AR 26 ATTACHMENT D — Pasadena City Council, December 11, 2023

E3 Technical Review of Pasadena Water and Power’s Integrated Resource Plan 1 E3 T echnical Review of Pasadena Water and Power’s Integrated Resource Plan
Executive Summary
October 31, 2023
Energy Environment and Economics (E3) was contracted by Pasadena Water and Power (PWP) as a technical reviewer to provide validation, critiques, and insights to support the 2023 Integrated Resource Plan (IRP), which explores a set of scenarios to achieve a goal of a carbon-free electricity portfolio by 2030.

E3 has worked extensively with utilities throughout North America (and specifically California) to develop high-quality, robust IRPs, providing both direct analytical support and critical analytical review to utilities seeking to decarbonize their portfolios while maintaining reliability.

The scope of this review consisted of a 1) evaluation of the methodology for consistency with industry standards, 2) review of inputs and assumptions, and 3) validation of results and key findings.

Overall, E3 found that the IRP framework as well as inputs and assumptions to be consistent with industry standard practices used by many utilities in long -term planning. Additionally, the results align with common trends seen in other jurisdictions seeking to decarbonize the electricity sector . All scenarios considered, including the Re ference Case, reach ambitious carbon reduction go als by 2030 and 2040 , achieving 80-100% and 90-100% carbon emissions reductions, respectively.

Key Takeaways
E3 finds that the overall IRP process and methodology is consistent with regulatory requirements and current industry standard practice.
• IRP aligns with the California Energy Commission (CEC) submission guidelines. • Planning framework is transparent, engages stakeholders, and sets clear objectives. • Analysis utilizes industry standard capacity expansion and system operation models.

E3 finds that the IRP inputs and assumptions , which were accessible for this review, are reasonable long-term planning assumptions, sourced from credible public sources where possible. • Key sources include the CEC Integrated Energy Policy Report (IEPR) and the National Renewable Energy Laboratory Annual Technology Baseline (NREL ATB). • Results of the IRP should be interpreted within the context of a rapidly shifting and uncertain market for clean energy; recent increases in PPA pricing provide an indication of directional changes in the industry that will impact costs of future decisions and will warrant continued monitoring as PWP makes progress towards its goals.

E3 concludes that the technical results are generally consistent with studies of ambitious clean energy objectives studied by other utilities and research institutions. • All portfolios include a mix of renewables, energy storage, and “firm” resources (resources capable of operating at full capacity over sustained periods of time), following a common blueprint for electricity sector decarbonization observed across a range of studies.

Attachment D

E3 Technical Review of Pasadena Water and Power’s Integrated Resource Plan 2 • Scenarios that meet PWP’s 2030 carbon-free goal are more ambitious than most of its peers’ current goals, which requires significant additional resources and results in high costs: the implied cost of carbon abatement in these scenarios exceeds the social cost of carbon. • Reliance on hydrogen fuel cells is a unique aspect of PWP’s carbon-free portfolios; most other plans retain or repurpose natural gas until a commercial “clean-firm” alternative is viable.

While we find the overall IRP analysis and results to be generally reasonable, we also provide PWP with recommendations for future improvements to the IRP . Most importantly, we recommend that PWP continue to refine its f orward-looking analysis of its system reliability needs to ensure that any plan developed ensures reliability for its customers.

The complete technical review report of PWP’s 2023 IRP follows with additional results and recommendations.

E3 Review
October 31, 2023
Pasadena Water and Power
Integrated Resource Plan (IRP)
Nick Schlag, Partner
Nathan Lee, Managing Consultant
Charlie Duff, Managing Consultant
Melissa Rodas, Associate

2 Who is E3?
Thought Leadership, Fact Based, Trusted.

San Francisco New York Boston
100+ full-time consultants
Engineering, Economics,
Mathematics, Public Policy…30 years of deep expertise
Calgary
Recent Examples of E3 ProjectsE3 Clients
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assets (20+ GW | ~$2B)
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Project
California: 100% clean energy planning and
carbon market design for California agencies
Net Zero New England study with Energy Futures
Initiative
New York: NYSERDA 100% clean energy planning
Pacific Northwest: 100% renewables and
resource adequacy studies for multiple utilities
300+
projects
per year
across our
diverse
client base

3  E3 served as a technical reviewer of Pasadena Water and Power’s (PWP’s) IRP analysis.  The scope included an evaluation of the methodology for consistency with industry standards, review of inputs and assumptions, and validation of results and key findings, among others:

Integrated Resource Plan (IRP) Review Purpose
Results & Key Findings
Inputs & Assumptions
Process & Methodology
• Modeling Methods
• Scenario Design
• CEC Alignment
• IRP framework
• Market Prices
• Policies
• Load Forecast
• Resources
• Benchmarking
• Carbon Abatement Costs
• Resource Mix
• System Costs
Pasadena set an ambitious goal of delivering hourly
carbon free electricity … PWP’s IRP explores strategies to accomplish that goal by 2030
Given the importance and impact for Pasadena, this
review provides confirmations, critiques, and
insights to support PWP in this challenge

4  IRP framework and inputs and assumptions generally follow industry standards and best practices  IRP results align with common trends seen in other jurisdictions seeking to decarbonize Key Findings: Review of PWP’s 2023 IRP
Results & Key Findings
Technical results are generally
consistent with studies of low-carbon
and carbon-free portfolios conducted by
utilities and research institutions:

Significant additions of renewables and
energy storage across all scenarios
Scenarios that meet PWP’s carbon-free
goal are more ambitious than most of its
peers’ current goals, requiring additional
resources and resulting in higher costs
Reliance on fuel cells is a unique aspect of
PWP’s carbon-free portfolios; most other
plans retain or repurpose natural gas until
a commercial alternative is viable
Inputs & Assumptions
Key inputs (load forecast, market and
commodity prices, resource costs, etc.)
are from reliable sources or analytical
processes
Key sources: CEC Integrated Energy
Policy Report, NREL Annual Technologies
Baseline
–––
Today’s market environment is rapidly
shifting, and results should be
interpreted within this context
Recent upward pressure on resource PPA
pricing will warrant continue market
monitoring for future IRP updates
Process & Methodology
IRP complies with California Energy
Commission (CEC) submission
guidelines
–––
Framework is transparent, engages
stakeholders, and sets clear objectives
–––
Modeling relies on industry standard
standard capacity expansion and
system operation modeling methods
E3 recommends additional reliability
analysis in scenarios that include fossil
retirement and hourly carbon-free goals

5  E3’s work with utilities and regulators to develop long-term electric system resource plans that achieve ambitious clean energy targets support four common findings:

1. Technologies available today can enable significant progress towards ambitious state and utility clean energy objectives

2. A technology-neutral approach to planning and procurement will enable utilities to meet reliability and clean energy goals most affordably

3. Decarbonization of the “last 10%” poses the greatest challenge, and may lead to significant increases in costs

4. Some form of firm capacity is needed for reliability even under a deeply decarbonized grid
 These findings are supported by a growing body of literature, including recent studies by the National Renewable Energy Laboratory (NREL), Princeton University, the Electric Power Research Institute (EPRI), and the Massachusetts Institute of Technology (MIT)
Deep Decarbonization Planning Studies: Common Trends
Firm Resources
Today: nuclear, natural gas,
geothermal, biogas
Future: hydrogen, long-duration
storage, nuclear SMR, CCS
Scalable Low-Cost Clean
Energy Resources
Today: wind, solar, efficiency
Future: nuclear small modular
reactors (SMR), carbon capture &
sequestration (CCS)
Balancing Resources
Today: batteries, pumped storage,
hydro, demand response
Future: advanced flexible loads, other
storage technologies
Blueprint for a Low Carbon Grid

6  PWP’s resource portfolios are consistent with common the blueprint for a low carbon grid
• All resulting portfolios include a mix of firm capacity, scalable clean energy generation, and balancing resources
 Carbon-free portfolios (scen. 1-3) require higher quantities of clean energy and storage capacity, resulting in considerably higher costs • PWP’s carbon-free portfolios result in high “implied carbon abatement” costs (~$600-1,200 per ton in 2030) compared to the social cost of carbon assumed in Scenario 5 ($400 per ton)
 Among California utilities’ plans, PWP’s consideration of hydrogen fuel cells for firm capacity is unique
• No other California utilities have committed to plans that include retirement of all existing natural gas plants that play critical roles in maintaining reliability • Sacramento Municipal Utility District’s current plan anticipates relying on existing gas resources for firm capacity through 2030, planning a transition to renewable fuels or CCS to support further decarbonization
Key Takeaways: PWP IRP Results Benchmarking
*PWP IRP results were compared against three California planning activities to identify key differences and validate model results:

