1. IEP Annual Conference September 19, 2016
Edward Randolph, Director, Energy Division
California Public Utilities Commission

2. CA’s 2030 GHG Emission Reduction Target
GHG reductions of 26 – 38% below 1990 levels (319 – 268 MMTCO2e) appears achievable in 2030 with significant increase in GHG reduction efforts, mitigation of key risks
2030 “straight line” scenario ranges from net savings of $4B to net cost of $11B (in real 2012$)
Critical to success of long-term GHG goals:
Significant increase in energy efficiency and conservation in buildings, vehicles & industry
Fuel-switching away from fossil fuels in buildings & vehicles
Sustained pace of low-carbon electricity development (~50% renewables in 2030 in CA)
Decarbonize liquid or gas fossil fuels with sustainable biofuels and/or synthetic decarbonized fuels
Reductions of non-energy GHGs (methane & F-gases) More data are needed on forestry & land-use GHG emissions
Source: Energy+Environment Economics (E3)
The other part of the procurement planning process is LTPP
Current LTPP process focus on ensuring reliability
It looks at future demand and supply scenarios and authorizing new procurement based on determined need.
The other “siloed” programs are inputs to LTPP, but LTPP does not optimizes those inputs and instead focuses on residual need.
KEY issue today is that the current LTPP does not
-- optimize different resource types to determine how to best meet the need.
-- Focus on GHG emission when determining final procurement.

3. Way Back in 2014 Rate cases LTTP RA RPS EE Rate reform
Customer Generation
JRF
GHG costs
storage
Demand response
Interconnection reform
Distribution Resource Plan
Elect Vehicles

4. SB 350: Integrated Resource Planning (IRP)
Commencing in 2017, CPUC shall adopt a process for each load- serving entity to file an Integrated Resource Plan (IRP) that:
Meets the GHG emissions reduction targets established by ARB
Procures at least 50% eligible renewable energy resources by 2030
Serves customers at just and reasonable rates
Minimizes impacts on ratepayers’ bills
Ensures system and local reliability
Strengthens the diversity, sustainability, and resilience of the bulk transmission and distribution systems, and local communities
Enhances distribution systems and demand-side energy management
The CPUC shall both adopt a process for each load serving entity to file an IRP (per ) and shall optimize resource portfolios (per )
READ SLIDE
Note that:
- CCAs and ESPs need to file IRP plans w/ PUC
- POUs have similar IRP requirements , need to file w/ CEC

5. Current Procurement planning process vs. IRP process

6. Overview of Current Resource Programs (EE, DR, CSI/NEM, SGIP, RPS, EV, Storage, etc.)
Legislature or CPUC set Procurement Goals
Some current program goals do not get to the deep cuts needed for goals
Goals/targets vary by individual proceeding, which inhibits optimal resource planning, e.g.:
EE optimizes all “cost-effective”
DR optimizes maximum DR participation
LTPP optimizes reliability
RPS maximizes kWhs
Each resource proceeding has its own cost effectiveness methodology to ensure either:
Least cost best-fit procurement to an established target (e.g. RPS)
Procured resources meet a minimum cost effectiveness threshold (e.g. EE and DR)
There are a number of procurement decision the CPUC makes that are outside of LTPP but are key to long term emissions reductions: EE, DR, CSI, RPS.
Each of these programs becomes its own procurement silo with its goals set independently of everything else.
Each program seeks to maximize its program objectives, EE seeks to reduce kwh, DR maximizes participation of DR, etc. No program maximizes costs and benefits across the range of state policy goals (GHG reduction, improve the environment, lower costs, improve grid reliability).
The targets of these programs are an input to the LTPP process.
This can result in programs working against each other, buying more of a resource than the grid can accommodate efficiently.

7. Overview of Current Long-Term Procurement Planning (LTPP) Process
Focuses on ensuring reliability- system, local, and flexible capacity
Planning process collects information about cost and GHG emissions of future electric supply scenarios
Authorizes new capacity after considering whether existing and already planned additions can meet reliability needs
Does not:
Perform optimization to determine what combinations of resources are best at meeting residual need
Consider GHG emission targets as a binding constraint
Provides for a competitive procurement process to identify least cost resources to meet reliability needs
The other part of the procurement planning process is LTPP
Current LTPP process focus on ensuring reliability
It looks at future demand and supply scenarios and authorizing new procurement based on determined need.
The other “siloed” programs are inputs to LTPP, but LTPP does not optimizes those inputs and instead focuses on residual need.
KEY issue today is that the current LTPP does not
-- optimize different resource types to determine how to best meet the need.
-- Focus on GHG emission when determining final procurement.

8. Components of Integrated Resource Planning (IRP)
Standard IRP definition - planning process that considers the costs and benefits of both demand and supply side resources when developing the least total cost mix of utility resource options
California Focus – IRP will look at both supply side and demand side resources as a means of focusing on GHG emissions and reliability of the utility’s portfolio.
IRP – Fundamental Steps:
Develop load forecast for planning horizon (e.g., 10 or 20 years)
Determine portfolios of existing/future resources (supply and demand-side) for meeting system need
Determine GHG metrics
Evaluate cost and risk of candidate resource portfolios: utilize common cost-effectiveness metric
Minimize total costs
Create a flexible plan that allows for uncertainty and permits adjustment in response to changed circumstances
Successful IRP process should include both meaningful stakeholder process and oversight from engaged commission
-- IRP is not a new concept and is used in some form or another in many states.
Basic idea is the utility looks at both supply and demand side resources and devolves a least cost mix from the options to ensure reliability.
-- Of course Calif. is likely to approach IRP in its own way. THE KEY DIFFERECE IN THE STATUTE IS THE ADDITION OF A FOCUS ON GHG REDUCTION
-- discuss fundamental steps.
Read from slide for fundemental steps.

