david howarth mrw & associates oakland, california [email protected]

David Howarth

MRW & AssociatesOakland, [email protected]*JUST THE FACTS: RESOURCE PLANNING AND PROCUREMENTINDEPENDENT ENERGY PRODUCERS ANNUAL MEETINGSEPTEMBER 18, 2014

Update on 2012 long-term procurement plan (LTPP) proceeding and associated procurementIntroduction to 2014 LTPP proceedingReview of other resource planning and procurement activitiesConclusions*OVERVIEW OF PRESENTATION

*2012 LTPP UPDATE

System requirements (Track 2) deferred to 2014 LTPPLocal capacity requirements (Track 1) expanded to address 2013 SONGS retirement (Track 4)CAISO modeling identified ~4600 MW of local need, assuming ~200 MW DR, ~980 MW incremental EE, and ~460 MW DGD.14-03-004 reduced CAISOs need estimate to account for some combination of load shedding, transmission, and incremental uncommitted EE, energy storage, demand response and customer PV resources to determine procurement authorization:

SCE also authorized to procure 215 -290 MW in Moorpark sub-area of Big Creek/Ventura *2012 LTPP UPDATE

SCE (LA Basin)SDG&ETotalPreferred Resources550 - 950175725 - 1125Storage502575Gas-Fired10001000Any Source300-500300-600600-1100Total1900-2500500-8002400-3300

SCE issued Track 1 LCR RFO in September 2013

*2012 LTPP UPDATEOffers were due 12/16/13Initially open to projects within West LA areaExpanded to include Track 4 authorization in March 2014No new bidsEligible area revised to include just the southern portionFinal offers 9/4/14Final selections by 10/16/14Application to CPUC 11/21/14

SDG&E negotiated bilateral contract with Carlsbad Energy Center for 600 MW peakerApplication to CPUC for contract approval (A.14-07-009) filed July 21, 2014SDG&E issued Track 4 RFO seeking 800 MW on September 5, 2014If approved, the 600 MW Carlsbad contract will count towards the authorized need, leaving 25 MW of storage and 175 MW of preferred resources to be procured through the RFOOffers due January 5, 2015Application to CPUC for approval of contracts Q1 2016

*2012 LTPP UPDATE

*2014 LTPP KICKOFF

*2014 LTPP: FORECAST OF LOADS & RESOURCES

2014 LTPP proceeding is focused on determining system reliability needs in 2024CAISO & ORA filed testimony in August presenting deterministic modeling results estimating reserve shortfalls for various scenarios

SCE performed stochastic modeling of the High Load Scenario onlyExpected shortfall of 8,500 MW, with 34-37 Stage 3 emergenciesand 1,000 GWh of expected dump energy

*2014 LTPP: PHASE 1A MODELING RESULTS

ScenarioUpward/DownwardNumber of HoursMaximum Shortfall (MW)Types of Reserve ShortfallCAISO/ORA: Trajectory ScenarioUpward51,489Load Following, Non-SpinCAISO: Trajectory without Diablo CanyonUpward193,730Load Following, Non-Spin, SpinCAISO: High Load ScenarioUpward345,353Load Following, Non-Spin, Spin, Regulation, EnergyCAISO: Expanded Preferred Resource ScenarioN/AN/A0N/ACAISO: 40% RPS in 2024 ScenarioUpward92,242Load Following, Non-SpinORA: Trajectory + PVUpward41,188Load FollowingORA: Trajectory + Tracks 1&4Upward1164Load Following

None of the modeling parties conclude that system reliability need can be determined from the Phase 1a resultsShortfall amounts do not account for 2,315 MW of Track 1&4 authorization not included in the CPUC scenarios CAISO: unlimited renewable curtailment potentially masking the need for flexible resources, need further studySCE: any need in 2024 can be addressed in 2016 LTPP, other ways to mitigate over-generation ORA: given duration of shortfall, no need for additional capacity or further study in this LTPP proceedingReply testimony due September 24thWill include PG&E modeling testimonyCAISO and SCE to submit stochastic results for Trajectory scenario in November 13th

