Wade Troxell; Gerry Horak; Bob Overbeck; Ray Martinez; Ken Summers; Kristin Stephens; Ross Cunniff Darin Atteberry Input on clean, affordable,

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1 From: To: Cc: Subject: Date: Attachments: David May Wade Troxell; Gerry Horak; Bob Overbeck; Ray Martinez; Ken Summers; Kristin Stephens; Ross Cunniff Darin Atteberry Input on clean, affordable, reliable electricity Tuesday, August 21, :02:47 AM Letter to Council transmitting draft resolution on electricity.pdf

2 August 21, 2018 Subject: Clean, Affordable, Reliable Electricity Dear Mayor Troxell, Mayor Pro Tem Horak, and Council Members Overbeck, Martinez, Summers, Stephens, and Cunniff; A few months ago you received a proposed resolution advocating for 100 percent renewable energy by The fact that staff had been directed to draft a resolution was a surprise and has raised concerns with many primary employers that count on Rawhide for affordable and reliable electricity. We met with Jeff Mihelich, Deputy City Manager, to inquire about this and the process. He indicated that if we had input, we should provide it soon. To that end, we submitted the attached resolution to the staff writing team last week. Even as we do so, we wonder what s to be gained with a resolution on this matter. Platte River Power Authority is currently updating its Integrated Resource Plan so you don t have all the information you need. And what may seem like just a symbolic gesture can turn into unintended policy and economic consequences that you haven t had the opportunity to fully consider. We provided our draft resolution to the staff as it s important to have input in the process, but we strongly believe that the more prudent course is to defer action until PRPA has finished its study so that you have all relevant information at hand when considering this important issue. Sincerely, David L. May President & CEO

3 DRAFT * DRAFT * DRAFT RESOLUTION IN SUPPORT OF CLEAN, AFFORDABLE, RELIABLE ELECTRICITY Submitted to City Staff Writing Team August 16, 2018 WHEREAS, electricity is a fundamental element of everyday American life, something that impacts quality of life, the economy, health and safety, and is embedded in every product, service and activity used by every individual, family, business, government entity, and nonprofit, and WHEREAS, in the 1970s leaders in four Northern Colorado communities decided to pool their efforts and resources to provide reliable and affordable electricity to their residents and businesses by forming a new organization called Platte River Power Authority (PRPA), and WHEREAS, PRPA has served its four member communities well by growing a portfolio of power generating options including hydroelectricity, coal, wind, solar and natural gas that have kept electricity rates affordable 1 and delivery reliable with Rawhide Unit 1 continuing to be among the nation s top performers 2 all while doing so in an environmentally responsible manner, and WHEREAS, PRPA has invested in environmentally-responsible clean coal technologies, natural gas-powered units, hydropower and intermittent renewable energy resources with the result of reducing the percentage of power produced by coal to 65 percent today 3, and WHEREAS, PRPA s Rawhide Unit 1 meets or exceeds all applicable environmental laws and regulations 4 and is in effect new because of proper maintenance and upgrades, and stands in stark contrast to dozens of plants that have been decommissioned in recent years or are slated to be, including some investorowned plants in Colorado that did not get the kinds of investments and upgrades made by PRPA, and WHEREAS, because of the large cost of capital investments necessary to produce electricity, PRPA uses an Integrated Resource Plan (IRP) as a critical planning tool 1 20%-40% below other Colorado utility wholesalers 2 Source: PRPA Annual Report Projected Deliveries of Energy in 2018 (communities) Proportions by Source ( 4 Source PRPA website:

