Opportunities and Challenges for Higher Renewable Penetration in California

Beyond 33%: UC Davis Policy Forum Series Sacramento, California

October 17, 2014

Arne Olson, Partner, E3

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California’s Current and Expected Renewable Energy Achievements

On track to meet or exceed 33% RPS by 2020

• ≈ 50% if counting rooftop PV (5%) and large hydro (13%)

• 32% reduction in electric sector GHG emissions, relative to 2005

California’s success factors:

• Access to high-quality resources

• Strong policy support

• Very active developer market

• Steep decline in solar PV prices

• Complementary fleet of flexible natural gas and hydro resources

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Where do we go from here?

Policymakers are now assessing the role of renewables in meeting potential GHG reduction targets in 2030 and beyond

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United Nations Deep Decarbonization Pathways Project

Collaborative analysis by research teams in 15 nations to explore 2050 decarbonization scenarios consistent with a global temperature increase of 2˚C or less

Country-level analysis reflects local constraints and perspectives within each country

E3 led U.S. analysis using our Pathways model

Interim report delivered to UN Secretary General Ban Ki-Moon on July 11, available at http://unsdsn.org/wp-content/uploads/2014/07/DDPP_interim_2014_report.pdf

Final report scheduled to be released in early November

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DDPP Study Interim Findings

Across countries & scenarios, deep decarbonization scenarios consistent with 2˚C target share three energy system transformations:

1. Energy Efficiency

2. Electricity Decarbonization

3. Electrification of fossil fuel end uses to rely more heavily on low-carbon electricity sources

All countries show nearly complete decarbonization of electric supply by 2050 for deep reduction scenario

Indicators of transformation in US balanced scenario

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Options for Electric Sector Decarbonization

1. Nuclear

• California law prohibits construction of new nuclear facilities until the federal government has designated a permanent nuclear waste repository

2. Fossil generation with carbon capture and sequestration (CCS)

• No commercial projects in service; proposed projects are struggling to make it to the finish line due to high costs

3. Renewables

• Current default option in American West

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Example US pathway: balanced scenario combines low-carbon generation technologies*

*Other scenarios emphasize renewables, nuclear or coal/gas with CCS

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Investigating a Higher Renewables Portfolio Standard in California

Study sponsors:

• Los Angeles Dept. of Water & Power

• Southern California Edison Co.

• Pacific Gas and Electric Co.

• San Diego Gas & Electric Co.

• Sacramento Municipal Utility District

• Technical input from California ISO

Advisory panel:

• Dr. Dan Arvizu, NREL

• Dr. Severin Borenstein, UC Berkeley

• Dr. Susan Tierney, Analysis Group

• Mr. Stephen Wright, ex BPA CEO

Available at: http://www.ethree.com/public_projects/renewables_portfolio_standard.php

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High Renewable Scenarios Create Grid Operations Challenges

Chart shows increasing overgeneration above 33%

• Overgeneration is very high on some days under the 50% Large Solar case

• Fossil generation is reduced to minimum levels needed for reliability

Renewable curtailment is a critical strategy to maintain reliability

• Reduces overgeneration

• Mitigates ramping events

Example April Day

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Overgeneration Challenge Worsens at Higher Penetrations

Average Overgeneration, Large Solar Scenario

Technology 33% RPS 40% RPS 50% RPS

Large Solar

50% RPS

Diverse

Average Overgen 0% 2% 9% 4%

Marginal Overgen

Geothermal 2% 9% 23% 15%

Wind 2% 10% 22% 15%

Solar PV 5% 26% 65% 42%

Overgeneration by Scenario

Overgeneration is minimal at 33% RPS, but increases dramatically above 40%

Saturation drives marginal overgen to unsustainable levels for solar PV

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Capacity Value Declines Significantly at High Penetration

Peak net load hour pushed past sundown at high solar penetration

Effective capacity of solar declines significantly

Between 33% and 50% renewables:

• 20 GW of nameplate capacity added

• 2 GW of effective capacity added

System will still need capacity resources

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Integration Solutions Will Be Critical to Success

Increased regional coordination

• Make best use of latent flexibility in current system

Renewable resource diversity

• Reduces overgeneration and need for flexible resources

Flexible loads

• Shifting loads from one time period to another, sometimes on short notice

Flexible generation

• Need generation that is fast ramping, starts quickly, and has low min. generation levels

Energy storage

• Long-duration storage (diurnal) is important

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Conclusions

Deep decarbonization efforts will inevitably lead to higher renewable penetration

• Renewables look like the least-cost, least-risk decarbonized electricity source in the American West

• We will need nuclear and CCS too (especially in other regions)

Saturation of the grid with solar energy begins to occur at 10-15% of total supply

• This will reduce its relative value and open up new opportunities for wind and geothermal

• May happen sooner than we think—CAISO already seeing many 5-minute intervals with negative pricing during daylight hours in springtime

Thank You! Energy and Environmental Economics, Inc. (E3) 101 Montgomery Street, Suite 1600 San Francisco, CA 94104 Tel 415-391-5100 Web http://www.ethree.com

Arne Olson, Partner (arne@ethree.com)