Microsoft PowerPoint - Presentation - RAM Forum 1-24-14.pptxJanuary 24, 2014 San Gabriel Hilton, San Gabriel, CA
Event address: https://sce.webex.com/sce/onstage/g.php?d=802136483&t=a Topic: SCE RAM Program Forum Date and Time: January 24, 2014 at 9:00 am Pacific Prevailing Time Event Number: 802 136 483 Event Password: RAMforum Dial-In Number: 888-469-1382 Access Code: RAM FORUM
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Agenda for SCE’s RAM Forum January 24, 2014 – San Gabriel, CA
Time Topic
9:15 am Overview of the RAM Contracting Tool and Results
9:45 am Independent Evaluator’s Observations
10:00 am Break
10:45 am Feedback and Discussion
11:30 am Adjourn
Purpose of the RAM Forum
1. SCE will provide a briefing on the progress of RAM to date
a. Data and observations on the four procurements completed to date, RAM 1 through RAM 4
2. The Independent Evaluator will present his observations
3. SCE will present proposed changes for the next procurement, RAM 5 a. Following discussion today, SCE will propose these changes in an advice letter to
the CPUC on February 7 b. Today and in that advice letter, SCE will not discuss “the Future of RAM” c. Nor will we discuss other SCE procurements at this meeting
4. Open dialog – we encourage participation today!
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5
• Consistent with the goals of Commissioner Ferron’s September 2012 Amended Scoping Memo regarding RPS administration, the Commission is now reviewing and considering the possible extension of the RAM Program after RAM 5.
• ALJ Ruling issued December 31, 2013, requesting comments on questions prepared by Energy Division Staff to help inform the Commission’s review of RAM.
• Issues to be examined in the proceeding include:
• Whether factors underlying original RAM authorization continue to apply;
• Whether reauthorization of RAM is appropriate;
• Existing RAM program elements;
• Existing RAM contract terms and conditions.
• Comments Due: January 30, 2014
• Reply Comments Due: February 14, 2014
• Proposed Decision on future of RAM expected Q2 2014.
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The RAM Contracting Tool
• In D.10-12-048 (“the RAM Decision”), the California Public Utilities Commission (“CPUC”) adopted a new contracting tool called the Renewable Auction Mechanism, or RAM
– To procure eligible renewable resources from generating facilities not greater than 20 megawatts (“MW”)
– Located within one of the investor-owned utilities’ (IOU) service territories
• RAM uses a standard non-negotiable power purchase agreement (PPA)
• SCE is required to procure 754.4 MW in three separate resource categories – Peaking, as-available – Non-peaking, as-available – Baseload – Offers must be evaluated and ranked separately within each category, based on
price, plus transmission adder, minus resource adequacy benefits – SCE may procure ±20 MW of the MW targeted in each product category as long as
the total capacity procured in each auction is ±20 MW of the total MW target
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The RAM Contracting Tool as Introduced in the RAM Decision • The first paragraph of the CPUC’s RAM Decision states:
– This decision authorizes a new procurement process called the Renewable Auction Mechanism, or RAM, for the procurement of smaller renewable energy projects that are eligible for the California Renewables Portfolio Standard (RPS) Program
– The RAM is a simplified and market-based procurement mechanism for large investor-owned utilities (IOU).
– The Commission adopts RAM as a primary contracting tool for this market segment because doing so will
• promote competition and elicit the lowest costs for ratepayers, • encourage the development of resources that can utilize existing transmission and
distribution infrastructure, and • contribute to RPS goals in the near term.
– We (CPUC) expect RAM to complement the RPS Program by • reducing transaction costs and • providing a procurement opportunity for smaller RPS-eligible projects, which • have not been able to effectively participate in the annual RPS solicitations to date.
