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Green Opportunities in California Ren Orans Managing Partner, E3.

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Presentation on theme: "Green Opportunities in California Ren Orans Managing Partner, E3."— Presentation transcript:

1 Green Opportunities in California Ren Orans Managing Partner, E3


3 Change in Regulatory Drivers Public Utilities Commission Investor Owned Utilities Regulatory Case Buzz State Government Public Buzz


5 Legislators are also busy…

6 …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

7 Agenda Utility business opportunities  Large-scale regional projects  Grid modernization  Customer service opportunities Intra-governmental wheeling  How does it fit?

8 Utility Business Opportunities Customer service options Grid modernization Large-scale regional projects

9 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

10 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

11 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

12 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

13 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.

14 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

15 Net Savings from Transportation Sector Emissions Reduction Measures Source: Zack Subin, PhD Candidate Energy and Resources Group, UC Berkeley

16 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.

17 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 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

18 Example Option Descriptions Customer OptionDescription 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 RoofUtility 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 CreditAllows customer to sell back grid support services from their PHEV

19 Bill Comparison – Old vs. New Existing PG&E ServiceGreen Household ‘Makeover’ Approximately $20,000 financed, ~$1,100 equity return per year per customer

20 Intra-Governmental Wheeling of Electricity Docket No. 2007-0176

21 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

22 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

23 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?

24 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.

25 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.

26 The Market Structure: Easy in Theory GGGGGG Spot Energy T&D Tweeners EnronHECOAES Competitive Generation market Wholesale Market Retail Market Customers Spot Energy Risk Premium Fixed Charge for Wires Service Charge Rate

27 But in Reality! The California Model G G G G G Contracts for Difference Bid-in Generation POWER EXCHANGE Spot Market Direct Access Bilateral Contracts Supply Aggregator #1 Scheduling Coordinator #1 INDEPENDENT SYSTEM OPERATOR UDC #1 UDC#2 UDC#3 CCCC CFD CCCCCCCC Non-Utility Retailer #1 Utility Retailer #2 Utility Retailer #1 Non-Utility Retailer #2 Utility Retailer #3 CFD Direct Access

28 TradingSchedulingSettlementsBilling A/R and G/L Metering Initial Preferred Schedules (Energy) Generator Meter Multipliers Adjustment Bids Ancillary Bids Supplemental Bids Final Energy Schedules Ancillary Service Reservation Schedules Cash Payments and Receipts Usage Charges (Zonal Prices) Real-Time Settlements (ISO Charge Types) Aggregate Meter Data Participant Meter Data Final Schedules Day-Ahead Final Settlement Statements Day-Ahead Preliminary Settlements Statements Real-Time Preliminary Settlement Statements Real-Time Final Settlement Statements Day-Ahead Invoices Real- Time Invoices Statements Aggregate Meter Data Cash Payments and Receipts Participant Meter Data Initial Preferred Schedules (Energy) Generator Meter Multipliers MCPs Traded Quantities Portfolio Bids Credit Info MCPs Quantities Admin File 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.

29 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.

30 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

31 Further Information Ren Orans, Managing Partner San Francisco (415) 391-5100

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