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A Guidebook to Expanding the Role of Renewables in a Power Supply Portfolio--A Webcast Review and Discussion

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					A Guidebook to Expanding the Role of Renewables in a Power Supply Portfolio:
A Webcast Review and Discussion
Altera Energy, Inc. 321 Gaylord St. Suite G Denver, CO 80206 (303) 355-1030

November 1, 2004

ALTERA
Energy

Webcast Agenda

I. II. III. IV. V.

Introductions of discussion leaders and participants History and method for guidebook Summary of guidebook Participant discussion Future webcasts

2

ALTERA Energy

History and Method for Guidebook
• Application in January 2004 to Demonstration of Energy-Efficient Development Program (DEED) of the American Public Power Association

• Purpose: To develop “A Guidebook to Expanding the Role of Renewables in a Power Supply Portfolio”
• Sponsored by: Gila Resources and Western Area Power Administration • Award and project initiation in March 2004 • Project team: Brian Walshe, Altera Energy, Inc. and Larry Barrett, Barrett Consulting Associates, Inc. • Management team: Ken Mecham, President and CEO, Gila Resources with Randy Manion, Western Area Power Administration • Over 30 expert reviewers with special support from • Harvey Boyce, Arizona Power Authority • William Golove, Lawrence Berkeley Laboratory • Ron Lehr, American Wind Energy Association • Tim Sutherland, COO, Nebraska Municipal Power Pool Agency • Various experts from National Renewable Energy Laboratory

•June 2004 webcast to review plans and progress with over a dozen people
•Result: Guidebook of over 80 pages, including references and case studies
3

ALTERA Energy

Outline of Guidebook and Webcast Discussion
Table of Contents
I. II. III. IV. V. Introduction and Background Encouraging Public Participation and Governance Defining Renewable Energy Objectives Screening Renewable Energy Alternatives Designing Projects and Programs

VI.
VII.

Analyzing Renewable Energy Costs and Risks
Implementation Planning

Appendix • Gila Resources Case Study • Other Utility Case Studies • Check List for Talking with Developers • Additional Website References
4

ALTERA Energy

Chapter 1 Introduction and Background

•

Guidebook objective: What should utility managers be doing to expand the role of renewables in their energy supply portfolio? Guidebook scope • Focused on helping the utility identifying alternatives in public participation, resource objectives, resource selections, project design, risk analysis and program implementation • Not designed to be a prescriptive cookbook or detailed encyclopedia Drivers for renewable energy Natural gas price volatility Renewable portfolio standard

•

•

Green pricing

Corporate governance

Costs to integrate with utility grid
Costs
5

Technical/experience base

ALTERA Energy

Potential Alternative Strategies to Achieve Renewable Goal

Goal(s)

Alternative Strategies

1

Build New Renewable Generation

Expand the Role of Renewables in the Power Supply Portfolio

2

Buy Renewable Generation Output via PPA

3

Purchase RECs

6

ALTERA Energy

Key Questions in Considering Alternative Strategies

How Will You Pay?

What is You r Capacity for Ri sk? • Fuel ris k • CapEx ris k • Development ris k • Counterparty ris k

What is Most Signifi cant Motivation? • Env ironmental c oncerns • Economic Development • Low- os t energy c • Supply diversity • RPS

Who Are Yo u Appealing T o? • Res idential • C&I • Activ ists • Media • Politic al

What Is You r Capab ility to Implem ent? • Development & c onstruc tion expert ise • Marketing s kill • Analyt s k ic ills • Legis lativ e inf luenc e

• Rate base • Green pric ing programs

7

ALTERA Energy

Requirements for a Successful Renewable Energy Strategy

Cha pt r 2 e Enc oura ging Public Pa rtic ipa tion

Cha pt r 3 e Cle a rly De fine d Obje c tiv e s

Cha pt r 4 e Ade qua te ly Sc re e ning Alte rna tiv e s

Cha pt r 5 e Ade qua te Progra m / Proje c t M a na ge m e nt

Cha pt r 6 e Rigorous Ana ly s is of Cos t & Ris k s

Cha pt r 7 e Strong Im ple m e nta tion Pla nning

• Cons is te nt with s tra te gy , c a pa bilitie s a nd v a lue s • Supports s tra te gic re quire m e nts for powe r s upply • Addre s s e s ne e ds a nd c onc e rns of a ll s ta k e holde r groups

