Existing law authorizes the State Energy Resources Conservation and Development Commission to prescribe, by regulation, energy efficiency standards, including appliance efficiency standards.

This bill would make nonsubstantive revisions to these provisions.

Date of Hearing: July 10, 2019

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Chris Holden, Chair

SBPCA Bill Id:SB 49

Author:(Skinner) – As Amended Ver:May 7, 2019

SENATE VOTE: 30-8

SUBJECT: Energy efficiency

SUMMARY: Expands the California Energy Commission’s (CEC) authority to develop standards for appliances to facilitate the deployment of flexible demand (i.e., demand response) technologies. This bill requires the CEC to develop and implement standards for appliances to facilitate the deployment of flexible demand technologies. The standards must enable appliance operations to be scheduled, shifted, or curtailed to reduce emissions of greenhouse gases (GHG) associated with electricity generation. The standards and other regulations shall become effective no sooner than one year after the date of adoption or revision and in compliance with the following:

1. Authorizes the CEC to determine the cost effectiveness of flexible demand appliances considering the following: compared to nonflexible demand appliances; the value of increased or decreased emission of greenhouse gases associated with the timing of the appliance’s use; the life cycle cost benefits to the consumer using the product and avoiding the electrical grid procurement, infrastructure, and operating cost.
2. Mandates the CEC to consult with the CPUC and load serving entities to align flexible demand standards with programs administered by those entities.
3. Requires flexible demand appliance standards to be based on feasible and attainable efficiencies or feasible improvements which would enable appliance operations to be scheduled, shifted, or curtailed to reduce GHG emissions associated with electricity generation.
4. Authorizes the CEC to use its appliance standard enforcement authority to enforce flexible demand appliance standards adopted pursuant to this bill.
5. Requires the CEC to consider National Institute of Standards and Technology’s reliability and cyber security protocols, or other equally protective or more protective cybersecurity protocols.
6. Mandates that the CEC prioritizes flexible demand – appliances to provide the following attributes: 1) power is conveniently controlled by load-management technology; 2) load-management technology is readily available; 3) has a user-friendly interface; 4) has simple standards for third-party direct operations of the appliances; and 5) is interoperable or open source.
7. Expands the CEC current enforcement provisions to include the provisions of this measure.
8. Mandates the CEC to submit a report to the Legislature every two years on any actions taken pursuant to this measure, including cost to consumers of any regulation adopted under the authority of this provision.

EXISTING LAW:

1. Requires the CEC to establish building design and construction standards that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings. The CEC must periodically update the standards. Six months after the CEC certifies an energy conservation manual, cities, counties, and state agencies are prohibited from issuing a building permit for a building that does not comply with the current standards created by the CEC. The CEC must demonstrate that any water efficiency standards are necessary to save energy. (Public Resources Code §25402(a)(1)).
2. Requires the CEC and the Department of Housing and Community Development to issue a joint finding that a building water efficiency standard is equivalent or superior in performance, safety, and for the protection of life, health, and general welfare to existing standards. The finding must also ensure that the standard does not unreasonably or unnecessarily impact Californians’ ability to purchase or rent affordable housing by taking into account the overall benefit derived from the standard. (Public Resources Code §25402(a)(2)).
3. Requires the CEC’s building efficiency standards to be cost-effective when taken in their entirety and amortized over the economic life of the structure compared with historic practice. When determining cost-effectiveness, the CEC must consider the value of the water or energy saved, impact on product efficacy for the consumer, and the life-cycle cost of complying with the standard. The CEC must consider other relevant factors, including, but not limited to the standards’ impact on housing costs, the total statewide costs and benefits of the standard over its lifetime, economic impacts on California businesses, and alternative approaches and their associated costs. (Public Resources Code §25402(b)(3)).
4. Requires the CEC to establish appliance efficiency standards based on a reasonable use pattern. The CEC may prescribe other cost-effective measures, not preempted by federal labeling law. An appliance manufactured on or after the effective date of these standards may not be offered for sale in California unless it complies with the standards. (Public Resources Code §25402(c)(1)).
5. Authorizes the CEC to adopt regulations establishing an administrative enforcement process for appliance efficiency violations and allows the CEC to assess civil money penalties for violations up to $2,500 for each violation. Penalties assessed for appliance efficiency violations are deposited into the CEC’s Appliance Efficiency Enforcement Subaccount and fund the CEC’s appliance efficiency enforcement activities upon appropriation by the Legislature. (Public Resources Code §25402.11).

FISCAL EFFECT:

According to Senate Appropriations Committee: “Ongoing special fund costs (Energy Resources Program Account) of $600,000 annually for the CEC to develop, update, and enforce flexible demand appliance standards.”

BACKGROUND:

Managing customer side energy use - According to a 2016 U.S. Department of Energy report, the electric industry is actively evaluating different potential business models of distributed utilities where core principles can help focus the design of the future power grid. One of the potential principles, is to encourage and enable electricity consumers to take advantage of all cost-effective energy efficiency and other demand-side management opportunities. Another principle is to facilitate innovation, implementation of new technologies, and delivery of new energy services. Underlying both of these core principles is the need for end-use devices in homes and buildings that work without complexity or additional cost to the consumer, which is referred to as interoperability. The objective is to enable consumers who so desire to more effectively and efficiently coordinate electric system operations. According to this report, approximately, 74% of electricity sold nationally by distribution utilities is used, or consumed, by residential and commercial building sectors; therefore, interoperability of end-use appliances, equipment, and devices is essential. An electric system with interoperable devices and systems spanning the delivery infrastructure and end-use facilities increases the overall reliability and performance of the grid while facilitating enhanced penetration of variable renewable generation.^[1]

California appliance and building efficiency standards - The CEC is required to promulgate energy efficiency and conservation standards for appliances and buildings pursuant to the Warren-Alquist Act. For an appliance to be sold or offered for sale in California, it must be certified to the CEC, which then allows it to appear on the publicly accessible "Appliance Efficiency Database." Certifying an appliance requires manufacturers to test an appliance's performance and submit the data collected to the CEC's Appliance Efficiency Program. A regulated appliance that is not certified cannot be legally sold or offered for sale in the state of California.

The California Energy Code (California Code of Regulations, Title 24, Part 6) contains energy conservation standards applicable to most residential and nonresidential buildings throughout California, including schools. The standards are periodically updated by the CEC to allow consideration and possible incorporation of new energy efficiency technologies and methods. The building standards contain energy and water efficiency requirements (and indoor air quality requirements) for newly constructed buildings, additions to existing buildings, and alterations to existing buildings. The standards are designed to reduce wasteful, uneconomic, inefficient or unnecessary consumption of energy, and enhance outdoor and indoor environmental quality. Standards ensure that builders use the most energy efficient and energy conserving technologies and construction practices, while being cost effective for homeowners over the 30-year lifespan of a building.

Managing renewable generation - The CEC estimates that 34% of California’s retail electricity sales were from renewable sources in 2018, which is already ahead of the 2020 renewable portfolio standard (RPS) goal of 33%. Renewable generation is set to continue to grow as the state advances to the 2030 RPS target of 60%. The rapid growth in renewable generation, particularly solar generation, has a significant impact on California’s generation profile. The daily solar generation is tied to the diurnal solar cycle, which peaks in the middle of the day, and is often accompanied by two periods of rapidly increasing then decreasing generation. Electricity demand peaks in the evening as ratepayers return home and increase their electricity use. The interplay between the solar (and wind) generation profile and the demand lends a shape to the net electricity load (load minus solar and wind generation) that has been referred to as the “duck curve.”

The California Independent System Operator (ISO) has recognized the need for additional flexible dispatchable resources to accommodate the morning and late-afternoon ramps in net electricity load. There are a variety of options that can be utilized to address the technical and market challenges associated with managing high renewable penetration. Fundamentally, greater diversity of resources—both in geography and technology—can reduce the coincidence of production patterns. In addition, multiple recent studies^{[2], [3]} have found that over-building solar photovoltaic (PV) generation and “supply-shaping” through curtailment of PV oversupply is possibly the most cost-effective way to reduce electricity prices in a high-renewable grid. The steady price decline of solar PV has the potential to reduce the amount of energy storage needed to keep electricity rates low.

