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TOM WHEELER:

Welcome to the Econews Report. I'm your host this week, Tom Wheeler, Executive Director of EPIC, the Environmental Protection Information Center. I'm joined by my friend, Richard Engel, Director of Power Resources at the Redwood Coast Energy Authority. Hey, Richard.

I should also disclose at the outset that in addition to being the Executive Director of EPIC, I also sit on the Humboldt Bay Municipal Water District Board of Directors. From that, I am an alternate on the RCEA Board of Directors as well. So I don't think I'm going to be disclosing anything that I shouldn't or whatever, but I feel like I should, out of journalistic duty, declare my alliances, allegiances, conflicts, whatever this is.

So Richard, we're talking about power purchase decisions at RCEA, how the Redwood Coast Energy Authority decides what to invest in, in terms of power and the trade-offs that are going to be inherently necessary with that. And that previews the exciting bit, which is a new long-term procurement contract for a large amount of solar coming online. So let's start at the beginning. Richard, how about you introduce yourself for folks who don't know you, and then we can talk about what RCEA is.

RICHARD ENGEL:

Thanks, Tom. Glad to be here. I'm Richard Engel, Director of Power Resources at Redwood Coast Energy Authority. RCEA is a joint powers agency serving Humboldt County and the communities within it. We've been operating since 2003, serving the community with energy efficiency services and all kinds of things related to energy, but specifically in 2016, I got hired to help launch the Community Choice Energy, also known as Community Choice Aggregation component of what RCEA does, which is a mechanism that's allowed under California state law and has resulted in us now being the default electricity provider for Humboldt County. In practice, that means that about a little more than 90% of the electricity sold in Humboldt County passes through Redwood Coast Energy Authority.

WHEELER:

So you are a local government. Your board of directors are folks like myself, who are power purchasers or jurisdictions within RCEA's bounds. So you are governed by the people, although not by a direct election like some other boards are. You are also distinct and separate from PG&E. Although when I receive my bill every month, it's maybe not clear distinction or separation. Can you talk about the relation of RCEA and PG&E?

ENGEL:

Sure. RCEA is now one of 25 community choice aggregators operating in California, so all of us are some combination of local governments, in some cases a single city, in other cases a conglomeration of city and county governments like we are, that are providing electricity for their respective community.

WHEELER:

So Richard, every month I get my bill and the bill is from PG&E. And so I think that that has led to a good deal of confusion of what is RCEA and how is it different from PG&E and how is it related to PG&E?

ENGEL:

Right. RCEA is one of 25 community choice aggregators operating in California, each of which is either an individual city or more commonly a combination of city and county governments that have formed a JPA, like us, a joint powers agency, to perform this function of providing electricity service to the community.

We're not like a municipal utility. A municipal utility like City of Redding or City of Palo Alto, City of Alameda, LADWP, Sacramento Municipal Utilities District, there are dozens of those in California, and they lock, stock, and barrel provide electricity. They own the poles and wires to deliver the electricity to folks as well as procuring it.

Our model is sometimes referred to as Muni Light, because we're doing some of that function. We're procuring energy with an emphasis on clean energy for our customers, but we're not owners of the poles and wires. That's still PG&E that's doing that just like they did before we set up our program. It's necessarily a partnership when you do a community choice energy program like ours, where we're the ones that are at the upstream end procuring the electricity that gets put into those poles and wires, and then PG&E owns the poles and wires, maintains them, hopefully without wildfire incidents, and then delivers that electricity through meters. They read the meters. They print the bills and send them out. There's information data exchange that happens between us and PG&E so that we get delivered the data from the meter readings, and we go, okay, for that, using our rates, here's how much the customers owe us for the energy generation.

PG&E has a separate page in the bill where they say, okay, for the delivery of the electricity, here's how much the customer owes us. You add those things together, and you get the total electric bill. In the old days when we weren't around, PG&E was charging the customers for all of those things, including the generation.

WHEELER:

And if you ever have a question about your PG&E bill, you can call RCEA, which I've done before. I have solar panels. I couldn't figure out when I'm going to get a payback or something like that. So I was trying to read my bill and I couldn't figure it out. And I called RCEA, a very helpful person, very patiently explained it to me on the phone. So if you are in a similar situation, call RCEA. They have great folks, local, who will help explain these things to you. Thanks.

