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MANAGING THE UTILITY ENTERPRISE CYBERSECURITY: IMPROVING UTILITY-GOVERNMENT INFORMATION SHARING Lack of cyber threat data is a major concern for critical infrastructure industries In a recent survey, participants were divided on the clarity and thoroughness of the federal government’s strategy. But nearly half of responding critical infrastructure organizations believe the U.S. government should create better ways to share security information with the private sector The Problem

• ScottMadden research shows many utilities lack actionable cybersecurity intelligence
• Historically, utilities and other private firms have been reluctant to share their own cybersecurity information, either with industry peers or the government due to:
  • Concerns about legal liability
  • Possibility of antitrust violations
  • Regulatory requirements
  • Protection of intellectual property and other proprietary information
  • A security emphasis on secrecy and confidentiality

Some Proposed Legislative Solutions

• To address these concerns, in 2015, five federal cyber threat sharing bills were introduced, targeting these information-sharing barriers. The House passed two bills in April:
  • H.R. 1731, the National Cybersecurity Protection Advancement Act of 2015 (NCPAA)
  • H.R. 1560, the Protecting Cyber Networks Act (PCNA)
• The House bills encourage voluntary information sharing about cyber threats between the private sector and with the federal government

How the Proposed Bills Compare

• NCPAA authorizes the use of DHS’s National Cybersecurity and Communications Integration Center to act as the primary hub for voluntary public and private cybersecurity information sharing
• PCNA does not authorize a hub, but rather provides a framework for sharing information with a number of federal agencies. Companies may share cyber threat information with the agency to which they are most aligned (e.g., DOE for utilities)
• Both bills provide protection for any liability that could result from information sharing
• Both require “reasonable” measures be taken to remove any personal information that is unrelated to a cyber risk or incident before sharing, but (for timely sharing) all unnecessary information need not be removed

The Objections and Outlook

• Privacy concerns have been raised: several digital rights groups and cybersecurity researchers oppose the bill, saying it requires data shared with civilian agencies, including potentially personal information, to be passed on to the NSA
• The Obama administration supported the House bills but has asked for significant changes to improve privacy and limit liability protections
• A Senate bill—the Cybersecurity Information Sharing Act of 2015— also opposed on privacy objections, has been stalled this summer and may finally get put to vote this session
• Observers expect that PCNA and NCPAA will be combined, but it is unclear how the bills will be reconciled

RENEWABLES vs GAS GENERATION: LEVELIZED COST OF ENERGY At the right location, subsidized utility-scale solar and unsubsidized wind are close to competing with new natural gas-fired generation.

• Siting of solar and wind facilities in high-resource locations significantly improves project economics. Solar and wind levelized costs of energy (LCOE) improve 36% and 55%, respectively, when comparing a low-resource location to a high one
• This will be a critical factor for states and utilities to consider in developing Clean Power Plan strategies and/or trading regimes
• The charts on this page and the next compare the LCOE of wind and fixed-tilt solar to gas combined-cycle generation at various gas prices, using current installed costs, policy conditions, and high and low resource levels
  • High wind and solar resources are 47% and 21% capacity factors, respectively
  • Low wind and solar resources are 21% and 13.6% capacity factors, respectively
• With high-resource locations, resulting in these higher capacity factors, wind and solar can be cost-competitive with gasfired generation at reasonable gas prices (although not necessarily at current low gas prices)

How Do They Do It? How Reasonable Are “Cheap” Utility Solar PPAs?

• Declining installed costs and strong resource availability, as well as aggressive pricing, help explain recent “rock-bottom” PPAs
• In July 2015, NV Energy sought regulatory approval for a 20-year solar PPA with SunPower for a level $46/MWh. This is one of the lowest cost solar PPAs in the United States as sub-$40/MWh PPAs often include annual escalators
• Based on NV Energy’s regulatory filings, installed costs for a single-axis tracking system are estimated to be $2.03/Wdc, which is comparable to the utility solar capacity weighted industry average of $1.72/Wdc*
• Even though the installed costs are above the industry average, the project is able to secure an industry-low PPA price because of the strong solar resource and single-axis tracking system

A thought experiment: Just how bright is the long-term outlook for utility-scale solar? Utility-Scale Solar as the “Least-Cost” Resource?

• After estimating average installed costs through 2025, ScottMadden finds the potential for utility-scale solar becoming the least-cost resource is primarily a function of changes in the investment tax credit and declining installed costs
• In the absence of carbon trading or Clean Power Plan impacts, solar subsidized with a 30% federal investment tax credit (ITC) competes with $4/MMBtu natural gas in 2016 (see chart at right)
• After changes to the ITC, solar subsidized with a 10% ITC does not compete with $4/MMBtu natural gas until 2024, assuming continued but decreasing experience curve effects will reduce the cost of solar (for reference, Henry Hub prices remained below $3/MMBtu in August 2015)
• If solar were to become the “least-cost” resource in the next decade, utilities and regulators would need to address the variable output in order to ensure system reliability

Key Assumptions to Thought Experiment

• ScottMadden calculated the LCOE of utility-scale solar in a highresource location from 2010 to 2025
• Recent cost declines (7% per year) were applied to estimate installed costs in 2016 through 2025. This figure is significantly lower than the 26% and 14% decline reported in 2013 and 2014, respectively
• The analysis assumes the ITC drops from 30% to 10% in 2017
• Impacts of the Clean Power Plan, state incentives, and renewable portfolio requirements were not considered