Apr 11, 2022 Public Utilities Board on 2022-04-11 9:00 AM

Okay, it is nine o'clock and we do have a quorum, so we'll call to order the Public Utilities Board for the City of Denton on Monday, April 11th. The first item is presentations from the members of the public. Is there anyone from the public who wishes to speak? Nope, it looks like it's all staff. Next is the consent agenda. We have three items, A, B, and C. Does any board member wish to pull an item? Lee? Okay, item A. Any others? Do we have a motion to approve items B and C? Larry Beck moved. Do we have a second? Ben seconds. All in favor say aye. Aye. I'm going to recuse myself from item A so I'll turn it over to Billy. Okay is there any discussion about consent agenda item A? Yes, I asked to remove it from the consent agenda. I was curious, it seems that we are preparing to spend some money and make some changes to the retirement of this facility in order to accommodate some additional work and I thought it might be nice to have a little further discussion about that before we proceed. The lift station or the reclamation facility is actually being repurposed. So we're converting it from a water reclamation facility into a peak flow station. So the investment that we're making, we're still going to be able to leverage those assets for quite some time. Ah, I see, well based on my reading of the material I didn't quite get that so I thought we were spending money on a facility that we were planning to take out of service. Not for, the east lift station won't go out of service for at least 20 more years and that's where we're installing the pumps. And that's plenty of time to make some improvements. Yes sir, yes sir. I thought it was going to be gone in a few years based on a prior discussion that we had about it. No sir. Okay, well very good. In that case, thank you. Appreciate it. You're very welcome sir. Any other questions? Further discussion? If not, we'll entertain a motion. Move approval. Move to approve item A. Second. Okay, we've got Lee and Barbara seconded. All those in favor please say aye. Aye. Any opposed? Okay. Okay, next item is consider approval of the March 28th minutes. We already have a change. Instead of Ben being the deputy city attorney, it was Marcella, so that's already been changed. Are there any other changes or corrections? Okay, do we have a motion to approve the minutes as amended? So moved. Lee moves. Thank you. Larry seconds. All in favor say aye. Aye. Carries. Management reports. Madam Chair, members of the PUB, thank you for being here this morning. The first time that we have on the agenda here and I wanted to ask Jeff Brown and his team if they can come up here to the podium, I wanted to make sure we recognize our safety team, but DME did recently receive an award through Association of Public Power and we're very proud of that award. The last time that DME received this award was in 2004 and so, you know, really shows the investment that certainly this community and certainly you as a board have allowed us through the budget. You know, we continue to add additional funding into that business unit at DME and, you know, one of the things that we tell our folks is that, you know, we want them to go home every single day just the way that they came to work that morning, if not, in some cases maybe even better, right, but we certainly take safety as a number one concern for us when it comes to our people. So Jeff, if you'll come up here and Jeff's going to come up and he's our manager over safety and he'll introduce himself and his two guys and just going to say a little bit about the award and what that means. Jeff. Good morning, board. My name is Jeff Brown. I'm the electric safety and training division manager. I brought with me today my senior safety specialist, Sal Spinelli, and our safety specialist, David Burrs. With the APPA safety award, as Tony mentioned, 2004 was the last time we received first place for a power plant our size. They used a couple factors to determine that. The primary one was the number of employees with hours worked with injuries. DMA did not have any recordable injuries last year, which is a huge accomplishment for the number of hours we worked. They also look at the current state of our safety program, the practices and policies we have in place, and then they also have a small category for current culture. So with that, for a power plant our size, we received first place for 2021, and we're very excited about that. Are there any questions? Thank you. Well done. So the next item that we have for you is our feature agenda. I think we've talked about this before, the items that are going to come to you here in the next couple of months will be the budget, and as I mentioned before, that will include electric water, wastewater, solid waste, and also utility customer service, which is our utility billing component, primarily because they're primarily funded by the utilities. And so that's what's on your agenda. Obviously there'll be a number of other items during that