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Comments on
Coal Elimination,
FiT100, and FiT50
to LA Chamber of
Commerce Frederick H. Pickel, Ph.D
Office of Public
Accountability /
Ratepayer Advocate,
City of Los Angeles
tel. 213-482-6814
April 26, 2013
1
Ratepayer Advocate’s Comments on IPP / Coal Elimination and
Feed-In Tariffs (FiT100 and FiT50) What is OPA’s view on the goals?
Reliable power at reasonable cost
Compliance with legal mandates, but need transparency on cost.
Leadership on carbon emission reduction
Worldwide, DWP is 0.04% of CO2 emissions.
Our impact can come from demonstrating CO2 emission reductions at an affordable cost.
What is the projected cost to Ratepayers?
Is that projected cost/benefit acceptable compared to alternatives for CO2/GHG reduction?
What does the Office of Public Accountability/Ratepayer Advocate (OPA) recommend?
Support the DWP on IPP 2nd Amendatory Power Sales Contract, but today’s plan is too
expensive, an extra $250 million/yr for $109/tonne carbon reduction.
DWP, IPP, and the City should continue exploring alternatives on the elimination of coal.
Today’s specific generation plan isn’t, and hopefully should not become, the default plan.
Different mixes of conservation, renewables, gas-fired generation sources, fuel / power
storage, and other alternatives should be explored over the next 7 years.
FiT100: $230 million extra relative to other renewables for no extra carbon reduction
FiT50: auction approach should bring Ratepayer cost close to other renewables
2
What is the cost to Ratepayers for coal elimination?
Navajo IPP
State mandate for end of
long-term contracting
2019 2027
City’s planned year 2015 2025
Cost per year for
accelerating coal
elimination
~ $50 million/year ~$250 million/year
Total cost of accelerating
coal elimination under
existing plan
$200 million $500 million
Cost per person
(4 million LA population)
$1.04 per person/month $5.21 per person/month
Uncertainties in cost
estimate
Natural gas prices
Coal plant retrofit cost
Plant sale cost
Renewables cost
Natural gas prices
Renewables cost
Coal plant retrofit cost
Source for costs: LADWP 2012 IRP, Figure 4-22
3
What is LADWP’s cost of CO2 reduction from coal elimination?
0
2
4
6
8
10
12
14
16
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Tota
l CO
2 E
mis
sio
n M
illio
n M
etr
ic t
on
s
Case #1 - Navajo 2019, IPP 2027
Case #2 - Navajo 2015, IPP 2027
Case #4 - Navajo 2015, IPP 2023
$26/ton
$109/ton
Source for costs and carbon reduction:
LADWP 2012 IRP, Figures 4-22 & 4-4
4
How does LADWP’s cost of CO2 reduction compare to alternatives?
Can we do this cheaper?
Accelerating phase out of Navajo, in terms of CO2 reduction at $26/metric ton, is in the range of earlier expectations for CO2 emission reduction costs from other emission sources in the 2015-2019 period.
“OK deal”
Current forecasts for accelerating phase out of IPP, in terms of CO2 reduction at $109/metric ton, are much higher than expectation for the value and cost CO2 emission reductions from other sources in the 2025-2027 period.
This estimate depends on the cost of future natural gas, coal generation, renewable sources and the cost of CO2 reductions from other emission sources
Too expensive -- as planned and forecast now, this is “Not a good deal”
Can renewables like large-scale wind and solar be expanded in the DWP mix, using the IPP location as a hub?
Cost of renewables and natural gas have both declined by huge factors over last 5 years.
Cost of integrating renewables while maintaining reliability is still very uncertain. We have about 7 years to explore alternatives before specific permitting and construction actions must be taken to meet the accelerated 2025 deadline.
5
Conclusions on LADWP’s Proposed Feed-In-Tariff 50 MW Proposal
The OPA supports the FiT50 program, especially the competitive bidding component.
