Hetch Hetchy Integrated Resource Plan Commission Meeting May 23, 2017

Transcription

1 Hetch Hetchy Integrated Resource Plan Commission Meeting May 23, 2017

2 Today s Presentation 1. Introduction to IRP 2. IRP Applied to Hetch Hetchy Program 3. IRP Approach 4. IRP Results 5. Discussion SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

3 Introduction to IRP Integrated Resource Planning provides many benefits to consumers and to the environment. It is a planning process that evaluates scenarios to provide customers with the lowest cost at which a utility can deliver reliable energy and meet its policy objectives. Photo Courtesy of Flickr CC Jennifer Williams SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

4 Usefulness of IRP Useful for... Evaluating the costeffectiveness of supply options Service reliability planning Comparing policy options and scenarios over long-term horizons (25 years) Not intended to... Replace budgeting and capital planning processes Replace rate setting processes SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

5 IRP Analysis Goals Identify plausible assumptions accounting for uncertainty: Hydro generation Distributed energy resources Natural gas and power prices Load growth Identify a path forward that is reasonable Adapt as market and operational conditions change SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

6 State Regulatory Requirements SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

7 IRP Applied to Hetch Hetchy Program SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

8 Hetch Hetchy Water & Power System Lake Lloyd Reservoir (Cherry Lake) Foothill Tunnel Transmission Holm Powerhouse Cherry Power Tunnel Lake Eleanor Reservoir Hetch Hetchy Reservoir San Joaquin Pipelines Moccasin Powerhouse & Reservoir Mountain Tunnel Kirkwood Powerhouse Canyon Power Tunnel O Shaughnessy Dam Illustration by Obscura SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

9 Hetch Hetchy Water & Power System Other Renewables 15 MW Total Generation = 395 MW Source Solar (local) Hetchy Small Hydro Biogas (local) Capacity 8 MW 4 MW 3 MW Total Load = 150 MW SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

10 Megawatt Hours Power Supply and Demand: Current Excess Supplies are sold in the Market Sale prices are lowest March through June Market Purchase 10% 300,000 Hetchy 90% 250, ,000 Moccasin Excess Sold to Market 150,000 Holm 100,000 Existing Load 150 MW 50,000 Kirkwood - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

11 Unique External Challenges Energy business models and technologies have changed significantly in recent years. Three SFPUC challenges: Industry Deregulation Water-First Policy Water Supply Agreement SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

12 Hydro and Renewables Large hydro is GHG free, but not recognized as a CA RPS renewable resource. Renewable resources often are valued at a premium due to state RPS requirements. SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

13 Integrated Resource Planning: Approach Photo Courtesy of Flickr CC Eric Fisher SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

14 Developing Key Assumptions Collaborative process involving multiple SFPUC stakeholders: Power Enterprise, Water Enterprise, Finance, and consultants (Black & Veatch) Working Group 1 Cost Allocation Working Group 2 Generation and Power Contracts Working Group 3 Transmission Working Group 4 Market Prices Working Group 5 Electric Demand Working Group 6 Regulatory and Policy Requirements SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

15 Scenario Development IRP Scenarios Maintain Current Generation Delay Some Projects Defer Moccasin Three scenarios describe possible approaches to operating and maintaining Hetch Hetchy resources. High/Low Load High/Low Rainfall High/Low Market Price Moccasin Holm Kirkwood SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

16 1. Maintain Current Generation Scenarios 1 Maintain Current Generation Delay Some Projects IRP Defer Moccasin Moccasin High/Low Load Holm High/Low Rainfall Kirkwood High/Low Market Price SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

17 2. Delay Some Projects Scenarios Maintain Current Generation 2 Delay Some Projects IRP Defer Moccasin Moccasin High/Low Load Holm High/Low Rainfall Kirkwood SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

18 3. Defer Moccasin IRP 3 Scenarios Maintain Current Generation Delay Some Projects Defer Moccasin Moccasin High/Low Load Holm High/Low Rainfall Kirkwood SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

19 Portfolio Development Scenarios Maintain Current Generation Delay Some Projects Defer Moccasin Portfolio *All portfolios rely on some market power purchases to supplement SFPUC generation. High/Low Load High/Low Rainfall High/Low Market Price SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

20 Sensitivity Analysis Scenarios Maintain Current Generation Delay Some Projects Defer Moccasin Portfolio *All portfolios rely on some market power purchases to supplement SFPUC generation. Sensitivities High/Low Load High/Low Rainfall High/Low Market Price Objective: Identify a path forward that is reasonable for all cases SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

21 Sensitivity Analysis Scenarios Maintain Current Generation Delay Some Projects Defer Moccasin Portfolio *All portfolios rely on some market power purchases to supplement SFPUC generation. Sensitivities High/Low Load High/Low Rainfall High/Low Market Price Scenario 2 quickly found to be less favorable than 1 and 3. Objective: Identify a path forward that is reasonable for all cases SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

22 Portfolio Selection Process Preferred Portfolios account for a variety of considerations Costs and Revenues Risk Profile City Goals Preferred Options Capital and operating costs Energy purchases and sales Load growth and market outlook Resource diversity and ownership Impacts of changes in market pricing and load Resource adequacy and flexibility Operational and environmental policies Local energy supply interest Maximize value of Hetch Hetchy system Community benefits SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

23 Integrated Resource Planning: Results SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

24 1. Maintain Current Generation Add in OH numbers SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

25 1. Maintain Current Generation Excess generation is sold to the market Average price: $59/MWh SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

26 1. Maintain Current Generation Sensitivity Analysis: Load increases more than projected SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

27 1. Maintain Current Generation Sensitivity Analysis: Load increases more than projected Average price: $59/MWh Lower cost supply options available (e.g. solar or wind) SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

