Existing law requires the Public Utilities Commission to determine appropriate targets, if any, for each load-serving entity, including an electrical corporation, to procure viable and cost-effective energy storage systems to be achieved by December 31, 2020. Existing law requires the commission to direct the states three largest electrical corporations to file applications for programs and investments to accelerate widespread deployment of distributed energy storage systems.

This bill would, by January 1, 2020, would require the commission, in addition to the requirements described above, to direct on or before January 1, 2020, to consider procurement strategies for the installation of a statewide total of up to 2,000 megawatts of energy storage systems. As part of the procurement strategies considered by the commission, the bill would require the commission to consider appropriate targets, if any, for electrical corporations, community choice aggregators, electric service providers, and certain electrical cooperatives (collectively, load-serving entities) to procure their proportionate share of a total of 2,000 megawatts, in aggregate, of viable and cost-effective energy storage systems and would authorize the commission to direct the load-serving entities to procure additional energy storage system capacity, as specified. The bill would authorize the electrical corporations to own and operate a certain percentage of these energy storage systems, measured by capacity, if certain conditions are met. systems, to be achieved by December 31, 2030. If the commission imposes an energy storage system procurement target on load-serving entities, the bill would authorize each load-serving entity to meet up to 50% of its procurement target through energy storage systems that it owns, that are interconnected at the transmission or distribution level, or that are located on the customer side of the meter, as specified. The bill would authorize community choice aggregators, electric service providers, and certain electrical cooperatives to own and operate energy storage systems to meet their allocated shares. The bill would require the commission to develop and make available to all load-serving entities a cost recovery mechanism that meets certain requirements. require the commission to reconsider procurement strategies and appropriate targets not less than once every 3 years.

Under existing law, a violation of an order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because a violation of an order or decision of the commission implementing the requirements of this bill would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law requires the Public Utilities Commission to determine appropriate targets, if any, for each load-serving entity, including an electrical corporation, to procure viable and cost-effective energy storage systems to be achieved by December 31, 2020. Existing law requires the commission to direct the states three largest electrical corporations to file applications for programs and investments to accelerate widespread deployment of distributed energy storage systems.

This bill would, by January 1, 2020, require the commission, in addition to the requirements described above, to direct electrical corporations, community choice aggregators, electric service providers, and certain electrical cooperatives (collectively, load-serving entities) to procure their proportionate share of a total of 2,000 megawatts, in aggregate, of energy storage systems and would authorize the commission to direct the load-serving entities to procure additional energy storage system capacity, as specified. The bill would authorize the electrical corporations to own and operate a certain percentage of these energy storage systems, measured by capacity, if certain conditions are met. The bill would authorize community choice aggregators, electric service providers, and certain electrical cooperatives to own and operate energy storage systems to meet their allocated shares. The bill would require the commission to develop and make available to all load-serving entities a cost recovery mechanism that meets certain requirements.

Under existing law, a violation of an order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because a violation of an order or decision of the commission implementing the requirements of this bill would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law requires the Public Utilities Commission to determine appropriate targets, if any, for each load-serving entity, including an electrical corporation, to procure viable and cost-effective energy storage systems to be achieved by December 31, 2020. Existing law requires the commission to direct the states three largest electrical corporations to file applications for programs and investments to accelerate widespread deployment of distributed energy storage systems.

This bill would, by January 1, 2020, require the commission, in addition to the requirements described above, to direct the states 3 largest electrical corporations corporations, community choice aggregators, electric service providers, and certain electrical cooperatives (collectively, load-serving entities) to procure their proportionate share of a total of 2,000 megawatts, in aggregate, of energy storage systems and would authorize the commission to direct those electrical corporations the load-serving entities to procure additional energy storage system capacity, as specified. The bill would authorize the electrical corporations to own and operate a certain percentage of these energy storage systems, measured by capacity, if certain conditions are met. The bill would authorize community choice aggregators, electric service providers, and certain electrical cooperatives to own and operate energy storage systems to meet their allocated shares. The bill would provide that the net costs of authorized energy storage systems shall be recovered from the electrical corporations retail end use customers on a fully nonbypassable basis. require the commission to develop and make available to all load-serving entities a cost recovery mechanism that meets certain requirements.

Under existing law, a violation of an order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because a violation of an order or decision of the commission implementing the requirements of this bill would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law requires the Public Utilities Commission to determine appropriate targets, if any, for each load-serving entity, including an electrical corporation, to procure viable and cost-effective energy storage systems to be achieved by December 31, 2020. Existing law requires the commission to direct the states three largest electrical corporations to file applications for programs and investments to accelerate widespread deployment of distributed energy storage systems.

Under existing law, a violation of an order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because a violation of an order or decision of the commission implementing the requirements of this bill would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law establishes California Renewables Portfolio Standards Program, which establishes a target of 50% for the annual amount of electricity generated and sold to customers by retail sellers of electricity from renewable energy resources at by December 31, 2030, and establishes various interim targets. Existing law makes various legislative findings and declarations regarding the program.

This bill would make a nonsubstantive change to those legislative findings and declarations.

Date of Hearing: August 8, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 1347

Author:(Stern) – As Amended Ver:July 3, 2018

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill requires the California Public Utilities Commission (CPUC), by January 1, 2020, to consider procurement strategies for the installation of up to 2,000 megawatts of energy storage systems and, as part of that consideration, consider appropriate storage procurement targets and other strategies applicable to the state’s load-serving entities (LSEs), meaning investor-owned utilities, community choice aggregators, and electric service providers. The bill directs the CPUC to reconsider procurement strategies every three years.

