City of Palo Alto CA : Item No. 2 - Presentation (Filebank)

January 29, 2020 at 10:30 am

Carbon Neutral Plan Update &

RPS Compliance Strategy Options

February 5, 2020

Jim Stack, PhD

Purpose & Outline

Seek a motion to recommend Council approval of changing the carbon accounting methodology used in the Carbon Neutral Plan to one based on average hourly emissions factors.
Present refined strategy options for complying with the state's Renewable Portfolio Standard law:
1. Sell Renewables > 104.5% of Load (to remain Carbon Neutral)
2. Sell Renewables > Load
3. Trade In-State Renewables > RPS Requirement for Out-of-State Renewables
Discuss implications of these potential changes.

Part 1:

Carbon Neutral Plan Updates

Proposed Carbon Neutral Plan Amendment

Primary Changes:
- Switch from an annual carbon accounting methodology to one based on hourly average emissions factors.
- Permit the use of RPS-eligible, unbundled RECs to neutralize any residual emissions that result from this change in carbon accounting methodology.

Additional minor clean-up

lbCO2/MWh

1100

1000

900

800

700

600

500

400

300

200

100

Average 2018

CAISO Emissions

Hour Ending Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec12:00 AM 1:00 AM 2:00 AM 3:00 AM 4:00 AM 5:00 AM 6:00 AM 7:00 AM 8:00 AM 9:00 AM 10:00 AM 11:00 AM 12:00 PM 1:00 PM 2:00 PM 3:00 PM 4:00 PM 5:00 PM 6:00 PM 7:00 PM 8:00 PM 9:00 PM 10:00 PM 11:00 PM

Part 2:

Refined RPS Compliance Strategy

Options

Background - CPAU Renewable Supplies

Palo Alto's renewable energy supplies greatly exceed state requirements

Refined RPS Compliance Strategy Options

		Annual Carbon-	In-State Carbon-
Portfolio Options	Note	Free Supplies	Free Resources
(as % of Annual	(as % of Annual

		Load)*	Load)*

1) Sell renewables >	Staff began
Load (remain Carbon
implementing this in	104.5%	104.5%
Neutral w/ hourly
2019
accounting)

2) Sell renewables >	Would require
purchasing small volume	100%	100%
Load	of unbundled RECs to

	remain Carbon Neutral
3) Trade in-state	Staff would like to		75%
renewable energy > RPS
explore this, seeking	100%	(25% out-of-state
requirement for out-of-
UAC feedback		renewables)
state renewable energy

		*in an average hydro year

Note: Current portfolio (before sales) has Carbon Neutral supplies equal to ~110% of annual load

Part 3:

Implications of RPS Compliance

Strategy Changes

Effects of RPS Compliance Strategies (2020-2030)


Annual Averages	Current	1) Sell Supplies	2) Sell Supplies	3) Renewable
Portfolio	> Load (&	> Load	Exchange
	Remain CN)

Supply Cost	---	+$1.7	+$0.6	+$1.0
Savings ($M)	($2.3 total)	($3.3 total)

Retail Rate
---	-1.1%	-0.5%	-0.7%
Impact (%)	(-1.5% total)	(-2.2% total)

RPS Level	63%	50%	45%	39%
Emissions
		42	131
Intensity (Hourly	-125	0
Accounting)	(0 w/ RECs)	(0 w/ RECs)

(lb CO2/MWh)
Emissions
Intensity (Power	13	10	9	65
Content Label)

(lb CO2/MWh)

PCLs of Various RPS Compliance Strategies (2020)

Projected	Save $2.3M	Save $3.3M Total
Supply Cost:	(1.5%)	(Add'l $1.0M)
$81M		(2.2% total)

Supply Cost Savings Comparison

RPS Level Comparison

PCL Emissions Intensity Comparison

Next Steps

Staff will take the amendment to the Council-approved Carbon Neutral Plan to the Finance Committee and Council.
Staff will seek additional feedback from the environmental community on the merits of trading in-state renewables for out-of-state renewables prior to returning to the UAC.
Staff will also bring a discussion of the proposed RPS strategy changes to the Finance Committee and Council.
Staff will implement any changes to portfolio strategy.
Staff will also bring a report to the UAC and Council this spring about the 2025 Western contract renewal.

QUESTIONS?