1.California Public Utilities Commission IRP Preferred System Plan (CPUC Resource Plan): A 73% Renewable Portfolio Standard, with 86% GHG free resources by 2032

2. Sacramento Municipal Utility District Case A (SMUD 2030 Carbon Neutrality): No allowance of combustion generation beyond currently contracted biogas; no unspecified market purchases in 2030

3. NREL LA 100% Renewable Scenario SB100 (LA 100% Renewable Plan): 100% renewable energy by 2045 Despite differences among
utilities and their modeling
methods and assumptions,
common findings observed
across a broad range of
decarbonization studies should
be broadly applicable and
consistent across them
IRP Benchmarking Framework

7 Current Trends: A Large Share of California’s Long-term Needs Will Be Met With Solar, Storage, and Other “Non-firm” Resources Peak Day Net Load
(GW)
2021 2025 IRP Portfolios 2033 IRP Portfolios
Solar
Energy-Limited
Resources
(Storage, Demand
Response, Hydro)
Wind
Net Load
Gross Load
Remaining firm
resource needs
1 Hour of Day 241 Hour of Day 241 Hour of Day 24
0%
5%
10%
15%
20%
25%
0 500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
GWh Solar Curtailment (GWh)
Solar Production (GWh)
Solar Curtailment (% of GWh) 5,000
4,000
3,000
2,000
1,000
0 25%
20%
15%
10%
5%
0%
0%
5%
10%
15%
20%
25%
0 500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
GWh Solar Curtailment (GWh)
Solar Production (GWh)
Solar Curtailment (% of GWh)
CAISO. Production and Curtailment Data.

The duck curve is expected to grow As more solar is integrated, the duck curve will deepen
Additional storage will help shift
energy to hours of greater need
Already, annual curtailment is growing in
California and with additional solar set to be
deployed, the trend will only continue.

Curtailment happens the most during spring
months when solar production is high and
demand levels are lower

8  To maintain reliability and meet clean energy
objectives, utilities in California and the Southwest
will add significant quantities of renewables and
storage resources in the next decade
 Coupled with supply chain constraints and
interconnection queue issues, there is uncertainty
in both cost and project execution timelines
Current Trends: Development Of New Resources Is
Expected to Occur at an Unprecedented Rate
Projected additions will
exceed 10 GW per year
based on utility plans
Aftermath of
California Energy
Crisis

9 1. Introduction to E3

2. Current Trends and Risks in California Energy Markets

3. Review of IRP Methodology and Inputs and Assumptions

4. Review of IRP Results
Contents

10 Who is E3?
Thought Leadership, Fact Based, Trusted.

11 E3’s experience in resource planning
 E3 has worked with a wide range of clients that are increasingly writing the script for the emerging clean energy transition to understand how to plan deeply decarbonized electricity systems • California PUC: Assisting the CPUC in administration of IRP program mandated by SB 350 by developing a ‘Reference System Plan’ that achieves 40% GHG emission reductions by 2030 • Pacific Northwest Low Carbon Scenarios Study: Investigated the costs and emission reductions associated with various policies in the Northwest, including a higher renewable portfolio standard, cap and trade, and a carbon tax
• Sacramento Municipal Utilities District: Assisting with 2018 IRP to evaluate long-term clean energy goals including GHG emission reductions of 90-100% by 2040 • Los Angeles Department of Water and Power (LADWP): Evaluated reliability contributions of clean energy alternatives to natural gas once-through-cooling plant repowerings • Hawaiian Electric Company (HECO): Developed an affordable, technical feasible Power Supply Improvement Plan (PSIP) consistent with Hawaii’s goal of 100 percent renewable energy by 2045 • Xcel Energy Upper Midwest IRP: Provided support to Xcel Minnesota by conducting independent technical analysis to examine how to meet long-term carbon reduction goals along with associated costs as part of their 2019 IRP process • Nova Scotia Power: Full support for Nova Scotia Power’s 2021 IRP considering coal retirements and deep decarbonization in a geographically constrained region  Through these projects, E3 has developed an unparalleled understanding of resource planning within highly decarbonized renewable electricity systems

12  Technological, economic, societal, and political factors are rapidly transforming the electricity sector:
• Climate change and the policy imperative to decarbonize the economy require deployment of massive quantities of low-carbon electricity • Renewable resources including wind, solar and batteries have fallen dramatically in cost, offering attractive alternatives to conventional resources • Consumers increasingly wish to control their own destiny, decentralizing the locus of decision-making
• Innovation in data processing, telemetry and metering are enabling greater utility and customer engagement in energy use
 In response to these trends, integrated resource planning is evolving – modern IRPs have come a long way since their origins in the 1980s
• New tools and techniques to address increasing complexity of planning problems • A new “dual” purpose to (1) support near-term actions and (2) articulate long- term vision
• Expanded scope to consider implications beyond electric sector and linkages with other planning functions
• More open and proactive stakeholder engagement process Emerging trends in Integrated Resource Planning

Current Trends and Risks in
California Energy Markets

14 A Large Share of California’s Long-term Needs Will Be Met With Solar, Storage, and Other “Non-firm” Resources
Peak Day Net Load
(GW)
2021 2025 IRP Portfolios 2033 IRP Portfolios
Solar
Energy-Limited
Resources
(Storage, Demand
Response, Hydro)
Wind
Net Load
Gross Load
Remaining firm
resource needs
1 Hour of Day 241 Hour of Day 241 Hour of Day 24
0%
5%
10%
15%
20%
25%
0 500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
GWh Solar Curtailment (GWh)
Solar Production (GWh)
Solar Curtailment (% of GWh) 5,000
4,000
3,000
2,000
1,000
0 25%
20%
15%
10%
5%
0%
0%
5%
10%
15%
20%
25%
0 500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
GWh Solar Curtailment (GWh)
Solar Production (GWh)
Solar Curtailment (% of GWh)
CAISO. Production and Curtailment Data.

Curtailment happens the most during spring
months when solar production is high and
demand levels are lower

15  To maintain reliability and meet clean energy
objectives, utilities in California and the Southwest
will add significant quantities of renewables and
storage resources in the next decade
 Coupled with supply chain constraints and
interconnection queue issues, there is uncertainty
in both cost and project execution timelines
Development Of New Resources Is Expected to Occur at
an Unprecedented Rate
Projected additions will
exceed 10 GW per year
based on utility plans
Aftermath of
California Energy
Crisis

Review of IRP Methodology
and Inputs and Assumptions

17 Elements of a Robust Integrated Resource Planning Process 3 1
elect ost
Cost Effective
Portfolio
Establish
our ear
Action Plan
ile IRP Report
Compare
Costs
Assess Risks
Compare
Environmental
Impacts
Create
Portfolios
apacity expansion
imulate
perations
Pro ction si lation
Test Reliability
oss of loa probability
oad orecast
eneration
xisting Reso rces
e an i e Progra s
e Reso rce ptions
Transmission
Commodity
orecasts
Identify ey
ecisions
Identify
ources of
ncertainty
elect
cenarios,
utures
ensitivities
Cost
Reliability
Environmental
oals
Regulatory
Re uirements
arbon issions
t er issions
Water se
RP argets
tan ar s
Identify
b ectives
efine
cenarios
ather
ata
Conduct
Analysis
Evaluate
ptions
inali e
Plan
Engage takeholders and Integrate eedback
Figure adapted from Public Service Company of New Mexico 2020 Integrated Resource Plan

18  Primary objective of utility planning: identify
and procure a portfolio of resources that
minimizes costs to ratepayers while
maintaining reliability and achieving clean
energy objectives
 Elements of a successful plan:
• Robust technical analysis of resource options
• Evaluation of key risks and uncertainties
• Consideration of short- and long-term implications
of planning decisions
• Engagement of a wide range of industry
stakeholders
Utility Planning Processes Balance Multiple Objectives
Common
Utility
Planning
Goals
Reliability
SustainabilityAffordability

