83.00/REC = $9.96MM in portfolio optimization o Option C: VCE does not sell any length in 2025
o 2025 RPS Compliance will be ~70-80%
18 2025 OPTIMIZATION
*Above examples have built in “buffers” for potential resource outages, curtailment, and higher than expected load.
*Above examples are for illustrative purposes and not meant to represent the only options available.
o Staff believes it is prudent to optimize VCE’s portfolio by selling length without jeopardizing state compliance, VCE’s Base Green & Standard Green rates, or VCE’s long-term goals (100% renewable by 2030) o Staff believes actions similar to Options A and B should generally be used as:
1. The power cost reduction from the length sale is material and will be used to fund other procurement needs in VCE’s portfolio
2. VCE has ample remaining attributes to meet or exceed state RPS compliance consistent with Board direction
19 CONCLUSION
Note: VCE’s Base Green is 0-5% above compliance and Standard Green rate is 5% above Base Green