20180410PAC to Staff WY PacifiCorp Solar RFP 2017 Closing Report - REDACTED.pdf

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INDEPENDENT EVALUATOR'S CLOSING
REPORT ON PACIFICORP'S 2017 SOLAR RFP
Prepared for
PacifiCorp
LONDON
ECONOMICS
London Economics International LLC
717 Atlantic Ave Suite 1A
Boston,MA 02111
March 29,2018
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Independent evaluator's closing report on PacifiCorp's
2017 Solar RFP
Preparedfor PacifiCorp by London Economics International LLC LONDONECONOMICSMarch29,2018
London Economics International ("LEI'Q was engaged by PacifiCorp to serve as Independent
Evaluator ("IE'S for its 2017 Solar Request for Proposals ("2017S RFP'S to ensure that the
procurement process is competitive,fair,and managed according to procurement best practices
such that the resulting acquisition of solar resources is price competitive.LEI provides this
closing report evaluatingthe initial andfinal shortlist evaluation process,and the final outcome
of the RFP process.
LEI finds that the 2017SRFP was consistent with the RFP documents.It was conducted in a fair
and unbiased manner.It attracted a large number of bidders,which helps ensure that any
resulting acquisition of solar resources would be price competitive and offer the most potential
benefit to retail ratepayers.PacifiCorp's evaluation process was thorough,reasonable,and
reflected industry best practices.
In an unusual RFP outcome,PacifiCorp ultimatelydid not select any of the 2017S RFP bids to
the final shortlist,in spite of the potentialcustomer net benefits which PacifiCorp's baseline
analysis showed.LEI did not find PacifiCorp's decision not to accept any solar bids to be
unreasonable.PacifiCorp believes that bid prices reflected a risk premium based on uncertainty
over looming tax and tariff changes during late 2017 and early2018;the company believes that
benefits to consumers will be higher once the uncertaintyfades.Therefore,PacifiCorp plans to
re-assess the potentialbenefits of solar resources in its 2019 IRP,with a view to potentially
conducting another solar RFP in 2018.
To ensure another robust turn-out of bidders,LEI recommends that PacifiCory clearlyexplain to
all bidders and to the broader communityof solar developers why no bids were chosen for the
FSL as part of this procurement process.
Table of Contents
1 EXECUTIVE SUMMARY................................................................................................................................4
1.1 KEY FINDINGS..............................................4
1.2 RECOMMENDATIONS..............................................5
2 CONTEXT AND OBJECTIVES......................................................................................................................7
2.1 THE ROLEOF THEINDEPENDENTEVALUATOR .............................................7
3 PACIFICORP'S EVALUATION PROCESS.................................................................................................8
3.1 MINIMUM ELIGIBILITY REQUIREMENTS..............................................8
3.2 COSTAND BENEFITEVALUATION MODELS............................................10
3.2.1 Screening model..........................................10
3.3 NON-PRICE EVALUATION ...........................................12
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4 PACIFICORP'S ISL RESULTS.....................................................................................................................13
4.1 ISL SELECTION..............................................13
4.2 LEI'S ASSESSMENTOF THE ISL..............................................14
5 PACIFICORP'S FSL RESULTS....................................................................................................................16
5.1 BEST AND FINAL BIDS .....................................................16
5.2 PACIFICORP'S FSL EVALUATION PROCESS ............................................17
5.2.1 Definingbaseline scenario assumptions...........................................................................................18
5.2.2 SO model created port olios o cost-e ective solar bids or the nine baseline scenarios......................19
5.2.3 PaR model examines risk pro ile o port olios..........................................19
5.3 PACIFICORP CHOSE TWO PORTFOLIOSFOR FURTHERTESTING...............................................20
5.4 BASELINE SCENARIORISK ANALYSIS OF THETOP TWO PORTFOLIOS...............................................21
5.5 ADDITIONAL SENSITIVITY ANALYSES...............................................23
5.5.1 Hourlypriceprofile sensitivity ..........................................23
5.5.2 Capacity contribution sensitivity ..........................................................25
5.6 PACIFICORP'S FSL FINAL RECOMMENDATION:NO WINNERS...............................................27
6 CONCLUSION:2017S RFP WAS CONDUCTED FAIRLY AND IN ACCORDANCE WITH
INDUSTRY BEST PRACTICES............................................................................................................................28
6.1 RECOMMENDATIONS..............................................29
7 APPENDIX A:PACIFICORP INITIAL SHORTLIST DETAILED RESULTS.....................................30
8 APPENDIX B:ROLE OF THE SOLAR INDEPENDENT EVALUATOR.............................................31
Table of figures
FIGURE 1.PACIFICORP MODELS USEDIN ISL AND FSL EVALUATION..................................................9
FIGURE 2.PACIFICORP AVERAGE ACC (NPV)BY STATE ..................................................11
FIGURE 3.PACIFICORP'S NON-PRICE WEIGHTING FACTORS..................................................12
FIGURE 4.NET BENEFITSOF PACIFICORP ISL BIDS.......................................................................13
FIGURE 5.COMPARISON BETWEEN LEI INDICATIVE ISL AND PACIFICORP ISL ...................................................14
FIGURE 6.ACC VALUE OF ENERGY AND CAPACITY(NPV 2018-2042)VS ISL PPA PRICES...................................15
FIGURE 7.ISL AND BEST AND FINAL PRICING COMPARISON ...................................................17
FIGURE 8.PACIFICORP'S PRICE-POLICY SCENARIos.....................................................19
FIGURE 9.NINE BID PORTFOLIOSSELECTEDBY SO BASELINE MODEL...................................................20
FIGURE 10.SELECTED PORTFOLIOS..............................................................................................................21
FIGURE 11.BASELINE SCENARIO RISK ANALYSIS RESULTS:SO MODEL (MILLIONDOLLARS)....................................22
FIGURE 12.BASELINE SCENARIO RISK ANALYSIS RESULTS:STOCHASTIC-MEAN PAR (MILLIONDOLLARS)..............22
FIGURE 13.SCENARIO RISKANALYSIS RESULTS:RISK-ADJUSTED PAR (MILLION DOLLARS).....................................23
FIGURE 14.HOURLY PRICEPROFILESENSITIVITY ..........................................................................24
FIGURE 15.HOURLY PRICE-PROFILESENSITIVITY RESULTS(MILLIONDOLLARS)......................................................24
FIGURE 16.CAPACITYCONTRIBUTION OF SOLAR RESOURCESREPRESENTEDAS A PERCENTAGEOF RESOURCE......26
FIGURE 17.CAPACITYCONTRIBUTION SENSITIVITY RESULTS(MILLIONDOLLARS)................................................26
FIGURE 18.PACIFICORP ISL .....................................................30
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1 Executive summary
On November 15,2017,PacifiCorp issued a Request for Proposals ("RFP")for solar photovoltaic
("PV")resources ("2017S RFP").1 PacifiCorp was seekingbids for up to approximately2,000 MW
of aggregate solar capacity in its service territory.
London Economics International ("LEI")was engaged by PacifiCorp to serve as the Independent
Evaluator ("IE")for its 2017S RFP to ensure that the procurement process was competitive,fair,
and managed according to procurement best practices,such that the resultingacquisition of solar
resources would be price competitive and offer the most potential benefit to retail ratepayers.