FISCAL EFFECT:

The CPUC has identified specific new tasks required by this bill as follows:

• A new storage evaluation and procurement proceeding.
• Consideration of appropriate targets for each LSE.
• Evaluation of the amount of authorized ownership between each LSE.
• Evaluation of the allocation of storage capacity among transmission, distribution, and customer side of the meter interconnections.
• Consideration of a variety of possible policies to encourage the cost-effective deployment of energy storage systems.
• Evaluation of appropriate cost recovery and rate design mechanisms.
• Evaluation of energy storage resource procurement targets and solicitation results.
• Processing advice letters for reasonableness of LSE and third-party contracts and draft/issue resolutions for vote by the commission.
• Evaluation of how the storage procurement applications proposed by LSEs help meet the goals and objectives of the CPUC integrated resource plan (IRP) process.
• Reconsideration of procurement strategies and targets not less than every three years.
• Ongoing electric system analysis to allow recurring analysis of appropriate energy storage targets and LSE procurement strategies.

According to the CPUC, this new workload will cost $1.4 million (special fund) annually to fund seven permanent, full-time positions and $250,000 in contracting costs.

Clearly, this bill will entail significant new costs for the CPUC, costs that could be in the hundreds-of-thousands of dollars annually. But requiring CPUC consideration is a low bar. It seems a stretch to conclude the CPUC would need seven full-time employees who would do nothing all day, every work day, other than facilitate consideration of energy storage procurement strategies.

COMMENTS:

1. Purpose. The author sees deployment of energy storage as key to enabling the state to achieve greenhouse gas emission reduction goals. According to the author:

With increasing amounts of renewable energy resources coming on to the grid, many of which generate energy intermittently, energy storage systems will be necessary to integrate these renewable resources, ensure the grid operates reliably and efficiently, and facilitate a transition towards a clean energy grid.

1. Background. This bill asks the CPUC to contemplate energy storage procurement mandates. California has frequently used procurement requirements to achieve energy and environmental goals. The Renewable Portfolio Standard itself requires LSE to satisfy certain percentages of their demand through procurement of electricity generated by only qualifying renewable energy resources. Similarly, the state has energy storage procurement requirements. Statute requires the CPUC to determine appropriate energy storage procurement targets, if any, for each LSE. In response, the CPUC required each of the large IOUs to procure its proportional share of 1,325 megawatts of energy storage.

However, state policy has recently moved away from technology-specific procurement mandates. Rather, in passing SB 350 (De Leon), Chapter 547, Statutes of 2015, the Legislature mandated LSEs, and publicly owned utilities, to plan for energy procurement through IRPs, that is, comprehensive procurement plans that achieve the state energy environmental goals at the least possible cost.

It is likely that the IRPs of the various LSEs and POUs will include some amount of energy storage, probably a substantial amount. Indeed, the author, in support of this bill, points to the CPUC’s model IRP, which identifies 2,000 megawatts of energy storage as part of the state’s ideal energy mix. However, as noted in the policy analysis of this bill, the CPUC model IRP is a “guidepost” not a “mandate,” and the LSEs may propose alternative procurement plans that might achieve the state’s goals more cost effectively.

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: June 27, 2018

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Chris Holden, Chair

SBPCA Bill Id:SB 1347

Author:(Stern) – As Amended Ver:May 10, 2018

SENATE VOTE: 28-10

SUBJECT: Energy storage systems: procurement

SUMMARY: This bill requires the California Public Utilities Commission (CPUC) by January 1, 2020, to direct certain load-serving entities (LSE) to procure a total of 2,000 megawatts (MW) of energy storage. This bill establishes criteria for utilities to own and operate a portion of the procured storage and recover costs from the procurements through rates. Specifically, this bill:

1. Requires the CPUC by January 1, 2020, to direct electrical corporations, CCAs, electric service providers, and larger electrical cooperatives to file applications to procure a total of 2,000 MW of energy storage.
2. Requires the CPUC to allocate the 2,000 MW procurement based on each LSE’s prorata share of customer demand as of July 1, 2019.
3. Authorizes the CPUC to direct additional energy storage procurement to support state energy and climate goals.
4. Allows the electrical corporations to own and operate up to 50 percent of their proportion of the 2,000 MW.
5. Allows the electrical corporations to own and operate up to 50 percent of the additional required energy storage that has an expected commercial operation date before 2031.
6. Allows the electrical corporations to own and operate up to 35 percent of the additional required energy storage that has an expected commercial operation date on or after January 1, 2031.
7. Requires the CPUC to enable LSE cost-recovery for energy storage investments if the electrical corporation competitively sources the energy storage equipment and installation, the storage systems are connected to the grid in front of the electrical corporation’s consumers’ meters, and the electrical corporation has proposed a schedule for competitive solicitations to contract for an equivalent or greater amount of third-party-owned storage in its filing to the CPUC.
8. Requires the CPUC to expedite review and approval of contracts for third-party ownership and operate of energy storage through a Tier 3 advice letter process.
9. Allows net costs for energy storage systems to be recovered via nonbypassable charges.

EXISTING LAW:

1. Requires the CPUC to determine appropriate targets for each load-serving entity to procure viable and cost-effective energy storage systems to be achieved by December 31, 2015, and December 31, 2020, reevaluate the determinations made pursuant to this subdivision not less than once every three years, and ensure that the energy storage system procurement targets and policies that are established are technologically viable and cost effective. (Public Utilities Code §§ 2836, 2836.2)
2. Requires POUs to determine appropriate targets, if any, for the utility to procure viable and cost-effective energy storage systems to be achieved by December 31, 2016, and December 31, 2020. (Public Utilities Code § 2836)
3. Requires the CPUC to direct the IOUs file applications for programs and investments to accelerate widespread deployment of distributed energy storage systems for a total capacity not to exceed 500 megawatts. (Public Utilities Code § 2838.2)
   
4. Requires the CPUC to identify a diverse and balanced portfolio of resources needed to ensure a reliable electricity supply that provides optimal integration of renewable energy in a cost-effective manner. The portfolio shall rely upon zero carbon-emitting resources to the maximum extent reasonable and be designed to achieve any statewide greenhouse gas (GHG) emissions limit established pursuant to the California Global Warming Solutions Act of 2006 or any successor legislation. (Public Utilities Code § 454.51[a])
   
