green opportunities in california ren orans managing partner, e3
TRANSCRIPT
Green Opportunities in California
Ren Orans
Managing Partner, E3
Change in Regulatory DriversPublic Utilities CommissionInvestor Owned Utilities
Regulatory Case
Buzz
BuzzBuzz
Buzz
State GovernmentPublic
Buzz
Legislators are also busy…
…Creating the perfect storm? Or new opportunities for utilities?
Bringing CA CO2 levels back to 1990,
while adding 9,000MW of generation,
without building nuclear,
while retrofitting 20,000MW of capacity to remove once-through cooling
With renewed interest in renewable energy and direct access
Agenda
Utility business opportunities Large-scale regional projects Grid modernization Customer service opportunities
Intra-governmental wheeling How does it fit?
Utility Business Opportunities
Customer service options
Grid modernization
Large-scale regional projects
Green Solutions Coming… Large-scale Clean Power Gen and Transmission
Utility-owned renewable generation Transmission system investment
Smart Distribution Systems Advanced Metering Infrastructure Distribution Automation Coordinated Distributed Energy Resources, including storage
Retail Service Options from Utility Plug-in Hybrid Electric Vehicles (PHEV) Photovoltaics Energy Efficiency Energy Storage, Home Back-up Demand Response / Load Shifting
Capturing Value Streams as Utility Ratebase Growth – provides value as long as the
investment is allowed Sales Growth – provides value between rate cases if (a)
no decoupling mechanism, and (b) retail rate is above marginal cost
DSM Incentives Performance-based ratemaking
CO2 Reductions – the mechanisms to implement CO2 caps is not yet defined in California, but any benefits of selling CO2 credits will likely flow back to ratepayers
Improved Reliability – there are small PBR incentives, but these are generally symmetrical and can result in penalties as well
Customer Satisfaction – there are small PBR incentives, but these are generally symmetrical and can result in penalties as well
Economic Energy Transfers – decreased consumer costs due to importing low-cost energy are difficult to capture directly, may provide more ‘room’ under existing rate levels
Direct Profit
Indirect Profit
California Shareholder Incentives
$500 million cap of reward / penalty over three years
Represents a change in net earnings of about 8%, much larger than prior PBR mechanisms
Proposed Decision on Energy Efficiency
Regional projects New large scale transmission projects to meet RPS
California Examples Tehachapi wind power development Palo Verde - Devers II transmission SDG&E ‘Sunrise’ transmission California-BC Renewable Partnership
Value Streams Ratebase growth, improved reliability, economic transfers, CO2
reductions
The electric utilities are willing and capable of building, maintaining, and operating a new wave of clean energy infrastructure that can reduce CO2 emissions and improve reliability
Grid modernization projects
New Information Technology; Metering, Automation
California Examples Advanced metering infrastructure Title 24 Programmable-Communicating Thermostat
Value Streams Ratebase growth, improved reliability, customer satisfaction
In the future, a technology backbone to coordinate distribution system operations can bring greater value out of dispatchable distributed generation, storage, and demand response.
Advanced Metering Infrastructure AMI Deployment Authorizations in
California by the CPUC
PG&E $2,200 million 9 million meters
SDG&E $719 million 2.4 million meters
SCE, Pre-deployment $63 million Predeployment
Proposed Functionality
Data Functions Interval consumption Tamper and diagnostic alarms Remote Firmware updates Net metering Two way communications Online customer access
Operational Functions Remote account activation and shut-off Outage and return to service verification Theft and tamper detection Voltage alerts
Future Implementation Demand response CPP, dynamic rates Communicate with home area network and individual devices Real-time price negotiation Distribution Automation
Net Savings from Transportation Sector Emissions Reduction Measures
Source: Zack Subin, PhD Candidate
Energy and Resources Group, UC Berkeley
Customer-service options
Offer set of products and services
CA examples PG&E ClimateSmart CO2 neutral rate option
Value streams Sales growth, ratebase growth, financing of equipment, CO2
reductions, customer satisfaction
A menu of green options can be packaged and delivered turn-key to customers with financing, low prices, complementary retail rates, with PUC approval.