On January 8,2018,PacifiCorp selected an initial short list ("ISL")of 25 bids,covering 11 projects,
with an aggregate solar capacity of 1,530 MW.2 The bidders selected in the ISL were given an
opportunity to provide best and final pricing,before PacifiCorp considered bids for the final short
list ("FSL").At the conclusion of the FSL evaluation process (discussed in detail in Section 5 of
this report),PacifiCorp decided not to select any of the bids to its final short list.
1.1 Key findings
The 2017S RFP was conducted under unusual circumstances.It was conducted at the
recommendation of the Utah Public Service Commission,3 rather than as the result of a business
strategy developed in the context of PacifiCorp's then-current IRP.The timing of the
procurement was accelerated to match as closely as possible the timingof PacifiCorp's wind RFP
(2017R RFP).
In this context,LEI found that:
PacifiCorp's 2017S RFP process was conducted in accordance with its RFP documents.
PacifiCorp accurately followed the process that was outlined in its RFP documents.LEI
monitored all communications with bidders;PacifiCorp evinced no bias for or against any
bidder.
PacifiCorp's process for selecting the ISL was conducted in a fair and unbiased manner.
LEI's analysis confirmed that the bids included in the ISL represent the best value
considering both price and non-price factors,from all the bids received during the RFP
1 PacifiCorp."RFP 2017S Solar RFP Main Document."November 15,2017.
<http://www.pacificorp.com/content/dam/pacificorp/doc/Suppliers/RFPs/2017S_RFP/Main_Documen
ts/RFP_2017S_SOLAR_RFP_MAIN_DOCUMENT.pdf>
2 London Economics International LLC."Independentevaluator's report on initial shortlist selection process:
PacifiCorp's 2017S RFP."January 26,2018.
3 The Utah PSC order recommending the solar RFP aligned with the Wind RPF COD was issued on September 22,2017.
Docket 17-035-23.<https://psedocs.utah.gov/electric/17docs/1703523/2969071703523oarfpwsm9-22-
2017.pdf>
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process.LEI believes that the initial shortlist accurately identified the bids that would
result in the largest net benefit to customers across PacifiCorp's service territory.
PacifiCorp's quantitativemodelingand analysis for the FSL process was fair and
reflected industry best practices.The FSL process included scenario analysis as well as
stochastic risk analysis,which reflects industry best practices.PacifiCorp's baseline
scenario analysis showed the results for the impact of the solar portfolio on system costs
were generally positive.Benefits in the baseline were resilient with respect to stochastic
outcomes,too.
PacifiCorp's additional sensitivityanalysis,applied to stress-test the baseline results,
was reasonable.PacifiCorp additionally stress-tested the top-performingportfolio of bids
using two sensitivity analyses.This aspect of the evaluation process was not explicitly
communicated to bidders in the RFP documents but was nevertheless consistent with the
RFP documents.And in the context of the unusual circumstances of the RFP noted above,
LEI believes that it represented a prudentapproach.The stress tests showed that projected
benefits of the top-performingportfolio mightbe overstated.
PacifiCorp's decision not to award any bids in this RFP was not inconsistent with the
process outlined in its RFP documents,which state "PacifiCorp reserves the right,
without limitation or qualificationand in its sole discretion,to reject any or all bids,and
to terminate or suspend this RFP in whole or in part at any time."4
LEI did not find PacifiCorp's decision not to accept any solar bids to be unreasonable.Without
the opportunity to vet a solar procurement in the context of its IRP,it is reasonable that PacifiCorp
mighthave been concerned that the 2017S RFP mightnot ultimatelyprovide net benefits for its
customers.PacifiCorp expressed concern that conditions in the solar market at the time of the
bidding reflected uncertainties over tax reform and tariffs on solar equipment.S These were
reasonable concerns,in light of PacifiCorp's view of market conditions at the time.PacifiCorp
believes that the net benefits to its customers of a solar procurement would be higher if it runs a
new procurement later in 2018.
1.2 Recommendations
The 2017S RPF was conducted in a manner that was consistent with general procurement best
practices,as we have stated above.At the same time,LEI does have recommendations about
future RFP processes.
4 ŸaCifiCOrp."RFP 2017S Solar RFP Main Document."Page 10.November 15,2017.
<http://www.pacificorp.com/content/dam/pacificorp/doc/Suppliers/RFPs/2017S_RFP/Main_Documen
ts/RFP_2017S_SOLAR_RFP_MAIN_DOCUMENT.pdf>.
5 PacifiCorp."PacifiCorp 2017S Request for Proposals:Final Shortlist.Confidential."March 12,2018.
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It is possible that by not choosing any winning bidders as part of this RFP that in future
procurements,fewer potential bidders might respond.PacifiCorp is considering conducting
another solar RFP later in 2018.PacifiCorp has said it expects the market environment for solar
to improve over 2018,so that potential bidders in a future RFP can offer lower prices;it also cited
the opportunity for solar bids to potentially incorporate storage;and allow more bidders to be
further along in the process of permitting,site control,and transmission interconnection.
PacifiCorp noted that an RFP initiated in mid-2018 would allow enough lead time for projects to
be capable of commercial operation by the end of 2021 (before the Investment Tax Credit ("ITC")
declines to its 10%floor).
To ensure that bidders would come back to the table,LEI recommends that PacifiCorp explain
clearly and to all bidders,and indeed to the broader solar development community,its rationale
for not selecting any bids to the FSL,and underscore that the main issue was the timing(as that
seems to be the case)rather than a fundamental concern about solar power.
LEI also suggests that PacifiCorp be more explicit about the stress-testing that it may or may not
conduct as part of its bid assessment to be more transparent about how bids will be evaluated as
part of the bid evaluation process.
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2 Context and objectives
PacifiCorp's 2017S RFP was conducted in response to a suggestion by the Utah Public Service
Commission to add solar to PacifiCorp's 2017R Wind RFP that began in 2017.6 The schedule of
the wind RFP was fixed to meet specific regulatorymilestones and those could not be extended
to accommodate the addition of solar to the wind RFP.Therefore,PacifiCorp offered a separate
solar RFP,with a compressed schedule to align with the commercial online date ("COD")
established in the 2017R Wind RFP,so that PacifiCorp would be able to solicit wind and solar
offers for the same COD.
2.1 The role of the IndependentEvaluator
The IE's role is to ensure the fair,proper,and consistent evaluation of proposals received.See
Section 8 (Appendix B)for additional details of the IE's role,as prescribed by PacifiCorp.The
involvement of an IE was the option of PacifiCorp,as an IE was not required.This points to a
disposition on the part of PacifiCorp to conduct business in a transparent and open manner,
which is a credit to PacifiCorp
LEI's task was not to create the ISL or the FSL,but to evaluate the process to ensure PacifiCorp's
bid evaluation process was fairly applied across the bidders and resulted in an FSL which provide
the most potential value for PacifiCorp customers.LEI undertook the followingactivities in
evaluatingthe RFP process and outcomes:
Reviewed and assessed the draft RFP documents;
Ensured the same information was provided to all bidders;
Participated in bidder's conference;
Reviewed bids'compliance with Minimum EligibilityRequirements;
Monitored all communications between PacifiCorp and bidders after receipt of bids;
Ensured there was no bias in the procurement process that unjustlyfavored bids;
Reviewed in detail PacifiCorp's proprietary models used in the bid evaluation process;
Assessed the ISL and FSL process to determine if the evaluation criteria,methods,and
models were consistently and appropriately applied to all bids and were performed as
laid out by PacifiCorp in the RFP;and
Documented the development of the 2017S RFP process with three reports:First Status
Report,ISL Report,and the Closing Report.
