2 Different Methodologies for the RNS The Renewable Net Short (RNS) calculation has been revised to better reflect the RNS calculated for RPS procurementVersions“Net Short” is the difference between the IOU’s RPS compliance requirement and generation from online RPS resourcesThe “Discounted Core” is a subset of future projects that fill a fraction of the net shortVersion 6.0“Net Short” is the difference between the compliance requirement and risk-adjusted generation from all procurement, inclusive of both projects online and projects in developmentForecast Generation from projects in development is adjusted for the risk of project failureNet ShortNet Short
3 RNS Changes in RPS Calculator Model FunctionalityVersions 2-5Version 6Includes all CPUC-approved projects on a risk-adjusted basis for generation and transmission planningAccounts for expiration of contracts with existing facilitiesReflects surplus compliance through allocation of banked credits to defer procurement
4 RNS Assumptions and Parameters May 2014 ALJ Ruling on RNS for RPS procurement requires standardized inputs and assumptions for calculating a retail seller’s “optimized” RNS for RPS procurementThe ruling can be seen at:Optimized RNS will be used by retail sellers to procure resources based on their own inputs and assumptions regarding:Banking (i.e. use of excess renewable energy credits)Measuring project risk (i.e. risk adjusting the portfolio)Objective is to align the RNS in Version 6.0 with the optimized RNS used for RPS procurement purposes to the extent possiblePerfect alignment won’t be possible due to the confidential nature of data inputs (risk- adjustment of projects in development and future application of banked RECs).
5 RNS Assumptions and Parameters Key inputs and assumptions for the RNS in Version 6.0 parallel those used for the optimized RNS in the IOU’s annual RPS procurement plansRather than using a “Discounted Core,” the RPS Calculator’s portfolios include all CPUC-approved contracts, on a risk-adjusted basisAssumes a “success rate” of 84% for future contracts (the historical average to date for all CPUC-approved projects)“success rate” assumption will be updated annually based on IOUs’ confidential risk-adjustment methodologies used for calculating the optimized RNS in the IOU’s RPS Annual PlansAs a result, the sum of all generation from resources included in a portfolio will exceed 33% on a non-risk-adjusted basis, but will meet 33% on a risk- adjusted basisBanked Renewable Energy Credits (RECs) are applied towards RPS compliance evenly over a 10-year rolling basis10% annual application used as a simplifying assumption to approximate the confidential REC banking strategies utilized in retail sellers’ optimized RNS calculationsExisting contracts are assumed to expire at the end of their current contract term and are placed in the supply curve of available resources (i.e. not automatically re-contracted)213
6 Risk Adjustment in the RNS Issue: how to account for contracting activity of IOUs in RPS planning, considering that some projects will be realized and others will failVersions dealt with this issue by creating a “Discounted Core”A subset of CPUC-approved contracts that 1) had a CPUC-approved PPA and 2) had filed for its major permit and was deemed data adequateIn Version 6.0, all CPUC-approved projects under development are risk-adjusted in the RPS calculatorIn the RNS calculation, expected annual generation (GWh) from projects in development is multiplied by a risk-adjustment factorRPS Calculator assumes a “success rate” of 84% for all future contracts (the historical average to date for all CPUC-approved projects)
7 Implications of New RNS Methodology All CPUC-approved projects are included in RPS portfolios on a risk- adjusted basisReflects the principle that projects with CPUC-approved contracts should be considered in state’s generation and infrastructure planning processesAvoids creation of “transmission orphans” by allowing all CPUC-approved projects to receive transmission allocation through the CAISO Transmission Planning Process (TPP)Avoids attribution of failure or success to specific projects under developmentEliminates the “Discounted Core” methodologyPlaces greater emphasis on the need assessment in the RPS Procurement Plan and project viability in the CPUC’s PPA review process
8 RPS Flexible Compliance & Banking Because Version 6.0 tracks compliance on a year-by-year basis, the methodology allows for the banking and use of surplus RECsAssumption: Banked RECs are applied evenly over a ten-year time period to meet an IOU’s RPS procurement requirementUsed as a simplifying assumption to approximate the confidential banking strategies utilized in retail sellers’ optimized procurement plan RNS calculationsIgnoring an IOU’s ability to apply surplus RECs to a future RPS compliance requirement might overestimate an IOU’s future RPS procurement need.
9 Banking Logic in Calculator Balance of bank accrues during periods of surplusSurplus RECs are used over a ten-year period to reduce RNS*Figure is illustrative of methodology, not a calculator result
10 Expiring ContractsA large number of the renewable contracts currently held by the IOUs are scheduled to expire over the next decadeVersions had different re-contracting assumptions for out-of- state and in-state renewable resourcesIn-state renewable resources were assumed to re-contract with the same IOU at the end of their PPA term and maintain the same level of outputContracts from out-of-state resources were assumed to terminate at the conclusion of their PPA termIn Version 6.0, the RNS calculation has been modified to avoid prejudging IOUs’ procurement decisions with existing facilities
11 Treatment of Expiring Contracts Upon the expiration of its original contract, an existing renewable facility is added back into the renewable supply curve, where it competes with other resources for inclusion in the portfolioA renewable facility with an expired contract is assumed to remain available for re-contracting indefinitelyThe resource cost for an expired contract that is placed into the supply curve is calculated generically based on simple assumptions:Ongoing fuel and O&M costs25% of capital cost of a new plant (assumption that some investment is needed)Expired contracts then compete with other potential new projects for selection to fill RNS in each year
12 Data InputsRPS Calculator RNS is calculated using IOU contract data housed in the CPUC’s RPS databaseRPS database is updated on a monthly basisRPS Calculator v.6.0 includes contract data submitted to CPUC’s database by IOUs on August 31, 2014RPS compliance obligations calculated based on CEC IEPR demand forecasts (Mid Demand, No AA EE or Mid AA EE)forecast_CMF/LSE_and_Balancing_Authority_Forecasts/
13 Guide to RNS data in RPS Calculator The Renewable Net Short calculation can be found on the following tabs:Active_Portfolio: list of all renewable projects included in the utilities’ portfoliosIncludes both ‘commercial’ and ‘generic’ projectsLoad_Forecast: input assumptions on load growth by utility used to establish renewable compliance targetsBased on CEC IEPR 2014Net_Short: calculation of Renewable Net Short for each utility (PG&E, SCE, and SDG&E) and other CAISO retail loads