n 2015, Hawai‘i passed unprecedented legislation, Act 97, which requires its investor-owned utility, Hawaiian Electric Company (HECO), to meet a 100 percent renewable portfolio standard (RPS) by the end of 2045. Strengthening the state’s economy depends on moving away from imported fossil fuels for both electricity and transportation and increasing reliance on its abundant renewable […]

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E3 Managing Partner Ren Orans provided expert testimony on behalf of the California ISO in San Diego Gas & Electric Company’s successful application to build the Sunrise Powerlink, a 500 kV transmission line that delivers renewable energy from the Salton Sea and Imperial Valley areas to San Diego. Our analyses demonstrated both the need for the proposed line and a net economic benefit. We performed a resource assessment and created a supply curve, including transmission costs, for each major renewable energy basin in the Western Electric Coordinating Council region. We quantified benefits in generation cost savings from reduced economic congestion across the region, reliability improvement and capacity market savings from increased firm-transfer capability into the San Diego area, and renewable procurement savings from improved access to low-cost renewable resources. Energized in June 2012, Sunrise helped prevent blackouts that summer by allowing replacement power to flow from Arizona when wildfires in the San Diego area shut down local infrastructure.

E3 helped Berkshire Hathaway Transmission and Pinnacle West win approval from the board of the California ISO (CAISO) for a new 500 kV transmission project linking Arizona and Southern California. The Delaney to Colorado River (DCR) transmission line was the first economically driven transmission project approved by CAISO: Using CAISO’s Transmission Economic Assessment Methodology, E3 projected ratepayer benefits of $20 million to $30 million per year. E3 worked with CAISO staff to implement the correct network topology and provided information to help ensure that the CAISO’s GridView case included planned infrastructure additions needed for compliance with California’s clean energy policy. E3 also developed an approach for estimating capital cost savings based on the deferral of generation investments allowed by the DCR line; CAISO has adopted this approach in evaluating all future transmission projects.

In 2001, E3 helped Bonneville Power Administration (BPA) develop a groundbreaking transmission planning process in which we considered non-wires alternatives—energy efficiency, demand response, and distributed generation—alongside conventional investments. BPA was one of the first major transmission providers in North America to use an economic screening for every potential bulk transmission investment. Since then, we have studied non-wires alternatives for other BPA project proposals, including the Hooper Springs line in southeastern Idaho and the 500 kV I-5 corridor reinforcement project in Washington. For the latter, E3 evaluated deferral options, including energy efficiency and demand response, as well as redispatch of generators. BPA is evaluating proposals for implementation of the redispatch option, with potential savings of up to $750 million for its customers.

Publications

• I‐5 Corridor Reinforcement Phase 2 Non‐Wires Analysis: Feasibility for Line Deferral

Since 2014, E3 has supported TransCanyon, a joint venture between Berkshire Hathaway and Pinnacle West, in developing high-voltage transmission in the Western Interconnection. We provide strategic advice and analysis for investment opportunities, help curate and prioritize TransCanyon’s project portfolio, and articulate how electricity sector policies will impact its transmission development business throughout the western U.S. E3 draws on the knowledge base within all our practice areas and our most recent pricing forecasts to provide insights on TransCanyon’s investment outlook.

In early 2013, California’s five largest electric utilities needed to find out how grid operations would be affected if the state increased its Renewables Portfolio Standard (RPS) to 50 percent by 2030. They turned to E3 to examine operational and cost implications, explore how the utilities could reach the 50 percent RPS goal, and assess […]

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With more than two decades of experience in Hawai‘i, E3 is now helping the Hawaiian Electric Company (HECO) plan for the grid transformation needed to reach 100 percent renewable generation by 2045. Our long-term analysis supported development of the utility’s Power System Improvement Plan (PSIP), with modeling centered on individual island plans and interisland transmission. The study develops least-cost expansion plans for each island using a variety of policy cases and fuel price forecasts. E3 used its Renewable Energy Solutions model (RESOLVE) to explore the economic trade-off between renewable curtailment and investments in storage, and to develop least-cost expansion plans consistent with each scenario. We also solicited and incorporated stakeholder input. HECO filed the PSIP, including testimony and support from E3, with the Hawai‘i Public Service Commission in December 2016.