6 Public Service Commission of Utah."Application of Rocky Mountain Power for Approval of Solicitation Process for
Wind Resources."November 9,2017.Docket no.17-035-23
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3 PacifiCorp's evaluation process
This section summarizes PacifiCorp's evaluation process.LEI found this process to be consistent
with PacifiCorp's RPF documents and industry best practices,and fair to bidders.
PacifiCorp's bid evaluation process began with establishing whether a bid met the minimum
eligibilityrequirements.The eligibilitycriteria help to ensure ratepayerswould not be stuck with
projects that would encounter unnecessary delays-andto ensure a bidder had the wherewithal
to complete a project.Bids that passed this threshold were then considered for the ISL.Bids that
made it to the ISL were then further analyzed to project their potential impacts on the PacifiCorp
system,to arrive at a projection of net benefits.
3.1 Minimum eligibility requirements
Before performing ISL evaluation,PacifiCorp eliminated 35 bids which clearly did not meet the
minimum eligibilitycriteria laid out by PacifiCorp.Key minimum requirements were:
demonstration of ability to meet the commercial online date;
evidence of interconnection;
evidence of site control;and
bidder's credit information.
As noted in the LEI First Status report,PacifiCorp's minimum criteria were reasonable and
consistent with other renewable resource RFPs.7 LEI observed that the bids which were
disqualified were disqualified based on importantand non-trivial criteria:
COD after2020:Failure to demonstrate a commercial online date prior to December 31,
2020 (17 bids disqualified);
Lack of prospect of timelyinterconnection:Failure to provide evidence that the proposed
project had a signed interconnection request with PacifiCorp transmission to execute an
interconnection feasibility studyagreement (15 bids disqualified);and
Lack of site control:Failure to provide documentation of site control (3 bids disqualified).
Any bid which was not disqualified was then eligible for the ISL,and PacifiCorp evaluated these
bids based on its ISL methodology.
After the bids were evaluated to assess their conformance with the minimum requirements,
PacifiCorp's bid evaluation and selection process occurred in two phases:
7 London Economics International LLC."First Status Report -LEI -PacifiCorp Solar RFP 2017."January 10,2018.
London Economics International LLC 8 contact:
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Phase I:PacifiCorp established and ranked an ISL based on both price and non-price
factors.Price accounted for 80%of the score and non-price factors for 20%(or a
maximum of 20 points).Bids with the highest total score (price and non-price),
representing up to 2,000 MW of aggregate capacity at any given location,were
considered for the ISL.Bids selected for the ISL were then givenan opportunityto
providebest and final pricing;
Phase II:PacifiCorp established its FSL based on an analysis of net customer benefit
of the ISL bids with updated pricing.This net benefits analysis simulated PacifiCorp's
system costs with and without ISL bids and compared the two outcomes to quantify
the net benefits of the bids.In this phase,PacifiCorp calculated the expected net
present value revenue requirementimpacts of proposed solar projects.
PacifiCorp used its proprietary model (Screening model)and two models licensed from third
parties (the SO model,and the PaR model),all discussed below,to performquantitativeanalysis
and rank the bids to create both the ISL and the FSL (see Figure 1).The method used to evaluate
and select bids was consistent with the methods that were used in the IRP.8
Figure 1.PacifiCorp models used in ISL and FSL evaluation
2017S RFP Bid Evaluation &Selection
PaR
PaR
I
Scenario Risk
Source:PacifiCorp 2017S Solar Request for Proposals,Bidders'Conference,November 21,2017.
8 PacifiCorp."RFP 2017S Solar RFP Main Document."Pages 18 and 19.November 15,2017.
<http://www.pacificorp.com/content/dam/pacificorp/doc/Suppliers/RFPs/2017S_RFP/Main_Documen
ts/RFP_2017S_SOLAR_RFP_MAIN_DOCUMENT.pdf>.
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3.2 Cost and benefit evaluation models
The primary model used for the ISL was the Screening Model,an excel-based model that
calculates the net present value ("NPV")of the net benefits of each bid.PacifiCorp provided LEI
with copies of the Screening Model for each bid which was included in the ISL.
3.2.1 Screening model
PacifiCorp's Screening model uses system-wide energy and capacity costs as inputs.These
energy and capacity costs are estimated outside of the Screening model,by PacifiCorp's System
Optimizer Model ("SO")and its Planning and Risk model ("PaR")9.In terms of their use to
support the Screening models for the ISL:
SO model:This model is run twice,to calculate system-wide energy and capacity costs
with,and without,a proxy generic solar resource of 100 MW.The cost of this resource is
assumed to be zero,in order that the SO model run with the capacity resource will be sure
to include it.Thus,the difference in system costs on a $/MWh basis resulting from the
two model runs reflects the benefit of having the solar resource on the system.
PaR:This model is also run twice.The outputs of the SO models (energy and capacity
costs)are fed into the PaR;the PaR creates 50 Monte Carlo simulations based on stochastic
characteristics of natural gas prices,power prices,load,hydropower availability,and
thermal outages.This is performed for the SO outputwhich includes the proxy solar
resource,and the SO outputwhich does not.
The risked values (the average energy and capacity prices from the PaR model runs with and
without the generic solar resource)are then incorporated into the Screening Model.These provide
the Screening model with the estimated benefits of a generic solar resource,on a $/MWh basis
for energy and capacity.These avoided costs of energy and capacity ("ACC")are the quantified
benefits of a generic solar resource.
With the inputs derived from the SO and PaR models,the Screening model calculates the cost of
a single bid and compares the cost to the ACC.It does this by calculating the real levelized
(discounted)revenue requirement cost and the real levelized (discounted)benefit for each bid,
where revenue requirement costs are reported as a negative value and customer benefits are
reported as a positive value.1o The Screening model is applied to each bid,separately.
The Screening model allows for different ACC values for each of five different market zones
(Idaho,Oregon,Utah,Washington and Wyoming)(see Figure 2).This allows the avoided energy
9 These models are the same models used by PacifiCorp to develop resource portfolios in the 2017 IRP.Source:
PacifiCorp."2017 Integrated Resource Plan."Volume 1.April 14,2017.These two models are discussed in
more detail in Section 5 in the context of the FSL.
10 PacifiCorp includes terminal value in the nominal levelized delivered benefit,however,it does not impact the model
as the terminal value is zero (terminal value equals the residual value of assets minus decommissioning cost).
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and supply costs to vary across the market zones.An offer for a project located in a market zone
with a higher avoided cost such as Washington would provide a greater benefit (higher avoided
cost)than a project in a market zone such as Utah with low avoided costs,all else equal.LEI found
this to be a reasonable approach.
Figure 2.PacifiCorp average ACC (NPV)by state
Source:Screening model version dated December 12,2017
PacifiCorp used the results of the Screening model (the benefits and costs)to create a net cost
calculation (in $/MWh)to score each bid individually.PacifiCorp created two different scoring
methods:
ScoringMethodI:Net Cost/(Benefit)["NC/(B)"]=Net Cost -Benefit
-Scores were scaled so that the lowest NC/(B)was awarded 80 points,and the
highest NC/(B)was awarded 0 points.