Demand response (DR) and load management technologies - While the future of high-renewable grids might include greater curtailment or more cost-effective energy storage technologies, currently grid-operators dispatch peaking power plants, which have GHG emissions associated with them, to balance the net load and meet the ramping requirements associated with the “duck curve”. DR offers a sensible pathway to use the already existing energy storage capacity of heating, ventilation, and air conditioning (HVAC) systems and other dispatchable appliances to shift and shape the energy use of ratepayers. HVAC systems and appliances such as water heaters and refrigerators have an inherent “thermal mass” associated with them. This thermal mass (e.g. the air inside the building or refrigerator, or the water in a water heater) can be used as an energy storage mechanism (e.g. pre-cooling/heating when there is more renewable generation on the grid). This principle is applicable to other appliances where the time-of-use can be deferred without significant impact to the customer (e.g. washing machines, dish washers, electric vehicle charging, etc.).

The CEC staff has indicated the significant potential to achieve GHG emission reductions by setting appliance standards that require manufacturers to include: DR capabilities for their certified appliances; and manufacturer-default appliance settings that will maximize emission reductions. While individual customers could participate in DR markets through appliances that are smart-meter compatible, not all customers with smart-meters have access to time-of-use rates that would achieve significant GHG reductions. The rates available to residential customers are not the same as the wholesale market rates, which include the complete information about available grid resources. However, retail customers can be aggregated by third-party DR aggregators (e.g., OhmConnect, one of the supporters of this bill) who can bid the aggregated DR load into wholesale markets to provide more significant cost-savings for individual customers. CEC staff has indicated that, in considering the life-cycle benefits of DR technologies, they will account for the potential of aggregated DR loads and consider the ratepayer benefits of avoided utility investments in meeting the 2030 RPS goals and the reduced need for additional fossil fuel generation.

Smart Appliances - Appliances that have flexible demand capabilities should, to the maximum extent feasible, have controls and communication functions that make them interoperable.  Interoperability is the ability to use resources from diverse origins as if they had been designed as parts of a single system. Ideally, interoperability will be accomplished with programming and communication protocols that are open source.  Interoperability enables flexible demand appliances to be integrated more effectively with electricity system delivery companies.  The function allows the appliance to be automated to receive signals from the electricity system during periods when the electric grid would benefit from adjustment of the appliance’s operation.

Communication protocols – The use of open source programming and communication protocols can be a powerful way to achieve interoperability at the highest reliability, by avoiding varying and potentially proprietary solutions across manufacturers.  For example, if a manufacturer that uses a unique or proprietary programming protocol goes out of business, customers and businesses with that product cannot readily be updated to stay current with utility system administrators’ flexible demand programs and incentives. In such cases, otherwise perfectly good appliances and controls may have to be abandoned and replaced in order for consumers and businesses to continue to participate and be compensated for flexible demand contributions. Compatibility and longevity across flexible demand devices are of highest value to utility system administrators and manufacturers who are all working to ensure interoperability.

Some examples of appliances where interoperability, programming and communication protocols would be useful include:

• Flexible demand controlled heat pump water heaters that allow heating of water to be scheduled during off-peak periods and maximize heating during periods of high production from utility-scale or customer-owned PVs.
• Flexible demand controlled thermostats that allow pre-cooling of homes and commercial buildings during off-peak periods when electricity costs are low. This could mitigate the impact on the electricity grid from high demand for air conditioning, which results in major GHG emissions, reduced system reliability, and high customer time of use (TOU) rates.

COMMENTS:

1. According to the author. “SB 49 is aimed at unleashing the power of aps and “smart” technology to improve energy efficiency, cut climate-polluting emissions, and better integrate renewable energy into California’s electricity grid by clarifying that the California Energy Commission (CEC) can consider greenhouse gas emissions (GHGs) reductions and electricity demand management when it sets appliance and building code standards.”
2. The CEC’s appliance standards authority. This bill expands the purpose of the CEC’s authority to establish building and appliance efficiency standards to include reductions in GHG emissions. The CEC has the authority to establish building and appliance efficiency standards for the purpose of reducing energy consumption. Existing law authorizes the CEC to establish energy efficiency standards for buildings that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings. The CEC may also separately establish regulations that set a minimum operating efficiency standards for appliances to promote the use of energy and water efficient appliances that consume a significant amount of energy or water on a statewide basis. While a demand responsive appliance may not reduce overall energy use, it can reduce GHG emissions and provide cost savings associated with water and energy use by allowing the consumer to schedule an electric appliance’s operation for times when the energy supply is cleaner and cheaper.
3. Devices Can Disrupt the Power Grid. A 2018 study by Princeton University^[4] demonstrates that devices such as air conditioners and heaters give a unique ability to adversaries to launch large-scale coordinated attacks on the power grid. The study reveals a new class of potential attacks on power grids that can manipulate power demand in the grid at a local and system level. These attacks can result in local power outages and in a worst case, large-scale blackouts. Moreover, the study illustrated that these attacks can be used to increase the operating cost of the grid to benefit a few utilities in the electricity market. The study sheds light on the vulnerability of the interdependency of the internet of things such as appliances and that of the other networks such as the power grid whose security requires attention from both the systems security and power engineering communities.

The Committee may wish to amend the measure to mandate the CEC, to at a minimum, adopt cyber security protocols consistent with the North American Electric Reliability Council’s Critical Infrastructure Protection standards:

PRC Section 25402 (f) (2): In adopting the flexible demand appliance standards, the commission shall consider the National Institute of Standards and Technology’s reliability and cybersecurity protocols, or other cybersecurity protocols that are equally or more protective, and shall at minimum adopt North American Electric Reliability Council’s Critical Infrastructure Protection standards.

1. Cost effectiveness requirements. This bill establishes cost-effectiveness criteria for flexible demand appliance standards that differ from cost-effectiveness requirements for other appliance standards in several ways. This bill allows the CEC to consider the cost of demand responsive appliances relative to non-responsive appliances, the value of GHG emissions associated with the timing of an appliance’s use, the life cycle cost to the consumer of a compliant product, and benefits of avoided electricity grid, procurement, infrastructure, and operating cost. Including those grid related avoided cost may inappropriately skew the cost-effectiveness test. Changes on the electric grid are occurring rapidly in large part due to the significant role that renewables and storage are playing on the grid. For example, in the 2017-2018 Transmission Plan, the California Independent Operator Board of Governors canceled or modified previously approved projects to avoid $2.6 billion in future costs. The changes were mainly due to changes in local area forecasts, and strongly influenced by energy efficiency programs and increasing levels of residential rooftop solar generation. Under the provisions of this measure, the $2.6 billion in previously approved infrastructure costs would have been factored into the appliance costs effectiveness test, which could have inappropriately led to an increase in the cost of the appliance.

The Committee may wish to amend the bill to recognize the need to better align consumer and electric system demand as a key value in flexible demand response:

PRC Section 25402 (f) (3): The flexible demand appliance standards shall be cost effective. When determining cost-effectiveness, solely for the purposes of (f), the commission may consider, as appropriate, the cost of flexible demand appliances compared to nonflexible demand appliances, the value of increased or decreased emissions of greenhouse gases associated with the timing of an appliance’s use, the life-cycle cost to the consumer from using a product that complies with the standard, and the life-cycle costs and benefits to consumers including the ability to conserve energy and to better align consumer and electric system demand. of avoiding electrical grid, procurement, infrastructure, and operating costs. The commission shall consider other relevant factors, as required by Sections 11346.5 and 11357 of the Government Code, including, but not limited to, the impact on housing costs, the total statewide costs and benefits of the standard over its lifetime, the economic impact on California businesses, and alternative approaches and their associated costs.