19 E3 reviewed PWP’s overall IRP framework and key inputs and assumptions for alignment with industry standards and best practices. The results of this review are presented as follows:

1. CEC IRP Submission Guidelines

2. General IRP Framework

3. Modeling Methodology

4. Load Forecast

5. Existing Resource Characterization

6. New Resource Options Considered

7. Resource Operational Characteristics

8. Commodity Price Forecasts

9. Carbon and Clean Energy Accounting
Areas of Review: IRP Framework and Inputs and
Assumptions

20 1. CEC Submission Guidelines
ID Criteria E3 Review
1a Is the IRP consistent with the planning horizon filing requirements adopting an IRP that ensures the utility achieves specific goals and targes by 2030?
Yes. The IRP is consistent with the current planning horizon requirement to 2030. Revised CEC submission guidelines, currently in the docket, would extend the planning horizon requirement to 2045, and under this revision PWP’s IRP would also remain in compliance. 1b Do the scenarios and sensitivity analyses adhere to the CEC IRP filing requirements?
Yes. The IRP considers five planning scenarios utilizing different resource option and emission constraints, with sensitivities on temperature impacts, generation technology costs, and transmission contingencies. 1c Are all Standardized Tables, required for filing, completed for the adopted strategy/plan?
Yes. The following standardized tables required for filling have been completed.

1. Capacity Resource Accounting Table (CRAT)

2. Energy Balance Table (EBT)

3. RPS Procurement Table (RPT)

4. Greenhouse Gas Emissions Accounting Table
(GEAT)
1d Does the IRP provide additional and supporting information? Yes. Supporting documents are available to indicate the methodology for selecting resources, load forecasts, and resource costs.
1e Does the IRP include the demand forecast required for filing? Yes. Demand forecasts based on IEPR forecasts are provided following CEC recommendations. 1f Does the IRP report the mix of resources used by the POU as required for the IRP filing?
Yes. IRP considers a resource mix considers a diverse set of emissions free resources; however, energy efficiency and transportation electrification sensitivities are not considered. 1g Does the IRP demonstrate how PWP will ensure it meets system and local reliability goals?
Yes. The IRP considers system reliability and models potential loss of load; however, concerns remain that with limited guidance from CEC and CAISO on how future resource adequacy requirements will evolve, the approach used in this IRP will not be sufficient to guarantee a reliable outcomes. 1h Does the IRP show how PWP will ensure how it will meet CARB established GHG emission targets?
Yes. PWP has a zero emissions goal by 2030, set by the City of Pasadena, which surpasses the requirement established by CARB.
1i Does the IRP show how PWP will serve customers at just and reasonable rates and minimize bill impacts?
Yes. Rates were calculated for each scenario studied. However, E3 suggests consideration of an additional write up of potential rate impacts and comparisons between studied scenarios and sensitivities. 1j Does the IRP ensure PWP strengthens the diversity,
sustainability and resilience of the transmission and distribution systems?
Yes. The IRP explores a Goodrich transfer contingency sensitivity, which is a vital interconnection for the PWP system. An additional writeup of the risks has been provided in the filing with the CEC. 1k Does the IRP ensure PWP achieves the goal of minimizing local air pollutants for disadvantaged communities?
Yes. IRP contains a discussion on air quality impacts in Pasadena’s disadvantaged communities. Fossil fuel generation occurs outside of the DAC, but positive impacts from plant decommissioning are discussed.

21 2. General IRP Framework
Criteria E3 Review
2a Does the IRP articulate a clear set of
motivating questions & objectives?
Yes. PWP established a clear vision with a set of goals for the IRP, a set of objectives, and a purpose, “to serve as a blueprint for PWP to deliver reliable, environmentally responsible electricity service at competitive rates over a ~20-year planning period.”
2b Does the IRP explore a coherent set of
scenarios and sensitivities clearly linked to
the objectives?
Yes. With this IRP, PWP explores the requirements to achieve the City of Pasadena’s ambitious goal to provide 100% carbon free electricity by 2030 through a set of scenarios and sensitivities that test stresses tied to heat wave impacts, Goodrich intertie transfer contingencies, and technology cost impacts. However, by focusing only on bookend scenarios, i.e., a “Reference” case and cases that entirely eliminate carbon emissions, the analysis misses an opportunity to explore tradeoffs between cost, environmental objectives, and reliability impacts that could be useful to decisionmakers.
2c Are the modeling inputs and assumptions
gathered from reputable and (where
possible) public sources?
Yes. Inputs and assumptions are from reputable and public sources, such as industry standard technical assumptions and costs data sources were cited for generic expansion resources. However, for key assumptions that employ proprietary datasets, such as market and gas prices and renewable resource profiles, providing additional information on methodology and assumptions and/or aggregated data in the final IRP would allow for more transparency around impacts.
2d Does the analysis follow best practices and
apply industry-standard modeling tools and
approaches to quantify metrics connected
to the IRP objectives?
Yes. The overall IRP process aligned with best practices and employed industry-recognized modeling tools.

However, ensuring that capacity expansion modeling optimizes portfolios to meet reliability goals in a robust manner together with and clean energy goals while minimizing cost would help to ensure PWP meets reliability as well as environmental and cost goals.
2e Is a concrete action plan identified based
on analysis?
Pending. At the time of E3’s original review, the IRP analysis and synthesis did not result in a specific action plan. With feedback from the Municipal Services Committee, PWP agreed to define a specific set of waypoints in the near future that would provide for concrete action and indicate progress towards the goals of this IRP. At the time this review was finalized, the specifics of those waypoints were still being determined. 2f Has the IRP process been transparent and
accessible to stakeholders?
Yes. PWP hosted regular Stakeholder Advisory Group (STAG) meetings; shared updates on the IRP process through multiple channels, e.g., online, print, social media, etc.; and provided opportunities for public input to shape the process.

22  The PWP IRP explored a range of scenarios and sensitivities that follow a similar trend other small utilities have analyzed  Extreme weather and a portfolio’s reliability and/or resilience are more often considered via a specific LOLP analysis
• Given this was out of scope in this IRP, its inclusion as a sensitivity acknowledges its importance
 A range of variables were not evaluated in the scenarios • Load growth from electrification and alternate resource and policy decisions (i.e., retention of Glenarm, no clean and firm, net zero policy, etc.)
Sensitivities
Scenarios
2b – Scenario Design
• Carbon Policy:
100% Carbon-Free by 2030 vs CA
State policy (treated as reference)
• Resource availability:

Local (internal) buildout constraints
in 100% carbon-free cases
• Social cost of carbon:

Impact on reference
• Extreme Weather:

Heat wave impact
• Market Ties:

Goodrich Transfer Contingency
• Technology Costs:

High / Low case
Scenarios
should focus on
drivers with
high impact &
high uncertainty
Low Medium High
Impact
Low Medium High
Uncertainty
Drivers with low
impact are not
useful for
analysis
Drivers with large
impacts but low
uncertainty can
be characterized
uniformly
!
E3 Recommendation
E3 found the scenarios and sensitivities explored as
“bookends” – in the realm of what’s possible – with
less focus on plausible or probable futures to help
guide PWP’s decision-making. E3 recommends
exploring options between the bookends during
future IRPs.

For example,
load growth via
electrification
For example,
commodity prices in
zero carbon case

23 Horizon:
• PWP model years for the long-term capacity
expansion study extend through 2050
• This is a common study horizon for utilities and
aligns with best practice
Industry Best Practices
Utilities should develop and evaluate
a range of resource portfolio options.

