G R E E N I N G O F T H E G R I D :

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1 G R E E N I N G O F T H E G R I D : H O W C A N S C H O O L S P A R T I C I P A T E I N T H E N E W R E V E N U E S C O M I N G F R O M C A L I F O R N I A ' S G R I D T R A N S F O R M A T I O N? D R A F T R I C K B R O W N, P H D, C H A R L E S M O N K, A L I C H E H R E H S A Z T E R R A V E R D E The views and opinions expressed in this presentation are those of the authors and do not necessarily reflect those of CASBO.

2 California is the Leader in Renewable Energy Current Situation Last year the Governor and Legislature set the ambitious goal of obtaining 50% of all electricity in California by In February, Senate Pro Tem, Kevin deleon introduced legislation to accelerate that gos: 50% by 2025, 100% by 2045 In fact, we are already at close to 33% in most utility territories in the State And this doesn t even include the growth of customer based solar, which has reached 5% in two of the three major utilities (PG&E and SDG&E) and is projected to hit that level in SoCal Edison later this year. K-12 schools have already done a lot to help the state move in that direction through implementation of solar, and more recently, battery storage. As of 2014, over 1000 schools in California had implemented solar, and many more have done so since then

3 Policy and Economics Initially these aggressive goals were driven by environmental concerns; i.e., the need to rapidly replace fossil fuel based electricity, which results in the emission of greenhouse gases (and other pollutants) that are contributing to the negative impacts of climate change A typical school solar project at a 2,000 ADA High school eliminates the release of close to 1 Million pounds/year of carbon dioxide, a very potent greenhouse gas. A lesser well known of such a solar project is the reduction in use of water, 550,000 gallons per year, used to cool traditional power plants But more recently, the Department of Energy has reported that renewable sources of energy have become less expensive than traditional sources. As a result, in 2016, for the first time, renewable sources outpaced the growth of traditional sources across the United States, despite the historically low cost of natural gas, which has replaced coal fired power as the current largest source of electricity in the US.

4 It s now All About the Grid Up to now we have been discussing the production, i.e., the generation of electricity, and that economics, i.e., the lower cost of renewables, has become the key driver of their growth. However, as the percent of renewable sources of electricity grows, a emerging impediment is how the grid is organized to deliver electricity Grid definition: An electrical grid is an interconnected network for delivering electricity from suppliers to consumers. It consists of generating stations that produce electrical power, high-voltage transmission lines that carry power from distant sources to demand centers, and distribution lines that connect individual customers.

5 Location, Location, Location Historically, the grid was organized to move power form centrally located power plants to widely dispersed demand centers, places where power was needed. In California, hydro-electric power has produced as much as 20% of our electricity, and so geography (the location of dams) has influenced the grid s configuration, a much greater proportion of electricity has come from gas fired power plants, which can be located somewhat more flexibly. However, this is not the case with wind and solar plants, which like hydro-power, are best located where the best source of energy exists. This locational reconfiguration of power sources is driving the reconfiguration of the transmission and distribution infrastructure; in particular, increasing the distance from sources of power to customers of power.

6 Intermittency and the Duck Curve An even larger driver in the reconfiguration of the grid is the intermittent nature of renewable power sources: Land-based wind energy generally blows in the mornings (as the sun comes up) and in the early evening, as the sun goes down. Solar energy is most effective at generating power between 12 PM and 6 PM, varying according to the season; i.e., the length of the day. The good news is that Solar s production/supply profile closely matched the historical demand profile; i.e., Solar produced the most power when California s demand peaked during the mid-afternoon, i.e., when use of Air conditioning is highest This has produced two benefits to ratepayers across the state Lower cost power: Significantly reduced the need for high cost peaker plants ; i.e., gas fired power plants that have only been used during the 2-4 hour period in the afternoons when demand spikes, and sit idle the rest of the time Replacing dirtiest power: the operational requirements of these peaker plants make them some of the dirtiest, highest sources of pollution, in the State However, with the rapid growth in solar, the supply in electricity during this traditional peak period is so much greater than the demand, that on some days the State s grid operator (CAISO), has to curtail the production of solar power plants. An even bigger challenge for CAISO, is now finding reliable cost effective, less polluting ways of ramping up power in the late afternoon/early evening as the sun goes down a and solar power production drops off. [Insert Duck Curve graphic] The ramp of wind power in the early evening helps, but is not always reliable Costly, dirty peaker plants are currently being used to address the ramp But given the State s GHG reduction goals, the California Public Utility Commission (CPUC) has made two rulings recently to address this supply demand imbalance issue All customers within the next few years will be switched to time of use pricing (TOU). Note: schools are already in TOU The TOU peak period (when electricity prices are highest) is being moved to the early evening. The CPUC hopes that the combined effect of these rulings is to send a price signal to customers to reduce their usage during the early evening, to reduce the challenge (and financial and environmental costs) of the ramp

7 So What is This Going to Cost? The California Energy Commission has estimated that to reach the 50% renewable goal by 2030, will require at least $5 Billion in transmission grid infrastructure upgrades. This may be a conservative figure; the President and CEO of Edison International (SoCal Edison s parent company), was bullish on his company s future profitability, give the need for SoCal Edison to spend $2-4 Billion/year for the foreseeable future to support California s RPS goals (and the growth of electric transportation and accompanying demand for electricity). SoCal Edison supplies about 30% of California s electricity; extrapolating that number to the whole states yields a total annual cost of $10 Billion/year And these numbers only represent the cost of transmission upgrades; the distribution network will also require additional investment Note: California s Investor Owned Utilities are guaranteed a ~10% rate of return on every dollar of capital they spend; costs which are rate based, paid for in the prices they charge customers

8 Distributed Energy Resources/Non-Wire Alternatives: A Lower Cost Solution The grid was originally designed to regulate the flow of electricity from large centralized power plants that produced a relatively predictable steady flow of power to local communities. With the explosion of smaller, more decentralized sources (solar, wind, small hydro), managing the grid efficiently can no longer be done on a totally centralized basis. The grid was originally designed to regulate the flow of electricity from large centralized power plants that produced a relatively predictable steady flow of power to local communities. With the explosion of smaller, more decentralized sources (solar, wind, small hydro), managing the grid efficiently can no longer be done on a totally centralized basis. One much lower cost alternative to this $5+ Billion price tag, which will hit every California rate payer, is the implementation of local battery storage and solar with advanced inverters, to provide non-wire grid support services. While right now the economic benefits of solar and storage come from the reduction in District s electricity bills, in the very near future, schools that implement solar and storage will be able to generate new sources of revenue for their districts by entering into arrangement to provide such grid support services to create the more efficient, decentralized green grid of the future.

9 Questions