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HomeMy WebLinkAboutElectric Board - Minutes - 04/16/2008Fort Collins Utilities Electric Board Minutes Wednesday, April 16, 2008 Electric Board Chairperson City Council Liaison John Morris, 377-8221 Wade Troxell Electric Board Vice Chairperson Staff Liaison Dan Bihn, 218-1962 Robin Pierce, 221-6702 Roll Call Board Present Chairperson John Morris, Vice Chairperson Dan Bihn, John Harris, Steve Wolley, John Graham, Tom Barnish and Jeff Lebesch StaffPresent Brian Janonis, Patty Bigner, Norm Weaver, John Phelan, Terri Bryant, Ellen Switzer, Eric Dahlgren, Robin Pierce and Olivia Brown Guests Elizabeth Mozer with Trees Water & People, Fred Kirsch with Fort Collins Community for Sustainable Energy and Eric Sutherland Meetine Convened Chairperson John Morris called the meeting to order at 5:40 p.m. Citizen Participation Elizabeth Mozer with Trees, Water & People, an environmental nonprofit organization in Fort Collins, spoke briefly about her organization's local renewable energy efforts. The organization will be using money collected through a recent fundraiser to install a 10-kilowatt (kWh) photovoltaic system on Poudre School District's new Bethke Elementary School in Timnath. She said Fort Collins has been very progressive with regards to renewable energy and encouraged the Utilities to apply for the funds available to municipal utilities for solar innovation programs through the Governor's Energy Office. Minutes of March 12, 2008 Board Member Steve Wolley motioned to approve the minutes from the March 12, 2008, meeting. Board Member Tom Bamish seconded the motion, and it passed unanimously. Renewable Ener¢v Update John Bleem, Division Manager of Customer Service at Platte River Power Authority (PRPA), spoke to the Electric Board about renewable energy policy and resources. Electric Board Minutes Page 2 April 16, 2008 History PRPA, which provides power to Fort Collins, Estes Park, Loveland and Longmont, started doing Integrated Resource Planning in the early 1990s, which looks at both demand side and supply side resources. They surveyed all four cities' customers about renewable energy, and they found there was a very strong interest in renewable energy. A majority of those surveyed said they would be willing to pay more for it, so they started a Green Pricing program in 1996-1997 that made renewable energy available to customers on a voluntary basis. PRPA took over the Medicine Bow Wind Energy Facility in Wyoming in 1998 and built two wind turbines based on demand at that time. There are now 10 turbines at the site. PRPA owns and operates the facility, takes care of the transmission and maintenance, and has a 40-year land lease at the site. There have been some transmission limitations with Medicine Bow. In 2002, they started to buy wind on a short-term basis from other wind plants to meet the customers demand for renewable energy. Up until this point, all of this was voluntary. The City of Fort Collins adopted a policy in 2003 to add renewable energy to their base rate or total portfolio. Based on direction from PRPA's Board and an agreement with the City, PRPA started purchasing Renewable Energy Certificates (RECs) in 2004 and have had them in their mix since. Renewable energy policies at the local and state levels have developed over the past 10 years from voluntary to mandated or rate based. The Colorado standard for municipal utilities is 10 percent renewable energy within 13 years of reaching 40,000 customers. Fort Collins' 2003 policy states that 15 percent of the City's electric energy must come from renewable sources by 2017. The City is at 6.4 percent currently. Longmont has a 3 percent minimum, and they're currently at 3.8 percent. Loveland and Estes Park are still voluntary, and they are each around one percent. PRPA is serving these four cities' individual needs and working within the state of Colorado's requirements. When Fort Collins' Electric Board looked at the renewable energy resources available in 2003, they voted on the source based on five criteria. Those criteria and how they were weighted were: • Reduce environmental impact — 20% • Incent new generation — 10% • Price — 50% • Explainability — 10% • Proximity to Fort Collins — 10% The options considered were to build a new plant with the energy and the RECs like Medicine Bow, invest in a new plant and sell the energy and keep the RECs, purchase short-term energy with RECs, or purchase RECs alone without energy. The weighing criteria was 50 percent for cost, so given that the price of RECs was so much lower than delivered energy, the Board decided to go with RECs. At that time RECs could be purchased for $5 a megawatt (MW), while new wind generation was going to cost about 3 cents a kWh, or $30 a MWh. Source requirements, location and types of facilities for the RECs were considered. PRPA developed a purchase agreement with the City and both entities signed it. Within a year, all the other cities