Current best practice entails the use
of optimal, typically least-cost, Long-
Term Capacity Expansion (LTCE)
software to create portfolios modeling
that account for:
 Expected changes to loads and
existing/planned resource
portfolio over a long (20+ year)
planning horizon
 System reliability, greenhouse gas
(GHG), and clean energy
objectives
 Costs to develop and operate new
generation resources
 Hourly (or similar) operational
dynamics of the electricity system
3a - Portfolio Development
Model:
• Used by many across the industry (Public Service
Company of New Mexico, Xcel Energy, others)
• Long-term capacity expansion model for portfolio
analysis which aligns with best practice
2050Now
Simulation:
• EnCompass allows hourly resolution of system
operations with a reduced set of sample days
• This is common practice, capturing a range of
conditions across the year for resource planning
Constraints:
• System reliability is represented in the model via a
planning reserve margin and capacity accreditation
• Clean energy and GHG constraints are applied
• Ensuring these are modeled is best practice
1 24
MW
GHG
PRM
 PWP uses an industry standard tool to develop long-term resource expansion portfolios across multiple scenarios and sensitivities, applying constraints to represent applicable state and city policies

24 3. Modeling Methodology
ID Criteria Explanation
3a Are least-cost portfolios developed for each scenario using capacity expansion modeling?
Yes. PWP’s portfolios are created using EnCompass, which uses optimization to construct portfolios to meet utilities’ needs. This tool is used by many utilities throughout the industry in the creation of IRPs, including Public Service Company of New Mexico, Xcel Energy, and others. 3b Are system operations simulated on an hourly basis? Yes. PWP’s analysis accounts for hourly operational needs of the system in two places:
• The capacity expansion analysis conducted in EnCompass includes an hourly representation of system operations on a reduced set of sample days
• Portfolio outputs from the capacity expansion module are subsequently simulated across a full year (8,760 hours) in EnCompass
This two-stage approach (capacity expansion followed by production simulation) is industry standard.
3c Does the PWP IRP methodology consider system
reliability needs?
Yes. A planning target is modeled with resources accredited using ELCCs or NQCs following CPUC guidance and using its datasets. However, with limited guidance from the CEC and CAISO on how future resource adequacy requirements will evolve, the approach used in this IRP will not be sufficient to guarantee a reliable outcome. Currently, the IRP analysis accounts for PWP’s reliability needs in three ways:

1. Requiring PWP to meet an annual planning reserve margin constraint, assuming capacity credits for all resources remain at today’s levels as calculated by the CPUC

2. Ensuring that load is served across all 8,760 hours of the operational simulation

3. Evaluating several “stress tests” to examine portfolios performs under extreme conditions, including a heat wave and a transmission contingency This approach is not sufficient to demonstrate conclusively that the portfolios developed would be sufficient to meet PWP’s resource adequacy obligations and local reliability needs.

25 Industry Best Practices
Utilities should evaluate
resulting portfolios through full
hourly operational simulations
across the model horizon
 Simulate operations for 8,760
hours in all model years
 Ensure operational resource
constraints are captured
 Operational simulation for least-
cost system operations
 System costs flow into revenue
requirement calculation
PWP leverages the same model for full operational simulation modeling to evaluate annual dispatch of its portfolios and calculate system costs for its revenue requirement calculation.
3b - Operational Simulation
• EnCompass also used for full
operational simulation
• PWP system is represented as
single zone connected to “market”
price strip zone
• 8,760 hours for model years
• Heat rate, Pmin, Pmax, and other
operational parameters reflected
• Hourly load and renewable
generation is represented
• Costs resulting from production
simulation runs fed into revenue
requirement calculations
Operational Simulation using Encompass
!
E3 Recommendation
Whenever the full 8,760 simulation resulted in unserved energy, additional fuel cell and/or storage capacity was added (depending on the scenario) and the simulation was re-run to ensure reliability; however, with more robust reliability modeling, E3 anticipates this iteration and “true-up” would not be necessary and better align with best practices.

26 Industry Best Practices
Utilities should ensure that their resource
portfolio plans are sufficient to meet their
reliability needs, depending on their unique
regulatory environment and physical
characteristics:

1. Establish a clear reliability standard that
may be one or more of the following:
• Based on a statistical standard for portfolio
reliability, such as Loss of Load Expectation
or an alternative measure,
• Set by a resource adequacy program
administrator, and/or
• Tied to an N-1 (or other) operating criterion.

2. Identify future system needs and ability
to meet those needs using:
• Loss of Load probability modeling to simulate
resource availability across a broad sampling
of conditions,
• Projections of future capacity credits
assigned to resources in the context of a
resource adequacy obligation, and/or
• Detailed modeling of system performance
under N-1 conditions.
 Reliably meeting PWP’s loads entails overlapping reliability re uirements:
• Long-term planning of its system to operate reliably under N-1 transmission contingency on its intertie with CAISO, and
• Annual obligation to CAISO to ensure the PWP portfolio has sufficient resources to meet local and system resource adequacy requirements
 Despite limited guidance from the CEC and CAISO on how future resource adequacy requirements will evolve, PWP does address future resource adequacy needs in its IRP • However, the capacity accreditation assumptions do not fully account for changing resource adequacy needs and are not sufficient to ensure PWP will meet its future resource adequacy obligations – particularly in scenarios with Glenarm retirement
3c – Portfolio Reliability
Aspect of Current Methodology Outstanding Risks & Vulnerabilities Portfolio is designed to meet resource adequacy needs as reflected by a Planning Reserve Margin (PRM) requirement using present- day, technology-specific capacity credit assumptions established by the CPUC and CAISO.

Resource adequacy modeling does not capture future capacity credit declines for renewables (only solar) and storage resources likely to occur as their penetrations in California increase; portfolio may be insufficient to meet CAISO RA obligations.

Additional adjustments to each portfolio are made to ensure resources can meet PWP demand across a single 8,760
operational simulation.

A single deterministic simulation will usually fail to capture the types of extreme conditions that ultimately lead to reliability events, which are not present in most years.

Additional stress tests – reflecting a heat wave and transmission contingency that reduces PWP’s import capacity – are evaluated.

These events evaluate system performance under summer stress conditions; however, many studies have shown that portfolios that are heavily reliant on renewables and energy storage tend to experience higher reliability risks in the winter.
!
E3 Recommendation
E3 suggests that during routine reliability due diligence, scenarios are tested for extreme winter events to ensure adequacy. Also, E3 suggests that future IRPs incorporate a forward-looking perspective on resource adequacy requirements and capacity accreditation. Finally, E3 recommends existing ongoing reliability studies directly assess implications of Glenarm retirement on local reliability.* *Glenarm retirement would require PWP due diligence & all standard required approvals 385

27 4. Load Forecast
ID Criteria E3 Review
4a Is the load forecast developed using
industry-standard approaches?
Yes. PWP’s load forecast is derived from the California Energy Commission’s (CEC’s) Integrated Energy Policy Report (IEPR) by applying a ratio of PWP to Southern California Edison (SCE) historical load to the IERP’s SCE forecast. The CEC develops load forecasts for each California Load Serving Entity that reflect projected economic & demographic trends and impacts of policy. This load forecast is used directly by most California municipal utilities in their IRPs and serves as the basis for the California Public Utilities Commission’s development of a “Preferred System Plan” for the utilities and Community Choice Aggregators under its jurisdiction. By adopting the IERP forecasts, PWP follows the industry standard approach for load serving entities.
4b Does the demand forecast account for
load modifiers resulting from future
energy efficiency and distributed
energy resources?
Yes. The IEPR load forecast captures expected impacts of key load modifiers, including additional achievable energy efficiency, behind-the-meter solar PV and energy storage, and transportation and building electrification. PWP modifies the SCE fraction- based results using its own energy efficiency, distributed resources, TOU rate impacts, electric vehicle adoption, and native load.

By adopting the IEPR forecasts and modifying via PWP-specific assumptions and analysis, this follows a best-in-class approach accounting for the impact of load modifiers.
4c Does the load forecast account for
expected impacts of climate change?
Yes. The CEC incorporates a climate change adjustment into its projections of annual energy and peak demand. By adopting the CEC forecasts, PWP is reflecting climate change impacts as captured within IEPR. 4d Are various components of load,
including future load modifiers,
represented by hourly profiles
developed from reasonable historical
or simulated data?
Yes. PWP uses individual hourly profiles for each load component. These are calculated as a fraction of the hourly SCE forecasts available in the CEC’s IEPR. However, final, disaggregated hourly load component data were not available to show how PWP’s hourly load shapes may differ from SCE’s hourly IEPR load data. While the future load modifiers were noted to capture PWP-specific load adjustments on an annual basis for various components, hourly load profile adjustments are not detailed in the methodology to be made PWP-specific. Altogether, the representation of hourly profiles is adequate and follows common practices across the industry.
4e Are uncertainties in load forecasts
explored through sensitivity analysis
or alternative scenarios?
No. Alternative load forecasts and load sensitivities were not explicitly studied in the IRP. Ultimately, the scenario and sensitivity design process conducted by PWP resulted in a focus around decarbonization policy, technology availability, and reliability via a “heat wave” and transmission availability sensitivity; but not load uncertainty. While not detrimental to the IRP, E3 recommends evaluation of load uncertainty during ongoing due diligence to understand the impacts on PWP resource portfolios and costs.