-Bidder Scorex=[NC/(B)Highest-NC/(B)Bidderx)-(NC/(B)Highest-NC/(B)Lowest)X 80
Points
Scoring Method II:Net Cost/Benefit["NC/B"]=Net Cost /Benefit
-Scores were scaled so that the lowest NC/B was awarded 80 points,and the
highest NC/B was awarded 0 points.
-Bidder Scorex =[NC/BHighest-NC/BBidderx)/(NC/BHighest-NC/BLowest)X 80 Points
If the two methods resulted in different initial shortlists,PacifiCorp included bids supported by
either method in its ISL.
LEI believes that this is a reasonable approach.Scoring Method I favors bids in which the absolute
size of the benefit less the cost is largest (the "impact"of the bid);Scoring Method II favors bids
which have the most attractive ratio of benefits to costs (the "efficiency")of the bid.By including
bids that are acceptable under either methodology,PacifiCorp is including both impactful and
efficient bids.
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3.3 Non-price evaluation
The total non-price score accounts for up to 20%of the total bid score in ISL.It incorporates the
relative development,construction and operational characteristics,and associated risks of each
bid (see Figure 3).
Figure 3.PacifiCorp's non-price weightingfactors
Non-Price
Non-PriceFactor Factor
Weighting
Conformity to RFP Requirements:
Bids provided all required RFP information pursuant to RFP instructions and schedule,including the accuracy
of such information.
Bids provided complete and accurate required RFP information of but not limited to documentation of site 6%
control and permitting process,environmental compliance plan,and interconnection or transmission
arrangements.
Bidder's development and construction experience related to large scale solar projects.
Project Deliverability:
Bids demonstrated the commercial operation date would be achieved by December 31,2020.
Bids provided sufficient detail,including schedule{s)and documentation,to demonstrate the ability of
meeting all of the project's site control,environmental compliance,permits,and equipment procurement.
Bids demonstrate and provide sufficient detail regarding access to generation equipment and well defined 6%
O&M plan and financing plan.
Bids included documentation that projects qualify for and would receive the full or partial value of the
federal ITC as interpreted by applicable guidelines and rules of the Internal Revenue Service at commercial
operation.
TransmissionProRression:
Bids provided sufficient detail,including schedule(s)and documentation for completing project
interconnection and securing any required third party transmission service to support December 31,2020
commercial operation date.
Source:PacifiCorp 2017S RFP Bidders'Conference November 21,2017
LEI believesthat the 20%weightingis reasonable,as mentioned in the IE ISL Report.11Non-price
scores were not taken into consideration in the FSL.
n London Economics International LLC."Independent evaluator's report on initial shortlist selection process:
PacifiCorp's 2017S RFP."January 26,2018.
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4 PacifiCorp's ISL results
PacifiCorp 2017S RFP had a robust level of response,with over 100 bids offered.After
disqualifying bidders which did not meet the minimum criteria,PacifiCorp followed the price
and non-price ranking methodologydescribed above and selected an ISL of 25 bids,covering 11
projects,with an aggregate solar capacity of 1,530 MW.
4.1 ISL selection
The two different price scoring methods described in Section 3 selected the same bid resources
(albeit with a slightlydifferent rankingbetween the bids).This means that the ISL was supported
by both price scoring methodologies.Details on the bids and PacifiCorp's rankings are provided
in Section 7 (Appendix A).
The ISL included projects with positive net benefits (negative costs)ranging between about
$12/MWh and $4/MWh (see Figure 4).The ISL allowed up to approximately 2,000 MW of
aggregate solar capacity,but at about $4/MWh of net benefit PacifiCorp saw a breakpoint and
decided to close the ISL.
Figure 4.Net benefits of PacifiCorp ISL bids
50 1.800
($14)0
Source:PacifiCorp 2017S RFP Initial Shortlist.January 8,2018.
*Cove Mountain Expansion includes the Cove Mountain project (58 MW)
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4.2 LEI's assessment of the ISL
As noted in Section 2,LEI's task was to evaluate the RFP process,not the ISL or the individual
bids themselves.However,so that LEI could be confident that our analysis was independent as
well as comprehensive,LEI's methodologydid not begin with PacifiCorp's ISL,and then work
backward through PacifiCorp's process.Instead,LEI began by using limited but common-sense
criteria for evaluation of the bids,to arrive at LEI's own "indicative"initial shortlist.The limited
criterion LEI used was solely the levelized cost of the bid price for the PPA term.LEI refers to its
initial shortlist as "indicative"because LEI did not analyze the bids based on a cost-benefit
analysis or based on their geographic value.
PacifiCorp provided LEI with all the bid responses,including all documents and attachments.
From this material,LEI created its indicative ISL.LEI then compared its indicative ISL to
PacifiCorp's ISL.
LEI's indicative ISL was consistent with PacifiCorp's ISL,with the exception of bids in zones with
high energy prices:in Washington,and-in Oregon (see Figure 5).
Figure 5.Comparison between LEI indicative ISL and PacifiCorp ISL
notWA 1selected
UT 1 3
UT 4 2
UT 3 6
UT 7 4
UT 6 9
UT 2 5
UT 8 10
notORselected
UT 9 7
UT 5 11
LEI's indicative ISL provided an unbiased guide to what the PacifiCorp ISL mightlook like.LEI
would not expect 100%overlap,but bids that did not make LEI's ISL point to the importance of
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PacifiCorp's criteria other than price,in creating the PacifiCorp ISL.PacifiCorp's Screening model
calculated the net benefit for each bid based on the resource location.Washington has the highest
ACC value,followed by Oregon,allowingbids located in those states to have a higher net
customer benefits,even with higher bid prices (see Figure 6).Capitas High Top Solar was the
only bid resource offered in Washington,and Invenergy Prineville and Millican Solar Energy
Center was the cheapest bid offered in Oregon.Resources were offered in Wyoming,but prices
were not competitive.No resources were offered in Idaho.
LEI found the PacifiCorp ISL process to be fair,unbiased and reasonable,and the outcome
represented the best value to customers given the Phase (I)of the evaluation process.
Figure 6.ACC Value of Energy and Capacity (NPV 2018-2042)vs ISL PPA prices
Indicative Minimum MaximumStateAŒPPApricePPAprice
Sources:
ACC =Excel spreadsheet "2017S RFP Solar Energy and Capacity Benefits.xlsx"version dated December 12,2017
PPA prices =Bid submission (first-year PPA price)
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5 PacifiCorp's FSL results
LEI believes the FSL results represent an unbiased evaluation that reflects the process described
to the bidders in the bid documents.PacifiCorp made reasonable assumptions for key value
drivers such as future natural gas and carbon prices.PacifiCorp used appropriatelysophisticated
modeling tools.
5.1 Best and final bids
As mentioned earlier,PacifiCorp gave bids selected to the ISL the opportunity to provide best
and final pricing for the FSL evaluation process.PacifiCorp received best and final pricing on
February 1,2018.Best and final pricing had to meet two requirements:
provide same site using the same or similar project equipment as original proposal,and
not exceed 10%of the original total bid cost (assess on a nominal levelized present value
revenue requirement basis).
If best and final pricing increased the total bid cost by more than 10%,PacifiCorp could either
reject the best and final proposal or replace the short-listed bid with another bid not originally
selected to the ISL.
The majority of the bidders selected to the ISL maintained their original bid price,with the
exception of ,who decreased their initial bid price between 1%and 3%,
and ,who increased their initial bid price by 5%(see Figure 7).