added RECs as well. Electric Board Minutes Page 3 April 16, 2008 Platte River Power Authority Renewable Energy Policy PRPA decided to organize all the city policies and the new state rules into a unified policy that would allow them to plan effectively. At this point, they developed and passed their Renewable Policy in March 2006, which was updated in August 2007. The policy states that qualified renewable sources are wind, solar, geothermal, biomass and small hydro. They have to be in the Western grid or contiguous to Colorado. No renewable energy will be purchased from facilities that were built as a result of legal settlements, PUC rulings or other mandates. And finally, the renewable source could be either delivered energy or RECs. PRPA realized they were getting a lot of RECs, based on the demand from the cities to which they supply power. They made the decision to build renewable energy plant capacity up to the Colorado state standard, have RECs for the rest of the demand, and roll it all together in a rate tariff. At this point PRPA's renewable energy is made up of about 80 percent RECs, 20 percent energy. Over time, they will need to add a 12-15 megawatt wind plant so the renewable energy will be about 40 percent delivered energy within a couple years. By 2020, it will be about 70 percent energy, 30 percent RECs, based on the combined cities' and state policies. Cities could do something in addition to that on an individual basis if they want. PRPA has purchased renewable energy from various sources in the past, but this year they have Medicine Bow, which provides wind energy and RECs, and they have several REC suppliers that are mainly wind energy and one landfill gas project. Renewable Energy Certificates RECs are difficult to explain. When electricity is generated and goes into the grid, it is an undistinguished commodity. The grid doesn't care whether electricity comes from wind, solar, coal, gas or nuclear power plants. Environmental attributes of different sources are captured in RECs, Renewable Energy Credits or Certificates. RECs are a contractual right to emission reductions, sort of like an offset. The title is transferred via a bilateral contract with the REC supplier. The contract defines a REC as, "Any and all credits, benefits ... offsets and allowances, resulting from the avoidance of any gas, chemical or other substance attributable to the generation of [Renewable Energy]". When the renewable plant runs and a fossil fuel plant backs off, RECs transfer ownership of the emission reduction associated with that. It's a form of carbon offset, but they are special because they are unique to renewable energy carbon offset. Other types of offsets are changing agricultural practices, paying to not cut down forests or paying to plant trees. PRPA uses Green-e Energy to track and verify RECs to make sure that all the qualifications put on them are met and they are not built for someone else nor sold to anyone else. RECs are endorsed by National Renewable Energy Laboratory, American Wind Energy Association, Western Governors Association, Environmental Protection Agency, Department of Energy, the Colorado Climate Action Panel and many other organizations. If PRPA purchases energy from a renewable energy generator, that power plant makes energy and it goes into the grid. An equivalent amount of energy is metered out of the grid and it goes into our system. Those electrons from that renewable energy generator do not go directly into PRPA's system but an equivalent amount of energy is delivered, and PRPA gets those renewable energy credits as well. Then PRPA sells an equivalent amount of energy to the cities. If PRPA just buys RECs, the difference is they are not taking an equivalent amount of energy out of the grid. Somebody else takes the electricity, but PRPA gets the credit for that carbon offset. Either Electric Board Minutes Page 4 April 16, 2008 way, fossil fuel resources are displaced, renewable energy is supported and CO2 emissions are reduced. Vice Chairperson Dan Bihn commented that from an investment perspective, RECs are very different than ownership of a renewable energy generating plant. Mr. Bleem agreed, saying that if a gear box fails at a plant you own, you have the responsibility to repair it. If you are buying RECs, your only responsibility in that situation is to seek out another REC source. RECs help provide and secure financing for new renewable energy developers. Board Member John Morris said if the electricity from the electric grid costs 6 cents/kWh, but it costs 8 cents/kWh to make renewable energy, the renewable energy offset can be sold as a REC at a 2 cent premium, and Green-e certifies that premium. Board Member Tom Barnish asked what that premium pays for. Is it profit for the wind generator? Mr. Bleem said it provides capital. Wind turbines are capital intensive, and although they do not have fuel costs, they do have operation, maintenance and transmission costs, including