• Ac hie v e s a ny RPS or re gula tory re quire m e nt • Se ts re a lis tic & re a s ona ble ta rge ts • Coordina te d with s tra te gic pla n & c om pa ny goa ls

• Cons ide rs a ll fe a s ible a lte rna tiv e s • Cle a r de c is ion m a k ing c rite ria a nd proc e s s

• Prope rly c ons ide rs how m uc h, how fa s t • Prov ide s for fle x ibility if c irc um s ta nc e s c ha nge

• Ana ly tic a lly s ound • Cons ide rs a lte rna te s c e na rios a nd s olutions

• Orga niz e d & foc us e d proje c t te a m • Coordina te d high le v e l a nd de ta ile d work pla ns • Ade qua te ly s ta ffe d a nd budge te d to m e e t goa ls

8

ALTERA Energy

Chapter 2 Ensuring Public Participation and Meaningful Governance
• Municipal utilities by design are more democratic with more public participation.
Municipal Utility Membership of the Board of Directors

Appointed 29%

Council 59% Elected 12%

Utility
Lenox Municipal City of Palo Alto Utilities Moorhead Public Service Holy Cross Energy Montezuma Municipal Light and Power Orcas Power and Light Fairbanks Municipal Utilities System Sacramento Municipal Utility District Central Electric Cooperative Madison Gas & Electric

Participation Rate
11.1percent 6.6 percent 5.5 percent 5.1 percent 4.9 percent 4.9 percent 4.7 percent 4.6 percent 4.1 percent 3.9 percent

Start Date
2003 2003 1998 1998 2003 1999 2003 1997 1999 1999

• Municipal utilities tend to have higher participation rates in renewable energy programs compared to other utilities.

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ALTERA Energy

Public Participation Defined, Characteristics and Components
•

Public participation defined “Any process that involves the public in problem-solving or decision-making and uses public input to make decisions.”

• Effective public participation has three characteristics: • Based on values • Oriented toward decisions • Driven by objectives • Critical components include: • Clarify the decision and decision-making process • Develop full understanding of who needs to be involved • Define the appropriate level of public participation • Understand and accept the core values of public participation

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ALTERA Energy

Public Participation Format Purposes, Techniques and Objectives to Inform to Involve to Empower
Format Techniques
Advertising Bill stuffers Brochures Displays Fliers Kiosks

Inform
       

Consult

Involve

Collaborate

Empower

Awareness

Education

Fact sheets Information centers

Newsletters
Public access TV Technical reports Web sites


                      

Bring people together

Tours Symposia/panels Open houses Fairs Events Briefings Workshops Town meetings Advisory committees Task forces Deliberative polls

Collect input and feedback

Focus groups Questionnaires Citizen juries Voting

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ALTERA Energy

Chapter 3 Defining Renewable Energy Objectives

Planning Pyramid
Vision
What you want to be in five years

Mission
What the organization does that brings value to customers

Goals
Major accomplishments to achieve the vision and mission

Strategies
Methods (how and when) for achieving goals

Objectives and Targets
Specific steps (milestones) in strategies to reach goals

Budget
Resources to meet objectives, strategies and goals
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ALTERA Energy

Planning Pyramid Applied for 5% and 10% Goals As an Example

I II.

Obtain 5% of our energy needs from renewables by 2007 Obtain 10% of our energy needs from renewables in 10 years (2014)

Goals
Vision 1. Build one new renewable project in our territory Goals 2. Buy renewable PPAs where economic 3. Buy RECs to cover any shortfall

Mission

Goals

Strategies
Strategies Strategies Objectives & Targets a) Have self-built project on-line by 2006 b) Issue RFP for alltechnology renewables bid in 2005 c) Define long-term program to achieve 2014 targets thru self-build and PPA

Objectives & Targets

Objectives & Targets
13

ALTERA Energy

Chapter 4 Screening Renewable Energy Alternatives • Utility scale projects
- Wind
Geothermal Bioenergy Solar Hydro Oceans Hydrogen

•Customer scale projects - Solar water heating
Passive solar design Transpired collectors Geothermal direct use Geoexchange heat pumps Photovoltaic systems Small wind turbines Fuel cells

14

ALTERA Energy

Largest Projected Increases for Renewable Resources: Wind, Geothermal, Biomass
U.S. Renewable Energy Generation in MW