Service Options for ‘Green’ Customers Typical customer profile
Priorities: Help The Environment, Flexibility, Convenience Middle and Higher Income, Technology Early Adopter
Menu of Customer Choices
Reinforce the message through on-bill reporting of environmental achievements such as displaced CO2 emissions
PHEV Retail Service ProductsOff-Peak Charging "Anytime" ChargingGrid-supplied Renewable Energy Home Backup Grid Backup Credit
Green Home Retail Service ProductsEfficiency Audit and upgrades Grid-supplied Renewable EnergyPhotovoltaic Roof On Bill Financing
Level of incentives, cross-subsidy issues, funding mechanisms have largely been determined at the CPUC New retail options can be cost-based without subsidy
Program Cost Treatment
Example Option DescriptionsCustomer Option Description
Assumptions & Calculations
Off-Peak Renewable Charging
Allows customer to purchase super off-peak energy to charge vehicle
Assumed cost-based rate of $0.08/kWh
Home Charging and Backup
Financing for the cost of the charging station at the home, plus install controls that use the car for backup service and intelligence to turn off appliances when not needed
Assumed cost of $3,000 financed by utility
PV Roof Utility aggregates the rebate ($2.60/W), and the tax credit (assumed $0.02/kWh) and sells the user energy at the net cost per kWh
Net cost per kWh is calculated to be approximately $0.34/kWh
EE Audit, Upgrades, and On-Bill Financing
Leverages existing energy efficiency options together and provides on-bill financing for customer portion of the costs
Grid Backup Credit Allows customer to sell back grid support services from their PHEV
Bill Comparison – Old vs. NewExisting PG&E Service Green Household ‘Makeover’
The Original Bill (Large Residence in San Ramon) The New Bill (EE, PV, Car Charging, Standby, Grid Support)
$/kWh kWh Annual Bill $/kWh kWh Annual BillTier 1 0.11$ 4,473 511$ Tier 1 0.11$ 4,473 511$ Tier 2 0.13$ 1,342 174$ Tier 2 0.13$ 479 62$ Tier 3 0.23$ 2,631 605$ Tier 3 0.23$ 0 -$ Tier 4 0.32$ 2,237 721$ Tier 4 0.32$ 0 -$ Tier 5 0.37$ 500 185$ Tier 5 0.37$ 0 -$ Regular Charges 11,183 2,196$ Regular Charges 4,952 573$
$/kWh kWhOn-Bill Financing of EE 150$ Charging Station & Home Backup 457$ Solar Roof 0.34$ 4,730 1,617$ Off-Peak Renewable Car Charging 0.08$ 5,400 432$ Selling to Grid (Placeholder) -$
Annual Bill 183 /mo$ 2,196$ Annual Bill 269 /mo$ 3,230$ CO2 from Grid (tons)* 5.59 CO2 from Grid (tons)* 1.73
Automobile Automobilegallons Annual Cost CO2 (tons) gallons Annual Cost CO2 (tons)
Gasoline 700 1,750$ 6.83 Gasoline 233 582$ 2.3
Total Cost (PG&E and Gasoline) 3,946$ Total Cost (PG&E and Gasoline) 3,812$ Total CO2 (tons) 12.42 Total CO2 (tons) 4.00
* Assumes 1000lbs per MWh
Approximately $20,000 financed, ~$1,100 equity return per year per customer
Intra-Governmental Wheeling of Electricity
Docket No. 2007-0176
Relevant and Embedded Issues
Technical Feasibility - Interconnection Impact on System Reliability What Load – One Order away from DA Governmental Entity as Utility POLR responsibilities - Coming and going rules Departing Load charges/exit fees RA, RPS and PPP responsibilities Tariff Design Financial impact on utilities – credit rating
Source: Alcantar & Khal, LLP
Evaluating the End Game
Given these issues and parties, where do the Companies want to be? Potential Alliances Political/Legislative Efforts Proceed Methodically Narrow Scope of Proceeding Pilot Project Demonstrate Infeasible and Threat to Reliability
Source: Alcantar & Khal, LLP
Two Choices
Delay Approach—Argument: Wheeling is expensive and hard to do on small island Maintain Reliability Live to fight another day, but that day may come too soon
Facilitate “Virtual Access” as low cost alternative to “Direct Access” Maintains Reliability Keeps customers whole Low cost implementation for utility Long term solution for Hawaii if utility can continue to develop
and integrate renewable energy resources into grid?