1. Appliance communication. Appliances that are interoperable can potentially communicate with each other, allowing multiple appliances to be synchronized to maximize electricity system performance and effectively reduce customer bills based on time-of-use rates.  Shifting customer demand away from either a peak load period or in response to the electric grid needs empowers consumers with the ability to help reduce both cost and greenhouse gas emissions along with increasing system reliability. 
2. Significant potential for demand response and other grid related attributes. California’s State Water Project (SWP) is the largest state-owned water conveyance and power generation system in the United States, serving over 27 million people and 750,000 acres of farmland. The SWP has approximately 2,600 Megawatts (MW) of water pumping capacity and 1,600 MW of energy generating capacity. It is the third largest producer of hydropower in California, producing approximately 14% of the State’s hydroelectricity, and self generates, on average, about 60% of its own energy needs. In fact, the SWP is the largest single participant in the California Independent System Operator’s demand response program. In 2017 and 2018, the SWP has consistently provided 200 MW of Demand Response into the CAISO market. However, during the California energy crisis, the SWP provided as much as 800 MW of Demand Response.  A reduction of 600 MW demand response is a significant loss of capability on the system. The Department of Water Resources is focused on their core mission of providing reliable and safe water supply to much of California. The full attributes of the SWP to assist California in achieving our climate goals is yet to be identified and realized. The CEC along with the Department of Water Resources have comprehensive understanding of the interdependency of water and energy. The development of a proposal to conduct an assessment is an initial step towards undertaking a comprehensive analysis of the modifications, which would be necessary for the SWP to increase participation in demand response and other system enhancements to the benefit of the SWP user while helping California achieve our climate goals.

The Committee may wish to consider an amendment that provides the following:

The Energy Commission in coordination with Department of Water Resources, shall develop a proposal to conduct an assessment of the changes in operations and structural upgrades needed for the State Water Project (SWP) to restore discontinued capabilities and enable additional demand response and upgrades that will aid California in achieving its climate goals.  The scope shall include an assessment of highest and best use of the project to continue to provide reliable water supplies while reducing the cost for the SWP users and contribute to California achieving its climate goals.  Because of the benefits derived by California, the assessment will also provide recommendations for funding source which could include a state water bond and a timeline for implementation.

REGISTERED SUPPORT / OPPOSITION:

Support

California Efficiency + Demand Management Council 
California Energy Efficiency Industry Council
East Bay Community Energy (Ebce)
Engie Services U.S. Inc.
Natural Resources Defense Council
Ohmconnect Incorporated
Peninsula Clean Energy

Opposition

None on file

Analysis Prepared by: Mary McDonald / U. & E. /916-319-2083

1. U.S. Department of Energy, Energy Efficiency & Renewable Energy: “The National Opportunity for Interoperability and its Benefits for a Reliable, Robust, and Future Grid Realized Through Buildings” 2016. ↑

2. Overbuilding & curtailment: The cost-effective enablers of firm PV generation, Perez, Marc, et. al., Solar Energy, March 2019, Vol. 180, Pg. 412-422, https://doi.org/10.1016/j.solener.2018.12.074 ↑

3. Minnesota Solar Potential Analysis Report, November 15, 2018, http://mnsolarpathways.org/spa/ ↑

4. Princeton University, 2018 - BlackloT: loT Botnet of High Wattage Devices Can Disrupt the Power Grid. ↑

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2019 - 2020 Regular

Bill No: Hearing Date: 9/11/2019

SUBJECT:

DIGEST: This bill modifies the California Energy Commission’s (CEC’s) appliance energy efficiency regulatory authority to allow the CEC to establish appliance efficiency standards that facilitate the deployment of flexible demand technologies. The bill also requires the California Natural Resources Agency (CNRA) to conduct an assessment of upgrades to the State Water Resources Development System that would support California’s climate goals.

ANALYSIS:

Existing law:

1. Requires the CEC to establish building and appliance standards to reduce the wasteful, uneconomic, inefficient, or unnecessary consumption of energy, including the energy associated with the use of water. (Public Resources Code §25402)
2. Requires the CEC to establish appliance efficiency standards based on a reasonable use pattern. The CEC may prescribe other cost-effective measures, including incentive programs, fleet averaging, energy and water consumption labeling not preempted by federal labeling law, and consumer education programs, to promote the use of energy and water efficient appliances whose use requires a significant amount of energy or water use on a statewide basis. An appliance manufactured on or after the effective date of these standards may not be offered for sale in California unless it complies with the standards. (Public Resources Code §25402(c)(1))
3. Prohibits appliance standards from resulting in any added total costs for consumers over the designed life of the appliances concerned. When determining cost-effectiveness, the CEC must consider the value of the water or energy saved, impact on product efficacy for the consumer, and the life cycle cost to the consumer of complying with the standard. The CEC must consider other relevant factors, including, but not limited to, the impact on housing costs, the total statewide costs and benefits of the standard over its lifetime, economic impact on California businesses, and alternative approaches and their associated costs. (Public Resources Code §25402(c)(1)(C))
4. Authorizes the CEC to adopt regulations establishing an administrative enforcement process for appliance efficiency violations and allows the CEC to assess a civil money penalty for violations up to $2,500 for each violation. Penalties assessed for appliance efficiency violations are deposited into the CEC’s Appliance Efficiency Enforcement Subaccount and fund the CEC’s appliance efficiency enforcement activities upon appropriation by the Legislature. (Public Resources Code §25402.11)

This bill:

1. Expands the purpose the CEC’s appliance efficiency standards to include the management of energy loads to maintain electrical grid reliability.
2. Expands the CEC’s appliance efficiency regulatory authority by requiring the CEC to establish and periodically update standards for appliances to facilitate to promote the use of flexible demand appliances. These regulations can include labeling provisions that promote the use of appliances with flexible demand capabilities.
3. Requires flexible demand appliance standards to be based on feasible and attainable efficiencies or feasible improvements enabling appliance operations to be scheduled, shifted, or curtailed to reduce greenhouse gas (GHG) emissions associated with electricity generation.
4. Requires the CEC to consider reliability and cybersecurity protocols from the National Institutes of Standards and Technology (NIST) when adopting flexible demand appliance standards. At a minimum, the CEC must adopt the North American Electric Reliability Corporation’s Critical Infrastructure Protection standards.
5. Establishes new cost-effectiveness requirements that apply solely to flexible demand appliance standards. These cost-effectiveness requirements allow the CEC to consider the cost of flexible demand appliances relative to non-flexible demand appliances, the value of GHG emissions associated with the timing of an appliance’s use, the life-cycle cost to the consumer from using a compliant appliance, and the life-cycle costs and benefits to consumers, including the ability to conserve energy and better align consumer and electric system demand. The CEC must also consider the standards’ impact on housing costs, the total statewide costs and benefits of the standard over its lifetime, economic impact on California businesses, and alternative approaches and their associated costs.
6. Requires the CEC to consult with the California Public Utilities Commission (CPUC) and load-serving entities (LSEs) to better align flexible demand appliance standards with demand response programs administered by LSEs and incentivize the deployment of flexible demand appliances.
7. Requires the flexible demand appliance standards to prioritize all of the following:
   1. Appliances that con more conveniently have their electrical demand controlled by load-management technology and third-party load management programs.
   2. Appliances with load-management technology options that are readily available.
   3. Appliances with a user-friendly interface and straightforward setup and connection process.
   4. Appliances with load-management technology options that follow simple standards for third-party direct operation of the appliances.
   5. Appliances that are interoperable or open-source.
8. Requires the CEC to report by January 1, 2021, in the Integrated Energy Policy Report (IEPR), on actions it has taken pursuant to this bill and costs to consumers.
9. Authorizes the CEC to use its appliance standard enforcement authority to enforce flexible demand appliance standards adopted pursuant to this bill.
10. Requires the CNRA to work with the CEC and Department of Water Resources (DWR) to assess the operational and structural upgrades to the State Water Resources Development System that would help California achieve its climate and energy goals. This assessment must include the following:
    1. An examination of the system’s actual and potential contribution to climate and energy goals without compromising the system’s purpose.
    2. A timeline for potential implementation of recommendations to help achieve the climate and energy goals.
    3. Recommendations for potential funding sources to the extent that recommendations benefit the climate and energy goals without compromising the system’s purposes.
11. Requires the CNRA to submit the assessment and recommendations to the appropriate policy committees of the Legislature by January 1, 2022.

