As many California utilities scramble to replace hydropower megawatts drying up in the ongoing drought—and raise their rates sharply to pay for that electricity—Silicon Valley Power’s (SVP) more moderate increases keep their rates among the lowest in the state, thanks to a diverse portfolio.
“For utilities with more than 5,000 customers, Silicon Valley Power’s average system rate is the lowest in California [EIA – form 861, 2013 data],” stated Larry Owens, SVP customer services manager.
SVP’s decades-long investment in a diverse mix of resources saved its customers more than $100 million last year, compared to the rates paid in neighboring communities. The city of Santa Clara municipal electric utility credits the “whole portfolio” approach with its ability to maintain a rate advantage over surrounding communities during historic drought.
For 2014, more than 36 percent of SVP’s electricity came from renewable resources including geothermal, solar, landfill gas, wind and eligible hydropower. Natural gas and large hydropower from Western make up the bulk of the conventional generation, rounded out with a small amount of coal and other resources.
Diversify three ways
Fuel sources are not the only thing about SVP’s portfolio that is diverse, but it is primary to their approach. Power comes from wind turbines in the state of Washington, geothermal and small hydro from all over northern California and a utility-scale solar plant in Kern County, California. In-town resources include a 147-megawatt (MW) combined-cycle plant, a 7-MW co-generation plant, 750 kilowatts (kW) of landfill gas power and 500 kW of solar.
Geographic diversity—when power resources are spread over a wide territory—helps reduce single-point-of-failure risk from extreme weather, transmission congestion and even earthquakes.
Ownership is the third aspect of the “triple diversity” strategy SVP uses to balance its portfolio. Most of the electricity is purchased through power purchase agreements and joint power agency contracts, but SVP owns or co-owns a natural gas power plant, some hydropower facilities and photovoltaic arrays. In addition to the SVP-owned local arrays at Jenny Strand Research Park and the Tasman Parking Structure at Levi’s Stadium, business and residential customers contributed 11.4 MW of installed capacity in 2014. “By not relying too much on one particular provider or one type of contract, SVP has created a very stable platform to keep rates affordable,” explained Owens.
Playing long game
That was the scenario that originally motivated SVP to pursue diversification in the 1980s when it was still a full-service taker from Pacific Gas & Electric (PG&E). “The first energy embargo was a wake-up call for our city leaders. They realized that moving away from a profit-motivated, sole source provider and seeking freedom from volatile fuel prices was key to providing affordable, reliable electricity to its customers,” Owens said. “Renewable energy in particular could help SVP achieve its environmental goals.”
Hydropower from Western and wind from the Altamont Pass wind turbines were the first carbon-free resources into SVP’s (power) pool in 1985, followed by geothermal power from the North Bay Area in 1988. “Geothermal is a great fit for our needs,” said Owens said. “It is such a reliable base-load resource for our customers.”
The solar power portion of SVP’s portfolio has been growing rapidly in the last few years, thanks to dropping equipment prices, the utility’s generous support for customer systems and California’s renewable portfolio standard. The state must get 33 percent of its retail electricity sales from renewables by 2020.
SVP has already met the state’s 33-percent goal, but the utility will continue to evaluate new renewable resources to meet its continued growth in retail sales and to address the expectation of even higher renewable requirements. Currently, SVP has more capacity than load, “So we can shop around for the options that best meet our ‘triple diversity’ criteria,” observed Owens. “Even though we are in a severe drought now, equipping existing small hydro dams with high-efficiency turbines is an approach that still has some potential opportunities,” he added. “With a surplus of both capacity and renewable energy, SVP has many opportunities to sell into the renewable and non-renewable markets available in California.”
Recognizing opportunity and knowing when to seize it has given Silicon Valley Power a drought-resistant portfolio, brag-worthy rates and a solid foundation for meeting future challenges. Because keeping rates low, complying with regulation and protecting the community’s resources for the next generation is simply too big a job for one resource alone.
Source: The Outlet, June 2015