28 3. Defer Moccasin SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

29 3. Defer Moccasin Sensitivity Analysis: Load increases more than projected SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

30 3. Defer Moccasin Portfolio Analysis: Add 50 MW of solar capacity SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

31 Cost of Various Supply Options Overhead Overhead Overhead Moccasin Geothermal Wind Price Sensitivity Range Solar Holm Kirkwood SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

32 Summary of 24 year NPV Costs $342 MM Costs Revenues Revenues Scenario 1 Scenario 3 Capital Costs account for the majority of the savings SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

33 Qualitative Factors FACTOR Capital Investment Risk MAINTAIN CURRENT GENERATION Long-term debt on uneconomic assets DEFER MOCCASIN More adaptable to market conditions Market Exposure Risk Significant uneconomic oversupply Balanced supply and demand Supply Diversity Predominantly hydro generation only Some flexibility to increase supply diversity Load and Operational Flexibility Generation commitments exceed load; water first Some flexibility to adapt to changing conditions Impact of Variable Weather Conditions Greater financial losses during wet years More market exposure during dry years SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

34 Qualitative Factors FACTOR Environmental Performance MAINTAIN CURRENT GENERATION No fossil assets; few market purchases DEFER MOCCASIN No fossil assets; flexibility to choose generation Technology Leadership/ RPS Content Predominantly large hydro generation only Some flexibility to choose RPS sources in the future Ownership/ Independence No new third-party obligations Option to develop new SFPUC resources Service Redundancy Intrinsic Value Excess generation capacity readily available Preservation of Hetch Hetchy legacy More reliant on market Deferral of investment in historically significant asset SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

35 Power IRP Key Conclusions 1. SFPUC generation far exceeds needs, unless there is significant new load growth. 2. Generation from Moccasin is uneconomic, unless market prices increase significantly. 3. Balancing load and generation insulates SFPUC from volatility in market power pricing. SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

36 Broader Agency Considerations Must consider overall SFPUC goals and constraints Impact on Water operations Overall agency economics Retain flexibility to adapt as conditions change Does not replace agency budgeting and capital planning SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

37 Thank You SFPUC Hetch Hetchy Integrated Resource Plan Commission Workshop May 23, 2017 SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

38 Appendix Slides SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

39 IRP Objectives Evaluate power supply options to meet future load and policy requirements over the next 25 years Identify market changes, costs, and risks Use scenarios to identify impacts of decisions Update every 2-5 years in response to changing conditions SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

40 Power s Full-Service Customer Base Other SF 50MW Waterfront & Mid-Market 50MW 150 MW 2,600 accounts Largest Customers 130 MW 100 accounts Airport 50MW SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

41 Most Pub. Utilities are Net Purchasers GWh Retail Sales/ Demand Owned Generation Source: Public Financial Management, 2014 SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

42 Wholesale Market Develops $/MWh Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Increase in suppliers has created low and relatively stable wholesale prices A wide variety of supply options are available $300 Northern California Market Prices $200 $100 $0 Market Deregulation California Energy Crisis Limited Liquidity Markets settle, standardized products develop Liquidity increases Gas prices mostly low Markets mature High liquidity Gas prices low (fracking) SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

43 Cost of Renewables Decreasing Recent utility scale solar PPAs signed at below $40/MWh (Palo Alto, $36.76/MWh, 40 year term) SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

44 Integration and Imbalances Generation Load SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

45 Balanced Resource Plan Generation Load Flexible Resources Renewables Energy Storage Electric Vehicles Thermal/Hydro Demand Response Energy Efficiency DG Solar SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

46 Hydro Generation by Scenario GWh 1,700 HHWP IRP Hydro Generation Scenarios - Base Water Year (1968) Scen 1: Maintain Current Gen 1,600 1,500 1,400 Scen 2: CIP Only 1,300 1,200 Scen 3: Defer MPH Projects 1,100 1, Scenario 1 Scenario 2 Scenario 3 SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

47 Inputs from Cost Allocation Model Example: Scenario 1 Inputs SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

48 Investments by Power House Scenario 1 Maintain Current Generation Powerhouse Avg. Annual Cap. + O&M ($MM) Generation (GWh) Cost of Generation ($/MWh) Cost of Generation With Overhead ($/MWh) Holm ,607 $19 $36 Kirkwood ,357 $15 $37 Moccasin ,985 $84 $113 Scenario 3 Defer Moccasin Projects Powerhouse Avg. Annual Cap. + O&M ($MM) Generation (GWh) Cost of Generation ($/MWh) Cost of Generation With Overhead ($/MWh) Holm ,891 $26 $45 Kirkwood ,202 $23 $50 Moccasin 0 1, SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

49 Investments by Power House Scenario 1 Maintain Current Generation Powerhouse Avg. Annual Cap. + O&M ($MM) Generation (GWh) Cost of Generation ($/MWh) Cost of Generation With Overhead ($/MWh) Holm ,607 $19 $36 Kirkwood ,357 $15 $37 Moccasin ,985 $84 $113 Scenario 3 Defer Moccasin Projects Powerhouse Avg. Annual Cap. + O&M ($MM) Generation (GWh) Cost of Generation ($/MWh) Cost of Generation With Overhead ($/MWh) Holm ,891 $26 $45 Kirkwood ,202 $23 $50 Moccasin 0 1, SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,

50 Market Price Forecasting Nominal $/MWh $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 March 2017 pricing: $23/MWh $10 $ NP 15 B&V Forecast Actual market prices vary wildly and are difficult to predict with certainty. SFPUC Power Enterprise Hetch Hetchy Integrated Resource Plan Commission Workshop / May 23,