Background

Flexible Demand Technologies can work with demand response programs to lower energy consumption. Demand response is a resource enabling electricity customers to reduce or shift their electricity usage in response to a price signal, a financial incentive, an environmental condition, or a reliability signal. Demand response has the capacity to reduce GHG emissions and increase ratepayer savings by lowering, shifting, and shaping demand for electricity at critical times in ways that can defer the need for additional fossil fuel generation, electricity infrastructure upgrades, and excess resource procurement. The load management capabilities of demand response resources can also help customers shift portions of their electricity use to times of the day when retail prices for electricity are lower, which can help lower a customer’s electricity bill. Many LSEs operate demand response programs that incentivize load reduction and management through behavioral changes to energy consumption or the use of specific flexible demand technologies.

Demand response is a critical component of facilitating building electrification in a manner that does not result in emissions shifts from the building sector to the electricity sector. In the 2018 update to the IEPR, the CEC noted that building electrification by itself is not sufficient to lower GHG emissions from buildings in a way that is meaningful for California’s climate goals. Without additional planning to incorporate mechanisms to ensure that electricity use does not increase during peak demand periods, electrification could also increase demand for electricity at times which natural gas generation supplies a larger portion of the total electricity mix. The IEPR states: “Electrification needs to be coupled with strategies such as time-of-use rates and demand response to shift the timing of energy consumption to maximize the use of renewable energy and achieve zero-emission buildings.”

Flexible demand technologies have the potential to support demand response programs by automating the energy consumption changes in response to grid and price signals. Flexible demand systems can be especially helpful in buildings with large energy consumption, including large residential multifamily and nonresidential commercial and industrial facilities. These systems can automate energy efficiency systems that control lighting and heating, ventilation and air conditioning controls to modify their energy use. Even in smaller residential buildings, smart thermostats and appliances that communicate with the thermostat can help reduce energy consumption in response to price signals.

The CEC’s appliance standards authority. This bill expands the purpose of the CEC’s authority to establish appliance efficiency standards to allow the CEC to establish flexible demand appliance standards for the purpose of managing energy loads to maintain electrical grid reliability. The CEC has the authority to establish building and appliance efficiency standards for the purpose of reducing energy consumption. Existing law authorizes the CEC to establish energy efficiency standards for buildings that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings. The CEC may also separately establish regulations that set a minimum operating efficiency standards for appliances to promote the use of energy and water efficient appliances that consume a significant amount of energy or water on a statewide basis. While a demand responsive appliance may not reduce overall energy use, it can reduce GHG emissions and provide cost savings associated with water and energy use by allowing the consumer to schedule an electric appliance’s operation for times when the energy supply is cleaner and cheaper.

Cost effectiveness requirements. This bill requires flexible demand technology standards to be cost-effective; however, it also allows the CEC to consider additional criteria solely for the purpose of cost-effectiveness evaluations for flexible-demand appliance standards. Under this bill, the CEC may consider the life-cycle of GHG emissions associated with the timing of an appliance’s use in addition to the life-cycle costs and benefits of the appliance to the consumer. Some of the appliances for which the CEC could promulgate flexible demand standards are necessary for the health and safety of Californians. As a result, ensuring that compliant appliances are accessible is critical. To the extent that a demand responsive appliance is sufficiently cost effective to produce savings for consumers, it will provide these savings in a manner that differs from those of non-responsive appliances. While non-responsive appliances may decrease the total energy consumption based on operating efficiencies, demand responsive appliances can provide savings by shifting and shaping electricity use to match utility price signals. Realized savings for consumers will largely depend on the degree to which a consumer uses an appliance in response to price signals.

State Water Project Demand Response Capabilities. This bill requires the CNRA to work with the CEC and DWR to assess operational and structural upgrades to the State Water Resources Development System that would help California achieve its climate and energy goals. Under the bill, the CNRA must submit recommendations about potential upgrades and potential funding sources for those upgrades to the relevant policy committees of the Legislature by 2022. While the bill does not specifically state that this report would identify opportunities for greater demand resources in the state’s water system, the assessment performed by CNRA could include recommendations that may increase the demand response potential of the system.

The State Water Resources Development System provides access to water across the state through several programs, including the State Water Project (SWP), the Davis-Grunsky Act Program, and the San Joaquin Drainage Implementation Program. According to DWR, the SWP is the fourth largest energy producer in California. The SWP generates electricity via hydroelectric facilities and pumped storage systems. The SWP’s sells its excess electric generation back to the grid.

In 2013, the California Independent System Operator (CAISO) developed a Demand Response and Energy Efficiency Roadmap to identify opportunities to better align electric demand with preferred resources to enhance grid reliability and better integrate lower carbon power sources. While the CAISO’s roadmap identified multiple paths for encouraging greater demand response and energy efficiency capacity, it did not identify specific resources that should be tapped for demand response potential. In response to the release of CAISO’s roadmap, DWR submitted comments recommending the CAISO to more specifically consider the demand response capabilities of the SWP. DWR’s comments stated: “CAISO’s Roadmap should consider how the regulatory framework can be better improved to better align the range of services that CAISO uses to meet reliability needs with SWP’s demand response resource capabilities.” In prior years, the SWP provided the CAISO with significant demand response resources from the SWP in the form of reduced load from SWP facilities. However, the amount of demand response achieved from the SWP has not been consistent. This bill would require the CNRA to conduct an assessment with DWR and CEC to identify potential upgrades to the SWP that could help meet climate and energy goals without compromising the SWP’s purpose, which could include measures such as the installation of highly efficient water pumps that may reduce energy consumption of SWP operations.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

California Efficiency + Demand Management

California Energy Storage Alliance

Ceres BICEP

East Bay Community Energy

ENGIE

Natural Resources Defense Council

OhmConnect

State Water Contractors, Inc.

TechNet

Union of Concerned Scientists

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to the author:

To implement SB 100 (De León, 2018), California will need to integrate more renewable resources into the grid that produce power only at certain times of the day – like solar and wind. California still uses fossil fuel – mostly natural gas – to provide energy when demand is highest and renewable resources are not able to produce. This means energy providers often have to build twice – building renewable energy facilities that provide power during the day and using natural gas facilities to provide energy at night when energy demand is high. The cost of double-building is passed on to the ratepayer.

To avoid the ratepayer cost of double-building and still keep the lights on, California needs to do two things. First, California needs to reduce unnecessary energy use. And second, California needs to better match the supply of energy (from solar and wind) with the demand for energy (coming from your plug, your fridge, or your electric car). Clarifying the CEC’s authority to consider GHGs when setting appliance standards, and directing the CEC to use this authority to set standards, will ensure that the state is making progress toward better and more cost-effectively integrating renewable energy into the grid.

-- END --

 UNFINISHED BUSINESS  

Bill No: SB 49

Author: Skinner (D)

Amended: 9/5/19

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 11-1, 4/10/19

AYES: Hueso, Bradford, Chang, Dodd, Hertzberg, Hill, McGuire, Rubio, Skinner, Stern, Wiener

NOES: Stone

NO VOTE RECORDED: Moorlach

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-1, 4/24/19

AYES: Allen, Hill, Skinner, Stern, Wieckowski

NOES: Bates

NO VOTE RECORDED: Stone

SENATE APPROPRIATIONS COMMITTEE: 4-2, 5/16/19

AYES: Portantino, Bradford, Hill, Wieckowski

NOES: Bates, Jones

SENATE FLOOR: 30-8, 5/20/19

AYES: Allen, Archuleta, Atkins, Beall, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Mitchell, Monning, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener, Wilk

NOES: Bates, Borgeas, Grove, Jones, Moorlach, Morrell, Nielsen, Stone

SENATE ENERGY, U. & C. COMMITTEE: 11-1, 9/11/19 (Pursuant to Senate Rule 29.10)

AYES: Hueso, Bradford, Chang, Dodd, Hertzberg, Hill, McGuire, Rubio, Skinner, Stern, Wiener

NOES: Stone

NO VOTE RECORDED: Moorlach

ASSEMBLY FLOOR: 60-15, 9/10/19 - See last page for vote

SUBJECT: Energy: appliance standards and State Water Project assessment

SOURCE: Author

DIGEST:

This bill modifies the California Energy Commission’s (CEC’s) appliance energy efficiency regulatory authority to allow the CEC to establish appliance efficiency standards that facilitate the deployment of flexible demand technologies. This bill also requires the California Natural Resources Agency (CNRA) to conduct an assessment of upgrades to the State Water Resources Development System that would support California’s climate goals.