5. Directs the California Energy Commission (CEC) and the CPUC, where feasible, to authorize procurement of resources to provide grid reliability services that minimize reliance on system power and fossil fuel resources and, where feasible, cost effective, and consistent with other state policy objectives, increase the use of large- and small-scale energy storage. (Public Utilities Code § 400)
   
6. Requires the CPUC to adopt a process for each LSE to file an IRP to ensure each meets (a) GHG emissions reduction targets for the electricity sector, (b) the Renewables Portfolio Standard (RPS), and (c) other goals and obligations. Requires each LSE to submit an IRP to the CPUC. (Public Resources Code § 454.52)
   
7. Requires the governing board of a local POU to adopt an IRP and a process for updating the plan at least once every five years to ensure the utility meets (a) the GHG emissions reduction targets for the electricity sector, (b) the RPS, and (c) other goals and obligations, to be submitted to the CEC for review. Requires the CEC to provide recommendations to correct the deficiencies in the IRP. (Public Resources Code §§ 9621, 9622)
8. Authorizes the CPUC to require the IOUs to collect funds from ratepayers, through December 31, 2019, to be used to provide incentives through January 1, 2021, under SGIP, for distributed energy resources and energy storage systems, the CPUC, in consultation with ARB, determines will achieve reductions in emissions of GHGs. (Public Utilities Code § 379.6)
   
9. Requires the CPUC and CEC to where feasible, authorize procurement of resources to provide grid reliability services that minimize reliance on system power and fossil fuel resources and, where feasible, cost effective, and consistent with other state policy objectives, increase the use of large- and small-scale energy storage with a variety of technologies, targeted energy efficiency, demand response, including, but not limited to, automated demand response, eligible renewable energy resources, or other renewable and nonrenewable technologies with zero or lowest feasible emissions of greenhouse gases, criteria pollutants, and toxic air contaminants onsite to protect system reliability. (Public Utilities Code § 400)
   
10. Requires the CPUC to evaluate and analyze the potential for all types of long duration bulk energy storage resources to help integrate renewable generation into the electrical grid. (Chapter 680, Statutes of 2016)

FISCAL EFFECT: According to the Senate Committee on Appropriations, this bill would result in new costs of about $839,000 (ratepayer funds). Of this amount, $589,000 would support four new positions to manage new proceedings, administer workshops, conduct analysis, advise on the energy storage market and policy developments, and provide legal assistance. The remaining amount would pay for a two-year contract to model flexible energy storage capacity, integrate renewable energy, and develop cost recovery models to achieve the state’s energy and climate goals.

BACKGROUND:

California Energy Storage Roadmap. In late 2014, the California Energy Commission (CEC), the ISO, and the CPUC, developed an energy storage roadmap (Roadmap) that identifies policy, technology and process changes to address challenges faced by the energy storage sector. The comprehensive roadmap assesses the current market environment and regulatory policies for connecting new energy storage technology to the state’s power grid. It is the result of collaboration by the three organizations and input from more than 400 stakeholders, including utilities, technology companies, environmental groups, and interested parties.

The roadmap focuses on activities that address three critical categories of challenges:

• Expanding revenue opportunities for energy storage providers;
• Reducing costs of integrating and connecting to the power grid; and
• Streamlining and defining policies and processes to increase the certainty of expected benefits of energy storage systems.

CPUC Energy Storage Roadmap. The CPUC has developed a comprehensive strategy on storage which builds on the joint agency energy storage roadmap and is reflected in several CPUC decisions the last of which was issued in March.^[1] The IOU energy storage procurements were revised in this decision and each was directed to plan for procurement of its share of AB 2868 (Gatto) distributed energy storage systems which will be reflected in the 2018 IOU energy storage procurement and investment plans due before March 1, 2018. The next track of this proceeding will consider rules for “multiple-use applications” which are behind-the-meter storage resources participating in the wholesale market.

Utility Storage Procurement Mandates. AB 2514 (Skinner, Chapter 469, Statutes of 2010) required the CPUC to determine appropriate targets for load-serving entities (LSEs) to procure energy storage systems. The bill required LSEs to meet any targets adopted by the CPUC by 2015 and 2020. The bill also required POUs to set their own targets for the procurement of energy storage and then meet those targets by 2016 and 2021.

The CPUC, in implementing AB 2514, established the following procurement targets for the three largest electric IOUs totaling 1,325 MW. (D.13-10-040) The CPUC reported in 2017 that the IOUs have each progressed in meeting their energy storage procurement goals. However, none has yet met its final procurement goal in any category, other than Southern California Edison (SCE), which has already exceeded the procurement goal for customer-side storage several times over.

Service territory Customer Distribution Transmission Total by Utility

AB 2868 (Gatto, Chapter 681, Statutes of 2016) – The mandate requires the IOUS to file applications with the CPUC for programs and investments in distributed energy storage systems. The total capacity of the programs and investments in distributed energy storage systems approved by the CPUC shall not exceed 500 megawatts, divided equally among the state’s three largest IOUs.

Integrated Resource Planning – Among the policies of SB 350 (De León and Leno), Chapter 547, Statutes of 2015, was the requirement that all LSEs and POUs prepare integrated resource plans. This "umbrella" process combines all of the state's electric procurement mandates, policies, and programs into one umbrella plan to achieve goals and ensure California has a safe, reliable, and cost-effective electricity supply.

The plans are intended to show how the LSEs and POUs will achieve GHG reduction targets and RPS mandates. And the plans must also at the same time: fulfill the obligation of just and reasonable rates, minimize ratepayer impact, ensure system and local reliability; strengthen the diversity, sustainability, and resilience of the bulk transmission and distribution systems, and local communities; enhance distribution systems and demand-side energy management; and minimize localized air pollutants and other GHG emission, with early priority on disadvantaged communities.

Ideally, this “integrated” approach to resource planning will help California transition away from its history of resource-specific, siloed procurement mandates. Prior to SB 350, IOUs submitted long-term procurement plans (LTPPs) to the CPUC, which evaluated the need for new resources to meet system and local area reliability needs. The CPUC established up-front standards for the LTPPs, pursuant to AB 57 (Wright, Chapter 835, Statutes of 2002), and directed IOUs to procure best-fit and least-cost resources.