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Evolution of Contracting Terms
• RAM contracting terms have evolved over the course of the four RFOs
• Listed here are examples from Resolution E-4546, which followed the IOUs’ first RAM Forums in mid-2012:
– Revisions to guaranteed energy performance requirements – Increased certainty around the resource adequacy benefits a project will provide – Introduction of dual time of delivery factors for energy only and full deliverability – Rules regarding the eligibility of existing projects – Standardized treatment of generation in excess of contracted quantities – Elimination of variable deposit amounts for different sized projects – Introduction of Woman-, Minority-, Disabled Veteran-owned, Business Enterprise
reporting requirements
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RAM Contracting – a Six Month Process
RFO Auction Date COD1, Months after CPUC Approval 1 November 15, 2011 182
2 May 31, 2012 242
3 December 21, 2012 242
4 June 28, 2013 242
1Commercial Operation Deadline required in the RAM PPA 2RAM PPA allows for a 6-month extension in the event of regulatory delays beyond Seller’s control
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# MW # MW # MW # MW
Offers 92 1,260 142 2,133 130 1,928 126 2,021
PPAs 7 67 6 97 13 202 10 164 PPAs, % of Offers 8% 5% 4% 5% 10% 10% 8% 8%
• Offers contracted, in terms of both number of offers and megawatts, have been a small percentage of offers received
– Ten percent or less in each RAM auction
• These results provide a good indication of a competitive market
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RAM 1 RAM 2 RAM 3 RAM 4
# Offers 92 142 130 126
# Firms 28 39 40 39
# Contracts 7 6 13 10
# Firms Receiving Contracts 4 3 9 8
• 28-40 firms have participated in each of the four RAM auctions
• Firms that submit a large number of offers in RAM auctions have not received a disproportionately high share of contracts
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RAM Resource Categories
• SCE has procured within resource categories as ordered in the RAM Decision
• The market has been dominated by solar PV offers – Therefore, SCE established targets (±20 MW) that allowed up to 100% of the
selected offers to be in the peaking, as-available category
Number of MW in PPAs Executed, by Resource Category Resource Category RAM 1 RAM 2 RAM 3 RAM 4
Peaking, as-available executed MW 67 97 194 128 Peaking, as-available target MW 55 166 200 146
Non-peaking, as-available executed MW 0 0 7.5 35.8 Non-Peaking, as-available target MW 5 10 15 20
Baseload executed MW 0 0 0 0 Baseload target MW 5 10 15 15 Total executed MW 67 97 201.5 163.8
Total target MW 65 186 230 181
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# Offers 92 142 130 126
# Screened Out for COD 45 22 16 30
# Screened Out for Other Reasons 1 7 21 16
Total # Screened Out 46 29 37 46
Percentage of Offers Screened Out 50% 20% 28% 37%
• Large numbers of offers were screened out during each procurement – The primary reason was failure to demonstrate the ability to meet the required COD
(which was 18 months in RAM 1; 24 months in RAM 2-4) • Based on interconnection studies and milestone schedules submitted with the offer
– Other reasons amounted to failure to provide conforming documentation to support the offer (e.g., interconnection study)
– Offerors were given the opportunity to cure
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RAM 1 RAM 2 RAM 3 RAM 4
COD Requirement, Months 18 24 24 24
Months Since PPA Approval 19 13 6 0
# PPAs Executed 7 6 131 101
# PPAs Terminated 1 0 5 2
# Projects Delayed 4 2 1 0
# On Track to Meet COD 22 4 7 8
1One of the PPAs executed in RAM 3 and two of the PPAs executed in RAM 4 are existing Qualifying Facilities. 2The two RAM 1 projects shown as “On Track” as of December 18, 2013 are now operating.
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RAM Program Recommendations The IE recommended in RAM 3 that the COD
deadline be extended to 30 months Construction schedules have gotten no shorter Competitive projects will fail for failure to meet 24 month
COD
RA Delivery & Interconnection Study should be correlated Issue = the actual RA Delivery Commencement date
occurs sooner than the Interconnection Study estimated IE recommends the Offeror should receive the FCDS TOD
factors as of earlier date
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SCE’s Proposed Changes for RAM 5
• SCE will ask the CPUC to approve the following changes in RAM 5:
– RAM PPA Changes: • Safety - Require independent engineer report regarding written safety plan • Network Upgrade Costs - Include termination right if network upgrade costs increase and
Seller does not exercise “buy-down right” • Curtailment - Simplify curtailment provisions • Resource Adequacy and Full Capacity Deliverability Status - Provide for payment of FCDS
TOD Factors on date promised in Seller bid (rather than date FCDS achieved) to align PPA with evaluation
• Shared Facilities - Include provisions related to shared facilities in the body of the PPA, rather than in a consent
• Ministerial and other minor changes
– RAM Procurement Process Changes: • Specify how SCE prevents larger projects from being split up into smaller projects to meet
the RAM 20 MW requirement • Relax procurement targets by resource category • Ministerial and other minor changes
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Proposed PPA Change: Safety