backing up the wind. Initially, at Medicine Bow, the generation cost was about 3.9 cents/kWh. PRPA's wholesale rate at the time was about 1.4 cents/kWh, so they took the difference between those and had about a 2.5 cent premium at that time. More RECs were added and that brought the premium down now to about one cent in Fort Collins, but as more generated energy is added into the mix, that premium is going to go up again. Vice Chairperson Bihn said the key assumption in the REC model is that renewable energy fundamentally costs more than non-renewable energy. As that begins to change, as natural gas prices rise and wind energy becomes cheaper, the REC margin will go away. Mr. Bleem agreed, but added that carbon offsetting is also driving the sale of RECs. The ultimate goal is to reduce total carbon emissions. If there is a better wind project in North Dakota than Colorado, and there's no transmission between the states, I might prefer to spend $20 to support that project, where I might have to spend $30 or $40 locally to ensure an equal reduction of carbon emissions. Vice Chairperson Bihn said some people question RECs because investment in RECs prevents investment in new carbon offsetting resources and infrastructure. Mr. Bleem said they would like to have a more diversified portfolio that is a mix of both RECs and delivered renewable energy, especially when carbon legislation or regulation is put in place in the future. On the Web site www.epa.gov/greenpower you will see many large companies that are household names purchase RECs. RECs have blemishes and benefits. They are not always local. Today's RECs are not always tied to a new plant. Sometimes they are tied to old wind turbines that are still making renewable energy, and still offsetting carbon. No one knows what the carbon policy will be, so they are not integrated into federal or state carbon policies. They are not easy to explain, and they are not the only source in our portfolio. Over half of PRPA's resource investments in Fort Collins are in energy efficiency. In fact, PRPA spends over a million dollars annually on efficiency. A little less than 20 percent is spent on RECs, and about one-third is invested in energy and RECs. PRPA gets 80 percent of their carbon credits from RECs at a cost of about 20 percent of what the energy costs, which illustrates how expensive renewable energy is. PRPA serves four unique cities that are each trying to do different things. They have asked the cities how many renewables they will commit to for the next 20 years. The cities have committed to about 125,000 MWh in 2008, increasing to about 145,000 by 2026, so that is what PRPA is trying to secure in resources. This will be done Electric Board Minutes Page 5 April 16, 2008 through a premium tariff the cities will need to pay over and above the standard energy tariffs. RECs that meet all the requirements have to be obtained from numerous sources. Mr. Bleem showed all the sources and how they will combine over the years to meet the renewable energy requirements. PRPA is also focused on getting a new plant online by the end of 2010. The costs for Vestas turbines, including capital, operation, maintenance, transmission and backing up the wind, is about $53/MWh. Short-term RECs cost about $5/MWh, and long-term RECs cost about $11/MWh. RECs are cheaper because there are no transmission costs, no ancillary services, there are no losses and there is no carbon rule yet. Wind prices have not gone down because there is such a high demand for it, and the cost of all the raw materials that go into power production have increased considerably. On the Chicago Climate Exchange, the exchange and purchase of offsets is at about $5/ton, but that will most likely increase substantially once a carbon rule is established. Some legislation is considering taxing carbon, but most likely it will be cap and trade, which is a formula that has worked well for other forms of pollution, such as SO2 and NOx. New Wind Power Acquisition Efforts In February 2007, PRPA did a request for information and received 17 indicative bids on pricing. The prices were very high. PRPA then sent out a Request for Proposals for 12-30 megawatts of energy and RECs combined at the Medicine Bow site, near Rawhide or anywhere else. They were pleased to receive 43 different bids from 12 companies and 18 sites. A number of the bids had contingencies. Some said they could not guarantee transmission, turbine availability or were unsure about federal tax credits. Many of the bids required PRPA to take part in joint projects with other participants because they considered PRPA's RFP too small. Several bids are at Medicine Bow, most of the others are scattered around Northeast Colorado and Southeast Wyoming. The average was 7 cents a KWh. If you add transmission and cost to back it up, the average is 8.5 cents. Luckily some bids were in the 5 cent range. They are hoping to push that $85 MWh average bid down by $10 or more. The