Analyzing California’s Proposed “Clean

Peak Standard” (in prep.)

Lincoln PratsonGendell Family Professor of Energy & Environment

Ziting Huang, Ananya Chaurey and Lina KahnMasters of Environmental Management Candidates

California’s Generating Capacity Relative to Brazil’s

http://www.dcsystems.com/wp-content/uploads/2014/08/theISOgrid_ca.jpg

CAISO

PGE

SCE

SDGE

California Independent System Operator (CAISO)

Example Day in CAISO

0

5,000

10,000

15,000

20,000

25,000

30,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Net L

oad

(MW

)

Hour

March Average Daily Load

2011 2012 2013 2014 2015 2016 2017

The Evolving “Duck Curve”

0%5%

10%15%20%25%30%35%40%45%50%

2011 2012 2013 2014 2015 2016 2017 2030

Rene

wab

le E

nerg

y Co

ntrib

utio

n

Year

March Average Daily RE Generation

The Evolving “Duck Curve”

0500,000

1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,0005,000,000

2015 2016 2017

MW

h

Annual Curtailment

Wind Solar

0.08%

0.14%

0.55%

% Total Generation

Side Effect: Rising Curtailment of Wind & Solar

30% PROGRESS 33% GOAL(2020)

50% GOAL(2030)

-50% GOAL(2030)

100%(2015)

Moving Forward: California’s Electricity Sector Goals

Renewable Energy

GHG Emissions Reductions

Load

Wind

Solar

Thermal

Projected Changes in Load & Generation by 2030

2017 Load & Generation Scaled to 2030 Projections

0

5000

10000

15000

20000

25000

30000

35000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

MW

Hour

2017 Average Hourly Load & Generation Scaled to 2030 Projections

Total Load Load minus BTM Solar IFOM Solar

Net Load Curtailment

IncreasedCurtailment

IncreasedRampingNeed;IncreasedGHGs

2017 Load & Generation Scaled to 2030 Projections

05,000

10,00015,00020,00025,00030,00035,00040,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

MW

Hour

Average Hourly Load, Sep. 2017

Net Load Total Load

Clean Energy40% of

Total Load

Net LoadPeak Hours

A Proposed Solution: The Clean Peak Standard

05,000

10,00015,00020,00025,00030,00035,00040,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

MW

Hour

Average Hourly Load, Sep. 2017

Net Load Total Load

ESDischarge

ES Charge

How Storage Would be Work under a CPS

curtailment

0

50,000

100,000

150,000

200,000

250,000

300,000

350,0001 16 31 46 61 76 91 106

121

136

151

166

181

196

211

226

241

256

271

286

301

316

331

346

361

MW

Day

Est. Energy Storage Needed by 2030 to Meet CPS

RE ESS Total Load CPS

Spring Summer FallWinter

Projected Storage Needed by 2030 to Meet CPS

Seasonal Variation Due to Load & Resource Changes

Winter Fall

Summer

Spring

0%

20%

40%

60%

80%

100%

- 5,000 10,000 15,000 20,000 25,000 30,000 35,000

Perc

ent o

f Yea

r

Storage Capacity (MWh)

2030 Storage-Only Projection for CPS

Amount Capacity Factor

As Storage Rises, CFs for Marginal Storage Fall

CPUC

202

0 St

orag

e M

anda

teOn

line

by 2

024

First Solar & APS, Arizona Public Service65 MW Solar PV50 MW, 200 MWh Battery15 y PPA @ ???Will deliver 50 MW from 16:00-20:00 hSigned February, 2018

https://www.greentechmedia.com/articles/read/50-megawatt-battery-will-give-arizona-peak-power-from-the-sun#gs.5lYdzg4

NextEra Energy, Tucson Electric Power100 MW Solar PV50 MW, 120 MWh Battery20 y PPA @ < $45/MWh (w/o subs. $90/MWh)Signed May, 2017

https://www.utilitydive.com/news/how-can-tucson-electric-get-solar-storage-for-45kwh/443715/

Previous Low:AES & Kauai Island Utility Coop28 MW Solar PV20 MW, 100 MWh battery??? Y PPA @ $111/MWhSigned January, 2017

PPAs for Storage? Recent Examples of PV + Storage

https://emp.lbl.gov/sites/default/files/utility-scale-solar-2016-report.pdf

32

compares it to the former, and finds that PPA prices are consistently lower than LCOE estimates, as expected.

PPA prices have fallen dramatically, in all regions of the country Figure 18 shows trends in the levelized (using a 7% real discount rate) PPA prices from the full PV contract sample over time. Each bubble in Figure 18 represents a single PPA, with the color of the bubble representing the region in which the underlying project is located,47 the area of the bubble corresponding to the size of the contract in MWAC, and the placement of the bubble reflecting both the levelized PPA price (along the vertical y-axis) and the date on the which the PPA was executed (along the horizontal x-axis).48 Figure 19, meanwhile, is essentially the same as Figure 18, except that it focuses only on those PPAs that were signed since the start of 2015. The purpose of Figure 19 is to provide greater resolution on the most-recent time period, which otherwise appears a bit crowded in Figure 18.

Figure 18. Levelized PPA Prices by Region, Contract Size, and PPA Execution Date: Full Sample

47 Figure 18 excludes the single northeastern PPA in our sample—a 32 MWAC project on Long Island that was signed in June 2010 and that has a real levelized price of ~$290/MWh (in 2016 dollars)—and we do not yet have PPA price data for any projects in the northwest region. 48 Because PPA prices reflect market expectations at the time a PPA is executed—which could be two years or more in advance of when the project achieves commercial operation—the PPA execution date is more relevant than the commercial operation date when analyzing PPA prices. For those interested in viewing average PPA prices by commercial operation date, however, Figure 21 breaks it out both ways.