Energy Source
Wind Geothermal Biomass Landfill gas Hydro Solar PV Solar thermal

2002
4,830 2,890 1,830 3,490 78,290 20 330

2025
15,990 6,840 3,740 3,950 78,680 410 520

Increase
11,160 3,950 1,910 460 390 390 190

Total

91,680

110,130

18,450

Source: U.S. Department of Energy, Energy Information Agency, Annual Energy Outlook 2004,

15

ALTERA Energy

Renewable Resource Screening Considerations Are Many

• • • • • • • • •

Capital Cost Capacity Resource availability Resource ($/kW) Factor (percent) Resource size Resource Comparisons in Capital Costs and $1,715 Factor 83 percent Capacity Biomass Technological maturity Geothermal $1,882 86 percent Capacity factor Landfill gas $1,470 90 percent Economically competitive Resource diversity Solar $3,889 24 percent photovoltaic Environmental impact Solar thermal $2,577 15 percent Public preferences Transmission interconnection Wind $1,010 39 percent

Source: U.S. DOE, Energy Information Administration, Assumptions to the Annual Energy Outlook 2004, February 2004, p. 128, 129.

16

ALTERA Energy

Chapter 5 Designing Projects and Programs

Determine stage of development and implementation

Research

Field Test

Pilot Program

Full Implementation

17

ALTERA Energy

Apply the Five P’s for Project and Program Design

Product

Price

Target of Purchase Utility or Customer

Promotion Policy

Place

Design Topics Product Price Place Promotion Policy

Utility Project User Quantity, Quality, Timing Costs, Bidding Location, Integration Education, Publicity Environment, Safety
18

Customer Program User Features, Services, Terms Premiums, Discounts, Financing Utility delivery, Trade allies Marketing, Advertising Zoning, Safety
ALTERA Energy

Chapter 6: Analyzing Renewable Energy Costs and Risks Phase I: Develop Base Case Forecast
1 Develop Preliminary Utility
Load Forecast
• Typical day/ typical month • Annual load growth
600 500 400

Typical End-Products
Monthly Energy Requirements

2

Complete Utility-Specific Load Forecast
• Conservation program • Other utility-specific assumptions

300 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

10-Year Power Supply Forecast

3

Develop Model of Existing Power Portfolio
• Existing contracts • Self-generation assets • Spot market purchases

1000 800 600 400 200 0

20 04

20 05

20 06

20 07

20 08

20 09

20 10

20 11

20 12

4

Develop Capacity Expansion Plan
• Fuel forecast • Contract alternatives • New alternatives/projects
600 500 400 300

10-Year Capacity Expansion Plan

5

Develop Power Supply Forecast & Budget
• “Expected case” • Longer-term perspective
19

200 100 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Other 2013

Existing Sources

Renewables

Contract Extension

ALTERA Energy

20 13

Phase II: Evaluate Additional Renewables
Typical End-Products
6
Develop Wind Integration Module
Load Forecast • Reliability & cost parameters • Integration & forecasting assumptions

7Assign Probability Distributions
to Inputs
• Load forecast • Electric price forecast • Fuel (gas) forecast

-30%

-15%

Dispatch model base case

+15%

+30%

Sim ulated Portfolio Cost (10 iterations) 1500 1000
1500 1000 500 0

Sim ulated Portfolio Cost (100 iterations)

8

Define Scenarios
• 2% versus 10% • Others, as appropriate

500 0 0 1 2 3 4 5 6 7 8 9 10

0

10

20

30

40

50

60

70

80

90

100

9

Run Simulations
• 2% versus 10% renewable • Relative contribution of key input parameters to total cost and risk
Standard Deviation

10

Interactive Review of Assumptions
• As appropriate
20

Expected Total Portfolio Cost

Expected Total Portfolio Cos ALTERA Energy

The optimal level of renewables can be estimated by modeling the impact to total portfolio cost
Total Portfolio Cost =
Self-Generation Cost Load Required to Serve PPAs Renewable Purchases
Renewable Energy Facilities Renewabl e Energy Costs

Spot Purchases
Spot Energy Purchases Spot Energy Cost

x

( ( ( ( ) )+( ) )+( ) )+( ) ) (
Owned Units Var + Fuel Cost Energy Contracts Energy Cost