ENGEL:

Thanks for that plug, Tom, and the number is 707-269-1700.

WHEELER:

I swear we didn't set that up like that. But yeah, I will have to say it was a wonderful experience. Usually when you try to call regarding any bill, it's a frustrating, terrible experience. This was actually kind of nice, and I feel like I left the conversation better understanding how energy and my bill worked in the world, so check it out. RCEA, you're the energy procurer. I think one of the important things to also understand about RCEA as an energy procurer is that the board has directed that RCEA always be cheaper than PG&E, that your power procurement will be cheaper. Can you talk about that? Sure.

ENGEL:

When we launched our program, like a lot of community choice energy programs, we knew that per state law, that any customer can choose whether or not to be in our program. Because we're the default electricity provider, a customer, whether it was an existing customer at the time that we launched, or a new customer that starts up a new electric service now, is by default going to be served electricity by us. But under state law, they do have the right to choose not to participate in the CCE, the Community Choice Energy Program, and they can instead just say, I want to be a bundled customer of PG&E, which is what everybody was back before 2017, before we launched our program. So because of that, we recognize the need to be cost competitive with PG&E. I don't know if it's true that we would have to always be cheaper than PG&E, but we can't be wildly more expensive than them, or the business model just doesn't work, because that would presumably trigger a lot of people opting out. So we aim to stay cost competitive. Specifically, our board has asked us to charge one half of 1% less than PG&E. So it's a very small discount, but it is true that we're less expensive than PG&E, and at the same time, we're striving to build a portfolio that's cleaner than PG&E's. So if we can manage the balancing act of being both less expensive and a greener portfolio, that's a win all around. And so far, we've been able to do that, generally.

WHEELER:

And so perhaps this is how I get into this balancing of competing values for RCEA. On one hand, you have price. You want to stay competitive cheaper than PG&E. And you also want to have as much renewables, as green of a grid as we possibly can. So those things can come into conflict with each other. And then there's a third direction that you have received from your board, which is the board has also emphasized the importance of local renewable energy production. Can you talk about that aspect?

ENGEL:

Yeah, Humboldt County among community choice energy providers in California is probably unique in having, I think of it as a ratio, like the ratio of how much green or renewable energy generation potential we have within our community service area of Humboldt County to how much load we have to serve. We're a rural area. We don't have lots of heavy industry, so we have a fairly small electric load in our community. We have a pretty large land area. We've got seacoast, which implies both wave energy and offshore wind potential. We've got a moderately good solar resource, not as good as some parts of California, which gets at some of the procurement choices that we've made vis-a-vis solar, and have places where onshore wind could be developed. We have potential for micro hydropower with run-of-the-river systems that don't disrupt fish migration, and we have, of course, biomass energy potential with our local forest products industry. We could even be doing some more innovative things like digesters of dairy manure to make methane. There are lots of ways and lots of quantity of renewable energy we can generate locally, and not that much load to serve. So I think if any community choice energy provider in California can set and achieve a goal of generating all of their energy locally in their own service area, I think we're probably the ones that can do it. And our board did adopt such a goal, and we've been striving towards it. At the same time, we've had some challenges to it. In addition to the goals that our board sets for us about procurement, we do also have to follow a lot of state regulations, including occasional procurement orders that come out of the California Public Utilities Commission, and those have timelines attached to them, and they're looking for everybody in California to do their share of ensuring the reliability of the grid, so they dictate what types of resources need to be procured and how soon they need to do it. And in a few instances, when we've done solicitations for lack of local project offers that met the necessary criteria, we have chosen to procure non-local resources, sometimes under fairly long-term contracts, like 10 years or more. At this point, we have some contractual obligations that stand in the way of 100% of our portfolio being local, but having said that, I still think that we have a lot more potential in the long term for building a clean, local portfolio that not only meets our green energy goals but provides jobs and other community benefits that go with just any kind of local economic development.

WHEELER:

So, as you alluded to, we are tied to this larger statewide grid or regional grid, sometimes weakly tied. We don't have enough import-export capacity to be able to exist on power generated elsewhere. We have to have some degree of local power generation in order to keep the lights on. But because we are tied into this larger grid, we are regulated by a host, a number of state and federal agencies that exist to ensure that the power grid is stable and reliable. One thing that I think often gets lost in conversations about power procurement is this, the time that we use the power and the time that the power is produced. It's great to have solar in your house, but solar doesn't mean that much in the middle of the night unless you have some sort of paired battery storage. So how does RCEA deal with this issue and what are the regulations for ensuring that we are buying power that will be available for us to use at the right time?