Assembly Amendments make various clarifying changes; modify the purpose of flexible demand appliance standards; add priorities the CEC must consider when adopting flexible demand appliance standards; remove the social cost of greenhouse gas emissions from cost-effectiveness calculations; and add language requiring the CNRA to conduct an assessment of upgrades that can be made to the State Water Resources Development System to support California climate and energy goals.

ANALYSIS:

Existing law:

1. Requires the CEC to establish building and appliance standards to reduce the wasteful, uneconomic, inefficient, or unnecessary consumption of energy, including the energy associated with the use of water. (Public Resources Code §25402)
2. Requires the CEC to establish appliance efficiency standards based on a reasonable use pattern. The CEC may prescribe other cost-effective measures, including incentive programs, fleet averaging, energy and water consumption labeling not preempted by federal labeling law, and consumer education programs, to promote the use of energy and water efficient appliances whose use requires a significant amount of energy or water use on a statewide basis. An appliance manufactured on or after the effective date of these standards may not be offered for sale in California unless it complies with the standards. (Public Resources Code §25402(c)(1))
3. Prohibits appliance standards from resulting in any added total costs for consumers over the designed life of the appliances concerned. When determining cost-effectiveness, the CEC must consider the value of the water or energy saved, impact on product efficacy for the consumer, and the life cycle cost to the consumer of complying with the standard. The CEC must consider other relevant factors, including, but not limited to, the impact on housing costs, the total statewide costs and benefits of the standard over its lifetime, economic impact on California businesses, and alternative approaches and their associated costs. (Public Resources Code §25402(c)(1)(C))
4. Authorizes the CEC to adopt regulations establishing an administrative enforcement process for appliance efficiency violations and allows the CEC to assess a civil money penalty for violations up to $2,500 for each violation. Penalties assessed for appliance efficiency violations are deposited into the CEC’s Appliance Efficiency Enforcement Subaccount and fund the CEC’s appliance efficiency enforcement activities upon appropriation by the Legislature. (Public Resources Code §25402.11)

This bill:

1. Expands the purpose the CEC’s appliance efficiency standards to include the management of energy loads to maintain electrical grid reliability.
2. Expands the CEC’s appliance efficiency regulatory authority by requiring the CEC to establish and periodically update standards for appliances to facilitate to promote the use of flexible demand appliances. These regulations can include labeling provisions that promote the use of appliances with flexible demand capabilities.
3. Requires flexible demand appliance standards to be based on feasible and attainable efficiencies or feasible improvements enabling appliance operations to be scheduled, shifted, or curtailed to reduce greenhouse gas (GHG) emissions associated with electricity generation.
4. Requires the CEC to consider reliability and cybersecurity protocols from the National Institutes of Standards and Technology (NIST) when adopting flexible demand appliance standards. At a minimum, the CEC must adopt the North American Electric Reliability Corporation’s Critical Infrastructure Protection standards.
5. Establishes new cost-effectiveness requirements that apply solely to flexible demand appliance standards. These cost-effectiveness requirements allow the CEC to consider the cost of flexible demand appliances relative to non-flexible demand appliances, the value of GHG emissions associated with the timing of an appliance’s use, the life-cycle cost to the consumer from using a compliant appliance, and the life-cycle costs and benefits to consumers, including the ability to conserve energy and better align consumer and electric system demand. The CEC must also consider the standards’ impact on housing costs, the total statewide costs and benefits of the standard over its lifetime, economic impact on California businesses, and alternative approaches and their associated costs.
6. Requires the CEC to consult with the California Public Utilities Commission (CPUC) and load-serving entities (LSEs) to better align flexible demand appliance standards with demand response programs administered by LSEs and incentivize the deployment of flexible demand appliances.
7. Requires the flexible demand appliance standards to prioritize all of the following:
   1. Appliances that con more conveniently have their electrical demand controlled by load-management technology and third-party load management programs.
   2. Appliances with load-management technology options that are readily available.
   3. Appliances with a user-friendly interface and straightforward setup and connection process.
   4. Appliances with load-management technology options that follow simple standards for third-party direct operation of the appliances.
   5. Appliances that are interoperable or open-source.
8. Requires the CEC to report by January 1, 2021, in the Integrated Energy Policy Report (IEPR), on actions it has taken pursuant to this bill and costs to consumers.
9. Authorizes the CEC to use its appliance standard enforcement authority to enforce flexible demand appliance standards adopted pursuant to this bill.
10. Requires the CNRA to work with the CEC and Department of Water Resources (DWR) to assess the operational and structural upgrades to the State Water Resources Development System that would help California achieve its climate and energy goals. This assessment must include the following:
    1. An examination of the system’s actual and potential contribution to climate and energy goals without compromising the system’s purpose.
    2. A timeline for potential implementation of recommendations to help achieve the climate and energy goals.
    3. Recommendations for potential funding sources to the extent that recommendations benefit the climate and energy goals without compromising the system’s purposes.
11. Requires the CNRA to submit the assessment and recommendations to the appropriate policy committees of the Legislature by January 1, 2022.

Background

Flexible Demand Technologies can work with demand response programs to lower energy consumption. Demand response is a resource enabling electricity customers to reduce or shift their electricity usage in response to a price signal, a financial incentive, an environmental condition, or a reliability signal. Demand response has the capacity to reduce GHG emissions and increase ratepayer savings by lowering, shifting, and shaping demand for electricity at critical times in ways that can defer the need for additional fossil fuel generation, electricity infrastructure upgrades, and excess resource procurement. The load management capabilities of demand response resources can also help customers shift portions of their electricity use to times of the day when retail prices for electricity are lower, which can help lower a customer’s electricity bill. Many LSEs operate demand response programs that incentivize load reduction and management through behavioral changes to energy consumption or the use of specific flexible demand technologies.

Demand response is a critical component of facilitating building electrification in a manner that does not result in emissions shifts from the building sector to the electricity sector. In the 2018 update to the IEPR, the CEC noted that building electrification by itself is not sufficient to lower GHG emissions from buildings in a way that is meaningful for California’s climate goals. Without additional planning to incorporate mechanisms to ensure that electricity use does not increase during peak demand periods, electrification could also increase demand for electricity at times which natural gas generation supplies a larger portion of the total electricity mix. The IEPR states: “Electrification needs to be coupled with strategies such as time-of-use rates and demand response to shift the timing of energy consumption to maximize the use of renewable energy and achieve zero-emission buildings.”

Flexible demand technologies have the potential to support demand response programs by automating the energy consumption changes in response to grid and price signals. Flexible demand systems can be especially helpful in buildings with large energy consumption, including large residential multifamily and nonresidential commercial and industrial facilities. These systems can automate energy efficiency systems that control lighting and heating, ventilation and air conditioning controls to modify their energy use. Even in smaller residential buildings, smart thermostats and appliances that communicate with the thermostat can help reduce energy consumption in response to price signals.

The CEC’s appliance standards authority. This bill expands the purpose of the CEC’s authority to establish appliance efficiency standards to allow the CEC to establish flexible demand appliance standards for the purpose of managing energy loads to maintain electrical grid reliability. The CEC has the authority to establish building and appliance efficiency standards for the purpose of reducing energy consumption. Existing law authorizes the CEC to establish energy efficiency standards for buildings that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings. The CEC may also separately establish regulations that set a minimum operating efficiency standards for appliances to promote the use of energy and water efficient appliances that consume a significant amount of energy or water on a statewide basis. While a demand responsive appliance may not reduce overall energy use, it can reduce GHG emissions and provide cost savings associated with water and energy use by allowing the consumer to schedule an electric appliance’s operation for times when the energy supply is cleaner and cheaper.

