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HomeMy WebLinkAbout18 Power Purchase ReviewJ A \ & ■ To: Board of Directors From: Joe Horvath Date. June 06, 2018 Subject: Purchase Power Resource Review 1. WHY THIS MATTER IS BEFORE THE BOARD This workshop item provides the Board with a discussion of the District's existing purchase power resources and new opportunities. It also includes a response to several statements about electric resource pricing made during public comment for the Utah Associated Municipal Power Systems (UAMPS) Carbon Free Power Project (CFPP) item presented at the April 4, 2018 Board meeting. 2. HISTORY The District's actual versus budgeted purchase power costs and energy consumption for 2017 was presented for review and discussion at the March 7, 2018 Board meeting. As part of that discussion, staff presented summary information for all of the District's purchase power resources out to the year 2030. The District is well. resourced to about year 2023. However, the District can consider and evaluate favorable opportunities for smaller amounts of carbon -free or renewable power in advance of this time frame. After 2023, the District has more options for adding larger amounts of resources to the purchase power portfolio. One such option was the CFPP project which was being considered for the potential to provide an attractive balance of rates, renewables, and reliability. The ('FPP small modular nuclear reactor item was presented for consideration at the April 4, 2018 Board meeting. During the public comment period, several people made statements concerning the pricing and availability of carbon -free RPS eligible renewable resources including biomass and utility -scale solar generation. In summary, the following comments were made: 1. Renewable resource pricing: Several individuals had copies of a recent all -source solicitation report prepared by Xcel Energy (Public Service Company of Colorado, dba Xcel Energy) dated December 28, 2017. Contained within the report was a table depicting median bid prices by generation technology. The median bid for solar with battery storage was $38.3/MWh, wind at $19.3/MWh, and solar at $31/MWh. More than one individual claimed that solar and other renewables are much less expensive than the UAMPS project under consideration. 2. Utility -scale solar generation: An individual prefaced her comments by saying that she is employed by a utility -scale solar developer, Solar Frontier, and is very familiar with pricing on utility -scale solar projects. She asserted that she would "probably be fired" from her position if she provided a price in excess of $40/MWh. 3. Biomass Generation: It was asserted by Mr. Steve Frisch from Sierra Business Council that power was available from the biomass generating facility located in Loyalton, California for under $64/MWh. 3. NEW INFORMATION Staff is investigating carbon -free and renewable resource options to diversify and strengthen the District's power supply portfolio. Staff is actively working with the UAMPS to study new power supply projects including heat recovery and utility -scale solar. UAMPS is currently investigating a utility -scale solar project in Utah with indicative pricing in the $40/MWh range. UAMPS is also investigating a heat recovery project in Wyoming similar to the Veyo heat recovery project. These are not a formal projects yet, and the investigations are in a very preliminary stage, and pricing is subject to change. We will bring more information to the Board as it becomes available in late 2018 or early 2019. District staff was also intent in following up on the statements made during public comment at the April 4, 2018 Board meeting as they implied viable and cost-effective power supply opportunities. However, investigation by staff has revealed the following information which contradicts the assertions made during public comment: 1. Renewable resource pricing: District staff obtained a full copy of the Xcel Energy all source solicitation report referenced in the meeting. There is a table in the report depicting median bid prices for energy by generation technology. Staff observed that baseload resources, consisting almost entirely of natural gas fuel sources, were listed but without energy costs. The table listed energy costs for renewable sources only. The median bid for solar with battery storage was listed at $38.3/MWh, wind at $19.3/MWh, and solar at $31/MWh. However, contained within the report are the following qualifying statements made by Xcel Energy: "Pricing is provided on an "as bid" basis and does not include other costs such as resource integration costs, additional transmission network upgrade costs for interconnection or deliverability, or credits for items like quick -start capability; that is, these are not based on "all in" costs. " "Finally, the Company has not yet sufficiently evaluated all of the proposals represented in Attachment A to determine if any contain any "fatal flaws" such that they are unlikely to achieve their proposed in-service dates." It is clear by these statements that Xcel Energy considers these prices to be indicative or representative only, as they do not include other costs. Per their comments, actual pricing will likely be higher than shown in this report. It should also be noted that Xcel Energy is a massive utility with 3.3 million customers and a load of about 24,000 MW. Xcel Energy greatly eclipses the customers and load of all UAMPS member utilities combined. The economies of scale available to Xcel Energy may not be available to UAMPS or the District. 2. Utility -scale solar generation: Staff followed up by phone and email with the individual who made the public comments about utility -scale solar pricing. During the phone conversation she admitted that she did not work in the business development or marketing departments and was not responsible for pricing projects. She works in the engineering department, but was somewhat familiar with pricing. When asked about pricing and availability of solar power in the $30/MWh range (as she seemed to indicate by her public comments) she responded by stating that there are no projects available at this time. She directed staff to contact an individual in the business development department for more information. Staff followed up with a communication to the managing director of business development, but our effort remains unanswered. 3. Biomass Generation: The Loyalton Biomass generation plant was built in the late 1980s and remained in commercial operation until the end of 2010 when it was shut down. American Renewable Power (ARP) bought the facility and started seeking customers for the plant's output, including approaching District staff in mid-2017 with price estimates above $80/MWh. ARP restarted the plant for commercial operation in late 2017 after a seven year break. On December 13, 2017 and February 2, 20181 power sales agreements (PSA) were signed by several larger public power utilities including Los Angeles Department of Water and Power, Imperial Irrigation District, Sacramento Municipal Utility District and others with ARP for biomass energy from this plant. These contracts have essentially subscribed the full capacity of the plant. The Loyalton Biomass plant PSA terms include an energy price of $97.5/MWh, a capacity of 1810W, and a delivery term of 5 years. It should be noted that $97.5/MWh is well above market price for any energy resource, renewable or not. Purchases made by some of the larger publically owned utilities were done to meet biomass procurement requirements mandated by California SB 859. The statement made during public comment that Loyalton Biomass energy is available for under $64/MWh is simply not in accordance with the facts of recent contracts for $97.5/MWh and the plant appearing to be fully subscribed for at least the next 5 years. In summary, and based on staff's investigation, several of the statements made during the public comment period were very misleading concerning pricing and availability of renewable resources such as biomass and utility -scale solar generation. Also, it is very important to note that wind and solar are intermittent resources only. A balanced and diversified power supply portfolio must include baseload, flexible electric resources to backstop intermittent generation. 4. FISCAL IMPACT There is no fiscal impact associated with this Workshop Item. 5. RECOMMENDATION Provide input to staff. Joe Horvath Electric Utility Director Michael D. Holley General Manager