The Public Renewables Partnership

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The Public Renewables Partnership

• Benefits to public power
• from mainstreaming renewables
• POWER-GEN Renewable Energy Conference
• Las Vegas March 1 - 3, 2004

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The Public Renewables Partnership

• Bill Golove
• National Public Renewables Coordinating Committee
  Chair
• Lawrence Berkeley National Laboratory
• 510-486-5229 WHGolove_at_lbl.gov
• Randy Manion
• Renewable Resource Program Manager
• Western Area Power Administration
• 720-962-7423 manion_at_wapa.gov

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What is the Public Renewables Partnership?

• Informal association
• public power utilities
• co-ops
• tribal utilities
• federal power marketing agencies
• national laboratories
• public, private and non-profit sector
  organizations
• Jointly managed by Western and the Center for
  Resource Solutions
• Overseen by the National Public Renewables
  Coordinating Committee

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PRPs principal goal

• Significantly increase the use of renewable
  energy among municipal utilities, co-ops, tribal
  utilities and other public power organizations
• Developing and making available new analysis and
  decisionmaking tools
• Better informing decisionmakers about the costs
  and benefits of renewable energy options,
  including
• reduced dispatchability and intermittency costs
• risk hedging and customer satisfaction benefits
• Conducting research leading to increased
  renewable resource availability and lower cost
• Generally reducing costs associated with
  renewable energy procurement and use

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Principal PRP funders to date

• Western
• DOE
• GeoPowering the West
• Wind Powering America
• Federal Energy Management Program
• California Energy Commission
• Los Angeles Department of Water Power
• American Public Power Association
• National Rural Electric Cooperative Association
• Northern California Public Power Agency

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Other key PRP supporters

• BPA
• SEPA
• DOE National Laboratories
• EPA
• BLM
• U.S. Department of Agriculture
• Many others

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PRP services

• PRP Web site ( www.repartners.org )
• R D management and project development
• Utility resource procurement aggregations
• PRP technical assistance
• Voluntary sustainable energy charter

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Major PRP accomplishments

• Developed and managed 6M CEC renewable research
  program
• Assisted SCPPA, NCPA and Riverside with
  developing renewable solicitations
• Developed report on green pricing program design
• Provided support for renewable finance research
  at LBNL (Buy vs. Build, Hedge Value of
  Renewables, etc.)
• Leading public power green tag certification
  effort
• Developed PRP Web site

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Buy vs. Build research question

• What can we say about direct municipal utility
  ownership of renewable generation vs. purchase
  commitments via PPAs?

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Buy vs. Build model overview

• Calculates 20-year cash flows, subject to
  assumptions and constraints

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Model results
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Case 1 (Full PTC/No REPI)Sensitivity to CEC
production incentive
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Case 1 (Full PTC/No REPI)Sensitivity to IRR
requirements
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Case Munis take advantage of lower property
taxes
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Case Public power plant bonds become taxable
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Case Geothermal gets PTC (but not ITC)
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Qualitative considerations

• Construction and operations risk
• Favors buy over build
• Flexibility
• Reliability
• Price risk
• Market power
• Educational value

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Buy vs. Build key findings

• Under most likely scenario, public utilities are
  better off economically buying wind power rather
  than building
• While the reverse is marginally true for
  geothermal, qualitative considerations favor
  purchased power
• In general, qualitative considerations may swamp
  purely direct financial considerations

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Hedging research question

• It is widely claimed in the renewables literature
  
• that renewables offer price risk mitigation
  benefits.
• Given that natural gas can be purchased
• under long-term, fixed-price contracts,
• can this claim be substantiated
• and, if so, quantified?

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Gas prices have increased
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Gas price volatility has increased
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Gas prices and volatility contribute to
electricity price volatility

• Natural gas costs account for more than half the
  levelized cost of new gas-fired generation, and
  more than 90 of operating costs
• Gas-fired peakers often set the market clearing
  price for electricity

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Accounting for fuel price risk
Question How to compare fixed-price renewable
to variable-price gas-fired generation?
Current Practice Cost of renewables is often
compared to cost of gas-fired generation based on
uncertain fuel price forecasts
Best Practice Cost of renewables should be
compared to cost of gas-fired generation based on
a guaranteed fuel price
How do guaranteed forward gas prices compare to
uncertain gas price forecasts??
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Swap prices exceed price forecasts
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Swap prices exceed price forecasts
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Futures prices exceed price forecasts
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Physical prices exceed price forecasts
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Premium range 0.4 - 0.8/MMBtu
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Hedging Key implication

• Whether these premiums represent hedge value or
  something else (e.g., biased forecasts) is
  debatable, but does not change implication
• Use forward prices, not forecasts, when comparing
  gas-fired to renewable generation

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PRP and you

• PRP is for the family of
• consumer-owned utilities
• Co-ops Munis Public power systems
  Tribal utilities
• For more info, call or e-mail
• Bill Golove 510-486-5229 WHGolove_at_lbl.gov
• www.repartners.org