28  Assessing the impacts of alternative future load
forecasts is common in utility IRPs
• Particularly when uncertainties or policy drivers could cause variations from the “base” forecast
 Electrification level assumptions are embedded
in PWP’s IRP forecast are consistent with a
“Reference” scenario
 Studies show significant future load increases
linked to the levels of transportation and building
electrification needed to achieve California’s
decarbonization goals, i.e., the CARB Scoping Plan
 These load growth levels could directly impact
conclusions regarding:

1. Cost and viability of achieving a 100% carbon-free
portfolio

2. Implications of retiring existing resources related to reliability of portfolio
4e – Load Forecast Sensitivities
!
E3 Recommendation
E3 recommends, during ongoing utility diligence, evaluation of impacts of higher electrification levels consistent with state policy goals to inform any specific commitments regarding clean energy targets or plant retirements.

Business-as-Usual Reference Scenario
CARB 2022 Scoping Plan
PWP IRP Load Forecast
Scoping Plan Scenario
CARB 2022 Scoping Plan
+70% increase by 2045
due to electrification
The adopted CARB 2022 Scoping Plan
Scenario shows substantially higher loads than
the Business-as-Usual Reference, highlighting
the range of uncertainty in California’s load
forecasts due to electrification

29 5. Existing System
ID Criteria E3 Review
5a Are the retirements and commercial operations
dates (CODs) of existing and planned resources,
reflected in the portfolio?
Yes. The IRP retires existing thermal resources by 2030 to meet the zero-carbon emissions goal and includes CODs for all planned resources. In reference scenarios, there are planned retirements for the existing coal plants and an assumed 20-year lifetime for renewable projects. Retirements for natural gas facilities are dependent on the scenario assumptions. Although not explicitly modeled in the IRP, additional costs associated with the retirement, or potential termination of contracts, of emitting resources should be part of the decision making related to achieving 100% carbon free electricity by 2030. This may be the case for resources such as Glenarm, Magnolia, and Intermountain Project units. 5b Are existing and planned resources’ technical
and cost inputs and assumptions sourced from
historic and/or recent RFP data, respectively?
Yes. The IRP assumes resource costs based on historic operations costs for existing resources or RFP data for planned resources. Existing coal resource costs are based on IPP budget projections while planned solar and geothermal project costs are sourced from RFP data. Natural gas resource costs are developed from natural gas costs, transportation, and facility O&M. 5c Are transmission constraints within the planning
area represented?
Yes. The IRP considers transmission constraints within the planning area by using a zonal representation where PWP’s local zone is connected to an external market zone in a single pipeline construct. PWP can utilize the Goodrich line and import up to 280 MW and export up to 100 MW. The limits reflect “real world” risk preferences and operational constraints.

30 6. New Resource Options
ID Criteria E3 Review
6a Does the IRP consider a reasonably broad set of
options, including both commercially available and
emerging technologies?
Yes. The IRP considers a broad set of resources applicable for Pasadena’s ambitious clean energy goals, while considering technological feasibility. However, additional disaggregation of solar and wind resources by region through resource profiles would help to capture resource diversity contributions and can potentially impact resource selection. 6b Are cost and financing assumptions developed based
on reputable public data sources and/or market
intelligence?
Yes. The IRP develops cost assumptions based on current market conditions and long-term energy forecasts according to industry standards. Near-term costs are based on recent RFPs for geothermal, solar, wind, and battery resources while long-term costs are calculated using NREL (or EIA) cost projections. 6c Do future resource costs account for availability of tax credits established by Inflation Reduction Act?
Yes, resource costs are adjusted to account for tax credits made available by the IRA. However, E3 does provide several recommendations for future refinement of treatment of IRA tax credits:
• IRP assumes a 2035 credit expiration, when it is likely credits will remain in effect after this time due to national emissions not reaching the 75% reduction 2022 emissions . Potential credit extensions should be tracked in future IRPs. • Analysis does not consider the PTC as an option for new solar – this may limit the selection of future solar as the PTC provides larger incentives at the assumed capacity factor of 32% • Hydrogen fuel cost projections do not account for available IRA credits. This may cause an overestimation in future hydrogen fuel costs and limit resource selection.
• Analysis does not account for costs of lost PTC when PTC-eligible resources are curtailed and may affect the way resources are deployed and curtailed.
6d Are new resource options characterized by
reasonable limits on technoeconomic potential and
other factors that could limit timing or amount of
development?
Yes. The IRP limits new resource build options to a 1 GW build limit per technology per year. Space constraints are considered in different scenarios by favoring distributed resources. Local constraints versus resource constraints for resources built externally on CAISO are unclear.
6e Are transmission costs to deliver new resources to
loads accounted for in the analysis?
Yes. Transmission costs for new resources are accounted for through a transmission access charge (TAC) applied to external resources.
6f Are the impacts of future technology cost uncertainty explored?
Yes. The IRP considers technology cost uncertainties by performing sensitivity analyses around high and low technology costs.
6g Are financial assumptions from public, reputable
sources?
Yes. The IRP does rely on public reputable sources for financial sources. PWP should ensure that these are clearly cited in the final IRP filing for transparency.

31 Excluded*Included
6a – Technologies Options Considered
• Community solar & paired solar
• 4-, 6-, 8-hr storage (local &
system)
• Fuel cells (local & system)
• Residential solar & batteries
• Commercial solar & storage
• Biogas
• Onshore wind & paired wind
• Offshore wind
• Utility solar & paired solar
• Geothermal
• Small modular nuclear
reactors*
• Hydrogen conversion at
existing gas plants*
• Carbon capture retrofits at
existing gas plants*
• Fossil Fuels
• Long duration storage*
• Tidal / wave power
• New gas with CCS*
✓
 The technologies included in the IRP were reasonable based on technology readiness and policy considerations ✓ Exclusion of new fossil fuels or small modular nuclear reactors follows Pasadena and California policy, respectively
✓ Exclusion of tidal / wave power is appropriate based on technology readiness and economics
× Long duration storage & gas with CCS could have been
considered as firm options, but do not compromise the approach* × Conversion of Glenarm to hydrogen could have been considered as a potentially lower-cost, clean firm option, but doesn’t compromise the approach*
✓ All mature renewable technologies and storage were included, including configuration variants (paired vs non-paired) ✓ Local and system resource options were considered, which is important for transmission-constrained utilities
✓ Firm, dispatchable, zero-carbon technologies were considered (fuel cells & biogas), which many utilities have found crucial to ensure reliability in low-carbon systems
– While fuel cells are a less mature technology, E3 has seen this option considered as a non-combustion-based firm resource !
E3 Recommendation
Consideration of more than one generic wind and solar resource option/location for onshore wind and solar and offshore wind may provide PWP with more diversified resource profiles contributing to a more resilient clean energy portfolio.
* Purposefully excluded due to Stakeholder Advisory Group (STAG) feedback

32  Methodology used to develop generic cost assumptions follows industry standard practices for IRPs:
• Near-term costs anchored to public market referents (typically executed power purchase agreements (PPAs))
• Long-term cost trajectories defined by public data sources (NREL Annual Technologies Baseline, supplemented with EIA Annual Energy Outlook)
• “High” and “Low” technology cost ranges developed to capture inherent future cost uncertainties
 Since assumptions were originally developed, inflationary pressures, global supply chain issues, and rising interest rates have continued to exert upward pressure on PPA
costs
• “IRP - Base” cost trajectories appear optimistic based on current PPA market data
• Cost impacts under the “IRP - High” sensitivity should be considered as a reasonably likely outcome that is consistent with today’s market
6b - Methodology to Develop Cost Assumptions

0.00 10.00

20.00 30.00

40.00 50.00

0.00 2025 202 202 202 202 2030 2031 2032 2033 2034 2035 203 203 203 203 2040 2041 2042 2043 2044 2045 204 204 204 204 2050 tility cale olar (Real 0 3 / Wh)
NREL High Low Range NREL Moderate IRP Base IRP Low IRP High

0.00 5.00

10.00 15.00

20.00 25.00
2025 202 202 202 202 2030 2031 2032 2033 2034 2035 203 203 203 203 2040 2041 2042 2043 2044 2045 204 204 204 204 2050 our attery torage (Real 0 3 /kW mo)
NREL High Low Range NREL Moderate IRP Base IRP Low IRP High

Example Cost Projections Used In PWP IRP

33 6c - Treatment of Inflation Reduction Act
Notable Items for Future Consideration

ZERO CARBON FUELS
• PWP did not include any fuel cost adjustments for hydrogen or biofuels that may sway the economics of achieving zero emissions on an hourly basis. E3 suggests applying this during routine utility due diligence as these resources also qualify for IRA credits.