COMMENTS:

1. Author’s Statement. California’s power sector is currently undergoing wide-ranging transformations. With increasing amounts of renewable energy resources coming on to the grid, many of which generate energy intermittently, energy storage systems will be necessary to integrate these renewable resources, ensure the grid operates reliably and efficiently, and facilitate a transition towards a clean energy grid. Specifically, SB 1347 requires all load-serving entities to procure 2,000 MW of energy storage systems. Furthermore, SB 1347 strikes a balance between utility and third-party ownership by requiring at least 50% of energy storage to be owned and operated by third parties. By promoting diverse ownership models, SB 1347 will provide market certainty for technological innovation across all ownership models. The state has set ambitious goals to drive down greenhouse gas emissions and SB 1347 is an important step towards a cleaner power sector.
2. Not All Storage is Created Equal. Storage can and is being used to meet multiple needs on California’s grid and it generally falls in two applications. First, energy that is stored for later injection back to the grid to provide grid services. These wholesale uses have been defined by the CPUC as charging energy, resistive losses, pumps (flow batteries and pumped hydro), power conversion system, transformer, battery management system, thermal regulation, and vacuum (for flywheels). Critical to the grid and ratepayer value is the location of the storage as well as time of use. To ensure ratepayer value for the investment in storage it is important that the optimization of the grid, including peak reduction, contribution to reliability needs, or deferment of transmission and distribution upgrade investments is needed.
   
   The second application is energy stored and injected at different times of the day to change consumption patterns which is a retail use. This typically occurs at a customer facility to help mitigate demand charges and minimize consumption during higher rate periods. These customer-sited storage applications are currently funded by the SGIP program.
   
3. Silos v. Integrated Resource Plans. A foundational policy objective of the integrated resource planning process is that this “integrated” approach to resource planning will help California transition away from its history of resource-specific, siloed procurement mandates such as the RPS (a kilowatt hour-based program) and instead plan for carbon reduction. Storage is and will be a critical part of procurement under these plans for most load-serving entities and POUs but there are many paths to meeting carbon reduction goals.
   
   As required by SB 350, the CPUC conducts modeling and analysis to recommend a GHG emissions target for the electricity sector, identify the optimal portfolio of resources to meet the target, and calculate a GHG Planning Price for use in IRP planning and demand side resource cost effectiveness evaluation.
   
   The load-serving entities then prepare and file IRPs with the CPUC based on the statewide, optimal portfolio approved by the CPUC. Each LSE then develops a conforming portfolio to be presented in its IRP. But each LSE may also present an alternate portfolio, or more than one, justifying why that portfolio is preferable to serve its load. So the CPUC model is a guidepost, not a mandate.
   
   This is key because this bill uses the CPUC’s IRP model, which in 2017 identified 2,000 MWs of storage as part of the optimal mix of resources to meet 2030 GHG and RPS goals as a mandate for procurement on each LSE which it is not. This bill does not offer LSEs flexibility in meeting demand for their customer base. It presupposes that every LSE will use storage. But they may determine that it’s not the right fit for their customer base and show why in their IRP. The prescriptive terms of this bill would preclude, for instance, one LSE 50 or 60% geothermal and the remainder from large hydro.
   
4. Pumped Hydro. Much discussion and analysis has occurred regarding the need for pumped storage hydropower. Projects come in many sizes but can be hundreds of megawatts in capacity. The largest pumped hydro project of which the committee is aware of in California is the Helms Pumped Storage Plant in Fresno County. The plant commenced construction in 1977, came online in 1984, and has a capacity of 1,212 megawatts.

The plant operates by moving water between two reservoirs, an upper and a lower. When energy demand is high, water is released from the upper reservoir to the plant where electricity is generated before the water is discharged into the lower reservoir. When demand is low (such as at night), water is pumped back up to the upper reservoir to be used as stored energy at a later time. This is accomplished by pump-generators which serve a dual role: both pumps which can reverse, for use as generators. The plant can go from a stand-still to operational in eight minutes which allows it to meet peak energy demand. It consumes more electricity pumping versus generating electricity but pumping occurs during periods of low demand, making the plant economical.

This bill requires each LSE to procure its proportionate share of 2,000 megawatts of storage. If this procurement mandate were to go forward, it would effectively squeeze out any large pumped hydro storage project from being considered for the next decade or two. If a pumped hydro project were to move forward, no one utility or CCA would likely be able to fund the effort. It would likely need one entity in the state to procure the resource for the system and then spread the costs among all benefitting customers.

1. An Alternative. To ensure that the priorities of the Legislature in mandating the integrated resource planning requirement and the flexibility for a range of storage resources and funding options is maintained, the committee may wish to amend the bill as follows:

2837.5.  In addition to the requirements of Sections 2836 and 2838.2, on or before January 1, 2020, the commission shall consider procurement strategies for up to a statewide total of 2,000 megawatts of energy storage systems.

(a) The commission shall consider appropriate targets, if any, for each load-serving entity to procure viable and cost-effective energy storage systems to be achieved by December 31, 2030. As part of this proceeding, the commission may consider a variety of possible policies to encourage the cost-effective deployment of energy storage systems, including refinement of existing procurement methods to properly value energy storage systems.

(b) The commission shall reevaluate the determinations made pursuant to this subdivision not less than once every three years.

(c) Nothing in this section prohibits the commission’s evaluation and approval of any application for funding or recovery of costs of any ongoing or new development, trialing, and testing of energy storage projects or technologies outside of the proceeding required by this chapter.

(d) Each load-serving entity may meet up to fifty percent of its distribution system procurement target through utility-owned energy storage and propose the energy storage asset within its applicable integrated resource plan, but must make a showing of cost-effectiveness and viability.