Cost effectiveness requirements. This bill requires flexible demand technology standards to be cost-effective; however, it also allows the CEC to consider additional criteria solely for the purpose of cost-effectiveness evaluations for flexible-demand appliance standards. Under this bill, the CEC may consider the life-cycle of GHG emissions associated with the timing of an appliance’s use in addition to the life-cycle costs and benefits of the appliance to the consumer. Some of the appliances for which the CEC could promulgate flexible demand standards are necessary for the health and safety of Californians. As a result, ensuring that compliant appliances are accessible is critical. To the extent that a demand responsive appliance is sufficiently cost effective to produce savings for consumers, it will provide these savings in a manner that differs from those of non-responsive appliances. While non-responsive appliances may decrease the total energy consumption based on operating efficiencies, demand responsive appliances can provide savings by shifting and shaping electricity use to match utility price signals. Realized savings for consumers will largely depend on the degree to which a consumer uses an appliance in response to price signals.

State Water Project Demand Response Capabilities. This bill requires the CNRA to work with the CEC and DWR to assess operational and structural upgrades to the State Water Resources Development System that would help California achieve its climate and energy goals. Under the bill, the CNRA must submit recommendations about potential upgrades and potential funding sources for those upgrades to the relevant policy committees of the Legislature by 2022. While the bill does not specifically state that this report would identify opportunities for greater demand resources in the state’s water system, the assessment performed by CNRA could include recommendations that may increase the demand response potential of the system.

The State Water Resources Development System provides access to water across the state through several programs, including the State Water Project (SWP), the Davis-Grunsky Act Program, and the San Joaquin Drainage Implementation Program. According to DWR, the SWP is the fourth largest energy producer in California. The SWP generates electricity via hydroelectric facilities and pumped storage systems. The SWP’s sells its excess electric generation back to the grid.

In 2013, the California Independent System Operator (CAISO) developed a Demand Response and Energy Efficiency Roadmap to identify opportunities to better align electric demand with preferred resources to enhance grid reliability and better integrate lower carbon power sources. While the CAISO’s roadmap identified multiple paths for encouraging greater demand response and energy efficiency capacity, it did not identify specific resources that should be tapped for demand response potential. In response to the release of CAISO’s roadmap, DWR submitted comments recommending the CAISO to more specifically consider the demand response capabilities of the SWP. DWR’s comments stated: “CAISO’s Roadmap should consider how the regulatory framework can be better improved to better align the range of services that CAISO uses to meet reliability needs with SWP’s demand response resource capabilities.” In prior years, the SWP provided the CAISO with significant demand response resources from the SWP in the form of reduced load from SWP facilities. However, the amount of demand response achieved from the SWP has not been consistent. This bill would require the CNRA to conduct an assessment with DWR and CEC to identify potential upgrades to the SWP that could help meet climate and energy goals without compromising the SWP’s purpose, which could include measures such as the installation of highly efficient water pumps that may reduce energy consumption of SWP operations.

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

According to the Assembly Appropriations Committee:

1. To develop and adopt appliance standards, CEC would incur cost in the mid hundreds of thousands of dollars annually (Energy Resources Programs Account (ERPA)) to establish regulations via a CEC's rulemaking process. Once the CEC has established the standards, it would incur slightly higher annual cost, though still in the mid hundreds of thousands of dollars, to conduct investigations and enforce compliance with the standards and the regularly update the regulations. CEC has established through the budget process that its primary operating account, ERPA, has a structural deficit. While CEC is supportive of the appliance standards authorized by this bill, it cautions ERPA cannot absorb these costs.
2. One-time costs of about $150,000 to CEC (ERPA) and of about $90,000 to DWR (special fund) to develop the proposal to assess operational changes and structural upgrades to the State Water Project that will aid California in achieving its climate goals. The assessment itself would entail additional, and more substantial, costs.

SUPPORT: (Verified 9/10/19)

California Efficiency + Demand Management

California Energy Storage Alliance

Ceres BICEP

East Bay Community Energy

ENGIE

Natural Resources Defense Council

OhmConnect

State Water Contractors, Inc.

TechNet

Union of Concerned Scientists

OPPOSITION: (Verified 9/10/19)

None received

ARGUMENTS IN SUPPORT: According to the author:

To implement SB 100 (De León, 2018), California will need to integrate more renewable resources into the grid that produce power only at certain times of the day – like solar and wind. California still uses fossil fuel – mostly natural gas – to provide energy when demand is highest and renewable resources are not able to produce. This means energy providers often have to build twice – building renewable energy facilities that provide power during the day and using natural gas facilities to provide energy at night when energy demand is high. The cost of double-building is passed on to the ratepayer.

To avoid the ratepayer cost of double-building and still keep the lights on, California needs to do two things. First, California needs to reduce unnecessary energy use. And second, California needs to better match the supply of energy (from solar and wind) with the demand for energy (coming from your plug, your fridge, or your electric car). Clarifying the CEC’s authority to consider GHGs when setting appliance standards, and directing the CEC to use this authority to set standards, will ensure that the state is making progress toward better and more cost-effectively integrating renewable energy into the grid.

ASSEMBLY FLOOR: 60-15, 9/10/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Diep, Eggman, Frazier, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Petrie-Norris, Quirk, Quirk-Silva, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Choi, Cunningham, Flora, Fong, Gallagher, Kiley, Lackey, Mathis, Melendez, Obernolte, Patterson, Voepel, Waldron

NO VOTE RECORDED: Chen, Gray, Mayes, Ramos

Prepared by: Sarah Smith / E., U., & C. / (916) 651-4107

9/11/19 20:20:35

**** END ****

SENATE THIRD READING

STR Bill Id:SB 49

Author:(Skinner)

As Amended Ver:September 5, 2019

Majority vote

SUMMARY:

Expands the California Energy Commission (CEC) authority to develop standards for appliances to facilitate the deployment of flexible demand (i.e., demand response) technologies, and adds as an additional objective for the CEC, in adopting energy efficiency standards, to "manage energy loads to help maintain electrical grid reliability."

Requires the Natural Resources Agency (NRA), in collaborations with the CEC and the Department of Water Resources (DWR), to assess and provide recommendations regarding opportunities and constraints for potential operational and structural upgrades to the State Water Project to aid California in achieving its climate and energy goals.

Major Provisions

1. Requires the CEC to adopt standards for appliances to facilitate the deployment of flexible demand technologies, based on feasible and attainable efficiencies or feasible improvements that will enable appliance operations to be scheduled, shifted, or curtailed.
   1. Requires the standards become effective no sooner than one year after the date of their adoption or updating.
   2. Requires the CEC to consider the National Institute of Standards and Technology's reliability and cybersecurity protocols, or other cybersecurity protocols that are equally or more protective, and adopt, at a minimum, the North American Electric Reliability Corporation's Critical Infrastructure Protection standards.
   3. Requires the standards to be cost effective, and authorizes the CEC, when determining cost-effectiveness, to consider, as appropriate, the cost of flexible demand appliances compared to nonflexible demand appliances, the value of increased or decreased GHG emissions associated with the timing of an appliance's use, the life-cycle cost to the consumer from using a product that complies with the standard, and the life-cycle costs and benefits to consumers, including the ability to conserve energy and better align consumer and electric system demand.  
   4. Requires the CEC to consult with the Public Utilities Commission and load-serving entities to better align the standards with demand response programs administered by the state and load-serving entities and to incentivize the deployment of flexible demand appliances.
   5. Requires the standards to prioritize all of the following:
      1. Appliances that can more conveniently have their electrical demand controlled by load-management technology and third-party load-management programs.
      2. Appliances with load-management technology options that are readily available.
      3. Appliances that have a user-friendly interface and follow a straightforward setup and connection process, such as remote setup by means of an internet website or application.
      4. Appliances with load-management technology options that follow simple standards for third-party direct operation of the appliances.
      5. Appliances that are interoperable or open source.
2. Requires the NRA, in collaborations with the CEC and DWR, to assess and provide recommendations regarding opportunities and constraints for potential operational and structural upgrades to the State Water Project to aid California in achieving its climate and energy goals.