long-term cost forecast for coal is $15- $25/MWh going out to 2020. The cost at Medicine Bow is about $52/MWh, which has come up from $39, but it is not nearly as high as the new bids. The average gas price index is about $70-80/MWh, so it is very close to the cost of wind. However, wind does not always produce at times of peak demand because it is an intermittent resource. In seven of the past 10 years, wind has provided less than 10 percent of PRPA's need at peak demand. Fred Kirsch with Fort Collins Community for Sustainable Energy asked if there was any interest in doing wind to hydro to address the storage questions. John Bleem said Medicine Bow was originally built for that purpose during the 1970s when federal hydro programs were trying to tie wind and hydro projects together. Today, hydro power projects often do not want to work with wind power because hydro power does not have the movement it used to. PRPA recently put two Met Towers up on some City of Fort Collins land to study how much generation could be secured within a reasonable distance for building transmission. This is a back-up if none of the new wind construction bids work out. PRPA is also looking at Button Rock, a small hydro facility west of Lyons. They could capture 2-3 megawatts of power from that site, but it has many bureaucratic hurdles to clear before it could work. Solar is very expensive, and it, like wind, does not align with peak demands. Concentrated solar looks promising for the future and PRPA is looking at other sources such as biomass and geothermal Electric Board Minutes Page 6 April 16, 2008 that are limited now but overtime may have new opportunities. Energy efficiency has been the best investment to date to reduce carbon. PRPA has chosen the top three bids for the new wind energy project, so the next step is to work on developing contracts. They would like to hear from the cities so their needs can be presented to PRPA's Board in May. They hope to have the new project online by 2010. Questions and Discussion Board Member Wolley asked how much more renewable energy Fort Collins would have to buy to get from the City's current 6.5 percent to the stated goal of 15 percent by 2017. Mr. Bleem said if you wanted it to all be energy with RECs (not RECs only), that would be about 80 megawatts. It would be difficult for PRPA to accommodate 80 MW of energy on their current system, because it would have to be backed up with other resources. They are comfortable with 30-40 MW at the most. Rawhide could add a combined cycle unit that would alternate gas and wind power, but it would be quite expensive to Fort Collins. The premium for the current mix is $12/MWh or 1.2 cents/kWh. If 12 MW of new wind plant are added with corresponding RECs, it raises the tariff to about $27-28/MWh, so 2.7-2.8 cents/kWh. To go to the 80 MW level, with PRPA's existing plant, would push the premium up more than $50/MWh, so 5-6 cents/kWh. If a gas plant was added to that, it could go to about 10 cents/kWh. Board Member Wolley said it is important for the Electric Board to know all the costs associated with increasing wind energy in order to make recommendations regarding policy. Utilities Executive Director Brian Janonis said Utilities staff is also trying to develop estimates of the policy's cost impact on rates for a discussion next Tuesday with City Council. Mr. Bleem said there is also some risk involved with investing all of the City's renewable energy funds into wind now because new technologies may make other alternatives more cost effective in a few years. He expects there to be carbon rules passed during the next four years because all three of the remaining presidential candidates have carbon in their platforms. He encouraged the City to keep informed of new technologies, such as concentrated solar and thin film photovoltaic systems that may present new opportunities. Chairperson Morris thanked Mr. Bleem for the information and asked him to make the slides from his presentation available to the Board. Brian Janonis reminded the Board that if someone from the audience speaks to make sure they are identified for the recorder so the minutes reflect whether a comment is made by a board member or a member of the audience. Partnerships with Area Entities Patty Bigner, Customer Service and Employee Relations Manager, spoke about the Utilities' community partnerships. Her focus for this meeting was Colorado State University, but she will address Utilities' partnerships with Poudre School District and UniverCity Connections/FortZED in the future, as well as any others entities the Board identifies. She will provide this information to the Board in a memo as well. The Utilities have enjoyed a long, active relationship with faculty and staff at Colorado State University (CSU). This relationship encompasses three major areas: facilities and operations (Key Accounts), resource conservation (electric and water) and strategic collaborations. Electric Board Minutes