TAX CREDIT EXPIRATION YEAR
• PWP assumes tax credits expire by 2035 which would occur if the US achieves 75% GHG reductions below 2022 levels by 2032. E3 finds this level of GHG reductions optimistic and suggests considering an extension of the “Application Year” or, at a minimum, performing cost sensitivities that explore the impact of extensions in ongoing utility analyses.

PTC vs. ITC Assignment in PWP IRP
 The IRA allows clean energy developers to select either the ITC or PTC
 Selection depends on both the cost and the capacity factor of resources
• ITC is often more favorable for higher-cost, lower capacity factor resources
• PTC is often more favorable for lower-cost, higher capacity factor resources
!
E3 Recommendation
As the threshold for choosing PTC vs ITC is close and dependent on future system dynamics (i.e., curtailment), E3 recommends evaluating both options for resources such as wind and solar to determine the optimal choice as part of future IRP studies.

Resource Capacity Factor PTC ITC
Onshore Wind 35%
Geothermal 90%
Solar 19% - 32%
Offshore Wind 46%
Battery Energy
Storage 10% - 42%
Fuel Cells Model optimized

34 7. Resource Operational Characteristics
ID Criteria E3 Review
7a Are operational constraints of dispatchable
resources, such as gas and nuclear captured
within the analysis?
Yes. The typical operational constraints such as pmin, pmax, must-run capacities, daily starts, min up and down times, outage rates, maintenance schedules ramp rates are reflected for the dispatchable resources. Heat rates for existing coal and natural gas resources are based on actual plant characteristics as provided by PWP and are consistent with industry standards for each technology. 7b Are operating costs for dispatchable resources
appropriately characterized within the analysis?
Yes. Variable O&M assumptions for existing coal and natural gas resources are based on actual plant characteristics as provided by PWP.
7c Do resource profiles for wind and solar resources
reflect expected diurnal and seasonal variability,
e.g., serially complete timeseries data 8,760?
Not Applicable. E3 did not review hourly profiles for renewables used in the modeling due to contractual restrictions between ACES and the third-party vendor that provided the profiles. However, based on the information available, E3 believes all renewable and load profiles are not “temporally aligned”, i.e., do not reflect a common set of meteorological conditions throughout the year, considered industry best practice and an opportunity for future improvement. Existing resources appear to be modeled with an average annual capacity factor, while new resources are represented by hourly profiles. Without temporal alignment between load profiles and renewable profiles, there is a risk of mischaracterizing renewable resource availability to meet load throughout the year; additional (or less) capacity may be required, depending on if the misalignment overstates or understates renewable resource availability.
7d Is renewable curtailment modeled in system
dispatch with appropriate penalties where
relevant?
Yes. The operational simulation in EnCompass allows for curtailment of renewable resources while ensuring that the full costs of all new resources are accounted for, i.e., under a PPA structure, resources that are curtailed are compensated at the full PPA price. However, no costs for the loss of the PTC when energy is curtailed are accounted for. These costs may be increasingly important if new solar resources opt for the PTC (rather than the ITC as modeled in this analysis).

35 7c – Renewable Energy Resource Profiles
Common Industry Practice:
 Hourly profiles for wind and solar are simulated and match hourly load conditions, i.e., using the same weather year modeled to ensure realistic system conditions are captured. • Hourly dynamics should reflect “real” generation – profiles shouldn’t be averaged over years  Geographic granularity of renewable profiles represent generic but distinct areas where utility would potentially procure resources.
 For a representative renewable resource in each area, multiple locations are simulated and aggregated to ensure profile does not over- or under-estimate resource potential.

Note: E3 was not able to review the full hourly renewable resource profiles used in PWP’s IRP due to contractual restrictions between PWP’s contractor and the third-party provider of the renewable profiles. 8,760
hours
Load
Solar
Wind
!
E3 Recommendation
E3 recommends using temporally aligned wind and solar resource and load profiles and representing more utility-scale solar and wind resources across California, as profiles vary regionally in future IRPs.

Temporal alignment of wind and solar resource and load profiles determines these resources’ contribution to firm capacity, or capacity credit, and has important economic implications (or renewable energy’s economic value).

36 8. Commodity Pricing - 1 of 2
ID Criteria E3 Review
8a Are cost assumptions for fuels
developed based on reputable
public data sources and/or market
intelligence?
Yes. Overall, commodity prices are from appropriate sources. The fuel prices at SoCal CG are provided by Horizons Energy and utilizes a variety of sources, i.e. Natural Gas Intelligence (NGI) to obtain forwards and historical LMCs, EIA Annual Energy Outlook (AEO), and other published sources, to produce the forecasts. A transport and delivery adder is applied to the Glenarm unit fuel prices. The green hydrogen and renewable natural gas prices are sourced from Utility Dive and Bloomberg, and the Gas Foundation, respectively. However, green hydrogen and RNG do not consider IRA tax credits, which could make these fuels more cost effective. This could impact resource dispatch or investment decisions and the subsequent system costs (revenue requirement) of the results. Given the lack of publicly available sources with clean fuel price forecasts that embed the IRA impacts, the IRP modeling team has responded with inclusion of a disclaimer and note that PWP will monitor the market, public, and private sources of information to investigate these fuels, as necessary.
8b Are wholesale market price
forecasts developed based on
reputable public data sources and/or
market intelligence?
Yes. Horizons Energy provided market price forecast data that uses a fundamentals-based approach, simulating full grid operations in the EnCompass model to determine the market prices. More background information on the associated methodology would improve understanding, such as documentation around the assumptions of policy achievement, installed capacity and generation across regions, hourly price dynamics, etc.; however, it is understood that some of this information is sensitive and confidential for the vendor and may not be shared. 8c Are future wholesale market prices
forecasts aligned with future
commodity price forecasts and
impacts of policy on markets?
Additionally, are market transactions
(sales/purchases) appropriately
accounted for and are the inputs
and assumptions clearly detailed?
Yes. The market is represented as a price strip representing SP-15 and PWP can transact on an hourly basis constrained by the limits described in 7a (price taker model), a sound approach for a small utility, relative to the market size. The data provided is only in an average “ x24” price for a given year, but the model uses an hourly representation of market price forecast data. As described by the market price vendor, gas prices and market prices are aligned.

However, due to contractual restrictions the full dataset and development methodology and assumptions were not available so E3 cannot fully evaluate the reasonableness of these assumptions without this review. For transparency, the inputs and assumptions behind the development of these market price forecasts shared by the vendor should be included in the IRP’s supporting information.

37 8. Commodity Pricing - 2 of 2
ID Criteria E3 Review
8d Are cost assumptions for carbon emissions
(such as emissions, compliance or social cost of
carbon) based on reputable public data sources?
The California Cap and Trade Program is modeled as a limit on carbon and direct inputs from the CARB identify limits for PWP. Costs and/or revenues from the disposition of allowances under the program are considered in dispatch or revenue requirement metrics. A social cost of carbon is modeled from the EPA’s “Supplemental Material for the Regulatory Impact Analysis for the Supplemental Proposed Rulemaking, ‘Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: oil and Natural Gas Sector Climate Review” 8e Are uncertainties in commodity price forecasts
explored through sensitivity analysis or
alternative scenarios?
No. Scenario and sensitivity analysis was not conducted on commodity price forecasts. Given deep uncertainty in future market prices, it is standard practice to explore sensitivities on these commodity prices or potential constraints on market purchases and sales; however, PWP’s approach to explore islanded and market access scenarios provides some understanding extreme ends of market exposure.