4 for ensuring an adequate supply of reliable, low-cost, and environmentallyresponsible electricity to meet the future needs of our owner communities. It details Platte River s plans in the areas of generation and transmission projects, renewable energy, and energy efficiency, and WHEREAS PRPA is in the process of updating the Integrated Resource Plan, and is scheduled to finish the IRP one year ahead of schedule in 2020 with new resource options, a revised baseline, supporting studies with congestion analysis, Regional Transmission Organization (RTO) impacts, a regional economic model to capture the impacts of electric rate changes and a formalized action plan defining and addressing renewable targets, 5 and WHEREAS, during July major employers and power users in the PRPA service area were interviewed by a study task force of the Fort Collins, Loveland and Longmont chambers of commerce and asked about their electricity needs and related issues, and WHEREAS, key findings of these interviews are: The highest business priority of those interviewed is power reliability, followed by affordability. Environment stewardship is an important and must-have consideration but ranked 3 rd in relation to reliability and cost in the vast majority of cases Premature retirement of efficient and clean coal-fired generation is not a business goal and is seen as squandering an important already paid-for community investment It is prudent to maintain a diversified portfolio of energy resources It is critical to understand the true cost to business of any renewable energy plan There is an immediate impact in that just the conversation about 100 percent renewables has created enough uncertainty around the long-term predictability of costs to cause at least one power user to put all expansion plans in the area on hold, and WHEREAS, PRPA retained the services to Pace Global in July 2017 to provide an independent assessment of the feasibility of PRPA achieving and maintaining a zero net carbon (ZNC) generation supply portfolio by 2030 and the study was designed to only assess the production costs of a ZNC portfolio and to aid in future planning decisions by PRPA, and WHEREAS, in its December 2017 report Pace Global did not recommend that PRPA pursue either a zero net carbon or a zero carbon electricity generation 5 Source: Presentation to PRPA Board by B Decker

5 supply portfolio; the Pace Global ZNC study did find that 1) ZNC could be implemented but will require investment, higher cost, and additional market risk, 2) PRPA could serve about 75% of load with zero carbon generation and would offset the remaining 25% with sales of zero carbon generation to the market, 3) PRPA would increase renewable capacity with about 600 MW of solar and 350 MW of wind and be able to sell a portion of that capacity into the market as an offset by 2030 and build about 286 MW of new gas-fired, combined cycle generation, 4) lithium ion battery storage is not economic for meeting firming and capacity needs at this time, 5) a zero carbon (rather than zero net carbon) portfolio would be more expensive because of added cost of storage and the limited capacity credit attributable to intermittent resources (much more renewables and batteries would be required), 6) higher rates are required to achieve a ZNC portfolio as compared to the IRP portfolio, and WHEREAS, Pace Global identified risk considerations for ZNC including: The study focused on Platte River achieving carbon neutrality assuming others in Colorado were not simultaneously pursuing this same goal. Researchers noted that if utilities did so, there would be more sellers of renewables, fewer buyers, lower market prices, reduced carbon offset values, and more renewables will have to be built to achieve ZNC, at higher investment and cost than modeled here. The impact on system integration costs of higher regional levels of renewables in the broader market (Colorado) remains uncertain but it is conceivable that At some point the needed sales may have no market. 6 Committing to renewables early in the planning period may result in foregoing opportunities to capitalize on lower renewable costs later in the planning period (need to strike the right balance). Future costs are uncertain, and this uncertainty increases further in the future. Selling higher quantities of power in a bilateral market imposes higher risks than in an RTO-based 7 market. Although risks to system reliability are largely addressed through the addition of natural gas-fired generating capacity, market access and price risks may rise as more utilities build renewables and sell excess power into the marketplace. (It was) noted that Platte River may need to sell renewable energy into the market at lower rates than anticipated, for example, to meet the requirement of achieving zero net carbon emissions throughout a given year. Costs will go up according to Pace: We estimate Platte River s energy production costs to achieve a zero net carbon portfolio would be 6 Zero Net Carbon Portfolio Analysis, PACE Global, Dec 5, 2017 p24 7 RTO = regional transmission organization

