Humboldt Redwood Company Humboldt Redwood Company Power Purchase Agreement Power Purchase Agreement March 20, 2017
Board-adopted Guidelines for Biomass Procurement 1. Issue a Request for Offers targeting power purchase agreements with 1-2 existing facilities. 2. Structure overall biomass procurement strategy around local waste-management and forest restoration priorities and needs. restoration priorities and needs. 3. Include environmental, community, and economic considerations in selection process. 4. Contingent on price and market conditions, contract for a target of around 20MW of local biomass energy.
Timber Lands Logging Fuels-reduction Thinning, Slash & Restoration Saw Logs - Sent to Mills Thinning, Slash
Timber Lands Logging Fuels-reduction Thinning, Slash & Restoration Saw Logs - Sent to Mills Thinning, Slash Residual Waste Waste Paper- Paper- Animal Dimensional Biomass quality Bedding & Lumber Chips Landscaping (exported)
Timber Lands Logging Fuels-reduction Thinning, Slash & Restoration Saw Logs - Sent to Mills Thinning, Slash Residual Waste Waste Paper- Paper- Animal Dimensional Biomass quality Bedding & Lumber Biomass Plant Chips Landscaping (exported)
Timber Lands Logging Fuels-reduction Thinning, Slash & Restoration Saw Logs - Sent to Mills Thinning, Slash Residual Waste Waste Paper- Paper- Animal Dimensional Biomass quality Bedding & Lumber Biomass Plant Chips Landscaping (exported) Activated Electricity Fertilizer Carbon (& Heat)
Timber Lands Logging Fuels-reduction Thinning, Slash & Restoration Saw Logs - Sent to Mills Thinning, Slash Residual Waste Waste Paper- Paper- Animal Dimensional Biomass quality Bedding & Lumber Biomass Plant Chips Landscaping (exported) Total Humboldt County mill residuals = ~400,000 Bone dry tons
Timber Lands Logging Fuels-reduction Thinning, Slash & Restoration Saw Logs - Sent to Mills Thinning, Slash Residual Waste Waste Paper- Paper- Animal Dimensional Biomass quality Bedding & Lumber Biomass Plant Chips Landscaping (exported) ~50% of residuals typically sold for other uses, leaving ~200,000+ BDT
Timber Lands Logging Fuels-reduction Thinning, Slash & Restoration Saw Logs - Sent to Mills Thinning, Slash Residual Waste Waste Paper- Paper- Animal Dimensional Biomass quality Bedding & Lumber Biomass Plant Chips Landscaping (exported) Processing 200,000 BDT requires about 25MW of operating power plant capacity
Current or projected wholesale power costs ($/MWh, approximate) $140.00 $130.00 $113.00 $120.00 $100.00 $83.00 $82.00 $89.23 $80.00 $60.00 $49.50 $35.00 $37.50 $40.50 $40.00 $40.00 $20.00 $-
Current or projected wholesale power costs ($/MWh, approximate) $140.00 $130.00 $113.00 $120.00 Market prices $100.00 $83.00 $82.00 $89.23 are low $80.00 $60.00 $49.50 $35.00 $37.50 $40.50 $40.00 $40.00 $20.00 $-
Market prices = big projects
Current or projected wholesale power costs ($/MWh, approximate) $140.00 $130.00 local/community- $113.00 $120.00 scale power comes $100.00 $83.00 $82.00 $89.23 at a premium $80.00 $60.00 $49.50 $35.00 $37.50 $40.50 $40.00 $40.00 $20.00 $-
Humboldt Redwood Company PPAs • $83/MWh bid price, 5-year contract period • 9 month-term initial PPA at reduce volume for $83, additional generation at market price • 51-month term at $83 for full volume • 51-month term at $83 for full volume – Includes “Material Change” clause to reduce RCEA risk exposure for multi-year commitment to above-market pricing. • Environmental & regulatory compliance provisions
Humboldt Redwood Company PPAs MWh per Month
Material Change Policy Elements Creates opportunity to renegotiate if: 1. RCEA forecasts for the coming year show that we won’t be able – Maintain 3% customer rate savings (~$2M/yr) – Maintain 3% customer rate savings (~$2M/yr) – Meet minimum power portfolio requirements and operating costs – Reserve accumulation of $2M/yr 2. Customer participation levels are not met
$10,000,000 $12,000,000 $14,000,000 $16,000,000 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $0 Jun-17 Aug-17 Oct-17 Dec-17 Reserve accumulation Feb-18 Apr-18 Jun-18 Aug-18 $6M minimum reserve Oct-18 Dec-18 Feb-19 Apr-19 Reserves Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22