Ultimately, the scenario and sensitivity design process resulted in a focus around other input assumptions.
8f Is the cost of delivering energy contracted
outside of the PWP region to the local system
properly represented?
Yes. The PWP IRP represents this using a Transmission Access Charges (TAC), which are applied to the external resources on a /MWh basis for getting energy to PWP’s system. This is a standard approach and reasonable assumption to use in the IRP.

38 8a. Natural Gas Price Forecast
 Horizons Energy provided the gas prices representing the Southern California City Gate Hub for use in the PWP IRP, and were also used in the underlying market prices • This alignment is important to ensure common economics between the market and dispatch of resources responding to those market signals
 PWP applied a 1.1x multiplier to gas prices for the Glenarm units to represent additional transportation costs and taxes for those units
 Only average annual gas prices were provided to E3 for its review, as hourly assumptions were unavailable due to contractual restrictions between ACES and the third-party vendor Note: Prices are from market quotes with a trade date of 12/30/2022 and data from Horizons Energy is blended at 10% per year. While more detail on how Horizons Energy produces the data that is blended in to produce prices would be useful, the overall gas price forecast is reasonable !
E3 Recommendation
Often, evaluating sensitivities around market prices/gas prices can help understand the range of costs utilities could experience in the future. E3 recommends consideration of these types of sensitivities during routine utility due diligence or future IRPs.

39 8d. Treatment of Carbon Emissions and Costs
 California’s Cap and Trade Program was modeled as an explicit cap on carbon for the PWP system based on limits set by the California Air Resources Board; and costs/revenues associated with the disposition of allowances are integrated into cost metrics
• Given the program results in /ton prices on carbon emissions that falls within the range of a published “floor” and “ceiling” price, it is appropriate to model this price explicitly
 PWP modeled a Social Cost of Carbon based on the EPA assumptions* and according to industry standard • E3 has seen the modeling of a Social Cost of Carbon in many jurisdictions • Social Cost of Carbon has been modeled as an implicit price signal to inform investments, but does not impact the revenue requirement as it is not an explicit cost borne by PWP ratepayers * “Supplemental Material for the Regulatory Impact Analysis for the Supplemental Proposed Rulemaking, ‘Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: oil and Natural Gas Sector Climate Review”

40 9. Carbon and Clean Energy Accounting
ID Criteria Explanation
9a Are all applicable RPS (or clean energy targets)
targets and related policies clearly defined and
detailed for the planning horizon?
Yes. The PWP IRP adheres to applicable RPS and clean energy targets and related policies through clearly defined targets aligned with SB 100 and SB 1020 as well as City of Pasadena goals. These targets are tied to modeling constraints and resource attributes 9b Are all applicable GHG targets and/or goals and
related policies clearly defined and detailed for
the planning horizon?
Yes. The PWP IRP planning approach explores how the ambitious climate goals of the City of Pasadena may drive resource portfolio choices. The PWP IRP model constraints adhere to the CARB target range to 2030 with straight-line reductions to zero emissions by year-end 2045, except for scenarios that meet the Pasadena Resolution to source 100% of the city’s electricity from carbon free sources by 2030 (year-end), which have zero emissions from 2031 through 2045. All existing, planned and new resource candidates considered in the model have assigned carbon emission rate attributes (lb CO2/MWh) for use in emissions accounting through the planning horizon.

Review of IRP Results

42 E3 benchmarked PWP’s IRP with peers planning for similarly ambitious energy goals and through a study of tradeoffs between metrics of total cost and carbon emissions reductions. The following sections present these results:

1. Benchmarking of Results with California Energy Plans

2. Carbon Abatement Costs Review
PWP IRP Results Review

43 PWP IRP Results Benchmarking: Approach
 PWP IRP results were benchmarked with three
California planning activities to identify key
differences and validate model results:

1. *California Public Utilities Commission IRP Preferred System Plan (CPUC Resource Plan): A 73% Renewable
Portfolio Standard, with 86% GHG free resources by 2032.

2. Sacramento Municipal Utility District Case A (SMUD
2030 Carbon Neutrality): No allowance of combustion
generation, only of currently contracted biogas, without unspecified market purchases in 2030.

3. NREL LA 100% Renewable Scenario SB100 (LA 100%
Renewable Plan): 100% renewable energy by 2045
Despite differences in terms of input
assumptions, tools used,
scenario design, etc.
…similar entities embarking on decarbonizing
their systems should come to
similar approaches in terms of
strategies.

Hypothesis: IRP Results Benchmarking
 Every power system is unique and requires tailored approaches to meet specific objectives; therefore, there are no “correct” solutions, and so E3 asks:

1. What trends are common across deep decarbonization energy planning strategies?

2. How does PWP’s IRP results align with these common trends among similar ambitious “peer” planning activities? *CPUC IRP creates a plan to meet GHG emissions goals while maintaining reliability at the lowest possible costs. Preferred plans are chosen with considerations from IOUs with independent modeling. See https://www.cpuc.ca.gov/irp

44  E3’s work with utilities and regulators to develop long-term resource plans support three common trends in deep
decarbonization planning studies:

1. Technologies available today can enable significant progress towards ambitious state and utility clean energy objectives

2. A technology-neutral approach to planning and procurement will enable utilities to meet reliability and clean energy goals most affordably

3. Some form of firm capacity is needed for reliability even under a deeply decarbonized grid
 These findings are supported by a growing body of literature, including recent studies by the National Renewable Energy Laboratory (NREL), Princeton University, the Electric Power Research Institute (EPRI), and the Massachusetts Institute of Technology (MIT)
Deep Decarbonization Planning Studies: Common Trends
Firm Resources
Today: nuclear, natural gas,
geothermal
Future: hydrogen, long-duration
storage, nuclear SMR, CCS
Scalable Low-Cost Clean
Energy Resources
Today: wind, solar, efficiency
Future: nuclear SMR, CCS
Balancing Resources
Today: batteries, pumped
storage, hydro, demand response
Future: advanced flexible loads,
other storage technologies
Blueprint for a Low Carbon Grid

45 Deep Decarbonization Planning Studies: Common Trends in California
Firm Resources
Today: nuclear, natural gas,
geothermal
Future: hydrogen, long-duration
storage, nuclear SMR, CCS
Scalable Low-Cost Clean
Energy Resources
Today: wind, solar, efficiency
Future: nuclear SMR, CCS
Balancing Resources
Today: batteries, pumped
storage, hydro, demand response
Future: advanced flexible loads,
other storage technologies
Nameplate Capacity Normalized by System Peak Demand: 2030 : geothermal, thermal resources, fuel cells,
and nuclear resources
: wind, solar and distributed resources
: demand response resources
: battery storage, long-duration storage, and pumped hydroelectric : large- and small-scale hydroelectric resources
Blueprint for a Low Carbon Grid

46 California in 2050 at a glance:
 93 GW peak demand
 90% carbon-free generation
• 150 GW solar PV
• 21 GW wind
• 8 GW hydro
• 5 GW geothermal
• 75 GW energy storage
 35 GW reliability need for
firm capacity (40% of peak)
 90% GHG reduction
relative to 2005 levels
Statistics and visuals adapted from High
Electrification scenario in Long-Run Resource
Adequacy under Deep Decarbonization
Pathways for California
The Essential Role of Firm Generation In a Low Carbon Grid Weekly Generation Mix
(GWh) Most weeks of the year, the supply of carbon-free resources s x s s s s…
Hourly Generation for a December Week (2007 Weather Conditions) (MW) …bu u w s w renewable droughts when storage is exhausted, firm resources are needed to ensure reliability 25-35 GW
natural gas capacity
Legend:

47 Multiple Analyses Conclude “Clean Firm” Resources Will Be Needed To Enable Complete Power Sector Decarbonization
Highlights from Clean Firm Power is the Key to C f ’s Carbon-Free Energy Future:

The Environmental Defense Fund and the Clean Air Task Force convened three groups of energy system experts to model C if rni ’s electricity system in order to figure out how the state might make that much affordable, clean, and reliable electricity. Groups from Princeton University, Stanford University, and Energy and Environmental Economics (E3), a San Francisco-based consulting firm, each ran separate models that sought to estimate not only how much electricity would cost under a variety of scenarios, but also the physical implications of building the decarbonized grid.
…
Despite distinct approaches to the calculations, all the models yielded very similar conclusions. The most important of these was that solar and wind c n’ do the job alone.
…
Our model results show that squeezing out the last increments of carbon from power generation while maintaining affordability and reliability will require clean firm power.
“Clean irm” Technology ptions
• Hydrogen Combustion
• Hydrogen Fuel Cells
• Natural Gas w/ Renewable Fuel
• Natural Gas w/ CCS
• Geothermal
• Nuclear

48  ’s 030 Clean Energy Vision
establishes an ambitious plan to
decarbonize energy supply over the next
decade
 After studying a range of options for existing
natural gas resources, SMUD found the most
viable path to be one in which plants are retooled
and repurposed using carbon-free fuels
• Need for firm capacity driven by reliability
Spotlight: SMUD 2030 Clean Energy Vision
Image source: SMUD 2030 Clean Energy Vision
“Retiring o r t er al po er plants an relying co pletely on proven clean tec nologies is possible, b t it’s an expensive option t at ay not be reliable n er every eat er scenario.”