period. And then the next item is the new business action items. We still have the two items that we've had on here for a little while, but we know that we are working on those, and we will be planning to bring those to you here before too long. And then the one item that's not on here, it's a work session today, will be a presentation by one of our EMO guys, Seth DeLeon, and he'll be presenting today just a little bit about RECs and what they mean in the whole electric market, and hopefully you find that information helpful. Certainly he's here, and Steven Johnson, who's the manager of that area, is here, and of course Mr. Nolte is here as well. If you have any questions, they'll be more than happy to dig into whatever questions you may have. So with that, Madam Chair, that's the management report. Happy to answer any questions that anyone may have. Questions? Nope. All right. Then we move into concluding items. Does any board member wish to add something to a future agenda or have anything to say to the public? I see nothing. All right. Work session. Seth? Good morning, members of the PUB. My name is Seth DeLeon, and I'm a senior energy market analyst with Energy Management Organization. Also here with me today is my supervisor, Steven Johnson, manager of the Energy Management Organization, or EMO. Today's presentation will provide information to DME's renewables, renewable market, and RECs. The goal for today is to leave you with a better understanding of our energy portfolio and renewable energy, but also to answer any questions that you may have. DME's current supply diversification consists of solar totaling a possible 205 megawatts, and wind totaling a possible 180 megawatts. There's also a future solar project scheduled, Samson Solar, providing an additional 75 megawatts. Denton Energy Center is our natural gas unit with a capacity of 225 megawatts. Using 2022 as an example, the city of Denton's total renewable portfolio equals 1.7 million megawatt hours, credited towards our demand of 1.5 million megawatt hours. With these renewables mentioned and shown later in the presentation, the city of Denton is clearly meeting our renewable objective. Looking at megawatt hours, which are the total expected output for the given year from a specific resource, we meet or exceed the current goal of being 100% renewable for the 2022 and 2023 calendar year. We do recognize the need to fill our renewable short position starting 2024 as our Wolf Ridge resource contract ends, and we will continue to assess various technologies and resource types to procure renewable resources to always be 100% renewable. Recently, to help address this need, we have entered into a fixed renewable agreement to provide short-term temporal diversity. Due to recent inflation and supply chain issues, we felt this was the better option that allows us to continue to meet the city of Denton's goal. I present to you one resource in our energy portfolio, Santa Rita Wind. While we assume a delivered quantity from Santa Rita, there does remain a large amount of uncertainty in actual megawatts being delivered, depending on the season and mother nature. The chart above illustrates these types of output projections to actual delivered quantities that the EMO manages and plans for on a daily basis. EMO's forecasting tools play a vital role in dealing with these renewable projections. Looking at the chart, the black line represents DME's load over the first three days of the second week of March 2022. As you can see, the 7th of March was a low wind projected day, but we did receive a high wind output at Santa Rita. The very next day on the 8th, we received a higher projection, but little to no actual wind output. On the last day of the same week, the 9th, we forecasted low projected output at Santa Rita the entire day, but did receive strong wind output in the late hours. ERCOT is a wholesale market facilitator. While DME is in the wholesale market, ERCOT's main goal is system reliability. One graph I'd like to point out is a 2021 generating capacity breakdown, reflecting operational installed capacity of 51% natural gas, 25% wind, and 4% solar. There is a substantial projected growth for wind and solar, with solar renewables seeing the largest amount of growth over the next couple years, as the next slide represents. This chart represents the installed, but not guaranteed projected resource output in ERCOT through 2024. Considering wind as an example, on average, only 49% of this renewable segment is expected as the actual output. Referencing the Santa Rita slide and its impact on DME, the uncertainty created by the intermittency of these resources also applies to ERCOT as a whole. As mentioned in the ERCOT slide, natural gas generating resources still play a large role as they are reliable and easier to dispatch, with the ability to generate at set amounts. I would like to highlight both wind and solar installed and projected capacity in ERCOT. Solar projections, which is the gray bar, are expected to grow substantially