COMMENTS:

This bill includes two distinct provisions. First, it requires the CEC to adopt "flexible demand" standards for appliances and adds managing energy loads to help maintain electrical grid reliability as an overall objective for CEC appliance efficiency standards. Second, it requires the NRA, in collaborations with the CEC and DWR, to assess and report on opportunities to improve energy efficiency of the State Water Project.

According to the Author:

SB 49 is aimed at unleashing the power of aps and "smart" technology to improve energy efficiency and better integrate new resources into California's 21st century electricity grid by clarifying that the CEC can consider emissions reductions when setting energy efficiency standards, and directing the CEC to establish demand response standards for appliances. This bill also asks the CEC to explore opportunities to restore lost demand response capabilities within the State Water Project, which is one of California's largest energy users and has provided some level of demand response as an ancillary benefit to its water delivery for many years.

Arguments in Support:

With the growth of renewable energy, California's electrical grid experiences swings in generation requirements, known as the "duck curve". Some renewable generation is curtailed in the middle of the day when generation exceeds demand, while evening demand requires a steep ramp of non-renewable generation. Management of building electrical load can shift demand, such as water heating from peak to off-peak hours, helping absorb excess generation and reduce ramping and peak needs. Load management will also help the state achieve its GHG reduction goals cost-effectively by optimizing the use of emissions-free electricity that may otherwise be curtailed and reducing the need for fossil fuel peaker plants.

Load management technology exists today but is not widely adopted due to a lack of standards. It is difficult for manufacturers and utilities to invest in large-scale deployments when there are no standards or guidance to provide a clear market signal. Setting standard requirements for manufacturers and utilities will spur market adoption and unlock the potential for this technology to reduce Californians' utility bills, electrical system costs, and emissions.

Arguments in Opposition:

None received

FISCAL COMMENTS:

According to the Assembly Appropriations Committee:

1. To develop and adopt appliance standards, CEC would incur cost in the mid hundreds of thousands of dollars annually (Energy Resources Programs Account (ERPA)) to establish regulations via a CEC's rulemaking process. Once the CEC has established the standards, it would incur slightly higher annual cost, though still in the mid hundreds of thousands of dollars, to conduct investigations and enforce compliance with the standards and the regularly update the regulations. CEC has established through the budget process that its primary operating account, ERPA, has a structural deficit. While CEC is supportive of the appliance standards authorized by this bill, it cautions ERPA cannot absorb these costs.
2. One-time costs of about $150,000 to CEC (ERPA) and of about $90,000 to DWR (special fund) to develop the proposal to assess operational changes and structural upgrades to the State Water Project that will aid California in achieving its climate goals. The assessment itself would entail additional, and more substantial, costs.

VOTES:

SENATE FLOOR: 30-8-0

YES: Allen, Archuleta, Atkins, Beall, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Mitchell, Monning, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener, Wilk

NO: Bates, Borgeas, Grove, Jones, Moorlach, Morrell, Nielsen, Stone

ASM NATURAL RESOURCES: 8-2-1

YES: Friedman, Chau, Eggman, Cristina Garcia, Limón, McCarty, Muratsuchi, Mark Stone

NO: Mathis, Melendez

ABS, ABST OR NV: Flora

ASM UTILITIES AND ENERGY: 11-2-2

YES: Holden, Burke, Carrillo, Eggman, Cristina Garcia, Eduardo Garcia, Muratsuchi, Quirk, Reyes, Santiago, Ting

NO: Patterson, Cunningham

ABS, ABST OR NV: Chen, Mayes

ASM APPROPRIATIONS: 14-4-0

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Diep, Eggman, Gabriel, Eduardo Garcia, Maienschein, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Brough, Fong, Obernolte

UPDATED:

VERSION: September 5, 2019

CONSULTANT: Achintya Madduri / NAT. RES. / (916) 319-2092 FN: 0001974

SENATE THIRD READING

STR Bill Id:SB 49

Author:(Skinner)

As Amended Ver:August 15, 2019

Majority vote

SUMMARY:

Expands the California Energy Commission (CEC) authority to develop standards for appliances to facilitate the deployment of flexible demand (i.e., demand response) technologies, and requires that energy efficiency standards developed by CEC reduce greenhouse gas (GHG) emissions.

Requires the CEC and the Department of Water Resources (DWR) to jointly assess and provide recommendations regarding opportunities and constraints for potential operational and structural upgrades to the State Water Project to aid California in achieving its climate and energy goals.

Major Provisions

1. Requires the CEC to adopt standards for appliances to facilitate the deployment of flexible demand technologies, based on feasible and attainable efficiencies or feasible improvements that will enable appliance operations to be scheduled, shifted, or curtailed to reduce GHG emissions associated with electricity generation.
   1. Requires the standards become effective no sooner than one year after the date of their adoption or updating.
   2. Requires the CEC to consider the National Institute of Standards and Technology's reliability and cybersecurity protocols, or other cybersecurity protocols that are equally or more protective, and adopt, at a minimum, the North American Electric Reliability Council's Critical Infrastructure Protection standards.
   3. Requires the standards to be cost effective, and authorizes the CEC, when determining cost-effectiveness, to consider, as appropriate, the cost of flexible demand appliances compared to nonflexible demand appliances, the value of increased or decreased GHG emissions associated with the timing of an appliance's use, the life-cycle cost to the consumer from using a product that complies with the standard, and the life-cycle costs and benefits to consumers, including the ability to conserve energy and better align consumer and electric system demand.  
   4. Requires the CEC to consult with the Public Utilities Commission and load-serving entities to better align the standards with demand response programs administered by the state and load-serving entities and to incentivize the deployment of flexible demand appliances.
   5. Requires the standards to prioritize all of the following:
      1. Appliances that can more conveniently have their electrical demand controlled by load-management technology and third-party load-management programs.
      2. Appliances with load-management technology options that are readily available.
      3. Appliances that have a user-friendly interface and follow a straightforward setup and connection process, such as remote setup by means of an internet website or application.
      4. Appliances with load-management technology options that follow simple standards for third-party direct operation of the appliances.
      5. Appliances that are interoperable or open source.
2. Requires the CEC and DWR to jointly assess and provide recommendations regarding opportunities and constraints for potential operational and structural upgrades to the State Water Project to aid California in achieving its climate and energy goals.

COMMENTS:

This bill includes two distinct provisions. First, it requires the CEC to adopt "flexible demand" standards for appliances and adds reduction of GHG emissions as an overall objective for CEC appliance efficiency standards. Second, it requires the CEC and DWR to assess and report on opportunities to improve energy efficiency of the State Water Project.

According to the Author:

SB 49 is aimed at unleashing the power of aps and "smart" technology to improve energy efficiency and better integrate new resources into California's 21st century electricity grid by clarifying that the CEC can consider emissions reductions when setting energy efficiency standards, and directing the CEC to establish demand response standards for appliances. This bill also asks the CEC to explore opportunities to restore lost demand response capabilities within the State Water Project, which is one of California's largest energy users and has provided some level of demand response as an ancillary benefit to its water delivery for many years.

Arguments in Support:

With the growth of renewable energy, California's electrical grid experiences swings in generation requirements, known as the "duck curve". Some renewable generation is curtailed in the middle of the day when generation exceeds demand, while evening demand requires a steep ramp of non-renewable generation. Management of building electrical load can shift demand, such as water heating from peak to off-peak hours, helping absorb excess generation and reduce ramping and peak needs. Load management will also help the state achieve its GHG reduction goals cost-effectively by optimizing the use of emissions-free electricity that may otherwise be curtailed and reducing the need for fossil fuel peaker plants.

Load management technology exists today but is not widely adopted due to a lack of standards. It is difficult for manufacturers and utilities to invest in large-scale deployments when there are no standards or guidance to provide a clear market signal. Setting standard requirements for manufacturers and utilities will spur market adoption and unlock the potential for this technology to reduce Californians' utility bills, electrical system costs, and emissions.