$10,000,000 $12,000,000 $14,000,000 $16,000,000 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $0 Jun-17 Aug-17 Oct-17 Dec-17 Reserve accumulation Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Reserves Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 allocation in 2020 Example $2M Board Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22
Future-year Budget Headroom Rate savings $100 Procurement budget $90 above base cost $80 Reserve contribution $70 $60 Base/minimum price per MWh power costs $50 $40 Operations $30 $20 PG&E PCIA & $10 other fees $- PG&E RCEA
Future-year Budget Headroom Costs determined by Board Policy Rate savings $100 Procurement budget $90 above base cost $80 Reserve contribution $70 $60 Base/minimum price per MWh power costs $50 $40 Operations $30 $20 PG&E PCIA & $10 other fees $- PG&E RCEA Fixed/base costs of providing service
Future-year Budget Headroom $100 $90 Material Change $80 Clause ensures $70 base operating base operating $60 price per MWh costs met and $50 also sets $40 minimum values $30 for reserves and $20 $10 rate savings $- PG&E RCEA
Future-year Budget Headroom Example: PG&E Rate decrease $100 $90 $80 $70 $60 price per MWh $50 $40 $30 $20 $10 $- PG&E RCEA
Future-year Budget Headroom $100 $90 Material Change $80 allows for $70 maintaining maintaining $60 price per MWh minimum rate $50 savings and $40 reserve $30 contributions by $20 $10 renegotiating $- price/volume PG&E RCEA
Humboldt Redwood Company PPAs Volume at $83 reduced to maintain 3% rate- 3% rate- savings and MWh per $2M reserve Month accumulation
Environmental/regulatory compliance provisions Questions?
Biomass Procurement Phase 2
Proposed terms for additional biomass procurement • Additional contract(s) layered on after HRC for available budget • Base price would be $83/MWh • PPA terms would be modified version of HRC PPAs Including adjusted version of Material Change clause
Options 1. Pursue negotiations with one additional facility 2. Pursue negotiations with both, with one ranked ahead of the other for allocations of ranked ahead of the other for allocations of available headroom 3. Pursue negotiations with both, split any headroom equally
Additional PPA(s) layered onto HRC 18,000 16,000 14,000 12,000 10,000 8,000 6,000 Facility 2 @ Market Price 4,000 Facility 2 @ $83/MWh 2,000 HRC Market price 0 HRC Purchases @ $83/MWh Jun-17 Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Oct-19 Feb-20 Jun-20 Oct-20 Feb-21 Jun-21 Oct-21 Feb-22
Additional PPA(s) layered onto HRC Example: budget moderately constrained 18,000 PPA #2 16,000 volume at 14,000 $83 reduced 12,000 due to budget due to budget 10,000 8,000 6,000 4,000 Facility 2 @ Market Price 2,000 Facility 2 @ $83/MWh HRC Market price 0 Jun-17 Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Oct-19 Feb-20 Jun-20 Oct-20 Feb-21 Jun-21 Oct-21 Feb-22 HRC Purchases @ $83/MWh
Additional PPA(s) layered onto HRC Example 2: budget significantly constrained 18,000 Both PPAs 16,000 volume at 14,000 $83 reduced 12,000 due to budget due to budget 10,000 8,000 6,000 Facility 2 @ Market Price 4,000 Facility 2 @ $83/MWh 2,000 HRC Market price 0 Jun-17 Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Oct-19 Feb-20 Jun-20 Oct-20 Feb-21 Jun-21 Oct-21 Feb-22 HRC Purchases @ $83/MWh
Considerations • Technical analysis/forecasts do not project being able to afford 3 biomass PPAs at $83/MWh • Preliminary analysis suggests the capacity provided by two operational facilities would be provided by two operational facilities would be sufficient to process currently-available biomass waste stream. • The more budget committed to biomass = less available for other priorities (customer programs, new local generation, lowering power mix GHG emissions)
Staff recommendation • Pursue negotiations with one additional facility • Select DG Fairhaven for negotiation base on RFO review team’s “offeror viability” scoring.
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