When FiT50 contracts come before the DWP Board for approval prior to signature,
they should individually include:
The two price components bid and proposed for a DWP FiT50 contract;
The total Beacon site costs and preparation to date along with the percentage of
these costs allocated to the proposed DWP FiT50 contract;
Expected additional Beacon site costs and preparation along with the percentage
of these costs allocated to the proposed DWP FiT50 ;
Estimate total costs and $/MWh for the FiT50 contract, including site costs.
In contrast to the FiT50 program, the first 20 MW tier of LADWP’s FIT 100 MW
program is creating an additional $50-75 million burden on LA’s customers, a 100%
premium over current avoided costs for other renewables.
OPA recommends that DWP and the DWP Board re-visit the FiT100 pricing and
applicability, especially before opening another price tier in the FiT100 program.
6
Myths in the Policy Analysis
Jobs? Whose jobs?
Pump priming: scale of LA vs. world market in carbon, solar, etc.
It’s sunny in LA
It’s a policy choice… they add up. Shouldn’t they be traded-off?
7
SUPPORTING MATERIALS
8 Estimate for world CO2 emissions in 2011: 33,376 MM tonnes (EDGAR/ EC http://edgar.jrc.ec.europa.eu/overview.php?v=CO2ts1990-2011). DWP was 0.04% in 2011.
9
10
11
From LADWP Industrial Electricity Sales Forecast
12
Program Pricing
13
DWP FIT100, as Adopted
FIT Tier
in MW
MW
in Tier
FIT Pricing
($/kWh)
Estimated
Average
Time-of-
Day
Adjusted
FIT Pricing
Multiplier
FIT Price on
Summer pm
Peak Price
x2.25
multiplier
($/kWh)
FIT Pricing
with
Average
ToD
Multiplier
($/kWh)
Avoided
Cost
($/ kWh)
Over-
Payment
($/kWh)
MWh / yr
at 19.6%
Cap Factor
Over-Payment
per Year
Undiscounted
Over-Payment
20 yr Term
Discounted Over-
Payment 20 yr
Term at DWP
Cost of Debt 5%
0-20 20 0.170$ 1.054 0.383$ 0.179$ 0.110$ 0.069$ 34,339 2,375,586$ 47,511,717$ 29,605,051$
20-40 20 0.160$ 1.054 0.360$ 0.169$ 0.110$ 0.059$ 34,339 2,013,651$ 40,273,014$ 25,094,538$
40-60 20 0.150$ 1.054 0.338$ 0.158$ 0.110$ 0.048$ 34,339 1,651,716$ 33,034,310$ 20,584,026$
60-80 20 0.140$ 1.054 0.315$ 0.148$ 0.110$ 0.038$ 34,339 1,289,780$ 25,795,607$ 16,073,514$
80-100 20 0.130$ 1.054 0.293$ 0.137$ 0.110$ 0.027$ 34,339 927,845$ 18,556,904$ 11,563,002$
Current Scenario 0.158$ 0.110$ 0.048$ 44% 8,258,578$ 165,171,552$ 102,920,131$
Summary for FIT Base Price of $0.17/kWh, stepping down in 20 MW blocks, plus ToD adjmnts
Avg FIT
Price
Avoided
Cost
Over-
Payment,
$/kWh
Over-
Payment
%
Annual Over-
Payment
Undiscounted
20 Yr Over-
Payment
Discounted
20 Yr Over-
Payment
0.158$ 0.125$ 0.033$ 26% 5,683,138$ 113,662,752$ 70,824,456$
0.158$ 0.110$ 0.048$ 44% 8,258,578$ 165,171,552$ 102,920,131$
0.158$ 0.090$ 0.068$ 76% 11,692,498$ 233,849,952$ 145,714,365$
14
Renewable Auction Mechanism – CPUC Q1Q2 Report – 9 cents/kWh
and new 2012 Q3Q4 Report – under 9 cents/kWh
15
Renewable Auction Mechanism – SCE 2nd RAM Report