Potential Uses of Revenue

Reducing electric rates ($1.9M is just over a 1% reduction)
Building electrification & decarbonization programs
AMI investment
EV infrastructure investment/incentives
Second transmission line

Part 1-A:

Affirmation of UAC Support for

Hourly Carbon Accounting

Alternative Carbon Emissions Accounting Methodologies

Today's Discussion:
- Time-stepGranularity: Annual vs. Hourly Accounting
- Emissions Intensity: Average vs. Marginal Emissions (for Hourly Accounting)
State 2019 Changes:
- Unbundled RECs (which we deem Carbon Neutral) will be treated as System Power

			State Changes
	Unbundled RECs	Unbundled	to 2019 Power
Current CPAU		Content Label
= Carbon	RECs
Method	Neutral	= System Power
		If no accounting


Annual Accounting	Method A	Method B	change today, this
			will still make our
Hourly Accounting	Method C	Method D	portfolio appear
(Average Emissions Factors)		more carbon-
Hourly Accounting			intensive
Method E	Method F

(Marginal Emissions Factors)

Calculation of Palo Alto's 2018 Emissions on an Hourly Basis

8760

= � ℎ ∗ ℎ

ℎ=1

2018 Average Net Load & Total Emissions

Net Annual

Emissions:

16,118 mT CO2

2018 Total Emissions by Accounting Methodology

After purchase of 3,638 unbundled RECs

(Note: 3,638 MWh @ system power emissions intensity = 1,557 mT CO2)

	Unbundled RECs	Unbundled RECs
	= Carbon Neutral	= System Power
		Net	Emissions		Net	Emissions
	Method	Emissions	Intensity	Method	Emissions	Intensity
		(mT)	(lb/MWh)		(mT)	(lb/MWh)

Annual Accounting	A	0	0	B	1,557	3.8
Hourly Accounting

(Average Emissions	C	16,118	39.2	D	17,675	43.0
Factors)
Hourly Accounting
(Marginal Emissions	E	(2,038)	(5.1)	F	(526)	(1.3)
Factors)

*If our whole portfolio consisted of average grid power we would have emitted 237,000 mTCO2 and had an emissions intensity of 576 lb CO2/MWh.

Part 1-B:

Affirmation of UAC Support for Portfolio Management Choices

Potential RPS Compliance Strategies

Lower	•	Use Banked RECs
•	Bucket Swap (maximize Bucket 3 RECs)
Cost
		• Sell RPS Supplies Exceeding RPS Requirement

		• Sell RPS Supplies Exceeding Load

		• Current Portfolio - Exceeding RPS with All Bucket 1 Resources
		• Rebalance Portfolio (sell solar, buy geothermal)

		•	Carbon Neutral Every Hour
Higher
Cost

Supply Cost Impacts of RPS Compliance Strategies

Potential RPS Compliance Strategies

Lower	•	Use Banked RECs
•	Bucket Swap (maximize Bucket 3 RECs)
Cost

Sell RPS Supplies Exceeding RPS Requirement
Sell RPS Supplies Exceeding Load
Current Portfolio - Exceeding RPS with All Bucket 1 Resources

	•	Rebalance Portfolio (sell solar, buy geothermal)		2020

			Staff

					Report
Higher •	Carbon Neutral Every Hour

Cost

Supply Costs Savings (2019-2030)

RPS Level Impacts (2019-2030)

PCL Average Emissions Intensities (2019-2030)

Background - Duck Curve

In 2013, Palo Alto approved its Carbon Neutral Electric Supply Plan - and the Duck Curve first appears

Background - Duck Curve, cont.

Because of the Duck Curve, the CO2 emissions intensity of grid electricity now varies tremendously, on an hourly and seasonal basis

Source: CAISO (Hourly Average CO2 Emissions Rates for March 16, 2019)

http://www.caiso.com/TodaysOutlook/Pages/emissions.aspx

Average vs. Marginal Emissions

*Appropriate emissions factor for a

Average* Emissions Intensity: portfolio approach

Total System-wide Emissions

Total Energy Generation

Marginal Emissions Intensity:

•

The emissions intensity of the generating unit called on to provide the last MWh

Useful for thinking about the impact of an individual action (e.g., turning on a light switch)

Not appropriate for a whole sector inventory

Background - CPAU Load & Resource Balance

Palo Alto's electric supply resources vary both hourly and seasonally

Monthly

Totals

January	July
(Average day)	(Average day)

State Changing Treatment of Unbundled RECs (Bucket 3 RECs)

Unbundled RECs: Selling the environmental attribute of renewable generation separate from the underlying energy, generally outside of California
Industry convention: The REC carries all of the environmental properties of the energy generated (including the emissions profile), while the energy is treated as "null" or "system" power
Counts towards RPS requirements (with limitations - 10% of RPS requirement)
Current CPAU accounting methodology: Unbundled RECs + market purchases are treated as carbon neutral