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Figure 7.ISL and best and final pricing comparison
ISL B&F
Bidder Name Project/Alternative PPA price PPA price PPA price PPA price
annual change(1st year)growth (1st year)
Source:PacifiCorp 2017S Request for Proposals Final Shortlist.March 12,2018
5.2 PacifiCorp's FSL evaluation process
The followingsection outlines PacifiCorp's FSL evaluation process.LEI reviewed PacifiCorp's
evaluation process in detail:PacifiCorp presented the methodologyof the SO and PaR models
and LEI asked detailed questions related to them;12 and LEI reviewed PacifiCorp's key input
assumptions.LEI did not acquire copies of the SO and PaR models.LEI believesthe process was
conducted fairly and was consistent with the process outlined in the RFP documents,
assumptions used in the models were reasonable,and the quantitativeanalysis was consistent
with industry best practices.
PacifiCorp used the same models for the FSL price evaluation as it used in the ISL process.The
best and final pricing was putinto the Screening model to produce the cost and performance data
which the SO and PaR models require.These productioncost models were then used to perform
a net customer benefit analysis by simulatingPacifiCorp's system costs with and without the ISL
bids under nine baseline scenarios.Both SO model and PaR simulations were run over a 20-year
planning horizon (2017-2036),which aligns with the planninghorizon used in the 2017 IRP.
12 Conference call,PacifiCorp and LEI,March 2,2018.
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In the ISL process,each bid was tested individuallyand in a single scenario;whereas,in the FSL
process,the bids as a group were tested across nine scenarios (based on combinations of natural
gas prices and CO2 gTiC€S).PacifiCorp then selected the solar resource portfolio composed of the
bid resources that were most consistently selected among the nine scenarios,for stochastic
analysis using the PaR model.This process was explained to bidders,in the document provided
for the bidders'conference.
In addition,PacifiCorp ran two sensitivities (discussed in more detail below).This process was
not explicitlydocumented for the bidders,but was not inconsistent with the RFP guidelines and,
in LEI's view,was applied fairly.
5.2.1 Definingbaseline scenario assumptions
Based on three different outlooks for natural gas prices,and three different outlooks for CO2
prices,PacifiCorp developed nine scenarios (referred to by PacifiCorp as "price-policy"scenario
assumptions).These are conceptually consistent with those used in the 2017 IRP,but updated to
reflect PacifiCorp's assessment of the most current information.13These baseline scenarios were
defined by assumptions of low,medium,and high alternatives for natural gas and CO2 priCing
(see Figure 8).The natural gas outlooks were based on the forward market for 72 months (in the
medium case),and after that,on forecasts developed by third-parties.PacifiCorp noted that the
increase in the gas price outlook from 2023 to 2025 was based on assumptions about rising
liquefied natural gas ("LNG")exports.The CO2 priC€Outlooks were based on forecasts developed
by third parties.
Given the characteristic uncertainty over the future of natural gas prices and CO2 policy,LEI
believesthat conducting a scenario-based analysis was reasonable and prudent.Scenario analysis
helps ensure that decisions are robust across a range of future outcomes;and use of scenarios
reflects industry best practices for long-termstrategic planningand investment.
13 PacifiCorp."RFP 2017S Solar RFP Main Document."Page 23,footnote 9.November 15,2017.
<http://www.pacificorp.com/content/dam/pacificorp/doc/Suppliers/RFPs/2017S_RFP/Main_Documen
ts/RFP_2017S_SOLAR_RFP_MAIN_DOCUMENT.pdf>
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Figure 8.PacifiCorp's price-policyscenarios
Henry Hub Natural Gas Carbon Dioxide
$10 535
-a-Low -Med(Dec20170FPC)-4-High -a-Zero -@-Medium -High
Source:PacifiCorp 2017S Request for Proposals Final Shortlist.March 12,2018
5.2.2 SO model created portfoliosof cost-effective solar bids for the nine baseline scenarios
PacifiCorp ran the SO model with the complete ISL (and all other assumed available resources)
for each of the nine scenarios.The model selected new solar capacity at any level that reduced
system costs,and it could select all,some,or none of the bids.
The group of bids selected was referred to by PacifiCorp as the "resource portfolio."Each of the
nine scenarios produced its own resource portfolio of cost-effective bids,though many bids
appeared in nearlyall the portfolios (see Figure 9).Five bids were selected in all nine scenarios,
one bid was selected in eight scenarios,and two bids were selected in four scenarios.
Then PacifiCorp ran the SO model nine more times,once for each scenario,and in each case,
without the portfolio of selected bids.This provided a baseline (or,rather,nine different
baselines)against which to test the impact on the present value revenue requirement ("PVRR")
(includingall relevant transmission interconnection costs)of the solar resource portfolio,in each
scenario.The results of comparing each baseline scenario with and without the resource portfolio
is shown in the row labelled "SO Model PVRR (difference)(Benefit)/cost ($m)"in Figure 9.
5.2.3 PaR model examines risk profile of portfolios
In the next step,PacifiCorp used the PaR model to analyze the risk of each resource portfolio
developed with the SO model.PaR captures stochastic risk in its production cost estimates,
without alteringthe resource portfolio,by using Monte Carlo sampling of the followingstochastic
variables:load,wholesale electricity and natural gas prices,hydro generation,and thermal unit
outages.The PaR model calculated the stochastic mean and the risk-adjusted present value
revenue requirement differential with and without the bid portfolio for each scenario.PacifiCorp
was interested in two metrics:
Stochastic mean metric:the average of system net variable operating costs for 50
iterations,combined with the real levelized capital costs and fixed costs taken from the
SO model;
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Risk-adjustedmetric:adds 5%of system variable costs from the 95th percentile to the
stochastic mean.The risk-adjusted metric incorporates the expected value of low-
probability,high-cost outcomes.
Figure 9.Nine bid portfolios selected by SO baseline model
n/s n/s n/s n/s n/s «//
n/s n/s n/s n/s n/s «
n/s n/s n/s n/s n/s ns n/s
Total Capacity
SO ModelPVRR(difference)
(Benefit)/Cost($m)($127)(S155)($250)(S227)($247)($385)($520)($529)(S559)
PaR Stochastic-MeanPVRR(difference)
(Benefit)/Cost($m)($79)(5106)($188)(S135)($174)($303)($338)($348)(S501)
PaR Risk-AdjustednPVRR(difference)
efi t
($83)(5112)($197)(S141)(5183)($318)($354)($365)(S525)
Source:PacifiCorp 2017S Request for Proposals Final Shortlist March 12,2018
The results of comparing the risked baseline to the resource set with the bids are shown in row
"PaR Model Stochastic-Mean PVRR (difference)(Benefit)/cost ($m)"and in row "PaR Model
Risk-Adjusted PVRR (difference)(Benefit)/cost ($m)"in Figure 9.
LEI believes adding a risk-adjusted component to the analysis,as PacifiCorp did using the PaR
model,was reasonable and prudent,as it provided additional insight into the potential value of
a solar resource portfolio.
5.3 PacifiCorp chose two portfolios for further testing
PacifiCorp chose the bid resources consistently selected among the nine scenarios and created
two 2017S RFP solar resource portfolios (see Figure 10).Bid portfolio 1 contained all the bids SO
selected in any scenario;Bid Portfolio 2 contained only the bids that SO selected in all the
scenarios.