9. Options for Imposing IRP
There are several ways that IRP could be implemented to reduce emissions and ensure reliability at lowest cost:
CPUC-centric IRP
CPUC develops the methodology and administers the IRP process
IRP process would set specific goals/targets for each individual resource programs
IOU-centric IRP
CPUC establishes reliability needs and GHG targets for each LSE, but LSEs develop the IRP methodology and administer the IRP process
Resource optimization decisions/strategies would be left to LSEs through something like an RFO with CPUC review and approval.
Hybrid IRP approach
It is worth stopping here to discuss how an IRP COULD control ultimate utility procurement.
CPUC centric/ micro managed process.
IOU centric process
Hybrid.

10. CPUC Staff IRP Concept Paper
August 11, 2016, CPUC staff issued high-level preliminary concept piece to inform the development of a draft staff proposal on IRP (to be issued in December 2016)
Solicit party feedback on key conceptual issues related to the IRP process, including:
Conceptual IRP framework, with emphasis on the 2017 IRP cycle and the features of the first IRPs to be filed with the CPUC
Workplan for developing additional content for the IRP proposal to be issued in December 2016.
Scenario development, IRP modeling framework, GHG target- computation, and process alignment.
Potential electricity market and regulatory issues to be addressed.
It is worth stopping here to discuss how an IRP COULD control ultimate utility procurement.
CPUC centric/ micro managed process.
IOU centric process
Hybrid.

11. CA-Specific Hybrid IRP Process
Staff concept paper recommended the consideration of a CA- specific hybrid IRP process
CPUC would develop a multi-LSE optimal portfolio, potentially using its own modeling tools, and individual LSEs would use elements of that portfolio as a benchmark for generating their own LSE-specific IRP plans
Benefits of the hybrid approach:
Using public information, the multi-LSE system plan will capture the system impacts (e.g., high renewable penetration) and the potential need for system resources (e.g., bulk storage)
Creates a level playing field for all CPUC-jurisdictional LSEs, ensuring that each entity can meet IRP requirements under a common set of guidelines
Acknowledges that different LSE types have different needs and requirements to fulfill
It is worth stopping here to discuss how an IRP COULD control ultimate utility procurement.
CPUC centric/ micro managed process.
IOU centric process
Hybrid.

12. CA-Specific Hybrid IRP Process in CPUC Concept Paper

13. IRP Implementation Issues
Need for new analytical tools and methodologies
Common cost effectiveness methodology
Modeling of cost-effective grid integration solutions (e.g., pump storage and demand response)
How do different planning approaches facilitate significant market transformation and infrastructure investments needed?
How will IRP address planning uncertainty?
Technology (innovation, uptake)
Resource interdependencies (solar PV and storage)
Load forecasting (e.g., EV adoption and customer DG)
How does the expansion of DG and CCAs impact the administration of IRP?

14. Next Steps for CPUC IRP Implementation
Sept 26th: Staff IRP workshop
Review problem statement and revised guiding principles
Discuss conceptual proposal for IRP modeling framework
Discuss revised proposal for IRP filing requirements for LSEs
October: Staff issue 2nd tranche of IRP deliverables for public comment
Staff proposal for IRP modeling framework
Conceptual proposal for IRP scenario development methodology
Conceptual proposal for apportioning an CARB electric sector target to LSEs
November: Reserved for additional stakeholder engagement (e.g., comments, workshops, webinars)
December: Issue staff IRP proposal for formal comment in IRP proceeding
April 2017: Issue proposed decision outlining IRP guidance for LSEs
Summer 2017: LSEs submit draft IRP plans
NOTE: 2017 IRP cycle is a proof-of concept, will inform 2018/2019 IRP cycle
No procurement authorizations are expected

15. Backup slides

16. Comparison of LTPP vs. IRP
Planning Attribute
LTPP
IRP (conceptual)
10 yr >= Planning Horizon √
Reliability (system, local, flexible) Constraint
Social & Enviro Considerations
GHG Emissions
Consider during planning process
Act as a binding constraint when picking optimal portfolio
Cost of Entire Portfolio
Consider during planning process
Select optimal portfolio using common cost-effectiveness
Cost of Procurement
Procurement Costs attained through Market Response (e.g. RFOs)
Procurement Costs attained through Market Response (e.g. RFOs)
LTPP assumes a competitive procurement process will identify the cheapest resource
IRP will solve for the indicative least cost portfolio that meets the reliability and GHG constraints…. BUT the procurement will still determine the cost (and whether or not the ACTUAL costs match the modeled EXPECTED costs) may determine whether the process outcomes has validity. (value to society)
IRP could solve for lowest net cost, assuming GHG target and reliability are constraints
IRP “plans” are only indicative – market responses (e.g. RFOs, response to program offerings) determine actual ratepayer costs