through 2023, reaching 35 million megawatt hours. Wind still sees strong growth, projected to reach 40 million megawatt hours. As you can see, renewable growth in Texas continues at a rapid pace, but there have been challenges due to supply chain issues. How long is that good for, I guess is what I'm asking? As far as the battery capacity? The storage capacity. Depending on the type of battery, two to four hours. So that gets us through part of the night. My understanding is more towards a peak type situation. Think of the summer when you have your peak hours, your 2 PM, 3 PM, 4 PMs, that would help there. Okay, good. Thank you. Any more questions? Yeah, following up on that. So even though it appears from your chart, there has been and will continue to be significant growth in the amount of this battery capacity, it's still a tiny fraction of the total available power at ERKON. That is correct, yeah. So is there a cost barrier to putting in these batteries? Is there a materials barrier to increasing this? I'm just curious because if you're going to rely more on renewables, then obviously you need some way to store when you go from peak production to peak use. Great question. My understanding is pretty much all the above. Renewables and definitely the cost of installing batteries. Any more questions? Renewable energy credits represent the energy generated by renewable energy sources, such as solar and wind power facilities, and represent the clean energy attribute of renewable electricity. A REC is produced when a renewable energy source generates one megawatt hour of electricity and delivers it to the grid. Here are examples of DME's RECs using resource from the previous slides. The first example, Wolfridge, is a firm renewable contract producing 525,600 megawatt hours, or RECs, that are credited towards our 100% renewable goal. Santorini is different, as DME only receives a percentage of the site capacity, but is also used to meet a renewable goal. DME does maintain a REC account with RCOT. There are a lot of numbers here, but the biggest takeaway is the capacity factor at each resource. As I mentioned in the previous slide, capacity factors do play a role in meeting and maintaining the City of Denton's renewable goal. Looking specifically at the top chart, DME's RECs meet or exceed DME's projected load at our renewable goal. Looking specifically at 2022 and 2023, we can see RECs meet 115% and 120% at DME's projected demand. Looking at the expected capacity factor of the second chart, wind tends to average 40% or higher. Santorini, for example, was solar averaging slightly higher than 30% total output of these resources as long draw shows. Due to the seasonal capacity factors, DME will continue to procure renewable supply in order to continue in meeting our long term 100% renewable goal. Are there any questions? Any additional questions? Go ahead Lee. In looking at the chart you provided, it appears that there's going to be a bit of a fall off in years 2024 going forward. So are there any plans to address that, and if so, what are they? We are currently looking at multiple plans right now. There's discussions, Stephen may have some more information on that. You don't have to give us any details, I just appreciate a little overview, kind of what you have in mind. Good morning board members, Madam Chamberlain, Stephen Johnson, manager of the Energy Marketing Organization, DME, in answer to your question, we continue to monitor daily if not weekly all of the people who are developing projects, whether it be solar, renewable, whether it be storage projects, any others, to assess their viability. Obviously I think everybody is aware of some of the supply and development shortages that have been going on with governmental restrictions on imports, currently an investigation going on for labor practices in Southeast Asia where a lot of panels are built for solar farms. We continue to assess what is the best path forward, and we'll be looking to issue RFPs as and when the opportunity arises to do so. So yes, we won't fall short, we continue to do what we need to, to make sure that we meet the 100% renewable objective. Well, I just want to ask, and this might be a dumb question, but just for my information, so the 100% renewable is a requirement imposed on DME by the city council? Correct sir. So if this becomes an impossible situation, or improbable from a cost standpoint, then it would be incumbent on whom to ask the council to change that requirement. Does that fall on you guys, on us, where does that come from? Yeah, so let me give you just a little flavor for that. So we are planning by the end of this year to update the debt and renewable resource plan, which is the document that really sets that goal for DME and spells out for the most part what the practices should be, right, and what we've been following. Because of the time frame that we have here, we'll have plenty of time that if the direction is to continue down the same path and we'll be issuing an RFP to secure some additional