1. Related Legislation.

SB 338 Requires the CPUC and the governing board of each local POU to each consider the role of a variety of energy technologies and resources in meeting energy and reliability needs during and around the hour of peak demand while reducing the need for new generation and transmission resources. (Chapter 389, Statutes of 2017)

1. Prior Legislation.

AB 2868 (Gatto) requires IOUs to file applications with the CPUC for programs and investments to accelerate widespread deployment of distributed energy storage systems. (Chapter 681, Statutes of 2016)

AB 33 (Quirk) obligated the CPUC, in consultation with the CEC, to evaluate and analyze the potential for all types of long-duration bulk energy storage resources to help integrate renewables into the electric grid. (Chapter 680, Statutes of 2015)

SB 886 (Pavley) would have required appropriate energy storage system procurement targets; requires each load-serving entity POU to plan for the procurement of energy storage systems before fossil-fuel-based generation; and requires each electrical corporation to propose measures to encourage customers to install energy storage systems. Status: Held in Assembly Committee on Appropriations.

AB 2514 (Skinner) required the CPUC to determine appropriate targets, if any, for LSEs to procure energy storage systems. The bill required LSEs to meet any targets adopted by the CPUC by 2015 and 2020. The bill required POUs to set their own targets for the procurement of energy storage and then meet those targets by 2016 and 2021. (Chapter 469, Statutes of 2010)

REGISTERED SUPPORT / OPPOSITION:

Support

Opposition

San Diego Gas & Electric
The Utility Reform Network

Oppose Unless Amended

California Community Choice Association

California Wind Energy Association

Independent Energy Producers Association

Analysis Prepared by: Kellie Smith / U. & E. /

1. http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M183/K277/183277651.PDF ↑

 THIRD READING  

Bill No: SB 1347

Author:

:

Vote:

SENATE ENERGY, U. & C. COMMITTEE: 9-1, 4/25/18

AYES: Hueso, Bradford, Cannella, Hertzberg, Hill, McGuire, Skinner, Stern, Wiener

NOES: Vidak

NO VOTE RECORDED: Morrell

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/25/18

AYES: Lara, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

SUBJECT:

SOURCE: Author

DIGEST:

This bill requires the California Public Utilities Commission (CPUC) by January 1, 2020, to direct certain load-serving entities (LSE) to procure a total of 2,000 megawatts (MW) of energy storage. This bill establishes criteria for utilities to own and operate a portion of the procured storage and recover costs from the procurements through rates.

ANALYSIS:

Existing law:

1. Requires the CPUC to identify a diverse and balanced portfolio of resources needed to ensure a reliable electricity supply that provides optimal integration of renewable energy in a cost-effective manner. The CPUC must direct each electrical corporation to develop a procurement plan that includes a strategy for procuring best-fit and least-cost resources to meet the portfolio’s needs. (Public Utilities Code §454.51)
2. Authorizes Community Choice Aggregators (CCAs) to submit proposals to meet their portion of the renewable integration needs identified by the CPUC. (Public Utilities Code §454.51)
3. Requires each LSE to prepare and file an integrated resource plan (IRP) that includes procurements enabling utilities to meet greenhouse gas (GHG) emissions reduction targets for the electricity sector. (Public Utilities Code §454.52)
4. Requires the CPUC to conduct a proceeding to determine appropriate targets, if any, for each LSE to procure viable and cost-effective energy storage systems to be achieved by December 31, 2015, and December 31, 2020. (Public Utilities Code §2836)
5. Requires the CPUC to direct the state’s three largest electrical corporations to file applications for programs and investments to accelerate widespread deployment of distributed energy storage systems to achieve ratepayer benefits, reduce dependence on petroleum, meet air quality standards, and reduce emissions of GHG. Programs and investments proposed by the state’s three largest electrical corporations must seek to minimize overall costs and maximize overall benefits. (Public Utilities Code §2838.2).

This bill:

1. Requires the CPUC by January 1, 2020, to direct electrical corporations, CCAs, electric service providers, and larger electrical cooperatives to file applications to procure a total of 2,000 MW of energy storage.
2. Requires the CPUC to allocate the 2,000 MW procurement based on each LSE’s prorata share of customer demand as of July 1, 2019.
3. Authorizes the CPUC to direct additional energy storage procurement to support state energy and climate goals.
4. Allows the electrical corporations to own and operate up to 50 percent of their proportion of the 2,000 MW.
5. Allows the electrical corporations to own and operate up to 50 percent of the additional required energy storage that has an expected commercial operation date before 2031.
6. Allows the electrical corporations to own and operate up to 35 percent of the additional required energy storage that has an expected commercial operation date on or after January 1, 2031.
7. Requires the CPUC to enable LSE cost-recovery for energy storage investments if the electrical corporation competitively sources the energy storage equipment and installation, the storage systems are connected to the grid in front of the electrical corporation’s consumers’ meters, and the electrical corporation has proposed a schedule for competitive solicitations to contract for an equivalent or greater amount of third-party-owned storage in its filing to the CPUC.
8. Requires the CPUC to expedite review and approval of contracts for third-party ownership and operate of energy storage through a Tier 3 advice letter process.
9. Allows net costs for energy storage systems to be recovered via nonbypassable charges.

Background

What is energy storage? Energy storage systems enable the capture of energy generated at one point of time for use at a later time. Energy storage encompasses a number of different technologies, including, but not limited to: battery storage, flywheels, pumped hydroelectric storage, thermal storage, and compressed air storage. Energy storage can help integrate intermittent renewable energy resources by storing excess renewable energy when these resources are generating and discharging the stored energy when renewable resources cannot generate. Energy storage can also help shave peak energy use and reduce the need for natural gas generation by storing energy during times of the day when energy production exceeds use and discharging this stored energy at peak demand periods in lieu of natural gas generation. Storage can also help defer transmission and distribution upgrades by reducing peak electricity loads.