49 PWP IRP Benchmarking 2030 Results: 1 of 3
Nameplate Capacity Percent of System Peak Demand 2030
PWP Reference CasesNormalized CA Results 100% Carbon Free by 2030 Firm Capacity and Hydro represent 70-90% of
system peak in CPUC, SMUD, and LA100, while firm
capacity and hydro only represent approximately
0% of capacity in PWP’s cenario 1.

With gas retirements, PWP firm capacity needs are met through existing nuclear, fuel cells, and geothermal energy, while comparison cases consider a combination of existing nuclear, gas resources, hydrogen combustion, and geothermal resources.

PWP Scenario 1 is the carbon free scenario with the
largest proportion of firm capacity.

System Peak Demand

50 PWP IRP Benchmarking 2030 Results: 2 of 3
Nameplate Capacity Percent of System Peak Demand 2030
PWP Reference CasesNormalized CA Results 100% Carbon Free by 2030 PWP scenarios 2 and 3 have less than 1/2
the firm capacity and hydro resources as
the comparison cases, but 3x the variable
and storage resources.

In the absence of firm capacity options PWP must add significant additional variable renewables and storage, which will have declining firm contributions with future system saturation. This may not be captured in current reliability modeling approach. Additional analysis during routine utility due diligence would be useful to ensure confidence these portfolios are adequately reliable.

System Peak Demand

51 PWP IRP Benchmarking 2030 Results: 3 of 3
Nameplate Capacity Percent of System Peak Demand 2030
PWP Reference CasesNormalized CA Results 100% Carbon Free by 2030 PWP Scenarios 4 and 5 have the
capacity to meet 80% of their peak load
with firm capacity and hydro resources,
comparable to CPUC, SMUD, and LA100
which range from 70-90% PWP Scenario 4 and 5 are reference cases meant to meet SB 1020 (Net Zero Emissions
by 2045), and thermal resources are not
retired in 2030
PWP Scenario 4 has comparable amounts of variable
and storage resource capacity to the CA plans,
suggesting that it is likely at or near reliability targets.

Scenario 5 has 2x the variable resource capacity of
the other plans resulting from the inclusion of the
social cost of carbon.

System Peak Demand

52 PWP IRP Benchmarking 2040 Results
Nameplate Capacity Percent of System Peak Demand 2040
PWP Reference CasesNormalized CA Results 100% Carbon Free by 2030 PWP Scenario 1 has similar firm
capacity and hydro resource
proportions as SMUD, but 75% of
the resources of CPUC and
LA100.

Scenarios 2 & 3 have 2x the variable
renewable and storage resource capacity
of CPUC and LA100, but capacity levels
are comparable to SMUD.

Scenario 4 & 5 have a comparable
levels of firm capacity as the
comparison cases.

53 PWP IRP Benchmarking:
2030 and Beyond Resource Mix
Resources PWP IRP1 CPUC IRP SMUD 2030
Carbon Neutrality
LA 100%
Renewable Plan
Fuel Cells
Hydrogen Combustion
Offshore Wind
Gas with CCS
Gas
Pumped Storage
Demand Response (DR)2
Nuclear
Biogas
Wind
Solar
Hydro
Battery
Geothermal
The only dispatchable firm capacity
resource option PWP considers is fuel
cells, while LA, CPUC and SMUD
include a mix of existing and new gas,
gas w/ CCS, and hydrogen combustion
for dispatchable firm capacity.

Balancing resources such as pumped
storage and DR, which are considered
by LA, CPUC and SMUD, are not
included in PWP’s IRP Mix in Scenarios
1-3.3
Only PWP’s IRP does not
consider new or existing gas
resources as a firm capacity
resources from 2030 on
In Mix
Not in Mix

1. Only carbon-free scenarios 1, 2, & 3 considered here.

2. PWP load forecast includes 1 MW of DR resources by 2030.

3. PWP included an emerging technologies scenario that
estimated additional DR potential; however, this DR capacity was not added to scenarios 1, 2 & 3.

54 PWP IRP Benchmarking: Key Takeaways
 PWP’s IRP aligns with ambitious decarboni ation plans in terms of scalable clean energy and storage resources; however, differences are evident in the firm capacity options considered. • Of the benchmarked plans, PWP was the only system that considered fuel cell additions and does not consider gas resources after 2030.
 Constraints on firm capacity options (i.e., thermal resources) in carbon-free scenarios result in higher variable renewable resources and storage additions than the benchmarked scenarios. • These additional variable renewables will have declining firm contributions with future system saturation, which may not be captured with the current reliability modeling approach.  CPUC, SMUD, and LA100 rely on existing thermal resources to provide firm capacity through 2030, moving to renewable fuels or CCS in the mid-term, and hydrogen combustion in the long-term. • PWP’s IRP gas resources are retired by 2030 in Carbon-Free scenarios, requiring significant additions of fuel cells and battery storage to meet firm capacity needs.
 Benchmarking exercise helps validate PWP IRP methodology as 2040 reference scenario results align well with deep decarbonization trends.
• PWP’s reference scenarios are well aligned with the common trends of firm capacity, scalable low-cost clean energy resources, and balancing resources of deep decarbonization plans.

55 PWP IRP Scenario Results: Carbon Abatement Costs
2030: Cost & Emissions Comparison to 2023 Reference Levels 2040: Cost & Emissions Comparison to 2023 Reference Levels  The additional cost to remove the remaining system carbon emissions after achieving 80% or 90% carbon reductions is significantly higher than the cost to get to those reduction levels  This is consistent across scenarios but exacerbated in 2 & 3 where firm capacity limits are applied 30% increase in cost
for 80% reduction in
emissions from 2023
to 2030 in the
Reference Scenario.
140% increase in cost for 100% reduction
in emissions from 2023 Reference levels.
60% increase in cost
for a 90% reduction in
emissions from 2023
Reference levels.
130% increase in cost for a 100%
reduction in emissions relative to 2023
Reference Scenario levels.
* *
*Refers to Scenario 4
**Costs include base energy rate and IRP scenario revenue requirement normalized by load for scenario. Cost does not include any stranded assets $0.13/kWh**
$0.23/kWh
$0.15/kWh
$0.22/kWh
$0.18/kWh $0.21/kWh$0.18/kWh $0.22/kWh

56  Implied cost of carbon abatement is higher than the assumed social cost of carbon chosen in Scenario 5, reaching 2x the costs in scenarios 2 and 3 in 2030.

PWP IRP Scenario Results:

SCC and Implied Carbon Abatement Cost Comparison
2030: Implied Cost of Carbon Abatement
In 2030 Scenario 2 and 3 implied carbon abatement
costs greater than 2.5x the assumed Social Cost of
Carbon (SCC).
$590
$870
$1,200
$1,700
$1,000
$1,600
$ / Short Ton Emissions
2040: Implied Cost of Carbon Abatement
GHG
The Implied Cost of Carbon Abatement ($/ton) for a given scenario measures the cost to achieve additional emissions reductions, relative to a reference case, on a per ton basis Calculation:
$/ton =
∆ 𝑐𝑜𝑠𝑡
∆ 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠
2030 SCC: $400 per short ton
2040 SCC: $580 per short ton
In 2040 Scenarios
2 and 3 this
implied cost is
over 2.5x the
assumed SCC.

Thank You
Contact Info: Nathan Lee, Managing Consultant
[email protected]

Pasadena City CouncilDecember 11, 2023

Pasadena City Council
December 11, 2023