A simplified view because “Total Portfolio Cost” driven by huge assumptions: • Energy and capacity planning criteria • Load forecast/scheduling accuracy • Gas price forecast • Electric spot market price • Dispatch order of plants and unit and contract availability • Spot market purchase to meet need

21

ALTERA Energy

Monte Carlo simulation can greatly improve your understanding of the impact of different amounts of renewables in a portfolio
Load Forecast

-30%

-15%

Dispatch model base case

+15%

+30%

Excel spreadsheet model can quickly simulate 8760 hours x 20 years dispatch and expected portfolio cost • Allows for hundreds of iterations, giving more robust answers • Allows stakeholders to see impact of changes to input assumptions (e.g. 2% wind, 5% wind, 10% wind)

Hydro Conditions
Portfolio “A” 5% Wind
-30% -15%
Dispatch model base case

+15%

+30%

Portfolio “B” 2% Wind

-30%

-15%

Dispatch model base case

+15%

+30%

Probability

Gas Price Forecast

Standard Deviation

Electric Price Forecast

Portfolio “A” shows higher expected cost, but a smaller range of potential outcomes

Expected Total Portfolio Cost
Mean = 1.00
-12% +35% +83% +231%

-60%

22

ALTERA Energy

Chapter 7: Implementation Planning Phase I: Organizing the Implementation Team
Board/City Council Steering Team

Project Manager

Partner/ Ally Interface
• If appropriate

Customer Interface
• • • • • • Green pricing Rate base Incentives Green tags Promotion Delivery

Finance
• Project financing • Tax • Budgets • Rates

Legal/ Contracts
• Land and property issues • Contract w/ developer • Power purchase agreement negotiations • • • • • •

Regulatory Interface
Utility commission Legislatures Land use codes Building codes Environmental Transmission

Public Interface
• Education • Polls • Communication

Construction
• • • • •

Operations

Engineer Procure Construct Contract Interconnection
23

• Grid integration • Testing/ certification • Metering/ billing • Power purchase agreement admin.
ALTERA Energy

Chapter 7: Implementation Planning Phase II: Implementation Planning Work Steps
Step I Step II Step III Step IV Step V

Ensure Clarity of Objectives, Roles & Responsibilities
1. Compile relevant documents on renewable energy goals , strategies, and objectives – Project analysis – Approval authority – Budget authority – Explicit goals, strategies and objectives 2. Compile relevant documents on goals , strategies, and objectives – Internal – External – Feedback loop 3. Identify steering team and project manager and define roles & responsibilities

Designate Team, and Project Organization
4. Define roles & responsibilities and reporting requirements for team leaders – Mktg/Customer – Finance – Legal/ Contracts – Regulatory – Public – Construction – Operations 5. Communicate organization structure and responsibilities via communication plan

Develop Detailed Cost & Schedule Information
6. Translate approved budget into cost & schedule tasks and areas of responsibility 7. Define project management tools and approach – Project reporting – Performance measures – Progress reviews – Contingency planning 8. Review available information from APPA, NREL, DOE and other public sources

Develop Individual Work Plans for Team Leaders
9. Separate plan for each team leader – Mktg/Customer – Finance – Legal/ Contracts – Regulatory – Public – Construction – Operations – Partner/Ally Interface (if appropriate)

Initiate Work Report Progress

10.Initiate discussions/ negotiations with developer (s) 11.Coordinate with vendors and trade allies 12.Document progress - Project team - Steering team - Public information

24

ALTERA Energy

Conclusion and Discussion

Questions?

Comments?

25

ALTERA Energy

Future Webcasts
Monday, November 1, 2004: Overview of Renewable Guidebook

Monday, December 6, 2004: -

Encouraging Public Participation and Meaningful Governance

Monday, January 3, 2005: - Defining Renewable Energy Objectives

Monday, February 7, 2005: - Screening Renewable Energy Alternatives Including Wind, Geothermal, Hydro, Biomass, and Solar

Monday, March 7, 2005:

- Analyzing Renewable Energy Costs and Risks

Monday, April 4, 2005:

- Designing Projects and Programs

26

ALTERA Energy

Contact

If you require any additional information, or would like to discuss any of the topics included in this presentation, please contact us at:
Altera Energy, Inc. 321 Gaylord St. Suite G Denver, CO 80206 (303) 355-1030 Brian Walshe (brianwalshe@earthlink.net) Larry Barrett (LBBarrett@aol.com)

27

ALTERA Energy


				
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