6 approximately 20 percent higher in 2030 than they would be under current forecasts within Platte River s current IRP. 8 Presumably zero carbon would be even higher. WHEREAS, a June 2017 paper published in Proceedings of the National Academy of Sciences by 21 academic and private energy researchers argued against 100 percent renewables; while they emphasized adding renewable energy sources as a matter of paramount importance, they disputed the contention that a 100 percent electric grid by 2050 is feasible and affordable; and according to the lead researcher "If we push down the avenue of 100 percent renewables, it will become very obvious very quickly that it is neither cheap nor effective," and WHEREAS, key points in the above-noted paper titled Evaluation of a proposal for reliable low-cost grid power with 100% wind, water, and solar 9 and an article in Inside Climate News by Leslie Kaufman titled Is 100% Renewable Energy Feasible? New Paper Argues for a Different Target 10 include: To remove carbon dioxide across the energy grid, a broad range of technologies are needed including nuclear power and carbon capture and storage to allow continued use of some fossil fuel energy source. It is critical to have energy sources that can be dispatched on demand when needed. Taking the entire energy grid to 100 percent renewable energy by the 2050 s is not feasible or affordable. Political blowback on renewables in general could occur if 100 percent renewables is attempted, driving energy prices up, eliminating serious efforts to responsibly reduce carbon emissions affordably. Affordable 100 percent renewables is only possible if scaled up over time, relying on other technologies to smooth the transition away from fossil fuels and to balance out the variability of renewable power source while storage solutions evolve. No evidence exists that 80 percent de-carbonization of the U.S. power grid could NOT be achieved at a reasonable cost (i.e. 80 percent reduction is feasible and CAN be done affordably and reliably). 8 Vicinus, G (2017, December 7) Zero Net Carbon Achievable, Platte River Power Authority Archives 9 Clack, Christopher T. M et al., (2017). Evaluation of a proposal for reliable low-cost grid power with 100% wind, water, and solar. Proceedings of the National Academy of Sciences of the United States of America, PNAS June 19, ; published ahead of print June 19, Kaufman, L (2017, June 19). Is 100% Renewable Energy Feasible? New Paper Argues for a Different Target, Inside Climate News,

7 A central point of the paper, "Relying on 100 percent wind, solar, and hydroelectric power could make climate mitigation more difficult and more expensive than it needs to be," and WHEREAS, converting the community s homes and autos to electricity appears to be a priority resulting in even more demands on baseload electricity production, and WHEREAS, power quality and reliability matters to end users with power quality referring to those characteristics of the power supply that enable equipment to work properly. A power quality problem is defined as Any power problem manifested in voltage, current, or frequency deviations that results in failure or misoperation of customer equipment. 11 When power quality is poor There are economic impacts on utilities, their customers, and suppliers of load equipment. The quality of power can have a direct economic impact on many industrial consumers This usually means electronically controlled, energy-efficient equipment that is often much more sensitive to deviations in the supply voltage than were its electromechanical predecessors. Thus, industrial customers are now more acutely aware of minor disturbances in the power system. For some businesses even the most minor disturbance in steady supply voltage, proper frequency and waveform have significant negative impacts. Power quality is at the heart of many businesses concerns about the intermittent nature of renewables, and, NOW THEREFORE BE IT RESOLVED THAT, as stewards of public resources and the public s welfare, the Fort Collins City Council believes the social well-being and health of residents and economic health of the area depends on universal access to clean, affordable and reliable energy resources, and the Council reiterates its commitment to the citizens and businesses of the community to support the production and distribution of electricity that is clean, affordable, and reliable, and to make the best possible use of existing capital assets, and BE IT FURTHER RESOLVED THAT, as a group the Fort Collins City Council prides itself on being data-driven and does its homework before making important policy decisions, and BE IT FURTHER RESOLVED THAT, we celebrate the success of the great collaborative regional partnership called the Platte River Power Authority that our Fort Collins predecessors helped found in 1973 with the Town of Estes Park, the City of Longmont, and the City of Loveland and which has delivered on the three 11 Electrical Power Systems Quality, Dugan, McGranghan, Santoso, Beaty