Page 7 April 16, 2008 Facilities and Operations The majority of interactions between the Facilities group at CSU and Utilities staff are conducted through our Key Accounts program. Monthly meetings provide a consistent channel of communication between our organizations. In addition to the Key Accounts program, Utilities also maintains a liaison related to water quality and other regulatory affairs. Resource Conservation CSU is an active participant in Utilities' energy and water conservation programs. So far this year, CSU has four active projects in the Integrated Design Assistance Program, providing $59,000 in financial support for design. Six projects are qualified for a total of $169,000 in energy efficiency incentives, and we expect more will be awarded in support of the University's ongoing program to reduce electric demand. To help reduce peak demand, Utilities is supporting implementation of demand response through our load management signal, also associated with the residential and commercial load management program. Utilities communications and education staff support a variety of CSU events and programs with both information and staffing. Some of these include: CSU's Green Energy Program for residence halls, Housing Fair, Earth Day, the Children's Water Festival, Natural Resources Day, CSUnity, President's Luncheon and through internships. This year, our energy services group will cosponsor the upcoming "Greening your Existing Building Workshop," to be held April 25. Collaboration In the past few years, more and more opportunities for strategic collaboration have become available, supporting partnering for both groups. Some of our current collaborations include: • Clean Energy Cluster's Department of Energy (DOE) grant application to study integration of distributed generation: • City's Climate Task Force: • Utilities' 2l't Century Sustainability Project: and • CSU's renewable energy project. Chairperson Morris asked if the Utilities collaborate with CSU on research projects such as the photovoltaic thin film. Ms. Bigner said the Utilities have been approached by CSU about a project with the Engines Lab that would be funded by a grant from the Governor's Energy Office. Darin Atteberry, Fort Collins City Manager, is focused on taking advantage of the research capabilities at the University. These collaborative projects are being undertaken because over the past 20, much work has been put into developing this relationship. Board Member Barnish asked a couple follow-up questions to a topic discussed last year. Are the Utilities making an effort to encourage efficiency and conservation when a big box retail building is redeveloped that had been vacated? Is the City educating businesses about the savings that can be gained despite the upfront costs? Ms. Bigner explained that the new Green Building Coordinator and the Key Account Managers are working to get in front of those kinds of projects, so when someone is going to retrofit or remodel, they take advantage of the opportunity. Once this expectation is imbedded in our community's business culture, it will become more routine. Electric Board Minutes Page 8 April 16, 2008 Adoption of 2007 ASHRAE 90.1 Commercial Energy Code Board Member Steven Wolley motioned to approve the Neighborhood and Building Services Department's adoption of the 2007 ASHRAE 90.1 Commercial Energy Code. Board Member John Harris seconded the motion, and it was passed unanimously by the Electric Board. Routine Updates PRPA — Dan Bihn No report Climate Task Force — Jeff Lebesch Climate Task Force has slowed down with the extension of the deadline based on direction from the City Council. They are now reviewing long-term objectives and measures, which will be discussed in an upcoming Council work session. Energy Supply Sub -Committee Update — Dan Bihn and Jeff Lebesch Meetings had been delayed until City Council made a decision about the Climate Task Force. The next step will be revision to the policy in a small group before the whole sub- committee meets again to review it. Capital News —Steve Wolley No report. Ms. Bigner offered to help ensure Board Member Wolley receives CAW and CML updates. Other Business Ms. Bigner announced that next Tuesday, April 22, the City is sponsoring an event in celebration of Earth Day from 11:30 a.m. to 1 p.m. at the Lincoln Center. Mike Nelson of 7News is going to talk about Climate Change from a meteorologist's viewpoint. All are invited to attend. The Utilities received notification that we received a Solar Grant from the Governor's Energy Office. It is a $25,000 matching grant that will allow the Utilities to offer an incentive of $2/Watt for a maximum of $4,000 per project. We will also be concluding our net metering pilot program and expanding it to a net metering solar program. Future Aaenda Items Send agenda items to Robin Pierce. The nAting was adjourned at 7:32 p.m., following a motion by Vice Chairperson Bihn. Brown, Electric Board Secretary