ENGEL:

It's a really good question to ask and it really gets at the heart of a lot of our procurement decision making. One product that we procure for our customers is just kilowatt hours of electricity. The units that you see on your PG&E bill when you pay it. So that's just a quantity of electricity that can be theoretically delivered in any time of day or night. The way electricity works, you do have to match when it's generated with when the load occurs. Having batteries for energy storage does buy you a little bit of buffer there so you can move things around temporarily between when it's generated and when it's delivered to the customer but that's a limitation.

Another product that we procure that seems a bit of an abstraction is power generating capacity, and that's measured usually in megawatts of capacity which is like an instantaneous figure like how much something is generating or able to generate right now in this instant. And that gets referred to in regulatory terms as resource adequacy. So the state has decreed that in order to make sure that not only is every load serving entity which is what our CEA is called, so is PG&E, we're both load serving entities, to ensure that all of these load serving entities are procuring enough power capacity and making sure that it's online at all times of day and night when it's needed, they have this regulatory construct called resource adequacy. And that obligates us to buy enough megawatts of capacity at different times of day and different times of the year to ensure that collectively we're doing our share to meet all of the statewide load at all times.

If everybody just said, hmm, contracts for solar electricity are pretty cheap now, I'm just going to go out and procure enough megawatt hours of solar energy to meet how much load I need to meet annually, people would all be doing that because it's cheaper than buying say geothermal energy. But it wouldn't work because they need to have a surplus of electricity in the middle of the day and not enough at night. This resource adequacy construct dictates not only how much electricity needs to be procured but dictates the timing of it as well.

WHEELER:

So this is also a large market too, where we are competing with other community choice aggregators or large energy users or industrial big companies like PG&E for that, that same power. You are listening to the Econews Report. I'm joined by my friend, Richard Engel, director of power resources, talking about power purchase decisions, how the Redwood coast energy authority decides what to invest in, in terms of power and the trade offs that are going to be inherently necessary with that. So RCEA has a goal, I believe 100% renewable no later than 2030. Other, other power purchasers have similar goals. We have statewide goals in terms of renewables. So there are a lot of people competing for a finite resource, which is power. Can you talk about some, some of those deliberations that you have in power purchases where you have to weigh it's a desert solar project, but it's relatively cheap versus a more expensive local renewable power source or whatever it is.

ENGEL:

Well, ideally we want those local projects and I'm happy to say that they're starting to happen. You talked with my colleague Jocelyn Gwin a couple of weeks ago about the North Coast Highway Solar Project, which is the first local project under our feed-in tariff that's due to come online in the coming year and we're excited about that becoming reality. We also have a project just west of Arcata in the Arcata Bottoms that's a solar plus storage project that's going to be online later this year. We're excited about these local energy projects becoming reality and certainly striving to get more of those.

As I mentioned before, we sometimes do find ourselves having to contract for projects outside of our community and sometimes that is in order to meet the dictates of regulatory burdens that we have on us from the Public Utilities Commission for that resource adequacy and sometimes it does come down to economics. If you put in a 100 megawatt solar project in Humboldt County, it's going to generate less electricity in a year than an identical 100 megawatt capacity project installed in say the lower Central Valley of California and that's just due to different weather conditions, different climatic conditions in those locations and that's one of the reasons why we have chosen to get some of our capacity from projects elsewhere and the leading example about this and I think this was a catalyst for us having this conversation today is we just announced about a month ago that we're successful in seeing one of the really big projects come to conclusion.

This is the 100 megawatt solar energy project known as the Sandrini Project in Kern County. It's actually part of an even larger project but that 100 megawatt slice of it is all contracted to RCEA. It's a big enough project to meet a little more than one-third of our total electricity load so it's a pretty awesome amount of electricity. A 100 megawatt project covers approximately 400 acres of land. I like the siting of this project. It's in Kern County and it's built on land that has been used as ag land in the past but I think we know a lot about what's happened to a lot of ag land in the lower San Joaquin Valley is they've had soil contamination and constraints on their water supply and their aquifers and various factors that have made it not feasible to use some of this land as productive ag land anymore. So I think it's a lot less habitat impact than you would have building a similar sized system just a few miles away from there where it might be on less impacted desert land that has Joshua trees.