$0

$50

$100

$150

$200

$250Ja

n-06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Jan-

14

Jan-

15

Jan-

16

Jan-

17

PPA Execution Date

California

Southwest

Texas

Southeast

Midwest

Hawaii

Leve

lized

PPA

Pric

e (R

eal 2

016

$/M

Wh)

550 MW

210MW

50 MW

Sample includes 189 contracts totaling 11.7 GWAC

12 MW

Low Solar+Storage PPAs Driven by Solar PPAs

…only showing the first seven years

PPA ($/MWh) $50.00

Size (MWh) 5

Capacity (MW) 1Installed cost ($/kWh) $385.00

O&M costs ($/kWh) $2.75

Tax rate 39%

Inflation 0.0%

5-y MACRS 20.00% 32.00% 19.20% 11.52% 11.52% 5.76%

365 day Revenue $91,250

0 1 2 3 4 5 6 7Revenue $0 $91,250 $91,250 $91,250 $91,250 $91,250 $91,250 $91,250

O&M $0 $13,750 $13,750 $13,750 $13,750 $13,750 $13,750 $13,750

EBITA $0 $77,500 $77,500 $77,500 $77,500 $77,500 $77,500 $77,500

Depreciation $0 ($385,000) ($616,000) ($369,600) ($221,760) ($221,760) ($110,880) $0

EBIT $0 ($307,500) ($538,500) ($292,100) ($144,260) ($144,260) ($33,380) $77,500

Taxes $0 $0 $0 $0 $0 $0 $0 ($30,225)

Net Income $0 ($307,500) ($538,500) ($292,100) ($144,260) ($144,260) ($33,380) $47,275

Add back in depreciation $0 $385,000 $616,000 $369,600 $221,760 $221,760 $110,880 $0

Installed cost ($1,925,000) $0 $0 $0 $0 $0 $0 $0

Tax Shield $119,925 $210,015 $113,919 $56,261 $56,261 $13,018 $0

Cash Flow ($1,925,000) $197,425 $287,515 $191,419 $133,761 $133,761 $90,518 $47,275

IRR -10.22%

Simple 10-y IRR Analysis of Storage Only

IRR

AES,

Kau

ai

Nex

tEra

, Tuc

son

???

CAIS

O M

ean

RT P

rice

Complete Discharge During CPS Hours Only

Lazard 2017 range ininstalled cost

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

-1

0

1

2

3

4

5

6

0 1 2 3 4 5 6 7 8 9 1011121314151617181920212223

$/MWh

MWh

Hour

Storage Charge/Discharge Price

CPS PPA(e.g., $90/MWh)

Using Storage to Arbitrage Hourly Prices Outside CPS

IRR

???

≥

AES,

Kau

ai

Nex

tEra

, Tuc

son

CAIS

O M

ean

RT P

rice

Complete Discharge During CPS Hours + Arbitrage

Lazard 2017 range ininstalled cost

IRR

Lazard 2017 range in

installed cost

???

≥

AE

S,

Ka

ua

i

Ne

xtE

ra,

Tucs

on

CA

ISO

Me

an

RT

Pri

ce

As Before, but over 20-y Rather than 10-y Period

https://emp.lbl.gov/sites/default/files/utility-scale-solar-2016-report.pdf

32

compares it to the former, and finds that PPA prices are consistently lower than LCOE estimates, as expected.

PPA prices have fallen dramatically, in all regions of the country Figure 18 shows trends in the levelized (using a 7% real discount rate) PPA prices from the full PV contract sample over time. Each bubble in Figure 18 represents a single PPA, with the color of the bubble representing the region in which the underlying project is located,47 the area of the bubble corresponding to the size of the contract in MWAC, and the placement of the bubble reflecting both the levelized PPA price (along the vertical y-axis) and the date on the which the PPA was executed (along the horizontal x-axis).48 Figure 19, meanwhile, is essentially the same as Figure 18, except that it focuses only on those PPAs that were signed since the start of 2015. The purpose of Figure 19 is to provide greater resolution on the most-recent time period, which otherwise appears a bit crowded in Figure 18.

Figure 18. Levelized PPA Prices by Region, Contract Size, and PPA Execution Date: Full Sample

47 Figure 18 excludes the single northeastern PPA in our sample—a 32 MWAC project on Long Island that was signed in June 2010 and that has a real levelized price of ~$290/MWh (in 2016 dollars)—and we do not yet have PPA price data for any projects in the northwest region. 48 Because PPA prices reflect market expectations at the time a PPA is executed—which could be two years or more in advance of when the project achieves commercial operation—the PPA execution date is more relevant than the commercial operation date when analyzing PPA prices. For those interested in viewing average PPA prices by commercial operation date, however, Figure 21 breaks it out both ways.

$0

$50

$100

$150

$200

$250Ja

n-06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Jan-

14

Jan-

15

Jan-

16

Jan-

17

PPA Execution Date

California

Southwest

Texas

Southeast

Midwest

Hawaii

Leve

lized

PPA

Pric

e (R

eal 2

016

$/M

Wh)

550 MW

210MW

50 MW

Sample includes 189 contracts totaling 11.7 GWAC

12 MW

Coupling w/ Storage Will Likely be for New PV Only