• Prior to the start of construction Seller must provide to SCE a report from an independent engineer that Seller has a written safety plan for the safe construction and operation of the Generating Facility
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Proposed PPA Change: Network Upgrade Costs and Seller’s “Buy-Down Right”
• Seller’s Interconnection Studies identify the estimated cost of Interconnection Facilities and Distribution Upgrades (i.e. non-reimbursable costs) and Network Upgrade Costs (i.e. typically “reimbursable costs”)
• The estimated amount of the total Network Upgrade Costs (Reliability Network Upgrades and, for FCDS projects, the Deliverability Network Upgrades, if applicable) is set as a Network Upgrade Cost Cap in the PPA
• After the PPA is executed, if that estimate goes up in a subsequent study, revision of the study, or in the final GIA, and exceeds the Network Upgrade Cost Cap, then SCE can terminate the PPA
• Seller has the right to pay SCE back the amount in excess of the Network Upgrade Cost Cap, in which case SCE no longer has this termination right
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Proposed PPA Change: Curtailment
• RAM 4 curtailment language is complex and has been difficult to administer
• Under simplified curtailment provisions, SCE may curtail and the primary question is whether Seller is paid for the curtailed energy
– SCE does not pay for curtailed energy if the curtailment instruction was ordered by CAISO, Transmission Provider, etc. or due to an Emergency
– SCE does not pay for curtailed energy if SCE gives Seller a Curtailment Order and • The Curtailment Order is for Non-On-Peak hours, and • SCE has hours remaining within the Curtailment Cap (Contract Capacity x 50 hours/year)
– SCE does pay for curtailed energy if SCE gives Seller a Curtailment Order and • The Curtailment Order is for On-Peak hours, or • SCE has used all of the hours within the Curtailment Cap
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Proposed PPA Change: Resource Adequacy and Full Capacity Deliverability Status
• The RAM 4 PPA contains provisions related to Resource Adequacy and Full Capacity Deliverability Status (FCDS)
– For energy only projects, SCE is not proposing any changes
• For FCDS projects, SCE proposes the following: – Starting on the RA Guarantee Date, Product Payment will be calculated using the
FCDS TOD Factors regardless of whether Seller actually is able to provide any RA Benefits
• This represents a change from the RAM 3 and 4 PPA, which provided that FCDS TOD Factors would only be used once the project has achieved FCDS
– Starting on the RA Guarantee Date, if there is an RA Deficit (calculated as Qualifying Capacity minus Net Qualifying Capacity), Seller must pay SCE an RA Deficit Payment (RA Deficit amount x Capacity Procurement Mechanism price)
• For RAM 5, SCE proposes making clean up and other minor improvements to the provision detailing Seller’s RA Deficit Payment obligations
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Proposed PPA Change: Shared Facilities
• SCE has standard provisions that it requires if a project intends to share interconnection facilities with another project
• In prior RAM solicitations, SCE included these provisions in a separate consent and amendment that it then submitted when filing its Tier 2 Advice Letter for approval of the RAM PPAs
• SCE proposes integrating those standard provisions into the RAM PPA, rather than a consent
• Terms generally fall into two categories – Permission for the Seller to utilize shared facilities and to finance the generating
facilities together as a portfolio – Protections for SCE and its customers from potential costs and risk that result from
the sharing of facilities
Proposed Procurement Process Change: Subdivision of Projects
• SCE will not enter into contracts with multiple projects that utilize the same interconnection queue number
– Intended to address subdivision of larger projects to meet RAM 20 MW limitation
• SCE will inform potential Sellers of this policy in the RAM RFO Instructions
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Proposed Procurement Process Change: Relax Resource Categories
• SCE will propose to the CPUC that the requirement to procure within resource categories (±20 MW) be relaxed or eliminated
– This would enable technology-agnostic ranking and selection of lower cost projects
• The relative participation of different technologies is difficult to predict before each RAM solicitation
– e.g., RAM 4 saw a significant increase in cost-competitive wind projects
• RAM 4 results were not optimal because of resource category constraints – Solar procurement range was constrained to 126-166 MW – Wind procurement range was constrained to 0-40 MW
• To stay within these constraints, SCE was forced to select some higher cost solar offers in place of more competitively priced wind offers
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Date Event
February 7 SCE files Tier 3 Advice Letter proposing RAM 5 changes
May 22 CPUC passes Resolution approving RAM 5
May 29 SCE files Tier 1 Advice Letter and launches RFO
June 6 SCE hosts RFO Conference
June 27 Auction – deadline for offer submittal
August 15 SCE notifies offerors of selection status
September 5 SCE executes PPAs
October 10 SCE submits Tier 2 Advice Letter for approval of PPAs
November 10 CPUC approves PPAs
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