Possible Approach
Use Case as an Opportunity Promote Renewable Energy Development Promote Energy Choices for Customers
How to Implement? Virtual Access: a low-cost way to implement
intra-governmental wheeling potentially benefits participants and holds all other
customers harmless.
Direct Access with OATT
Rates are unbundled to reflect the separate costs of Transmission Distribution and Ancillary Services. [G + AS+ T + D].
Customers electing to purchase directly from suppliers are billed AS + T + D from utility and they sign bilateral contracts directly with third party suppliers for G.
Utilities must run their systems to keep the lights on and charge customers for all necessary ancillary services.
The Market Structure:Easy in Theory
G G G
Spot Energy
T&D
TweenersEnron HECO AES
Competitive Generation market
Wholesale Market
RetailMarket
Customers
Spot Energy
Risk PremiumFixed Charge
for WiresService Charge
Rate
But in Reality!The California Model
G G G G G
Contracts for Difference
Bid-in Generation
POWER EXCHANGESpot Market
Direct Access Bilateral Contracts
Supply Aggregator #1
Scheduling Coordinator #1
INDEPENDENT SYSTEM OPERATOR
UDC #1 UDC#2 UDC#3
CC CC
CFD
CC CC CC CC
Non-Utility Retailer #1Utility
Retailer #2Utility
Retailer #1Non-Utility Retailer #2
Utility Retailer #3
CFDDirect Access
Trading Scheduling Settlements BillingA/R
and G/LMetering
Initial Preferred Schedules(Energy)
Generator Meter
Multipliers
Adjustment Bids
Ancillary Bids
Supplemental Bids
Final Energy
Schedules
AncillaryService
Reservation Schedules
Cash Payments
and Receipts
UsageCharges(Zonal Prices)
Real-TimeSettlements(ISO Charge
Types)
AggregateMeterData
Participant Meter Data
Final Schedules
Day-AheadFinal
SettlementStatements
Day-AheadPreliminary SettlementsStatements
Real-TimePreliminarySettlementStatements
Real-TimeFinal
SettlementStatements
Day-Ahead Invoices
Real-Time
Invoices
Statements AggregateMeter DataCash
Paymentsand
Receipts
Participant MeterData
Initial Preferred Schedules(Energy)
GeneratorMeter
Multipliers
MCPs
Traded Quantities
Portfolio Bids
Credit InfoCredit Info
MCPs
MCPs
Quantities
AdminFile
A/R Updates
Adjustment Bids
Ancillary Bids
Supplemental Bids
Notes: • An Initial Preferred Schedule (ISP) may be for a generator, load, intertie, or an inter-SC trade. • An ancillary bid may be for operating reserve, spinning reserve, regulation, or replacement.
Virtual Access
Agencies are allowed to sign bilateral contracts with third party suppliers and receive bill credits
Bill Credits = Benchmark Price - Contract Price Bills are reduced if contracts < Benchmark
HECO continues to procure and integrate all resources; however, customer can add their specific resource to utility resources.
Case Strategy
In workshops, describe what it would take to implement real direct access just to take care of intra-governmental wheeling
Offer alternative of virtual access as low cost way to accomplish same goals
Work on settlement and joint filing, with ability of third parties to let HECO implement virtual access and see it works
