title: One City Utility is Carbon Neutral, Today – Episode 21 of Local Energy Rules Podcast
author: Local Energy Rules
contenttype: podcast
publication: Local Energy Rules
sourceurl: https://media.blubrry.com/localenergyrules/content.blubrry.com/localenergyrules/local-energy-rules-podcast-interview-Jim-Stark-Palo-Alto-2014-0227-edited-5114-1_19-PM.mp3
word_count: 2614
I think if you were a customer of an industrial utility, you'd be much less likely to see a program like this in place, but because industrial utilities have much more of a traditional business model focusing on profits at the bottom line. Can a city have a completely carbon neutral electricity supply in the year 2014? The answer in this week's podcast may surprise you. I talk with Jim Stack, Senior Resource Planner of the Palo Alto, California Municipal Electric Utility about their cities surprisingly forward on renewable energy and its commitment to getting more of that low-cost clean power from their own community. I'm John Farrell, and this is Local Energy Rules, a podcast sharing powerful stories of successful local renewable energy and exposing the policy and practical barriers to its expansion. Jim, welcome to the program. Thanks, John. Thanks for having me on. Now, as I read it, Palo Alto is very close to or is going to achieve by the end of 2014 a carbon neutral power supply. How is that possible? Don't we still need fossil fuels to provide electricity? Good question. I think looking at the whole state or the whole country at this point in 2014, having fossil generation is useful for balancing intermittency of renewables like wind and solar. I think you could probably integrate those kinds of resources using dispatchable hydroelectric and biomass resources through other measures like smart grid technologies and time-based price signals and so forth. I think looking forward a few years, it's very likely that the cost of energy storage will come down and smart grid technologies will improve and in a handful of years will probably won't need any fossil generation at all to achieve carbon neutrality on a nationwide scale. Right now for the city of Palo Alto we do rely on market resources that are primarily natural gas fired by our plants to balance our load and our supply a bit, so from month to month we may be a little bit short on our carbon neutral resources and we may have extra resources greater than our demand that we can sell those into the market. So for Palo Alto, the way we define carbon neutrality is that we look at it on a calendar year basis, so we net out our purchases and our sales, our target is to be carbon neutral on a calendar year, that basis. Now one of the more remarkable accomplishments in your renewable energy portfolio is that you've been able to procure some large-scale solar at pretty impressive price is that something that you expected and is that that something that you continue to see happening? We were surprised at how low the prices had gotten for solar at that point in time. I remember looking back a couple of years earlier, 2010 or 2011, price of solar was at least twice that high when we were doing requests for proposals for new projects. We were a bit surprised at how quickly the price of solar came down, but based on the pure market factors, the price of solar panels, the supply of solar panels in the world and the improvements in the efficiency of the overall system, the panels and the inverters and everything, I'd say I'm not too surprised at this point. Now I'd put together a report last fall where I highlighted Palo Alto and its remarkable achievements on renewable energy and the carbon neutrality goal, and I think about half of your energy supply, if I'm not mistaken, in a given year typically comes from hydro power. Do you think carbon neutrality could be achieved by a utility that doesn't have that kind of energy resource? Obviously we get a half way to carbon neutral just through the traditional hydro power we've had in our portfolio for quite some time, and this is a relatively low cost resource for us, so it's definitely helpful that keeps our supply costs down, but with the decline in prices we've seen lately for solar power and the extremely low prices that we've seen on the market for renewable energy certificates or REX, it's definitely feasible for any utility, even without a large amount of hydro or other carbon neutral resources already, to become carbon neutral through signing contracts for solar power or other renewables. I'm sure in some parts of the country wind is the cheapest resource right now. I was curious in terms of your both the renewable energy goals and then the procurement plans that you've had, has being a municipal utility made that achievement easier or harder? Does the public support in the community matter in terms of the goals that you set? Yeah, I'd say being a municipal utility definitely makes it easier for us to go to carbon neutral, just having the local control over our utility, having the citizen determine the policy here, it allows us to go out and try to address issues that matter to us or to pursue sort of cutting edge programs like this one whenever the citizens and the city council direct us to do so. I think if you were a customer of an industrial utility, you'd be much less likely to see a program like this being put in place, simply because the industrial utilities have much more of a traditional business model just focusing on profits and their bottom line. In addition to the general local control and having the independence to pursue initiatives that matter to our citizens, I think being a municipal utility, we also benefit from adding a lower cost to capital. We are a highly rated, highly, very high credit rating here in Palo Alto. Our utility has access to low cost capital through issuing municipal bonds, so that's one way that we can do programs like this or, you know, these sort of innovative things across the upfront money, upfront capital at reasonably low cost. So compared to an industrial utility where the cost of capital might be around 10% ours is about half that or maybe even less. On the flip sides, since we're a municipal utility, you're probably aware that the federal tax benefits, they go to renewable energy project, projects, the investment tax credit. We're not eligible to receive those tax credits because we don't pay any income tax, so as a result of that, we don't have an option to build a project ourselves and take advantage of the 30% investment tax credit that a private entity would. You alluded to this in our conversation before we got online here. You said about half your power comes from Hydro, the other half of your carbon neutral package will come from other renewables. You know, what role is local energy generation playing? Well right now most of our renewable supplies are coming from projects that are more remote. They're located in California but they're not directly in Palo Alto. Most of them are within a two hour drive of the city but they're not directly located in town. We do currently have a variety of local distributed generation programs in place, rebates for rooftop PV so far. So we have about four megawatts, I think, of rooftop PV installed right now on businesses and homes in the city. And then we've also invested, of course, heavily in energy efficiency in order to reduce our demand and reduce the amount of renewables we have to buy from remote plants. In terms of building more within the city, we are a fairly built-out city. We