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Figure 10.Selected portfolios
Total Capacity =1,535 MW Total Capacity =1,320 MW
Source:PacifiCorp 2017S Request for Proposals Final Shortlist.March 12,2018
These top-performingbid portfolios were further analyzed in the scenario risk analysis phase of
the FSL bid evaluation process.
5.4 Baseline scenario risk analysisof the top two portfolios
This step of the evaluation process identified whether the two top-performingportfolios would
experiencepoor performance under any of the scenarios.The two bid portfolios were analyzed
under all nine scenarios,using the SO and PaR models.14
First,in the SO model,PacifiCorp calculated the present value revenue-requirement differential
between two model runs -one with and one without the solar PPAs -for each scenario.The SO
model results showed greaterbenefits from Bid Portfolio 2 compared to Bid Portfolio 1 in five out
of the nine scenarios:all the low gas scenarios,the medium gas/zero CO2 PTIC€Scenario,and the
medium gas/medium CO2 priC€Scenario (see Figure 11).
14 All simulations included PacifiCorp's new wind and transmission investments.
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Figure 11.Baseline scenario risk analysis results:SO model (million dollars)
Low Gas,Zero CO2 ($80)($115)($36)
Low Gas,Medium CO2 ($118)($148)($30)
Low Gas,High CO2 ($232)($250)($18)
Medium Gas,Zero CO2 ($216)($227)($11)
Medium Gas,Medium CO2 ($240)($247)($8)
Medium Gas,High CO2 ($385)($370)$15
High Gas,Zero CO2 ($520)($483)$37
High Gas,MediumCO2 ($529)($493)$35
High Gas,High CO2 ($559)($517)$43
Source:PacifiCorp 2017S Request for Proposals Final Shortlist.March 12,2018
To determine how system operations might impact the value of the portfolios,PacifiCorp
analyzed the stochastic-mean and risk-adjusted PaR results for each scenario (see Figure 12 and
Figure 13).
Figure 12.Baseline scenario risk analysis results:Stochastic-mean PaR (million dollars)
Low Gas,Zero CO2 ($1)($45)($44)
Low Gas,Medium CO2 ($43)($84)($41)
Low Gas,High CO2 ($159)($188)($29)
Medium Gas,Zero CO2 ($110)($135)($25)
Medium Gas,Medium CO2 ($142)($174)($31)
Medium Gas,High CO2 ($303)($294)$9
High Gas,Zero CO2 ($338)($320)$19
High Gas,MediumCO2 ($348)($329)$19
High Gas,High CO2 ($501)($473)$28
Source:PacifiCorp 2017S Request for Proposals Final Shortlist.March 12,2018
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Figure 13.Scenario risk analysis results:risk-adjustedPaR (milliondollars)
Low Gas,Zero CO2 ($2)($48)($46)
Low Gas,Medium CO2 ($46)($89)($43)
Low Gas,High CO2 ($168)($197)($29)
Medium Gas,Zero CO2 ($115)($141)($26)
Medium Gas,Medium CO2 ($150)($183)($33)
Medium Gas,High CO2 ($318)($309)$9
High Gas,Zero CO2 ($354)($335)$20
High Gas,MediumCO2 ($365)($345)$20
High Gas,High CO2 ($525)($511)$13
Source:PacifiCorp 2017S Request for Proposals Final Shortlist.March 12,2018
Bid Portfolio 2 (the smaller portfolio)relative to Bid Portfolio 1 had greater benefits both in the
stochastic-mean PaR and the risk-adjusted PaR results.Based on the SO model and PaR results,
PacifiCorp identified Bid Portfolio 2 as preferable to Bid Portfolio 1.
5.5 Additional sensitivity analyses
PacifiCorp informed LEI of its intention to run additional sensitivity analyses in a March 2,2018
conference call with LEI.In addition,PacifiCorp had informed bidders that it may take into
consideration other factors that are not expressed in the RFP document when deciding the final
shortlist.E PacifiCorp ultimatelyran two additional sensitivityanalyses:1)hourly price profiles,
and 2)capacity contribution sensitivities.PacifiCorp performed these sensitivityanalyses on Bid
Portfolio 2 for two of the baseline scenarios:medium gas/mediumCO2 and low gas/zero CO2-
5.5.1 Hourlyprice profile sensitivity
For the baseline analysis described above,PacifiCorp used average hourly price profiles derived
from historical Powerdex data (five years of on peak and off-peak data).The hourly market price
profiles vary by month and day type (weekdays,Saturdays,and Sundays/holidays).However,
PacifiCorp was concerned that this hourly profile would not reflect system conditions in the
future,when the Western Electricity Coordinating Council ("WECC")region is projected to have
more solar in its system.
15 PacifiCorp."RFP 2017S Solar RFP Main Document."Page 24.November 15,2017.
<http://www.pacificorp.com/content/dam/pacificorp/doc/Suppliers/RFPs/2017S_RFP/Main_Documen
ts/RFP_2017S_SOLAR_RFP_MAIN_DOCUMENT.pdf>.
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Therefore,PacifiCorp developed a sensitivity analysis based on an alternative set of prices
derived from one year of day-ahead hourly prices available from the California Independent
System Operator ("CAISO")(see Figure 14).
Figure 14.Hourlyprice profile sensitivity
Current Method (Powerdex)Sensitivity (CAISO Day Ahead)
140 80%140 80%
130 ,.,130 ,-
120 120
110 110
100 100
10 g 10
o ------*----·o%o -----------o%
1 2 3 4 5 6 7 8 9 101112131415161718192021222324 1 2 3 4 5 6 7 8 9 101112131415161718192021222324
2021 Price Profile 2036 Price Profile ---Portfolio 2 CF *2021 Price Profile 2036 Price Profile ---Portfolio 2 CF
Source:PacifiCorp 2017S Request for Proposals Final Shortlist.March 12,2018
In both charts,the hourly price profile is based on the average hourly prices from representative
months (January,April,July,and October)and shown alongside the average hourly capacity
profile of bids included in Bid Portfolio 2.This shows that prices would be lower during those
hours when the resources in Bid Portfolio 2 are expected to generate electricity.
PacifiCorp used the CAISO hourly prices to run a sensitivitywith the PaR model.Results showed
that the value of Bid Portfolio 2 was reduced by $66 million to $69 million in the medium
gas/medium CO2 SC€naTiO and by $55 million to $58 million in the low gas/zero CO2 SC€naTiO.In
the low gas/zero CO2SC€nariO,Bid Portfolio 2 shifted from showing net benefits to showing a net
cost when the CAISO hourly price profile was assumed (see Figure 15).Net benefits remained
positive in the medium gas price/mediumCO2 priC€SCenaTiO.
Figure 15.Hourlyprice-profile sensitivityresults (milliondollars)
MediumGas,MediumCO2 Low Gas,Zero CO2Price-Policy Scenario/Stochastic-Mean PaR Risk-Adjusted PaR Stochastic-Mean PaR Risk-Adjusted PaRPaR(BenefityCost (BenefityCost (BenefityCost (BenefityCost
BenchmarkCase ($174)($183)($45)($48)(Current Pnce Profile)
Hourly Price-Profile
.($108)($114)$10 $10Sensitivity
Decreased Net Benefit $66 $69 $55 $58
Source:PacifiCorp 2017S Request for Proposals Final Shortlist.March 12,2018
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PacifiCorp pointed to trends which may impact price profiles even further,and compiled the
followingfindings:16
S&P Global Market Intelligence reported solar capacity in the WECC region is expected
to grow by 77%in six years,from 16.8 GW in 2017 to 29.8 GW by 2023.