8 objectives of environmental stewardship, reliable power, and affordable power, and BE IT FURTHER RESOLVED THAT, as we acknowledge the tremendous capital asset that we have in the Rawhide Station, appreciate the financial stewardship of past and current PRPA staffs and boards to maintain and retrofit it, and thank them for being open to other options over time, and now, as stewards of these capital assets through the PRPA Board, the Fort Collins City Council is committed to the proper maintenance of these assets to extract their full value to the benefit of residents, businesses, and ratepayers, and BE IT FURTHER RESOLVED THAT, any conversations about increasing renewable power sources are not intended in any way to suggest or imply lack of commitment on the part of the Fort Collins City Council and its agents to continue making capital improvements and maintenance investments in Rawhide Unit 1 through our role on the board of directors of the Platte River Power Authority. We have a fiduciary responsibility to residents to assure capital investments are protected as contained in Article 18, Part 1 of CO Rev Stat (2016) which in part reads A public officer, member of the general assembly, local government official, or employee whose conduct departs from his fiduciary duty is liable to the people of the state as a trustee of property and shall suffer such other liabilities as a private fiduciary would suffer for abuse of his trust, and, BE IT FURTHER RESOLVED THAT, we pledge to remain reliable partners with the companies in our region that count on Rawhide to deliver high quality power reliably and affordably and in our interest to expand intermittent renewable power fuels sources we will do nothing to compromise the high level of power quality as defined above, and BE IT FURTHER RESOLVED THAT, we encourage PRPA to continue to pursue joining an organized market because intermittent generation is much easier to manage in an organized market, the market effectively allows regulation up / down to be done on a regional-wide basis within the hour, and reserve charges for renewable wind resources would be significantly less which would save Platte River approximately $2.5 million in , and BE IT FURTHER RESOLVED THAT, since PRPA is doing an update to its IRP, we acknowledge not all of the data is available regarding generation and transmission projects, renewable energy, and energy efficiency and impacts on customer rates, 12 Butcher, A (2018, May 31). Managing Renewables in Markets. PRPA Board of Directors Presentation

9 reliability, and environmental impacts but we do encourage PRPA to continue to explore expansion of renewables and ask PRPA leaders to continue their practice of being fully transparent with its four partner communities about the obstacles, risks, capital costs, power quality and reliability risks, and potential rate impacts relative to various fuel sources, and BE IT FURTHER RESOLVED THAT, as we encourage PRPA to continue to expand use of renewable sources as it deems feasible while keeping rates as low as possible and without compromising reliability, and we are not committing to a specific percentage of renewables by a specific time, but rather, we are saying to the PRPA board that we want to pursue renewables in a brisk but prudent fashion in the context of the IRP update, and, BE IT FURTHER RESOLVED THAT, to that end, we have the following suggestions: Reliability of the power grid is of paramount importance. As such, alternative forms of decarbonized energy sources should be included in all cost analyses (e.g. nuclear, bioenergy, etc.) that address the reliability of the grid. Carbon capture and storage technologies for fossil fuel generation should be factored into the analysis, in combination with bioenergy this could actually be a NEGATIVE emissions system (i.e. carbon absorption). Make it a condition that storage technologies examined in the model must be proven technologically feasible NOW, scalable and cost effective. Make it a condition that a regional transmission organization (RTO) must be included in any study to reduce reliability issues. The IRP should show that the proposed energy system is technically and economically feasible, and at a minimum, show, through transparent inputs, outputs, analysis, and validated modeling, that the required technologies have been commercially proven at scale at a cost comparable with alternatives; that the technologies can, at scale, provide adequate and reliable energy; that the deployment rate required of such technologies and their associated infrastructure is plausible and commensurate with other historical examples in the energy sector; and that the deployment and operation of the technologies do not violate environmental regulations. This analysis should include an accounting of the costs of the physical infrastructure (pipes and distribution lines) to support these systems. Reliability of the grid must be adequately modeled including realistic capacity factors of existing technologies, transmission, reserve margins, and frequency response.

10 The IRP should study the negative environmental impacts associated with creating and effectively using renewable resources such that those impacts can be included in any cost/benefits analysis, and FINALLY BE IT RESOLVED THAT, in summary the Fort Collins City Council stands behind all three elements of PRPA s mission to provide clean, affordable and reliable electricity, and while strongly supporting the growth of renewable fuel sources, as fiscal stewards of the public s resources, we do not believe it should be done at any price. As such, we will not support fuel, technology or other changes that result in electricity rate increases of more than 2% to 5% per year; and in light of the fact that PRPA is updating its Integrated Resource Plan (IRP), which is a critical planning tool for ensuring an adequate supply of reliable, low-cost, and environmentally-responsible electricity to meet the future needs of (PRPA) communities and because PRPA has the expertise best suited to conduct the IRP it is inappropriate for the Fort Collins City Council to make a policy statement on something as important as renewable energy sources until PRPA completes its work on the IRP. # # #