Power Content Label treatment: CEC proposal is that 2019 Power Content Label will nottreat unbundled REC purchases as carbon neutral

2017-2018 Loads & Supply Resources

	CY 2017	CY 2018
Hydroelectric	667,772	342,419
Solar	329,938	342,640
Wind
97,239	107,414
Landfill Gas	107,495	110,140
Net Market Power
(255,795)	3,638
Total Load	946,649	906,251
Carbon Neutral Supplies
127.0%	99.6%
(% of Total Load)

"Average year" hydroelectric generation:

496,000 MWh

3,638 RECs needed

under current Carbon Neutral accounting method

Takeaways from Hourly Emissions Analysis

lbCO2/MWh

1100

1000

900

800

700

600

500

400

300

200

100

Average 2018

Marginal 2018

Palo Alto Resources

CAISO Emissions

Exceeding Load

Hour Ending Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Hour Ending Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Dec

12:00 AM

1:00 AM

2:00 AM

3:00 AM

4:00 AM

5:00 AM

6:00 AM

7:00 AM

8:00 AM

9:00 AM

10:00 AM

11:00 AM

12:00 PM

1:00 PM

2:00 PM

3:00 PM

4:00 PM

5:00 PM

6:00 PM

7:00 PM

8:00 PM

9:00 PM

10:00 PM

11:00 PM

We are displacing a lot of carbon with the hydro resources in the summer evenings.
By generating at times of peak electricity prices, our hydro resources displace a lot of carbon (price and carbon are correlated in CAISO).

Palo Alto's2018Net= LoadbyHour−

CAISO's 2018 Hourly Average Emissions Intensities

CAISO's 2018 Hourly Marginal Emissions Intensities

Palo Alto's 2018 Hourly Average Total Emissions

Background - CPAU 2018 Electric Supplies

CPAU RPS Level: 64%

State requirement: 29%

Seeking feedback on the following issues:

Power Content Label Confusion: If we opt for an accounting methodology whose end result differs from the PCL methodology, how do we address the confusion that might cause?
Hourly Emissions Accounting: Should we adopt an hourly emissions accounting approach? If so, how should we address the portfolio's residual emissions-e.g. in a dry year, or if hourly accounting yields a positive annual emissions total?
RPS Strategy Change to Reduce Portfolio Cost: If we choose to sell excess renewables and "swap" bundled REC resources for unbundled RECs (and system power), the above issues will be accentuated. Is that OK?

Key Takeaways from Hourly Emissions Analysis
		Average 2018			Marginal 2018	Palo Alto Resources
lbCO2/MWh	Hour Ending	CAISO Emissions	Oct Nov Dec	Hour Ending	CAISO Emissions	Exceeding Load
	Jan Feb Mar Apr May Jun Jul Aug Sep	Jan Feb Mar Apr May Jun Jul Aug Sep	Oct Nov Dec
1100	12:00 AM			12:00 AM
1:00 AM			1:00 AM
1000	2:00 AM			2:00 AM
3:00 AM			3:00 AM
900	4:00 AM			4:00 AM
5:00 AM			5:00 AM
800	6:00 AM			6:00 AM
7:00 AM			7:00 AM
700	8:00 AM			8:00 AM
9:00 AM			9:00 AM
600	10:00 AM			10:00 AM
11:00 AM			11:00 AM
500	12:00 PM			12:00 PM
1:00 PM			1:00 PM
400	2:00 PM			2:00 PM
3:00 PM			3:00 PM
300	4:00 PM			4:00 PM
5:00 PM			5:00 PM
200	6:00 PM			6:00 PM
7:00 PM			7:00 PM
100	8:00 PM			8:00 PM
9:00 PM			9:00 PM
0	10:00 PM			10:00 PM
11:00 PM			11:00 PM

By generating at times of peak electricity prices, our hydro resources displace a lot of carbon (price and carbon are correlated in CAISO).
Even in a drier than average hydro year, and using an hourly accounting method, the City's average electric portfolio emissions intensity is extremely low.
Average emissions intensities are appropriate for evaluating the emissions associated with the City's entire electric load.
Marginal emissions intensities are appropriate for calculating the emissions impact of energy efficiency and load shifting measures.

Methods of Abating Residual Emissions

The mechanisms that could be used to abate the City's residual emissions, and their current approximate costs per metric tonne of CO2 abated, include:

Unbundled RECs ($3.50/mT CO2)
Carbon Offsets ($14/mT CO2)
Carbon Allowances ($18/mT CO2)
Bundled (Bucket 1) RECs ($44/mT CO2)
Rebalancing the Portfolio (Difficult to quantify)

Purchasing unbundled RECs or carbon offsets would be the easiest mechanisms to implement, and the easiest to explain. The argument against unbundled RECs is that they don't provide any "additionality."

