2024-015 Renewable Energy ISR April 26,2024 Report No. 2024-015
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Calendar Year 2023 Renewable Energy Supply & Goal
EXECUTIVE SUMMARY:
For calendar year 2023, DME's power supply again was 100% renewable. However, due to the
default of Delilah Solar coupled with 6.28% higher load served during the year, we did have to
purchase Renewable Energy Credits (RECs) to ensure 100%renewable energy power supply.
BACKGROUND:
DME previously received approval from City Council to recognize the use of RECs to meet its
100% renewable energy goal as mandated by the Denton Renewable Resource Plan. Compliance
with the renewable energy supply mandate has been achieved for 2021, 2022, and now 2023. This
compliance report documents the sources of Renewable Energy Credits (RECs) used to
demonstrate compliance. For the purposes of this discussion, RECs are synonymous with MWhs
because each REC is associated with a MWh of renewable energy production as verified by the
Electric Reliability Council of Texas (ERCOT).
DISCUSSION:
Compliance with the requirements of the Denton Renewable Energy Plan(DRRP) is measured on
a calendar year basis. This compliance period is a direct result of the accounting and crediting of
RECs by ERCOT which provides a third-party independent verification of renewable energy
credits for all market participants. Consequently, when DME forecasts the number of MWhs of
renewable energy required to demonstrate compliance with the DRRP, it spans two fiscal years.
For calendar year 2023, the number of expected MWhs served for the months of January through
September 2023, were forecasted in April of 2022 as part of the fiscal year 2023 budget. The
remaining months of October through December 2023 were forecasted in April 2023 as part of the
fiscal year 2024 budget. The Energy Management Organization (EMO) uses weather normalized
forecasts to predict the amount of energy to be served in the City of Denton and the generation
expected from our renewable resources under long-term PPAs. Renewable energy output from our
contracted resources are a function of wind speed and duration and hours and intensity of solar
irradiation during each day. Forecasting these quantities is based upon proprietary algorithms that
use historical correlations of wind and sun to forecast output from each of our contracted resources.
Given the volatility of weather,the EMO recognizes that forecasts are likely to be off from actuals
but in order to maintain the statistical integrity of the load and generation forecasts, this analytical
approach is considered a best practice in the electric utility industry.
For calendar year 2023 the EMO projected that the total DME served load would be 1,646,280
MWh. The actual calendar year 2023 load served was 1,749,737 MWh, or 6.28% more than
forecasted. Recall that the summer of 2023 was one in which the ERCOT market experienced the
second hottest summer on record, and DME also set new records.
April 26,2024 Report No. 2024-015
For the calendar year, the EMO projected that renewable energy supply under contract would be
sufficient to meet the forecasted load. However, in June of 2023, the summer forecasts continued
to build week after week until it was evident that DME would experience a hotter than normal
summer. The Delilah Solar project default contributed to the shortfall, however demand usage in
November and December was lower than forecasted which helped reduce the overall shortfall.
Renewable Energy Credit Inventory
ERCOT, as the market administrator for RECs, issues RECs to each renewable energy generator
monthly. However, Retail Energy Providers (REPS) who provide contracted energy in the
competitive retail market areas of ERCOT are not required to demonstrate compliance with the
renewable energy portfolio standards until May 1 of the year following the compliance year.
Because the REC market was developed with this compliance date in mind, renewable energy
resources do not generally finalize their REC transactions until mid-April of each year. DME's
contracted renewable energy resources, including the Delilah Replacement Contract, do not post
their RECs to DME's REC account at ERCOT until mid-April. Consequently, DME does not
know the actual level of RECs officially allocated by ERCOT to each renewable energy resource
and those resources are trueing up their ERCOT accounts into April of each year. In early April
2024,DME's ERCOT REC account contained 1,742,944 RECs or 98,454 (5.35%)less RECs than
the actual load served during calendar year 2023.DME's load forecast for calendar year 2023 was
1,646,280 MWh and less than the actual load (1,749,737) for the calendar year.
Actual Load Served and Actions Taken by EMO
As previously stated,DME purchased 1,749,737 MWh from ERCOT for resale to retail(non-Core
Scientific) customers in calendar year 2023. With an ERCOT REC inventory of 1,742,944 for the
calendar year, DME's account was 6,793 or 0.39% short of the actual load served. To balance the
account DME purchased 6,793 calendar year 2023 RECs from the market to achieve 100%
renewable energy supply for the year and to again achieve compliance with the DRRP goal.
The 0.39% deficit in RECs at the end of the year was expected based upon the 6.28% more load
served by DME than was forecasted. However, because energy can only be purchased
prospectively, and the EMO manages the hourly load position in real-time and next day ERCOT
markets,REC backed energy is not purchased. There is no real time or day ahead market for REC
backed energy in ERGOT, or any other regional transmission market. Unless DME were to
purposefully over procure REC backed energy as compared to the EMO's forecast, the only way
to true-up the REC amounts at the end of the year is through the bilateral REC market. This is
what was done for the calendar year 2023. DME will continue to function in this manner and this
practice will be fully explained in the revised DRRP that will be issued later this year. It should
be noted that if DME were in a surplus position relative to REC inventory levels, DME would use
the same bilateral REC market to sell the surplus RECs and monetize the excess value for the
benefits of DME customers.
The EMO believes the actions taken this year to demonstrate compliance with the DRRP are
prudent and consistent with electric industry best practices. The processes and procedures used to
demonstrate compliance are fully auditable and are consistent with the findings and
recommendations of the City of Denton's March 14, 2022, EMO audit.
April 26,2024 Report No. 2024-015
STAFF CONTACT:
Terry Naulty
Assistant General Manager
(940) 349-7565
Tony Puente
General Manager
(940) 349-8487
REOUESTOR: Staff Initiated
STAFF TIME TO COMPLETE REPORT: 2 hours
PARTICIPATING DEPARTMENTS: Denton Municipal Electric