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Renewable Net Short.

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Presentation on theme: "Renewable Net Short."— Presentation transcript:

1 Renewable Net Short

2 Different Methodologies for the RNS
The Renewable Net Short (RNS) calculation has been revised to better reflect the RNS calculated for RPS procurement Versions “Net Short” is the difference between the IOU’s RPS compliance requirement and generation from online RPS resources The “Discounted Core” is a subset of future projects that fill a fraction of the net short Version 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 development Forecast Generation from projects in development is adjusted for the risk of project failure Net Short Net Short

3 RNS Changes in RPS Calculator
Model Functionality Versions 2-5 Version 6 Includes all CPUC-approved projects on a risk-adjusted basis for generation and transmission planning Accounts for expiration of contracts with existing facilities Reflects 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 procurement The 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 possible Perfect 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 plans Rather than using a “Discounted Core,” the RPS Calculator’s portfolios include all CPUC-approved contracts, on a risk-adjusted basis Assumes 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 Plans As 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 basis Banked Renewable Energy Credits (RECs) are applied towards RPS compliance evenly over a 10-year rolling basis 10% annual application used as a simplifying assumption to approximate the confidential REC banking strategies utilized in retail sellers’ optimized RNS calculations Existing 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) 2 1 3

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 fail Versions 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 adequate In Version 6.0, all CPUC-approved projects under development are risk-adjusted in the RPS calculator In the RNS calculation, expected annual generation (GWh) from projects in development is multiplied by a risk-adjustment factor RPS 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 basis Reflects the principle that projects with CPUC-approved contracts should be considered in state’s generation and infrastructure planning processes Avoids 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 development Eliminates the “Discounted Core” methodology Places 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 RECs Assumption: Banked RECs are applied evenly over a ten-year time period to meet an IOU’s RPS procurement requirement Used as a simplifying assumption to approximate the confidential banking strategies utilized in retail sellers’ optimized procurement plan RNS calculations Ignoring 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 surplus Surplus RECs are used over a ten-year period to reduce RNS *Figure is illustrative of methodology, not a calculator result

10 Expiring Contracts A large number of the renewable contracts currently held by the IOUs are scheduled to expire over the next decade Versions had different re-contracting assumptions for out-of- state and in-state renewable resources In-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 output Contracts from out-of-state resources were assumed to terminate at the conclusion of their PPA term In 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 portfolio A renewable facility with an expired contract is assumed to remain available for re-contracting indefinitely The 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 costs 25% 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 Inputs RPS Calculator RNS is calculated using IOU contract data housed in the CPUC’s RPS database RPS database is updated on a monthly basis RPS Calculator v.6.0 includes contract data submitted to CPUC’s database by IOUs on August 31, 2014 RPS 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’ portfolios Includes both ‘commercial’ and ‘generic’ projects Load_Forecast: input assumptions on load growth by utility used to establish renewable compliance targets Based on CEC IEPR 2014 Net_Short: calculation of Renewable Net Short for each utility (PG&E, SCE, and SDG&E) and other CAISO retail loads

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