California Energy Commission Options for Developing Contingency Mitigation Measures 2015 Integrated Energy Policy Report UC Irvine Campus, Irvine, California August 17, 2015 Mike Jaske Energy Assessments Division /

California Energy Commission Terminology Contingency –The things that go wrong and lead to a potential reliability problem Mitigation Measures –One or more options developed as much as possible and are “on the shelf” waiting to be triggered if necessary Triggering –A recommendation that an “on the shelf” mitigation measure be launched into its established approval process, and if approved, development process 2

California Energy Commission Context for Mitigation Measures Enhanced Monitoring & Assessment Systems Track resource development closely for both preferred and conventional resources Use monitoring data to update future projections If expected resource development falls short compared to reliability requirements consider triggering mitigation Contingency Mitigation Measures –Goal – have measures “on the shelf” ready to be triggered Mitigation Measures Being Evaluated –OTC facility deferral – process/timeline vetted by SWRCB –New conventional generation – three options under review 3

California Energy Commission MITIGATION BY OTC DEFERRAL 4

California Energy Commission OTC Compliance Date Deferral OTC Policy Recognizes Possible Need to Shift Compliance Dates to Ensure Reliability Two Forms of Deferral: –90 day emergency triggered by ISO –Proposals for longer delays reviewed by SACCWIS SACCWIS Process –Composed of 6 state agencies and CAISO –Reviews any specific requests, reviews progress toward compliance, and provides a recommendation to SWRCB SWRCB Chooses how to Respond to a Request 5

California Energy Commission Approval Considerations Specificity – Units to be Deferred and the Rationale Assure Compliance – How and When will Compliance be Achieved Use Existing Processes – SACCWIS Be Timely – Transparent Decision-making Suggests about one Year Lead Time for Approval Recognize Consequences – Requests for Compliance Dates beyond 12/31/2022 Require Additional Mitigation 6

California Energy Commission Deferral Timeline StepElapsed Time Conduct analyses and prepare a draft request to SACCWIS ready for public comment Various depending on complexity and need for new analyses Comment period for draft request30 days Respond to comments, revise request and conduct SACCWIS meeting 45 days SWRCB review of SACCWIS report and preparation of the staff recommendation 60 days Public notice, comment, comment response, Board consideration 120 days Board Reconsideration (if needed)60 days (if needed) Preparation of OAL package and review by OAL90 days 7

California Energy Commission Remaining Issues How Far Ahead of Official Compliance Date to Submit Request? –As soon as it is clear compliance cannot occur –When it is clear how much additional time will be needed for the OTC facility Who Submits Deferral Request to SACCWIS? –Owner/operator of facility –Technical staff of the energy agencies concerned about reliability consequences of an OTC closure 8

California Energy Commission NEW GENERATION OPTIONS 9

California Energy Commission Design Considerations Minimize Elapsed Time from Triggering to Operational Project Cost Recovery for Project Design and Permitting Costs Market Power of Potential Project Owners Close Match between Projects Waiting to be Triggered and Reliability Needs 10

California Energy Commission New Generation Options Option 1: Utility Request for Offer (RFO) to Elicit Project Proposals from Developers Option 2: Utility Develops Project through Permit, Turn Over to Developers once Triggered Option 3: Rely Exclusively on a Pool of Already Permitted Projects without Power Purchase Agreements (PPA) 11

California Energy Commission Option 1: Utility RFO to Elicit Proposals Stage 1: Develop the Mitigating Measure –Utility Issues an RFO to elicit proposals from project developers –Utility chooses developer –Developer initiates permitting process and utility submits PPA to CPUC –Agencies Process Permit and PPA as Far as Possible Stage 2: Implement the Mitigating Measure –Finalize permit and PPA –If permit and PPA approved, construct the project 12

California Energy Commission Option 2: Utility Develops Initial Phase Stage 1: Develop the Mitigating Measure –Utility designs project and selects site –Utility initiates permitting and submits PPA to CPUC –Agencies process permit and PPA as far as possible Stage 2: Implement the Mitigating Measure –Utility uses RFO to select developer for project –Developer tweaks project design –Developer submits revised project into permitting and IOU submits revisions to proposed PPA –If permit and PPA approved, construct the project 13

California Energy Commission Option 3: Rely on Permitted Projects Stage 1: Monitoring Pool of Permitted Projects –CEC staff monitors pool of developer initiated projects that have received permits –CEC staff works with agencies to understand evolving permit viability concerns Stage 2: Implement the Mitigating Measure –Utility uses RFO to select project from pool –Developer submits modifications to permit, if required, –Utility submits PPA to CPUC for approval –If permit and PPA approved, construct the project 14

California Energy Commission Comparing Options AttributeOption 1Option 2Option 3 Stage 2 Time for Approval & Construction months41-54 months32-54 months Stage 1 Cost RecoveryDevelopers will require payment IOUs need cost reimbursement Implicit in eventual PPA Upfront PermittingMostly standard process Developer like IOU design? completed Match to Reliability Problem Works best if general areas are sufficient Works best if problems highly location-specific IOU RFO will need to obtain best match Sequential vs Parallel Review at CPUC & CEC feasible Less feasible for CPUC Stage 1 Development

California Energy Commission Next Steps Receive Input from Stakeholders Staffs of agencies make a recommendation for a specific option to the Energy Principals Initiate effort to turn selected option into a real mitigation measure 16

California Energy Commission QUESTIONS? 17