*2014 LTPP: INITIAL CONCLUSIONS

*OTHER RESOURCE PLANNING AND PROCUREMENT ACTIVITIES IN CA

Renewable Energy Procurement (R.11-05-005)2013 RPS purchases: PG&E 23.8%, SDG&E 23.6%, SCE 21.6%Appear to be on track to reach 33% by 2020Procurement expenditure limitation to be adopted by CPUC

*RESOURCE PLANNING AND PROCUREMENT ACTIVITIES

PG&Es forecasted renewable net short (2014 RPS Procurement Plan)*RESOURCE PLANNING AND PROCUREMENT ACTIVITIESSource: PG&E 2014 Draft RPS Procurement Plan June 6, 2014

SCEs forecasted renewable net short (2014 RPS Procurement Plan) *RESOURCE PLANNING AND PROCUREMENT ACTIVITIESSource: SCE 2014 Draft RPS Procurement Plan, June 6, 2014

SDG&Es forecasted renewable net short (2014 RPS Procurement Plan)

*RESOURCE PLANNING AND PROCUREMENT ACTIVITIESSource: SDG&E 2014 Draft RPS Procurement Plan, June 6, 2014

Comparison of SDG&Es forecasted REC bank balances (2013 Plan vs. 2014 Plan)*RESOURCE PLANNING AND PROCUREMENT ACTIVITIES

Energy Storage (R.10-12-007)October 2013 decision set specific energy storage targets for each IOU totaling 1,325 MW by 2020PG&E (580 MW); SCE (580 MW); SDG&E (165 MW)First RFOs anticipated December 1, 2014Energy Efficiency (R.13-11-005)Considering move to rolling portfolios with long term (10 yr.) funding approvalWould avoid program funding disruptions and embed EE in demand forecasts used for resource planning and procurementRolling portfolios will not be considered in time for setting 2015 goals and funding levels, which will continue as an extension of the 2013-14 budget cycle*RESOURCE PLANNING AND PROCUREMENT ACTIVITIES

Demand Response (R.13-09-011)Demand Response Auction Mechanism (DRAM) proposalIntended to create competitive procurement mechanism through reverse auction and to integrate DR supply resources into CAISO energy marketsAim is to launch in 2015 and achieve 5% of peak by 2020Settlement agreement proposes DRAM pilot auctions to be held in 2015 and 2016, many details to be determinedCAISO/CPUC Joint Reliability PlanMulti-year RA requirement, market-based replacement of CAISO backstop, unified long-term reliability planningFacing pushback from legislature over FERC role in regulating RA market

*RESOURCE PLANNING AND PROCUREMENT ACTIVITIES

Residential Rate Design Rulemaking and Net Energy Metering (NEM)Will new rate design and NEM rules hinder further expansion of residential solar?PG&E Gas Transmission and StorageCombined with already approved pipeline safety enhancement plan (PSEP), likely to result in a significant increase in gas transportation costs for gas-fired generators

*REGULATORY PROCEEDINGS WITH IMPLICATIONS FOR PROCUREMENT

Procurement for local resources is under wayResults of all-source RFOs will tell us if EE and DR can compete with other supply resources to provide local capacityIf incremental EE and DR fall short of levels assumed in the procurement authorization, there will be implications for reliabilitySignificant modeling work remains to quantify system reliability needsWhat level of forecasted shortfall justifies procurement?Long-term procurement of system resources appears at least 1-2 years awayRenewable procurement seems to be reaching a plateau, but poised for new growth phaseWill the RPS be expanded or will there be other drivers for renewable procurement?What is future of RAM and FiT?

*CONCLUSIONS

David Howarth

MRW & AssociatesOakland, [email protected]*QUESTIONS?

THANKS!

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