The Energy Information Administration's Annual Energy Outlook 2018 ("AEO 2018")Reference Case also shows continued growth trends of solar capacity in the WECC,
reaching 46.8 GW by 2050.
Thus,PacifiCorp believes that the rapid increase in solar capacity across the WECC region over
the past five years has significantlyimpacted hourly market prices and continued solar capacitygrowthcouldfurtheraffectthemarketvalueofsolarenergyevenbeyondtheresultsoftheprice
profile sensitivity.
It is LEI's view that PacifiCorp's alternative price profile was a reasonable way to examine
potential downside risks to customers of committingto solar resources.PacifiCorp also informed
LEI that it will be evaluatingthe hourly price profile it will use in the next IRP.
5.5.2 Capacity contribution sensitivity
PacifiCorp's SO and PaR modeling relied on the capacity contribution value developed for the
2017 IRP,which was 59.7%for solar resources.In other words,FSL evaluation assumed that the
solar resources in Bid Portfolio 2 can displace the need for approximately788 MW of system
capacity (59.7 percent x 1,320 MW).
PacifiCorp believes that as more highly correlated solar generation is added to the system,the
energy output from these resources will shift the timing of potential loss-of-load events to
evening hours when solar irradiance is low and generation levels are greatly reduced or zero.18
Consequently,solar capacity contribution values would decline with increasing solar penetration
levels (see Figure 16).PacifiCorp informed LEI that the addition of 1,320 MW of solar capacity
would increase the percentage of solar on PacifiCorp's system from 5%to 10%.
16 PacifiCorp 2017S Request for Proposals Final Shortlist.Page 14.March 12,2018.
17 Conference call LEI and PacifiCorp,March 19,2018
18 PacifiCorp 2017S Request for Proposals Final Shortlist.Page 15.March 12,2018.
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Figure 16.Capacity contribution of solar resources represented as a percentage of resource
80 -NV Power:Pere2 et al (2008)
-CA Case Study.Mills and Wiser (2012)70 MA Case Study:Jones (2012)
60 APS -Tracking:R.W.BeE 9)
-APS -Fixed:R.W.Beck (2009)
50 WestConnect:GE Energy (2010)
40 -Toronto:Pelland and Abboud (2008)
-PGE:Perez et al (2008)
20
10
0
0 5 10 15 20 25 30
PV Penetration (%annual energy)
source:Mills,Andrew,and Ryan Wiser.2012."An Evaluation of Solar Valuation Methods Used in Utility Planning and
Procurement Processes."LBNL-5933E,Berkeley,CA:Ernest Orlando Lawrence Berkeley National Laboratory.
Source:PacifiCorp 2017S Request for Proposals Final Shortlist.March 12,2018
Therefore,PacifiCorp ran a sensitivitybased on halvingthe capacity contribution value from
59.7%to 29.9%.This would reduce the amount of system capacity that the Bid Portfolio 2 can
displace from 788 MW to 394 MW.This reduced the resource-deferral value of the resources in
Bid Portfolio 2,therefore reducing the net benefits of the solar PPA bids (see Figure 17).
Figure 17.Capacity contribution sensitivityresults (milliondollars)
Medium Gas,Medium CO2 Low Gas,Zero CO2Price-Policy Scenario/
PaR Stochastic-Mean PaR Risk-Adjusted PaR Stochastic-Mean PaR Risk-Adjusted PaR
(Benefit)/Cost (Benefit)/Cost (Benefit)/Cost (Benefit)/Cost
Benchmark Case ($174)($183)($45)($48)(Current Price Profile)
Capacity-
Contribution/Hourly ($69)($73)$56 $58
Price Profile Sensitivity
Decreased Net Benefit $105 $110 $101 $106
Source:PacifiCorp 2017S Request for Proposals Final Shortlist.March 12,2018
The combined effect of the hourly price-profile and capacity-contributionassumptions was to
reduce the net benefits by approximately$105 million to $110 million in the medium gas/medium
CO2SC€naTiO and by approximately$101 million to $106 million in the low gas/zero CO2 SC€naTÎO.
In LEI's view,the halving of the solar capacity value provides a hypothetical downside
sensitivity,but one that may not be easy to defend empirically.As Figure 16 above shows,the
relationship between solar capacity and penetration varies widely;and the data referred to in that
figure may be out of date,as the reports cited date from 2008-2012.
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5.6 PacifiCorp's FSL final recommendation:No winners
The bid selection process identified two potential bid portfolios as candidates for the 2017S RFP
final shortlist,and the baseline scenario risk analysis phase showed that Bid Portfolio 2 was
preferable.However,while analysis (excluding the sensitivitycases)shows that there would be
potential customer net benefits,PacifiCorp decided not to award any bids:
PacifiCorp noted that its sensitivityanalyses showed that there is a risk that projected
benefits are overstated."This refers to the hourly price profile sensitivityanalysis and
the capacity contribution sensitivityanalysis.
PacifiCorp felt that bidders'offer prices incorporated a risk premium.PacifiCorp
believes the 2017S RFP bid prices incorporated potential tax reform and tariff-related
uncertainties,which were part of the market environment in late 2017 and early 2018.
PacifiCorp believes,if a new RFP were to be issued in 2018,it would attract bids for solar
projects that could still come online by 2021 (and qualify for the 30 percent ITC),at lower
prices.The lower-priced bids would reflect reductions in the cost of solar equipment and
avoid the risk premium that was driven by tariff and tax reform uncertainties.
PacifiCorp felt that more projects could be viable in the near future.PacifiCorp also
pointed to the possibility that a future RFP would allow time participants to be further
along with permitting,site control,or the transmission interconnection process.20
PacifiCorp noted a future solicitation could include storage.With more lead time,a new
solicitation could include storage with solar,which could help mitigate valuation risks.21
For wind procurement,PacifiCorp had to move quickly to attract projects which could be under
way in time to get the full Production Tax Credit ("PTC").The ITC has more time,as it ramps
down from 30%to 26%in 2020,22%in 2021,and finally to 10%in 2022.22 In the coming months,
PacifiCorp surmises that bid prices for PPAs could fall,owing to improvements in technology,or
to greater perceived certainty over tax and tariff rules.The solar panel tariff,issued on January
22,2018,increased tariffs on imported solar cells and modules by 30%for the first year,and will
fall by 5%annually,dropping to a 15%tariff in 2021.23 Thus,by 2021 PacifiCorp may be correct
to assume cell and module prices will be lower.
19 PacifiCorp 2017S Request for Proposals Final Shortlist.Page 2.March 12,2018.
20 PacifiCorp 2017S Request for Proposals Final Shortlist.Page 2.March 12,2018.
21 PacifiCorp 2017S Request for Proposals Final Shortlist.Page 2.March 12,2018.
22 U.S.Department of Energy.Business Energy Investment Tax Credit (ITC).<https://www.energy.gov/savings/business-energy-investment-tax-credit-itc>
23 Office of the United States Trade Representative."Section 201 Cases:ImportedLarge Residential Washing Machines
and ImportedSolar Cells and Modules."January 22,2018.