are kind of located right between San Francisco and San Jose. There's not a whole lot of a free land or rooftop space that could be used for doing a large installation that might be a low cost generation option. But we are trying to encourage more rooftop solar and other generation within the city when generation is built in the city. It certainly has additional benefits to Palo Alto in the sense that we don't have to pay for the expensive cost of transmission to get the power from the Central Valley of California into Palo Alto. We also get the capacity benefits, the reliability benefits of having generation here in town. We're in the process of developing a local solar plan right now. We'll be taking this to our city council for approval within the next month or two. Currently, the plan is to underdevelopment but we are thinking we'll have a target of achieving 23 megawatts of total solar generation in town by 2023. We'll be targeting that goal through a variety of different methods including the traditional rebates for rooftop solar. We also have a feed-in tariff program that's in place that we instituted a couple of years ago. We're looking at various types of community solar options as well as a bulk buy program to help reduce the cost for folks who want to put rooftop solar on their homes. One question that I had about the 23 megawatts of local solar that's your goal by 2023. Can you just tell me how much that would be as a percentage of your peak load? Sure. In Palo Alto, we have a peak summertime load of about 180 megawatts. That would be around 15 percent of our peak load would be supplied by those systems on an average basis. Over the course of the year, I think that all that would be supplying about 4 percent of our overall energy use. One other thing I thought was interesting in doing some background on your renewable energy programs. You had a green pricing program that was launched over 10 years ago that used to have a price premium for folks who wanted to essentially buy blocks of green electricity. What I read was that city council had suspended that price premium I guess in part because you found such low-cost renewables available. That's true. It's partly because we had found such low-cost renewables. There were enough funds in that program that we didn't need to recover anymore revenue through the the adder for that program. But it was also their decision was also driven by the fact that now that we are carbon neutral effective in 2013, everybody's going to be receiving 100 percent renewable electricity as their base power supply. So it doesn't make any sense to charge folks more, to purchase recs to further green up their supply. I want to already 100 percent carbon neutral. So what the city council decided to do was to spend that program for the green electricity pricing program. And in Palata, we also own our own water and gas utilities. So what they decided to do was sort of transition that the Palata green the voluntary green energy program from an electric program to a gas program. So starting later this year, I believe customers are going to have the option to pay a bit more to sort of green up their gas supply. Try to reduce the emissions associated with their natural gas usage. I'm curious about that particular program actually. We're in the city of Minneapolis is undergoing some negotiations with it's to incumbent utilities electric and gas over its climate action plan and trying to get the utilities to help it move along that the gas utility has actually signed a a memorandum of understanding with a local campaign to work with the city on this. And they've kind of pushed back on the idea that there is a lot they can do when it comes to renewable energy and the gas system. Can you explain a little bit more about how you'll go about using those resources from the sign-up to that program to green the gas supply? Sure, I'm not an expert on the gas utility but I'll give it a shot. We looked at a number of different options for how to approach the issue of reducing the emissions associated with gas usage. One of the options we considered was signing a contract to receive gas supply from methane is generated from dairies actually and dairies can digest the manure to generate methane and then they can either burn that on site or they can inject it into the pipeline and deliver it to customers. So that's a carbon neutral gas supply with a dairy like on methane. We looked at that option and it looked to be a bit expensive. We wouldn't be able to supply customers with a fully carbon neutral gas supply through that method and what we consider to be a reasonable cost. We looked at some other options and I think we're going to be proposing doing a voluntary green gas program using offsets. Let me just ask my final question, which is what advice would you offer to other communities that would look to emulate your success moving toward carbon neutrality, really ramping up renewable energy development, those with municipal utility but those that may not have control over local utility? Speaking to the communities that have municipal utilities, there's really nothing stopping them. They should just go for it. Renewables are reasonably cheap right now or certainly federal tax subsidies work to the point where long-term contracts for renewables are probably less expensive than signing a long-term contract for a traditional gas generation facility. Go for it and put it into your long-term plans, do a request for proposals to test the market and see what's out there and you may be surprised that at how low the prices are, how well it compares to a traditional generation resources contracts like this also provide a great deal of price stability. If you're interested in getting started in trying to increase the amount of renewable energy you have in your supply portfolio, there are a variety of resources out there through the National Renewable Energy Lab and through other municipal utilities like Palo Alto who have done this before. I'd encourage you to seek out those resources and talk to people who have done this before and get advice from them. I know here in Palo Alto we're happy to share the resources we have like our standard contract forms and our RFP documents and so forth to help other utilities to do what we're doing. I guess for folks who don't have municipal utilities, you could always try to push your utility to offer a voluntary green power program or a community solar type program or a community renewables program. I also encourage them to talk to their legislators and regulators to see if they can get their utilities to be required to provide programs like these and then you guys can also just work with your community to try to install more renewables on schools and government building and churches and so forth too. Jim, thank you so much for taking the time to talk with us. It was a pleasure and we wish you the best success in this dry year for your carbon neutral plans. Thanks John, I appreciate your time too and thanks for having me on. That was John Farrell, ILSR's Director of Democratic Energy speaking with Jim Stack, Senior Resource Planner of the Palo Alto Municipal Electric Utility via Skype in February 2014. You can learn more about Palo Alto and Municipal Utilities leading on clean local energy in our 2013 report titled City Power Play. It's on our website iLSR.org where we also find 20 other episodes of our local energy rules podcast. Until next time, keep your energy local and thanks for listening.