Puget Sound Energy's 1.5 GW all-source RFP provisions allows for expanded sourcing scope
Puget Sound Energy has issued an all-source RFP seeking requests from bidders as the company looks to sign eligible resources of up to 1.5 GW.
This is the company's first such RFP since 2018. It also represents a significant shift for the company as it seeks to exponentially increase its renewable capacity ahead of new requirements placed upon it by the Washington state legislature.
Bidders and Potential Winners
PSE has not issued an all-source RFP since 2018 when it issued a combined all-source and demand response RFP. The company received 97 bids in response to this RFP including 36 solar proposals, 20 wind, 17 battery storage, and six demand response. The remaining bids were a combination of geothermal, hydro, biomass and natural gas.
From these proposals, PSE selected NextEra Energy's 350 MW Clearwater Wind project, which is still under development. The company also selected a 200 MW PPA for energy supplied from Avangrid's Golden Hills Wind Farm, for a total of 550 MW contracted through the RFP.
This added to an existing portfolio that includes the 224 MW Klondike III wind project developed by Avangrid, the 150 MW Lund Hill Solar project developed by Avangrid, and the 131 MW Skookumchuck wind project developed by Southern Company. PSE also internally developed the 267 MW Tucannon River Wind project, which reached its COD in 2014.
Since the scope of this RFP is so much larger than anything PSE has issued before, the response and options available to PSE will likely be much larger than anything the company has considered in the past.
Notably, PSE has confirmed that project proposals do not have to be connected directly to a PSE substation to be considered, though bidders would be responsible for arranging delivery to PSE's system in such a case. As a result, the scope of where projects may be sourced to be viable for compliance with this RFP is significantly expanded.
Expanded Background
PSE's 2021 IRP identifies a significant increase in the company's energy needs, particularly renewable energy, over the course of this decade. Under Washington's regulation code, when an IRP identifies a resource needed within the next four years, the company must file an all-source RFP in response leading to the filing of this all-source RFP.
The size and scope of this RFP comes as no surprise as it is the first such RFP issued by the company since the passage of Washington's Clean Energy Transformation Act, which requires all Washington utilities to eliminate coal from their portfolios by the end of 2025 and sets an 80 percent carbon-free generation and carbon neutrality mandate by 2030 and a 100 percent carbon free energy mandate by 2045. Together, these requirements make Washington's energy transition stipulations some of the strongest in the nation, leading many utilities like PacifiCorp and PGE to issue their own RFPs as they scramble to scrub coal power from their pipelines and replace them with renewable resources. PSE itself will have to cut its 750 MW coal capacity, necessitating an RFP of this scale. As such the company's IRP and PSE's Senior VP of Energy Supply Ron Roberts both indicate that renewable energy will be heavily favored during this process.
"PSE has a strong preference for renewable resources, and we are hoping to find that combination of renewable resources that will prove to be a sustainable, reliable and low-cost way to meet the needs of our customers identified in the RFP," Roberts said.
While the original draft RFP included a social cost for any proposals that included carbon emissions, the UTC directed the company to remove this barrier due to the "urgency" of its energy needs. The original draft also included a cost adder for bids including PPAs rather than newly constructed projects that would be owned by PSE upon completion. Although the UTC also required the company to remove this adder following objections from companies including Renewable Northwest, the NW Energy Coalition, and the Northwest and Intermountain Power Producers Coalition, PSE may still favor new projects that they can own rather than PPAs.
Next Steps
All proposals and bid fees for the all-source RFP will be due to PGE by 1 September 2021. Once all proposals are submitted, a lengthy, multi-month process will begin at PGE to determine the winning bids. The company will provide an opportunity for bidders to revise or augment their Customer Benefit Plans by 31 January 2022, once its CEIP is finalized.
Later in 1Q22, PSE will complete Phase 1 of its screening process and select Phase 2 candidates. Bidders will be updated at this stage about their current standing. From there, PSE will narrow down its Phase 2 candidates to its final short list in 2Q22 with post-proposal negotiations and a final compliance report to be filed with the Washington UTC.
In addition to procuring renewable energy as a key part of its procurement strategies going forward, PSE also plans to expand its energy efficiency programs to save 500 MW of energy, which is about 20 percent of PSE's current average annual demand. Related to this, the company plans to issue an additional RFP later this year seeking DERs. The company is currently targeting 15 November as the deadline for the draft filing of this RFP with a final RFP to be issued to bidders in early 2022. This RFP will have a preferred portfolio of 29 MW of demand response, 80 MW of distributed solar and 25 MW of battery storage to be developed between 2022 and 2025. Finally, the company says it also intends to develop requirements for a vPPA platform that will be used to dispatch DERs.
PSE says it expects this second DER RFP evaluation process to be shorter than that of its all-source RFP and is targeting concurrent evaluations of both in 2022.
If you are interested in a demo or to see whether you qualify for a FREE trial of NPM, click the “Learn More” button below.