Hey tweeps, been a little while. Seeing the IRP PD from CPUC has me thinking and wanted to share. Tens of thousands of new MWs of clean energy are going to be needed to meet CA 2030 goals. We are sure to hear a lot about impediments to getting there over coming months
IMO, major issue that needs to be settled is who is going to retain obligation to serve customer load over the long term. Right now, CCAs serve over 10m Californians. While each of those customers does have choice to revert to IOU service, opt outs remain very low
Result is that CCAs have stable customer base and by extension consistent revenue. This translates to predictable long term finances which in turn allow CCAs to go out and sign PPAs for big clean energy (over 3,000 MWs of CCA PPAs to date) that get financed at market cost of debt
The major risk facing CA clean energy goals are that this stability is challenged by fundamental changes to retail energy market
One idea that’s out there is to create a central procurement entity to buy all the clean energy. Problem is with this approach is threefold. 1) regulatory process to stand up any new entity will take years while we need to start contracting now for 2030
2) central entity will necessarily come into conflict with individual LSE resource planning. Who is responsible for which resources when? This uncertainty will result in no procurement - particularly in near term
3) hitting 2030 will mean doing things much differently. Prosumer, DERs, electrification have to be part of solution. This means engaging customers in ways electric utilities have never done before. A central entity with no connection to customers isn’t going to engage customers
Another idea advanced by some is opening up CA market to full retail competition. CPUC is now looking at this and preparing a recommendation to CA leg. One major Problem with this model is how do you align shortterm customer supply agreements with long term energysupply contracts
Customers in retail competitive states typically sign 1-3 year supply agreements. After that, they are able to shop for a new supplier. To meet CA clean energy goals, we need tens of thousands of MWs procured through long term contracts.
How can CA achieve lowest cost of capital - this lowest energy cost - with so much merchant risk?
Bottom line is this. Current CCA /IOU model isn’t perfect but it’s working. CA leg and Reg apparatus should focus on making small changes on margins to further clarify CCA and IOU roles and responsibilities and then let us go about our business to meet CA goals