IRP Reference System Plan. Existing law requires the CPUC to identify a portfolio of resources for electricity procurement that provides optimal integration of renewable energy in a cost-effective manner. The identification of this portfolio is intended to guide LSEs’ IRPs, which help ensure that utilities meet GHG reduction targets for the electricity sector. On February 8, 2018, the CPUC adopted a reference system plan, which identifies the energy procurements needed to help the LSEs meet specific GHG reduction goals. The CPUC adopted a GHG reduction goal of 42 million metric tons by 2030. To meet this target, the CPUC identified specific procurements for LSEs, including 2,000 MW of energy storage needed by 2030.

Storage, generation, or both? Utilities may opt for energy storage investments to couple with existing resources in lieu of building new generating facilities. With appropriate planning, utility ownership of distributed resources can help lower total costs of deploying storage and coordinate distributed storage. Utility procurement and ownership of storage can help build economies of scale for ratepayer storage investments. However, storage is still an expensive technology and ratepayer benefits from large storage procurements will partly depend on how storage is deployed and leveraged with the grid.

No static in the electricity sector. This bill requires the CPUC to direct LSEs to procure 2,000 MW of energy storage. Legislation may not be needed to require the CPUC to direct utilities to procure energy storage identified as a resource. Utilities can propose storage procurements of needed resources through the IRP process. However, this bill establishes specific requirements for storage procurement, ownership and operation of storage, and pre-requisites for LSEs to recover storage investment costs through rates. These requirements limit the CPUC’s discretion to adjust energy storage procurements based on changes in the electricity sector. Under this bill, the CPUC would be required to allocate the 2,000 MW of storage across eligible LSEs based on each LSE’s pro-rata share of customer demand as of July 1, 2019. LSEs’ customer bases are continuously shifting, changing forecasts for electrical demand frequently. Electrical load for an LSE may depart, and the amount of energy storage appropriate for each LSE may change. However, this bill would require LSEs to procure storage after 2020 based on 2019 customer demand. While fixing allocations to demand at a static point in time could help ensure stability for competitive bidding and energy storage contracts by providing predictability, it could also lead some LSEs to have disproportionate storage investments and cost-recovery requirements as load shifts in the electricity sector.

Incentivizing third-party owned storage. The bill also creates and energy storage ownership and operation model that may favor third-party storage ownership models in the long-term. While the bill allows LSEs to own and operate up to 50 percent of storage procured between 2020 and 2030, it lowers the percentage of additional storage an LSE can own and operate after 2030. Under the bill, LSEs may only own and operate up to 35 percent of additional energy storage procurements with an expected operation date of 2031 or later. Additionally, the bill makes procuring third-party owned energy storage a pre-requisite for obtaining cost-recovery for other energy storage investments. Under the bill, an LSE may only receive approval from the CPUC to recover energy storage investment costs through rates if certain conditions are met. Those conditions include submitting a schedule for competitive solicitations to contract for an equivalent or greater amount of third-party owned energy storage as part of a filing to procure storage to be owned and operated by the LSE.

Related/Prior Legislation

AB 2868 (Gatto, Chapter 681, Statutes of 2016) required the CPUC to direct the state’s three largest IOUs to file applications for a total of 500 MW of distributed energy storage to achieve ratepayer benefits, reduce dependence on petroleum, meet air quality standards and reduce emissions of greenhouse gases.

SB 350 (De León, Chapter 547, Statutes of 2015) the Clean Energy and Pollution Reduction Act of 2015, established new clean energy, clean air and GHG reduction goals. The bill also required utilities to submit IRPs to the CPUC and CEC to ensure that the electricity sector meets specified greenhouse gas emissions reduction goals.

AB 2514 (Skinner, Chapter 469, Statutes of 2010) required the CPUC to determine appropriate targets for LSEs to procure energy storage systems. The bill required LSEs to meet any targets adopted by the CPUC by 2015 and 2020. The bill requires publicly owned utilities to set their own targets for the procurement of energy storage and then meet those targets by 2016 and 2021.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Committee on Appropriations, this bill would result in new costs of about $839,000 (ratepayer funds). Of this amount, $589,000 would support four new positions to manage new proceedings, administer workshops, conduct analysis, advise on the energy storage market and policy developments, and provide legal assistance. The remaining amount would pay for a two-year contract to model flexible energy storage capacity, integrate renewable energy, and develop cost recovery models to achieve the state’s energy and climate goals.

SUPPORT: (Verified 5/25/18)

Advanced Microgrid Solutions

AltaGas

California Energy Storage Alliance

E.ON

Greensmith Energy

LG Chem

Southern California Edison

Tesla

OPPOSITION: (Verified 5/25/18)

Nuvve Corporation

San Diego Gas and Electric

The Utility Reform Network

ARGUMENTS IN SUPPORT: According to the author:

“California’s power sector is currently undergoing wide-ranging transformations. With increasing amounts of renewable energy resources coming on to the grid, many of which generate energy intermittently, energy storage systems will be necessary to integrate these renewable resources, ensure the grid operates reliably and efficiently, and facilitate a transition towards a clean energy grid. Specifically, SB 1347 requires all load-serving entities to procure 2,000 MW of energy storage systems. Furthermore, SB 1347 strikes a balance between utility and third-party ownership by requiring at least 50 percent of energy storage to be owned and operated by third parties. By promoting diverse ownership models, SB 1347 will provide market certainty for technological innovation across all ownership models. The state has set ambitious goals to drive down greenhouse gas emissions and SB 1347 is an important step towards a cleaner power sector.”

ARGUMENTS IN OPPOSITION: Opponents claim that the bill contradicts existing energy procurement policies, limits the CPUC’s ability to flexibly respond to ongoing changes in the energy storage marketplace, and is duplicative of existing energy storage procurement requirements established by AB 2514 (Skinner, Chapter 469, Statutes of 2010) and AB 2868 (Gatto, Chapter 681, Statutes of 2016). They also argue that the bill may negatively impact ratepayers by permitting utility ownership and operation of energy storage, which may be more expensive than other ownership models. In opposition, The Utility Reform Network (TURN) states: “This prescriptive legislation may impose unnecessary costs on ratepayers and strips the Commission of its ability to rationally analyze problems and propose solutions.”