<https://ustr.gov/sites/default/files/files/Press/fs/201%20Cases%20Fact%20Sheet.pdf>
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6 Conclusion:2017S RFP was conducted fairly and in accordance with
industrybest practices
PacifiCorp's 2017S RFP was conducted at the recommendation from the Utah Public Service
Commission-it was not a requirement.24 LEI's involvement as the IE was,again,at the optionof
PacifiCorp,as an IE was not required.These two conditions point to a disposition on the part of
PacifiCorp to conduct business in a transparent and open manner.
To summarize LEI's finding in this report,LEI believes the 2017S RFP procurement process was
fair and unbiased:
The 2017S RFP documents were clear and available to all bidders;
The minimum eligibilityrequirements were reasonable and applied consistently among
bids,eliminatingbids unable to demonstrate ability to meet the commercial online date
The screening factors in the ISL were applied consistently among bids;
The evaluation was performed consistently among bids and with Commission-approved
bidding guidelines;
All bids selected in to the ISL were given the opportunity to provide best and final pricing
for the FSL evaluation process;
The FSL evaluation process was conducted according to the processes outlined in the RFP;
All ISL Screening models were provided to the LEI to check inputs,outputs,and results;
The SO and PaR models were explained to LEI thoroughlyand in-depth;
There were no confidentialityclaims or concerns between IE and PacifiCorp during the
solicitation process.
LEI finds that the PacifiCorp's FSL evaluation process was conducted in alignmentwith the
guidelines established in the 2017SRFP main document.PacifiCorp was explicit in reserving the
right to reject all bids in its sole discretion.26 In addition,PacifiCorp relied on best practices such
24 The Utah PSC order recommending the solar RFP aligned with the Wind RPF COD was issued on September 22,
2017.Docket 17-035-23.<https://psedocs.utah.gov/electric/17docs/1703523/2969071703523oarfpwsm9-22-
2017.pdf>
25 PacifiCorp."RFP 2017S Solar RFP Main Document."Page 10.November 15,2017.
<http://www.pacificorp.com/content/dam/pacificorp/doc/Suppliers/RFPs/2017S_RFP/Main_Documen
ts/RFP_2017S_SOLAR_RFP_MAIN_DOCUMENT.pdf>.
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as examination of multiplescenarios for future net benefits,and stochastic tools for projecting the
risks to these benefits.
6.1 Recommendations
LEI did not find PacifiCorp's decision not to accept any solar bids to be unreasonable or unfair.
The circumstances around the RFP were unusual,in that the company did not have the
opportunity to apply a full IRP process to the decision to offer a solar procurement.
However,the risk of not choosing any winningbidders is that future procurements may attract
fewer bidders.PacifiCorp is in the process of developing its 2019 IRP,which may demonstrate
that new solar resources provide economic benefits for customers.The new 2019 IRP will
incorporate a thorough evaluation of hourly price profiles and capacity contribution risks.26
PacifiCorp has said it expects the market environment for solar to improve over 2018,so that
potential bidders in a future RFP can offer lower prices;it also cited the opportunity for solar bids
to potentially incorporate storage;and allow more bidders to be further along in the process of
permitting,site control,and transmission interconnection.
To ensure that bidders will come back to the table,LEI recommends that PacifiCorp explain
clearly and to all bidders,and indeed to the broader solar development community,its rationale
for not selecting any bids to the FSL,and underscore that the main issue was the timingrather
than a fundamental concern about solar power.In addition,LEI recommends that PacifiCorp add
to any future RFP documents that it reserves the right to stress test any final potential portfolios
so that bidders are more aware of that potential evaluation process.
26 PacifiCorp 2017S Request for Proposals Final Shortlist.Page 26.March 12,2018.
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7 AppendixA:PacifiCorp Initial Shortlist Detailed Results
The initial shortlist consisted of 25 bids,based on over 11 projects with an aggregate solar capacity
1,530 MW (see Figure 18).The different prices for each project represent separate bids.
Figure 18.PacifiCorp ISL
15-Dec-20 WA 100 1 80 14
1-Dec-20 UT 100-300 3 71 13
1-Dec-20 UT 100-300 2 77 13
31-Dec-20 UT 100 6 67 18
31-Dec-20 UT 80 4 65 19
31-Dec-20 UT 58 9 58 18
31-Dec-20 UT 122 5 68 15
31-Dec-20 UT 58 10 64 11
31-Dec-20 OR 115 8 61 17
30-Nov-20 UT 99 7 63 18
30-Nov-20 UT 198 11 54 17
1 NLDC =Nominal Levelized Delivered Cost.
2 NLDB =Nominal Levelized Delivered Benefit.The NLDB includes a terminal value of zero.
3 Price Score using method 1.
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8 AppendixB:Role of the Solar Independent Evaluator
The followingmaterial is from PacifiCorp's Appendix M of the 2017S RFP.
1)The general role and function of the IndependentEvaluator ("IE")are outlined as follows.
The IndependentEvaluator will facilitate and monitor communications between PacifiCorp
and bidders.
a.Review and validate the assumptions and evaluation calculations of any bids.
b.Analyzeand evaluate bids for reasonableness and consistency with the solicitation process.
c.Access all importantmodels in order to analyze,operate and validate all important models,
modeling techniques,assumptions and inputs utilized by PacifiCorp in the solicitation
process
d.Receive copies of bid responses.
e.Provide inputto PacifiCorp on:
i.the development of screening and evaluation criteria,ranking factors and
evaluation methodologies that are reasonably designed to ensure that the
solicitation process is fair,reasonable and in the public interest in preparing a
solicitation and in evaluatingthe bids;
ii.the development of initial screening and evaluation criteria that take into
consideration the assumptions included in the PacifiCorp's most recent IRP,any
recentlyfiled IRP Update,any Commission order on the IRP or IRP Update;
iii.whether a bidder has met the criteria specified in any bidding process and whether
to reject or accept non-conformingbid responses;
iv.whether and when data and information should be distributed to bidders when it
is necessary to facilitate a fair and reasonable competitive bidding process or has
been reasonably requested by bidders;
v.whether to reject non-conforming bids for any reason or accept conforming
changes;
vi.whether to return bid fees.
f.Ensure that all bids are treated in a fair and non-discriminatorymanner.
g.Monitor,observe,validate and offer feedback to PacifiCorp on all aspects of the solicitation
and solicitation process,including:
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i.evaluation and ranking of bid responses;
ii.creation of a short list(s)of bidders for more detailed analysis and negotiation;
iii.post-bid discussions and negotiations with,and evaluations of,shortlisted
bidders,and negotiation of proposed contracts with successful bidders.
h.Once the competing bids have been evaluated by PacifiCorp and the IE,PacifiCorp and the
IE will compare results.
i.Offer feedback to PacifiCorp on possible adjustments to the scope or nature of the
solicitation or requested resources in light of bid responses received.
j.Solicit additional information on bids necessary for screening and evaluation purposes.
k.Analyze and attempt to mediate disputes that arise in the solicitation process with
PacifiCorp and/orbidders
1.Coordinate as appropriate and as directed by PacifiCorp with staff or evaluators
designated by regulatoryauthorities from other states served by PacifiCorp.
2)The communications between the IE,PacifiCorp,and the bidders shall be conducted in the
followingmanner:
a.the IE will be included in the communications between the parties.
3)The IE shall prepare at least the followingconfidential reports and provide them to
PacifiCorp:
a.Final reports as soon as possible followingthe completion of the solicitation process.
Final reports shall include analyses of the solicitation,the solicitation process,the
PacifiCorp's evaluation and selection of bids and resources,the final results and
whether the selected resources are in the public interest.
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