Publications

• E3 December 2016 PSIP Update: Summary of findings from RESOLVE modeling of Oahu, Maui, and Hawai’i Islands

On behalf of California’s five largest electric utilities, E3 evaluated the challenges, costs, and potential solutions for achieving a 50 percent renewables portfolio standard (RPS) by 2030. Using our Renewable Energy Flexibility Model (REFLEX), we performed detailed operational studies of power system dispatch flexibility constraints under high levels of wind and solar generation. We found that achieving a 50 percent RPS is feasible and that California’s power system can remain reliable as long as renewable resources can be dispatched in response to grid needs. Our study recommended strategies for integrating higher levels of renewables, including greater regional coordination, renewables portfolio diversity, flexible generation capacity, flexible loads, and energy storage. We found that deploying these strategies would reduce the need to curtail renewables, lowering the cost of reaching 50 percent RPS.

Publications

• Investigating a Higher Renewables Portfolio Standard in California: Summary
• Investigating a Higher Renewable Portfolio Standard for California: Full Report

E3 has provided procurement and rate-making advice to Wyoming’s Lower Valley Energy (LVE) since 2001. Our long-term procurement plans have carefully addressed LVE’s need to mitigate cost increases due to changes in either market prices of energy or Bonneville Power Administration’s rates. We have also helped LVE assess the merits of different rate structures and compare the value of building generation in its own service territory with the costs of building new transmission facilities to access alternative power sources. Most recently, we provided an independent evaluation of the costs and benefits of a potential merger with a neighboring co-op utility.

Our work for Vancouver-based BC Hydro began with the design and implementation of an innovative multipart rate structure that included customized baselines for each of its 100 largest industrial customers. In 2008, E3 began assisting the utility with developing and implementing inclining block rate structures to encourage conservation. These ranged from a simple, two-step residential inverted block rate to more-complex baseline structures for commercial customers. Our process included surveying default rates for large general service and residential customers in other markets, analyzing usage characteristics, examining class segmentation options, and ensuring that our proposed rates adhered to BC Hydro’s cost of service principles and regulatory rate-making framework. E3 also developed materials for customer engagement, solicited feedback through moderated customer sessions, and provided expert witness testimony.

E3 has supported electric rate design in Hawai‘i since 2005. Currently, E3 is assisting Hawaiian Electric Company (HECO) on next-generation retail pricing strategy and rate designs that align with the state’s goal of meeting its 100 percent renewable portfolio standard (RPS) requirements in a way that encourages cost-effective deployment of customer-owned distributed energy resources. HECO first retained E3 to recommend a strategy for developing rates that would encourage conservation to mitigate the impact of high electricity supply costs on its customers. We recommended a three-tier inclining block structure, which is still in place, to minimize increases on small customers and provide conservation incentives to large customers. We also helped get the rate approved, preparing direct testimony and presenting to the utility’s board of directors.

E3 has completed studies for more than 10 utilities on the costs and benefits of participating in the western energy imbalance market (EIM), a regional 5-minute balancing market that became operational in 2014. The EIM aims to lower costs for consumers and assist states in meeting renewable energy goals through more-efficient dispatch, which reduces the need to carry costly reserves and curtail renewable generation. For each study, we ran a production simulation grounded in a detailed representation of the utility’s system. Our work has informed decisions by PacifiCorp, Arizona Public Service, NV Energy, and other utilities to join the EIM, as well as Chelan County Public Utility District’s decision not to participate. Consistent with E3 findings, the California ISO estimated that participants saved more than $85 million in the 20 months after the EIM became operational. Several more studies for utilities are under way.

Publications

• APS Energy Imbalance Market Participation: Economic Benefits Assessment
• NV Energy‐ISO Energy Imbalance Market Economic Assessment
• PacifiCorp-ISO Energy Imbalance Market Benefits
• Benefits Analysis of Puget Sound Energy’s Participation in the ISO Energy Imbalance Market

The Western Electric Coordinating Council (WECC) engaged E3 to model the benefits of implementing an energy imbalance market (EIM) across the Western Interconnection. Working with WECC staff and many stakeholders, we modeled and compared simulated production costs for a scenario that maintained existing operational arrangements and a second scenario with a consolidated regional balancing market. The analysis found benefits from improved system dispatch, as well as from reductions in operating reserves needed to accommodate wind and solar variability. E3 devised an innovative technique to more accurately estimate the potential impact of the EIM, and pioneered applying “hurdle rates” to calibrate the GridView production simulation base case so that it more accurately reflected bidding and dispatch practices in the West. Since presenting our findings to WECC in 2011, we have developed similar EIM cost-benefit studies for 10 additional utilities.