Prepared by:

5/26/18 14:48:58

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SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

SB 1347 (Stern) - Energy storage systems: procurement

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

This bill would direct the California Public Utilities Commission (CPUC) by January 1, 2020, to direct all load-serving entities to procure their proportionate share of a statewide total of 2,000 megawatts (MWs) of energy storage.

Fiscal Impact:

The CPUC indicates that this bill would result in new costs of about $839,000 (ratepayer funds). Of this amount, $589,000 would support four new positions to manage new proceedings, administer workshops, conduct analysis, advise on the energy storage market and policy developments, and provide legal assistance. The remaining amount would pay for a two-year contract to model flexible energy storage capacity, integrate renewable energy, and develop cost recovery models to achieve the state’s energy and climate goals.

Background:

Existing law requires the CPUC to identify a diverse and balanced portfolio of resources needed to ensure a reliable electricity supply that provides optimal integration of renewable energy in a cost-effective manner. The CPUC must direct each electrical corporation to develop a procurement plan that includes a strategy for procuring best-fit and least-cost resources to meet the portfolio’s needs.

Existing law also authorizes Community Choice Aggregators (CCAs) to submit proposals to meet their portion of the renewable integration needs identified by the CPUC.

Further, existing law requires each load-serving entity (LSE) to prepare and file an integrated resource plan (IRP) that includes procurements enabling utilities to meet greenhouse gas (GHG) emissions reduction targets for the electricity sector.

Existing law requires the CPUC to conduct a proceeding to determine appropriate targets, if any, for each LSE to procure viable and cost-effective energy storage systems to be achieved by December 31, 2015, and December 31, 2020.

Existing law also requires the CPUC to direct the state’s three largest electrical corporations to file applications for programs and investments to accelerate widespread deployment of distributed energy storage systems to achieve ratepayer benefits, reduce dependence on petroleum, meet air quality standards, and reduce emissions of GHG. Programs and investments proposed by the state’s three largest electrical corporations must seek to minimize overall costs and maximize overall benefits.

Proposed Law:

This bill requires the CPUC by January 1, 2020, to direct all load-serving entities to procure their proportionate share of a statewide total of 2,000 megawatts (MW) of energy storage. The CPUC may direct these entities to procure additional energy storage system capacity to facilitate the state’s ability to meet its energy and climate goals. Further, the CPUC shall allocate the required 2,000 MWs to each load-serving entity based on its prorata share of customer demand.

This bill allows:

1. The electrical corporations to own and operate up to 50 percent of their capacity that is required;
2. The electrical corporations to own and operate up to 50 percent of the additional required energy storage that has an expected commercial operation date before 2031; and
3. The electrical corporations to own and operate up to 35 percent of the additional required energy storage that has an expected commercial operation date on or after January 1, 2031.

This bill provides that community choice aggregators may own and operate energy storage systems following guidelines determined by their local governing boards. Electric service providers and eletrical cooperatives may own and oerate all or a portion of the energy storage system allocated, as specified. Further, the CPUC shall order all load-serving entities to procure their prorata share of energy storage systems on the same timelines.

This bill specifies the criteria for recovering energy storage costs via rates.

This bill also requires the CPUC to expedite review and approval of contracts for third-party ownership and operate of energy storage through a Tier 3 advice letter process.

This bill requires the CPUC to develop and make available to all load-serving entities a cost recovery mechanism that meets specified criteria, including the requirement that it does not unduly shift costs between customers receiving generation services from other load-serving entities. The bill provides that a load-serving entity does not include an electrical cooperative, as defined, if it has an annual electrical demand of less than 700 gigawatthours, as determined on a three-year average, commencing with January 1, 2013.

Related Legislation:

AB 2868 (Gatto, Chapter 681, Statutes of 2016) required the CPUC to direct the state’s three largest IOUs to file applications for a total of 500 MW of distributed energy storage to achieve ratepayer benefits, reduce dependence on petroleum, meet air quality standards and reduce emissions of greenhouse gases.

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SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2017 - 2018 Regular

Bill No: SB 1347 Hearing Date: 4/25/2018

SUBJECT: Energy storage systems: procurement

DIGEST: This bill requires the CPUC to direct the state’s three largest IOUs to procure a total of 2,000 MW of energy storage.

ANALYSIS:

Existing law:

1. Requires the California Public Utilities Commission (CPUC) to identify a diverse and balanced portfolio of resources needed to ensure a reliable electricity supply that provides optimal integration of renewable energy in a cost-effective manner. The CPUC must direct each electrical corporation to develop a procurement plan that includes a strategy for procuring best-fit and least-cost resources to meet the portfolio’s needs. (Public Utilities Code §454.51)
2. Authorizes Community Choice Aggregators (CCAs) to submit proposals to meet their portion of the renewable integration needs identified by the CPUC. (Public Utilities Code §454.51)
3. Requires each load-serving entity (LSE) to prepare and file an integrated resource plan (IRP) that includes procurements enabling utilities to meet greenhouse gas (GHG) emissions reduction targets for the electricity sector. (Public Utilities Code §454.52)
4. Requires the CPUC to conduct a proceeding to determine appropriate targets, if any, for each LSE to procure viable and cost-effective energy storage systems to be achieved by December 31, 2015, and December 31, 2020. (Public Utilities Code §2836)
5. Requires the CPUC to direct the state’s three largest electrical corporations to file applications for programs and investments to accelerate widespread deployment of distributed energy storage systems to achieve ratepayer benefits, reduce dependence on petroleum, meet air quality standards, and reduce emissions of GHG. Programs and investments proposed by the state’s three largest electrical corporations must seek to minimize overall costs and maximize overall benefits. (Public Utilities Code §2838.2).

