1. ENERGY ONLY RESOURCES & THE RPS CALCULATOR

2. Deliverability Overview Most resources procured to date have been procured to be fully deliverable – CAISO conducts power-flow study to ensure that transmission network will be able to deliver resource to load during peak periods – Costs of delivery network upgrades (DNUs) are recovered through transmission access charge (TAC) – Resources receive credit based on NQC for resource adequacy With declining ELCC value at higher penetration, FCDS may not be best value going forward FCDS Load All Resources Fully Deliverable 2

3. Deliverability Overview Alternatively, resources may interconnect as energy-only – CAISO does not build upgrades to deliver resource during peak period associated with the resource – Purchaser receives no capacity credit in RA A portfolio that includes energy- only resources may help limit investments in new transmission at higher renewable penetrations The appropriate mix depends on cost & value of potential resources and will vary depending on location-specific considerations FCDS Load FCDS EO Load All Resources Fully Deliverable Combination of Fully Deliverable & Energy Only Resources 3

4. Deliverability in the RPS Calculator Prior versions of the RPS Calculator have assumed that all new renewable resources are made fully deliverable Stakeholders have indicated that functionality to examine the tradeoff between full deliverability and energy only is needed in the RPS Calculator Contracting for and developing energy only resources may provide better value at higher RPS penetrations by limiting investments in new transmission 4

5. System RA value of solar declines significantly at high penetration – Marginal RA value of wind and solar PV < 25% Due to lower value of System RA and high cost of transmission, it may be more economic to procure energy-only contracts View renewables as energy resources and meet RA needs with local resources such as peakers or storage Range at 33-40% RPS in CA Source: RPS Calculator Reduced RA Value Makes Energy-Only Contracts More Attractive 5

6. Transmission Investment in an Energy Only World Building energy-only resources does not imply that no new transmission investment will be needed – Without transmission upgrades, curtailment of renewables due to congestion will eventually grow Addressing this issue suggests a change in the paradigm used to evaluate and/or justify transmission investments – Goal of planning for full deliverability is to ensure availability of resource during a single peak hour – Goal of transmission planning for energy only resources should be to minimize the net delivered cost of renewable generation over the economic lifetime 6

7. Intermittent resources rarely produce at their nameplate capacity Given the cost of delivery infrastructure, the least-cost solution will involve some curtailment of renewable energy output Solar developers are already accounting for this phenomenon in project design by increasing inverter loading ratios No curtailment of PV output at ILR of 1.2 Some curtailment of PV output at ILR of 1.4 It Will Rarely be Economic to Plan to Deliver All Renewable Production to Grid 7

8. Generation & transmission investments should consider impacts of curtailment – It will likely to cost-prohibitive to size transmission to deliver all MWh of expected production – However, curtailment means lost value from renewable production Optimal buildout of generation & transmission a cost tradeoff between: – Cost of the new transmission – Expected quantity of curtailment – Value of the curtailed output – Value of deliverable RA Delivered Cost ($/MWh) Curtailment (% of available energy) Low Curtailment: Too much Tx – Cost of Tx is too high relative to curtailment Medium Curtailment: Delivered cost is minimized High Curtailment: Not enough Tx – too much production is lost Renewable Output Curtailment in Transmission Planning 8

9. Needs for Effective Planning & Procurement The information needed to make efficient planning and procurement decisions will differ if the market shifts towards energy-only procurement Full DeliverabilityEnergy Only ParadigmDelivery of capacity during peak periodsDelivery of energy throughout year Key Questions How much additional capacity can be deliverable on the existing system? How much additional capacity can be added with minor & major upgrades? How much additional energy can the existing system accommodate? How much additional energy can be added with minor & major upgrades? Information Needed from CAISO Estimates of available capacity on the existing system and with a subset of upgrades Estimate of the amount of energy that can be accommodated on the existing system and with a subset of upgrades Currently provided by CAISO through iterative planning process Needed for effective energy-only planning 9

10. Challenges Assessing Transmission-Related Curtailment Many factors could contribute to transmission-driven curtailment: – Loads in and around the area of interest – Renewable generation in and around the area of interest – Constraints on transmission infrastructure Exploring this phenomenon is a time- and resource-intensive modeling process that requires detailed production simulation analysis Determining the least-cost renewable portfolio would require evaluating every possible combination of resources (location and type) in this modeling framework to understand resulting curtailment – While CAISO develops and maintains GridView cases for analysis, this type of study is far beyond the scope of any undertaken to date 10

11. Planned Functionality for v.6.1 Optimizing the transmission and generation investments is a complex problem that requires estimation of transmission-related curtailment for different combinations of the two – Not currently evaluated in any planning or modeling process In the near-term, RPS Calculator v.6.1 will have simplified energy- only logic in addition to the traditional fully deliverable framework – Ranking and selection used to develop energy-only portfolio will ignore both capacity value and transmission cost – Model will not have functionality to estimate congestion-related curtailment due to lack of information – Limits on penetration of energy-only resources in each CREZ will be established based on rules-of-thumb determined by CAISO in collaboration with CPUC 11

12. SPECIAL STUDY PLANS 12

13. 2015 Special Study CAISO’s Transmission Planning Process (TPP) focuses on current policy-preferred portfolio (a 33% portfolio) The idea of a “Special Study” was borne of the mutual desires of the CPUC and CAISO to begin investigating the implications of moving beyond 33% upon transmission planning Goal is to investigate issues, challenges, and opportunities that may arise as the state shifts its focus to higher penetrations of renewable generation 13

14. Parallel Tracks for Planning Work & Special Study Proposed Scope of Study Scope of Special Study is still under development through interagency discussions between CPUC, CAISO, and CEC Special Study is intended as an informational effort to examine higher penetrations and will not provide basis for procurement/build decisions – Results are not expected to inform planning portfolios used in 2016-17 LTPP or TPP cycles Efforts are expected to begin in August, when CAISO concludes reliability analysis needed for current TPP cycle RPS Calculator v.6.0 RPS Calculator v.6.1 CAISO Special Study CAISO TPP CPUC LTPP Workshop & Stakeholder Feedback High RPS Portfolios Policy- Preferred RPS Portfolios