There are projects being built in places like that and they're having to get take permits for cutting down Joshua trees and stuff. So I feel like this project is in a place where it's got a really excellent solar resource and where there isn't really like an alternative land use of that land that would really be much more beneficial in environmental terms or human economic terms either.

WHEELER:

Well, that's cool. I, I, I'm glad that the cell that you're, you're giving it. I was curious how RCA came to invest in this project. Was, was it the, the price was right and that was the, the main motivator or is it a suite of things like price together with environmental considerations?

ENGEL:

Yeah, so we issued a solicitation in 2019, I believe, for new build renewable energy projects. And we got an offer from EDP Renewables, the company that built this project. And originally what we negotiated with them was a 50 megawatt take, so only half of what we actually ended up with under contract. And this was right at the same time that the Terragen wind project was being planned here in Humboldt County. And in fact, under the same solicitation, we did get an offer for all of the power offtake from the Terragen project. And if we had contracted with the Terragen project, which was going to produce something like 65% of our total energy need, that plus the 50 megawatts of solar in Kern County would have covered together a very large portion of our total energy need.

But as you and your listeners know, things happened and the Terragen wind project was not approved by our planning commission or ultimately by our board of supervisors. And when that came to pass, we were looking at not only meeting our board's clean energy procurement mandate, but also some looming deadlines for meeting resource adequacy requirements from the state. And so we went to the EDP Renewables folks and said, hey, can we upgrade that 50 megawatts to 100 megawatts? And we worked that out and negotiated a contract with them. So the amount that we're buying from Kern County electricity production has a very direct relationship to the fortunes of otherwise hoped for local renewable energy projects.

WHEELER:

A reminder, a very important reminder. So this was in 2019, the original solicitation, it's 2025 now, it's coming online, which is fantastic. But this has been a significant period of time. As I understand it, there have been delays in delivery of this project. And that has caused you to have to scramble a little bit as RCEA in meeting the county's energy needs. Can you talk about how you have had to procure other power that you were anticipating to come from Sandrini? And now what this long term contract will mean for ratepayers when it comes to the bill every month?

ENGEL:

Yeah, well I think the good news about the Sandrini project is that we got a good deal on it financially. It was delayed in coming online like most large renewable energy projects were in the wake of the pandemic and the supply chain disruptions that were happening across all kinds of industries around that time.

WHEELER:

I've also heard, I read a report in the New York Times that transmission infrastructure has been a delay for certain solar projects. Was that an issue at all for Sandrini?

ENGEL:

Not really a critical path one. We did see some processes for interconnection move a little more slowly than hoped for, but in the end, I don't think that really made much of a difference when the commercial operation actually came to pass. But yes, certainly in the bigger picture and looking at other projects that we have contracted for, almost all of them, unfortunately, have had some kind of significant delay or disruption having to do with interconnection. We've even seen a couple of cancellations of contracted projects that were mainly due to challenges with just not getting the project built, but getting it interconnected to the grid.

WHEELER:

This might be foreshadowing, hopefully not offshore wind. Because we will, again, as we said earlier in the show, we have relatively skimpy export capacity and it's going to be far more energy than Humboldt County could ever use, so we're going to need to send that somewhere else. So without the ability to send it out of county, that project might stall, so.

ENGEL:

Yeah, it's kind of a game of chicken when you think about it, because you've got one entity, the developer, that's responsible for actually building the project, and then you've got totally separate entities, the California Independent System Operator and the utility companies that are responsible for the transmission, and they're all side-eyeing each other, like, who's going to make the next move? So both in terms of timing and volume, they want to stay reasonably synchronized. You don't want a bridge-to-nowhere situation where you build a massive amount of transmission infrastructure and then the whole generating project gets scuttled by some strange government fiat. Not that that would ever happen.

WHEELER:

But this is why I'm in favor of the Soviet model, right? Like, let's just have one entity in charge of all the things.

ENGEL:

Which is, and not even Soviet, I mean in Europe. We've talked with European developers, as you know, all the people that came to the table to actually build offshore wind in California's north coast are European companies, and they're all flabbergasted when you talk with the people from those companies that there's so much separation of functions here and all of the dysfunction that that creates. And there is a lot more vertical integration of those responsibilities, a lot more of it falling in the government's court in Europe when it comes to providing the pathway to interconnection for large projects like offshore wind.