This bill:

1. Requires the CPUC by January 1, 2020, to direct the state’s three largest investor-owned utilities (IOUs) to procure a total of 2,000 megawatts (MW) of energy storage in the following proportions:
2. Pacific Gas and Electric (PG&E) must procure 900 MW
3. Southern California Edison (SCE) must procure 900 MW
4. San Diego Gas and Electric (SDG&E) must procure 200 MW
5. Authorizes the CPUC to direct the state’s three largest IOUs to procure additional energy storage to support state energy and climate goals.
6. Allows the electrical corporations to own and operate up to 50 percent of their proportion of the 2,000 MW.
7. Allows the electrical corporations to own and operate up to 50 percent of the additional required energy storage that has an expected commercial operation date before 2031.
8. Allows the electrical corporations to own and operate up to 35 percent of the additional required energy storage that has an expected commercial operation date on or after January 1, 2031.
9. Specifies the criteria for recovering energy storage costs via rates.
10. Requires the CPUC to expedite review and approval of contracts for third-party ownership and operate of energy storage through a Tier 3 advice letter process.
11. Allows net costs for energy storage systems to be recovered via nonbypassable charges.

Background

What is energy storage? Energy storage systems enable the capture of energy generated at one point of time for use at a later time. Energy storage encompasses a number of different technologies, including, but not limited to: battery storage, flywheels, pumped hydroelectric storage, thermal storage, and compressed air storage. Energy storage can help integrate intermittent renewable energy resources by storing excess renewable energy when these resources are generating and discharging the stored energy when renewable resources cannot generate. Energy storage can also help shave peak energy use and reduce the need for natural gas generation by storing excess renewable energy at low demand times of the day and discharging this energy at peak periods in lieu of natural gas generation. Storage can also help defer transmission and distribution upgrades by reducing peak electricity loads.

IRP Reference System Plan. Existing law requires the CPUC to identify a portfolio of resources for electricity procurement that provides optimal integration of renewable energy in a cost-effective manner. The identification of this portfolio is intended to guide LSE’s IRPs, which help ensure that utilities meet GHG reduction targets for the electricity sector. On February 8, 2018, the CPUC adopted a reference system plan, which identifies the procurements needed to help the LSEs meet specific GHG reduction goals. The CPUC adopted a GHG reduction goal of 42 million metric tons by 2030. To meet this target, the CPUC identified specific procurements for LSEs, including 2,000 MW of energy storage needed by 2030.

This bill requires the CPUC to direct the state’s three largest IOUs to procure the 2,000 MW of energy storage that the CPUC identified in the reference system plan. Generally, LSE procurement targets are intended for all utilities, including CCAs; however, this bill directs the CPUC to apply this procurement to only the three largest IOUs. Legislation is not necessarily needed to require the CPUC to direct utilities to procure energy storage identified as a resource needed in the IRP process. However, this bill also establishes specific requirements for how utilities will be authorized to own and operate storage. While legislation may not be strictly necessary for utilities to propose that they own and operate storage procured through the IRP process, this bill codifies the terms under which utilities can own and operate storage meeting the procurement goal outlined in the Reference System Plan.

Storage, generation, or both? Utilities may opt for energy storage investments to couple with existing resources in lieu of building new generating facilities. With appropriate planning, utility ownership of distributed resources can help lower total costs of deploying storage and coordinate distributed storage. Utility procurement and ownership of storage can help build economies of scale for ratepayer storage investments. However, storage is still an expensive technology and ratepayer benefits from large storage procurements will partly depend on how storage is deployed and leveraged with the grid.

Need for amendments. This committee understands that the author is working with stakeholders, including the CCAs, to address concerns about the procurement mandate established under this bill. As currently drafted, this bill would limit procurement requirements to only three IOUs. To conform this bill’s procurement mandate to IRP goals, the author and committee may wish to amend this bill to include all LSEs in the procurement, prohibit this bill from resulting in cost-shifts, and require the CPUC to ensure that the procurements are cost-effective for ratepayers.

Prior/Related Legislation

AB 2868 (Gatto, Chapter 681, Statutes of 2016) required the CPUC to direct the state’s three largest IOUs to file applications for a total of 500 MW of distributed energy storage to achieve ratepayer benefits, reduce dependence on petroleum, meet air quality standards and reduce emissions of greenhouse gases.

AB 2514 (Skinner, Chapter 469, Statutes of 2010) required the CPUC to determine appropriate targets for LSEs to procure energy storage systems. The bill required LSEs to meet any targets adopted by the CPUC by 2015 and 2020. The bill requires publicly owned utilities to set their own targets for the procurement of energy storage and then meet those targets by 2016 and 2021.

SB 350 (De León, Chapter 547, 2015) the Clean Energy and Pollution Reduction Act of 2015, established new clean energy, clean air and GHG reduction goals. The bill also required utilities to submit IRPs to the CPUC and CEC to ensure that the electricity sector meets specified greenhouse gas emissions reduction goals.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT:

California Energy Storage Alliance

Southern California Edison

OPPOSITION:

The Utility Reform Network

ARGUMENTS IN SUPPORT: According to supporters, this bill will support grid resiliency efforts and reduce reliance on fossil fuels for electricity generation by expanding the use of energy storage. Supporters also claim that utility ownership and operation of energy storage under this bill will enhance energy storage benefits for utility customers. In support, SCE states:

“While customer-owned or independently-owned storage installation can provide value, utility-owned storage deployment can be precisely targeted for utility grid operation for the benefit of all customers, and not just those customers with the necessary capital and space to install customer-owned systems. Utilities are also uniquely situated to utilize energy storage for system reliability and renewable integration purposes. Furthermore, utility market operations are regulated by the California Public Utilities Commission, which will ensure that utility-owned energy storage systems are used for the benefit of all customers.”

ARGUMENTS IN OPPOSITION: The Utility Reform Network (TURN) opposes this bill because it believes that this bill is unnecessary and will increase ratepayer costs without providing a corresponding benefit. In opposition, TURN states:

“At this time, with consideration given to all of the existing storage mandates and incentive programs, SB 1347 is unnecessary and will result in needless costs to ratepayers. At a minimum, we urge the author to consider removing any language regarding utility ownership of energy storage assets and cost recovery (Section 2). This may help to ensure that undue costs are not imposed on ratepayers and allow the California Public Utilities Commission sufficient flexibility to implement programs.”

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