Publications

• WECC EDT Phase 2 EIM Benefits Analysis & Results

E3 provided independent, comprehensive valuation and due diligence services to a client considering the acquisition of a natural gas power plant in the Pacific Northwest. We examined transmission options and associated costs, energy market revenue projections under various regulatory and environmental scenarios, capacity values, ancillary services revenues, and potential off-takers. Based on our low-valuation case, the buyer made the prudent decision not to acquire this plant.

E3 advised a large private equity firm on a potential acquisition of nearly 1 GW of wind generation assets. This project tapped our deep understanding of the western grid, markets, and public policy. We applied our suite of models to project price trajectories for future renewable power purchase agreements, to assess the impact of renewable curtailment on asset values, and to weigh supply and demand for renewable energy credits under potential future regulation. Our analysis helped the company stress-test its internal valuation results and ultimately supported a successful bidding strategy and acquisition.

Macquarie Capital turned to E3 for analysis and strategic advice on a potential investment in a 50 MW distributed storage project developed by Advanced Microgrid Solutions (AMS) in the Los Angeles Basin. We performed simulations to verify AMS’s internal modeling of the benefits, costs, and value proposition of behind-the-meter, customer-sited storage assets. To understand potential revenue streams over a 20-year period, E3 analyzed the storage project and the underlying business model, forecasting wholesale and retail electric markets. Our financial analysis for the investors and potential lenders was a key element of the due diligence leading to Macquarie’s $200 million financing arrangement with AMS to take ownership of the project.

The Ivanpah Solar Electric Generating System (ISEGS) is the largest commercial solar thermal plant in the world. Built in California’s Mojave Desert by BrightSource Energy, the plant produces a maximum output of almost 400 MW and cost more than $2 billion. E3 supported its development with strategic and regulatory consulting, plant valuation, site and transmission valuation, and other services. BrightSource relied on E3’s reports and testimony to gain site permits and transmission interconnection; utilities relied on our work in signing power purchase agreements. E3 partner Arne Olson’s testimony was key to BrightSource’s successful application to the California Energy Commission (CEC) to construct the ISEGS, as opponents claimed that distributed solar photovoltaic projects would negate the need for it. Olson’s rebuttal reinforced the BrightSource proposal, and the CEC approved the site license in 2009. Construction began in 2010, and Ivanpah came online in February 2014.

The Canadian Association of Petroleum Producers (CAPP) retained E3 to develop regulatory strategy and testify before the Canadian National Energy Board (NEB) in proceedings opposing TransCanada’s proposal to restructure tolls on the Mainline, which transports natural gas from western Canada to eastern markets.  TransCanada had proposed restructuring tolls to maintain the line’s economic viability, as throughput declined due to soaring shale gas production in the northeastern U.S. The proposed change shifted fixed costs away from shippers, who were direct customers of the Mainline, toward producers, who were supplying gas to TransCanada’s own distribution network. Our alternative on behalf of CAPP offered a performance-based incentive with some pricing flexibility and balancing accounts that allowed TransCanada a reasonable opportunity to increase throughput and revenues and recover its investment. The NEB ultimately rejected TransCanada’s proposal in favor of CAPP’s, averting a shift of $300 million per year in fixed costs to western Canadian gas producers.

The University of California Office of the President (UCOP) retained E3 to develop an energy procurement plan for the six UC campuses served by competitive energy suppliers with total annual usage of over 250 GWh. We developed a model to compare the economic and environmental attributes of proposed purchase contracts against the university’s existing portfolio of contracts and retail electric rates. E3 projected each campus’s loads, operation profiles, and costs for existing combined heat and power facilities, and calculated the cost of new supply portfolios that included on-site generation, off-campus renewable power purchase agreements, and market electricity purchases. Our analysis, which found significant potential to make progress on sustainability goals while managing procurement costs and risk, formed the basis for UCOP’s procurement strategy. E3 continues to advise UCOP and individual campuses on the economics of renewable energy projects and procurement strategies for achieving the UC Sustainability Directive of zero carbon emissions by 2025.

he grid in the western U.S. is a patchwork of 38 balancing authorities. Each balances its loads and resources independently, exchanging energy through bilateral trades. This inefficient system is being strained with the growing presence of variable resources such as wind and solar. In 2011, the Western Electric Coordinating Council (WECC) engaged E3 to quantify […]

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