WHEELER:

I distracted you from my original question. So, so Santorini was delayed. It caused our CEA to have to do some other things to fill gaps. You talk about what it was like and what it will be like now that we have this project going forward. What does it mean for our CEA? Yeah.

ENGEL:

Well fortunately we had a really good relationship with the developer all along and there never was any like really serious existential doubt whether the project would move forward. I think everybody was working in good faith to get it online, so it wasn't like a catastrophic disruption for us, but we did make some choices we wouldn't have otherwise.

There are three categories of renewables under the regulatory construct that governs renewable procurement mandates, and they're called Product Content Category 1, 2, and 3, or PCC 1, 2, and 3. And the number one category is the highest quality one. This is generally resources that are generated here in state and where the energy and the renewable energy certificates are delivered together, bundled. And then there's Category 2 is typically out-of-state renewables where the chain of custody is just a little bit looser when it comes to importing resources from other states. So typically these resources are a bit less expensive than the Category 1. And then there's Category 3 where the renewable certificates are completely unbundled from the energy, and that's the loosest supply chain of all. It still counts towards your renewable requirements, but you're limited on how much of that Category 3 you're allowed to procure to meet regulatory mandates.

In the beginning, we just really frowned upon the Category 3. We didn't have official policy from our board on this, but we were just choosing not to pursue those. We just liked the integrity of using the Category 1 and 2 products. But the price gap between the Category 1 and 2 and the 3 has grown enormously to where in the past couple of years it got to where there was about a tenfold cost difference per megawatt hour of the Category 1 versus Category 3. And that was hard to ignore for us at a time when projects weren't coming online as expected, and we had the state breathing down our neck with a mandate not only to procure a certain amount of renewable energy, but to have it be under long-term, i.e. ten-year or longer contracts. So we did last year enter into a contract for these Category 3 RECs, which I can't tell you nearly, I can't say it's this project in this place, here's some photos of it. It's more sort of the sausage factory variety of renewable energy. It's still renewable energy, but the chain of custody doesn't give us as much disclosure about what exactly we're buying, but like I say, to an extent it can still be used to satisfy state requirements.

So we have a moderate volume of that that we entered into contract for, but obviously that's not our endgame. What we want is projects that we can see, hear, smell, touch, and taste that are ideally in our own service territory or as close as possible to our north coast here.

WHEELER:

Is there anything that we haven't talked about that you think is important for folks to understand, to understand where their power comes from and why RCEA makes the decisions that it does?

ENGEL:

Here's one that comes to mind that I did want to talk about. I talked about the Sandrini solar project. These days it's considered bad etiquette in the energy industry to just buy big solar-only projects because you're just increasing the glut of solar energy in the middle of the day that we already have more than enough of in California, and you're ignoring the other times of day when we are sometimes critically short on electricity. One solution to that is energy storage, and I'm happy to say that not long after we got assurance from the developers of the Sandrini project that their solar project was actually under construction and moving forward, we were able to add a solar component to that project.

So we now have, in addition to 100 megawatts of solar, 92 megawatts of battery storage that is getting put together this year, and by the end of 2025 that will be running side by side with the solar project in Kern County, and it'll be making that project so much more valuable in terms of making that energy dispatchable to the grid at the times of day when it's most needed, and a lot of our projects we're working on getting developed locally will also include storage components. I already mentioned the Foster solar project that's just outside of Arcata that's solar and storage, and we currently have a solicitation open for new energy storage projects here in Humboldt County to help move those intermittent clean energy resources like wind and solar into the times of day when we truly need them.

WHEELER:

I will say of all the things that are going wrong in the world, I do feel good because I feel like I can see us making progress, at least as a state, when it comes to meeting our renewable energy targets and our goals. And it's things like this project, it's things like the pair battery storage that are going to get us to that point. So I worry about many things, pulling out of Paris, climate accords, and Trump revoking our fuel economy standards. But we can control certain things, and this is one of the things that we can control. And so I appreciate RCEA for continuing to have your eye on the ball and moving us forward to that 100% goal. So thank you, Richard, and thank you to everyone from RCEA.

ENGEL:

Thank you, Tom, for giving me the opportunity to come and talk with you about this today.

WHEELER:

All right, well, you can join us again next week on this time and channel for more environmental news from the North Coast of California.