long term contracts. But there's certainly some clarification that's needed within the debt and renewable resource plan. There's also changes in the electric wholesale market in the state of Texas and various other initiatives that could potentially impact how we take that forward. And I'll be remiss to say, in my prior life as a finance person, the financial implications of decisions that are made have to be weighed and they have to be very transparent so that the decision makers, you first, then the council, has the information on how we take that forward. And so this issue of recs, recs tied to energy or recs on their own and how we incorporate them or not incorporate them into this goal that we have, along with what do we do with large loads like Core Scientific is an example. Those are good discussions that we need to have with the decision makers and how we chart the course going forward. So for now, as Seth has stated, we're not seeking long term PPAs. What we're doing is these short term deals to continue to meet the 100% obligation. And that will give us time to sort all these issues out, have a good robust discussion and get good direction. And then how do we take that forward? Not for the next couple of years, but the next five, 10, 15 years. So do we anticipate, excuse me, do we anticipate that the cost of fossil fuel power production, natural gas primarily, are going to go up or down or is there any information about the current long term outlook? I think Stephen can look at his crystal ball and tell you. I think the short answer is if I had the answer to that, I probably wouldn't be answering the question here today. I think we can safely say that the past six months or so have seen a dramatic increase in the cost of a lot of things, not the least of which has been energy worldwide. And I think collectively the world is reassessing how it wishes to try and address energy needs versus desires to have a more sustainable and environmentally friendly planet. As to whether that keeps prices where they are or developments of some sort of technology or some sort of, we saw in natural gas for an example, that different methods of approach to extraction help reduce costs and help make things more available. Supply exceeding demand drops price. I think long term the objective is whatever the answer comes is to provide enough of it, the solution, to make sure that prices are I'll say affordable, but that's a relative statement. >> Mr. Beck, you had a question. >> Yes. Thank you. And if I heard it right, it's not so much that the capability of producing clean energy from solar and wind, it's the ability to get it from its original source to the consumer through products that we're having a hard time getting a hold of, the supply chain, as you mentioned. It's not a matter so much that we can't produce it as we can't deliver it. Is that a fair assumption? Or are we going to have more difficulty? >> No, it's unfortunately not as simple of that in as much as it isn't just a delivery challenge. There's a lot of challenge to intermittent, to supplying them sufficiently to meet grid demand. Clearly, I think if any of us have lived in North Texas for a while, we know that the wind right now the last couple of weeks has been excessively strong. It is spring, we know it's strong, but it's been very, very strong and we know that on very hot summer days, one of the reasons it's very hot is wind will drop. We continue to have those unavoidable challenges. Equally with solar, nothing happens at night. I think we've established that from a cost perspective, storage is not sufficient, is not able to meet the cost challenges at this moment. So it's not a case of renewables can supply everybody all of the time, they simply can't. They can't meet a lot of the electrical grid challenges of meeting inertia and frequency response and controls. So there's basically a marriage of all of the above that we're using to meet goals. But yes, to answer your question specifically, I think greater transmission is probably needed because clearly out west is a more sunny area than central and eastern Texas. So that says that solar probably needs to locate west, but there are tremendous challenges with trying to move energy from 500 miles or more away. Our ability to provide hydro and geothermal, we're not in a good position for that, I take it. I look at it this way, God gave us our resources in each area of the United States. He's given the Pacific Northwest an awful lot of mountains and rain and water. They are great for hydro. Texas has an awful lot of open land and an awful lot of clear skies at times and a prevailing wind. We're great for solar and wind. Transporting it from longer areas is just too big of an issue. If that's what's required, then that's what the solution probably ends up being. Okay, thank you. Does that answer your question? Yes, sir. Any other questions? Thank you very much. Thank you. All right, that is the agenda. Do we have a motion to adjourn? All right, 924. Second. Okay, re-adjourned.