However, aside from the CEC's PCL protocols, all industry protocols recognize the emissions value of unbundled RECs.

Methods & Cost of Abating Residual Emissions

Cost of Abating 2018 Total Emissions

	Annual	Hourly Accounting
	(Average Emissions
	Accounting
	Factors)


Total Emissions	1,557 mT CO2	17,675 mT CO2
Unbundled RECs	$5,500	$62,000
Carbon Offsets
$21,800	$247,000
Carbon Allowances
$28,000	$318,000
Bundled (Bucket 1) RECs
$68,500	$778,000

Renewable Energy in California

Bucket 1 (PCC1) - Energy and RECs (typically from CA) delivered to a California Balancing Authority (CBA) without substituting electricity from another source. Premium product, ~$20/MWh, Min 75% RPS
Bucket 2 (PCC2) - Energy and RECs (typically from an out-of-state renewable energy project) that cannot be delivered to a CBA without substituting energy from another source (i.e. intermittent wind energy needs to substitute in another energy source to meet demand during times when the wind facility is not generating electricity). $8 to $12/MWh
Bucket 3 (PCC3) - Unbundled RECs, or RECs that do not meet Category 1 and 2 conditions. $2/MWh, Maximum 10%

Source: SVCE 2/19/19
Board Presentation	45

Effects of RPS Compliance Strategies in 2020

RPS Compliance Options

	Minimal RPS	A: Use	B:	C: Sell	Sell			Carbon
For CY 2020	Compliance	Current	Sell Solar,	Neutral
Banked	Bucket	Supplies >	Supplies
(Sum of	Portfolio	Buy Geo	Every
	RECs	Swap	RPS Req.	> Load
	options A, B, C)			Hour

Supply Cost	($7.4)	($2.0)	($0.5)	($4.9)	($2.9)	---	+$7.2	+$6.3
Change ($M)


RPS Level	21.6%	49.3%	60.7%	33.0%	44.4%	60.7%	60.7%	44.4%

PCL Emissions	237	-45	-118	104	---	-148	-148	---
Intensity	(Delta: +385 from
(+103)	(+30)	(+252)	(+148)	(+0)	(+148)
(lb CO2/MWh)	Current Portfolio)

Total Emissions
(Annual	98,200	-18,500	-48,900	42,900	---	-61,300	-61,300	---
Accounting)	(Delta: +159,500)	(+42,800)	(+12,400)	(+104,200)	(+61,300)	(+0)	(+61,300)

(mt CO2)
Total Emissions
(Hourly	114,300	-2,400	-32,800	59,000	16,100	-45,200	-61,300	---
Accounting)	(Delta: +159,500)	(+42,800)	(+12,400)	(+104,200)	(+61,300)	(-16,100)	(+45,200)

(mt CO2)
								46

2018 Annual Total Emissions by Accounting Methodology

After purchase of 3,638 unbundled RECs

(Note: 3,638 MWh @ system power emissions intensity = 1,557 mT CO2)

	Unbundled RECs	Unbundled RECs
	= Carbon Neutral	= System Power
		Net		Net
	Method	Emissions	Method	Emissions
		(mT)		(mT)

Annual Accounting	A	0	B	1,557
Hourly Accounting
C	16,118	D	17,675
(Average Emissions Factors)

Hourly Accounting
E	(2,038)	F	(526)
(Marginal Emissions Factors)

Heat Map of Average CO2 Emissions Intensities

Heat Map of Marginal CO2 Emissions Intensities (2018)

Heat Map of Marginal CO2 Emissions Intensities (2030)

2030 Projected Marginal CO2 Emissions Intensities

2018 Marginal CO2 Emissions Intensities

Development of "Average" Marginal Emissions Rates (1)

Development of "Average" Marginal Emissions Rates (2)

Development of "Average" Marginal Emissions Rates (3)

Development of "Average" Marginal Emissions Rates (4)

Development of "Average" Average Emissions Rates (1)

Development of "Average" Average Emissions Rates (2)

Development of "Average" Average Emissions Rates (3)

Qualitative Factors to Consider

Public messaging consistency (Treatment of unbundled RECs on PCL)
Public perception of carbon intensity
Carbon impact of alternative products (unbundled RECs, carbon offsets, Bucket 1 RECs)
- Additionality, verifiability

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Disclaimer

City of Palo Alto, CA published this content on 29 January 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 January 2020 15:29:00 UTC

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