Arguments in Opposition:

None received

FISCAL COMMENTS:

According to the Assembly Appropriations Committee:

1. To develop and adopt appliance standards, CEC would incur cost in the mid hundreds of thousands of dollars annually (Energy Resources Programs Account (ERPA)) to establish regulations via a CEC's rulemaking process. Once the CEC has established the standards, it would incur slightly higher annual cost, though still in the mid hundreds of thousands of dollars, to conduct investigations and enforce compliance with the standards and the regularly update the regulations.

CEC has established through the budget process that its primary operating account, ERPA, has a structural deficit. While CEC is supportive of the appliance standards authorized by this bill, it cautions ERPA cannot absorb these costs.

1. One-time costs of about $150,000 to CEC (ERPA) and of about $90,000 to DWR (special fund) to develop the proposal to assess operational changes and structural upgrades to the State Water Project that will aid California in achieving its climate goals. The assessment itself would entail additional, and more substantial, costs.

VOTES:

SENATE FLOOR: 30-8-0

YES: Allen, Archuleta, Atkins, Beall, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Mitchell, Monning, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener, Wilk

NO: Bates, Borgeas, Grove, Jones, Moorlach, Morrell, Nielsen, Stone

ASM NATURAL RESOURCES: 8-2-1

YES: Friedman, Chau, Eggman, Cristina Garcia, Limón, McCarty, Muratsuchi, Mark Stone

NO: Mathis, Melendez

ABS, ABST OR NV: Flora

ASM UTILITIES AND ENERGY: 11-2-2

YES: Holden, Burke, Carrillo, Eggman, Cristina Garcia, Eduardo Garcia, Muratsuchi, Quirk, Reyes, Santiago, Ting

NO: Patterson, Cunningham

ABS, ABST OR NV: Chen, Mayes

ASM APPROPRIATIONS: 14-4-0

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Diep, Eggman, Gabriel, Eduardo Garcia, Maienschein, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Brough, Fong, Obernolte

UPDATED:

VERSION: August 15, 2019

CONSULTANT: Achintya Madduri / NAT. RES. / (916) 319-2092 FN: 0001673

Date of Hearing: August 21, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 49

Author:(Skinner) – As Amended Ver:August 15, 2019

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

SUMMARY:

This bill has two, distinct provisions.

First, this bill allows the California Energy Commission (CEC) to adopt standards for appliances to facilitate deployment of “flexible demand technologies.”

Second, the bill requires CEC, in coordination with the Department of Water Resources (DWR), to develop a proposal to conduct an assessment of changes in operations and the structural upgrades needed for the State Water Resources Development System (the State Water Project) to restore discontinued capabilities and enable additional demand response and upgrades that will aid California in achieving its climate goals.

Relative to the first provision, this bill allows CEC to adopt standards for appliances to facilitate deployment of flexible demand technologies, that is, feasible and attainable efficiencies or feasible improvements that will enable appliance operations to be scheduled, shifted or curtailed to reduce emissions of greenhouse gases associated with electricity generation. The bill requires CEC’s standards to be cost-effective and allows CEC to consider, when determining the cost-effectiveness of a standard, as appropriate, the cost of flexible demand appliances compared to (a) nonflexible demand appliances, (b) the value of increased or decreased emissions of greenhouse gases associated with the timing of an appliance’s use, (c) the life-cycle cost to the consumer from using a product that complies with the standard and (d) the life-cycle costs and benefits to consumers, including the ability to conserve energy and better align consumer and electric system demand. 

FISCAL EFFECT:

1. To develop and adopt appliance standards, CEC would incur cost in the mid hundreds of thousands of dollars annually (Energy Resources Programs Account (ERPA)) to establish regulations via a CEC’s rulemaking process. Once the CEC has established the standards, it would incur slightly higher annual cost, though still in the mid hundreds of thousands of dollars, to conduct investigations and enforce compliance with the standards and the regularly update the regulations.

CEC has established through the budget process that its primary operating account, ERPA, has a structural deficit. While CEC is supportive of the appliance standards authorized by this bill, it cautions ERPA cannot absorb these costs.

1. One-time costs of about $150,000 to CEC (ERPA) and of about $90,000 to DWR (special fund) to develop the proposal to assess operational changes and structural upgrades to the State Water Project that will aid California in achieving its climate goals. The assessment itself would entail additional, and more substantial, costs.

COMMENTS:

1. Background and Purpose—CEC’s Energy Efficiency Standards. Existing law authorizes CEC to adopt standards for buildings and appliances to increase the efficiency in use of energy and water. This bill expands CEC’s authority to additionally authorize CEC to adopt standards for appliances to facilitate deployment of flexible demand technologies that enable appliance operations to be scheduled, shifted or curtailed to reduce emissions of greenhouse gases associated with electricity generation.

In one sense, this bill builds upon CEC’s existing authority, processes and experience. However, the authority this bill gives to CEC expands beyond CEC’s existing authority in two significant ways. First, it explicitly allows CEC to adopt standards with the goal of reducing greenhouse gas emissions, rather than limiting CEC to attempts to increase the efficiency of use of energy and water.

In addition, the bill limits CEC’s authority to adopt only those standards that are cost effect, consistent with statute governing CEC’s authority to adopt building and appliance energy efficiency standards. However, existing statute limits CEC’s consideration of cost-effectiveness to the value of the water or energy saved, impact on product efficacy for the consumer and the life-cycle cost of complying with the standard. In contrast, this bill, in relation to CEC’s flexible demand technologies standards only, directs CEC to consider (a) the cost of flexible demand appliances compared to nonflexible demand appliances, (b) the value of increased or decreased emissions of greenhouse gases associated with the timing of an appliance’s use, (c) the life-cycle cost to the consumer from using a product that complies with the standard and (d) the life-cycle costs and benefits to consumers, including the ability to conserve energy and better align consumer and electric system demand.

This is a more expansive view of cost-effectiveness, in that it tasks CEC with thinking about relative costs not directly experienced by the consumer of the appliance—emissions of greenhouse gases. As the author makes clear, this expansion is her intent:

SB 49 is aimed at unleashing the power of aps and “smart” technology to improve energy efficiency, cut climate-polluting emissions, and better integrate renewable energy into California’s electricity grid by clarifying that the California Energy Commission (CEC) can consider greenhouse gas emissions (GHGs) reductions and electricity demand management when it sets appliance and building code standards.

If this bill becomes law, the Legislature might want to consider whether it is appropriate to similarly expand CEC’s consideration of cost-effectiveness when applied to building and appliance energy and water efficiency standards.

1. Background and Purpose—Proposal to Assess the State Water Project. This proposal seems to have come from consideration of the bill by the Assembly Committee on Utilities and Energy (U&E). According to that committee’s analysis of this bill:

California’s State Water Project (SWP) is the largest state-owned water conveyance and power generation system in the United States, serving over 27 million people and 750,000 acres of farmland. The SWP has approximately 2,600 Megawatts (MW) of water pumping capacity and 1,600 MW of energy generating capacity. It is the third largest producer of hydropower in California, producing approximately 14% of the State’s hydroelectricity, and self generates, on average, about 60% of its own energy needs. In fact, the SWP is the largest single participant in the California Independent System Operator’s demand response program. In 2017 and 2018, the SWP has consistently provided 200 MW of Demand Response into the CAISO market. However, during the California energy crisis, the SWP provided as much as 800 MW of Demand Response. A reduction of 600 MW demand response is a significant loss of capability on the system. The Department of Water Resources is focused on their core mission of providing reliable and safe water supply to much of California. The full attributes of the SWP to assist California in achieving our climate goals is yet to be identified and realized. The CEC along with the Department of Water Resources have comprehensive understanding of the interdependency of water and energy. The development of a proposal to conduct an assessment is an initial step towards undertaking a comprehensive analysis of the modifications, which would be necessary for the SWP to increase participation in demand response and other system enhancements to the benefit of the SWP user while helping California achieve our climate goals.

U&E did not amend the bill to include the language to require CEC and DWR to develop the proposal, though the committee analysis suggests amendments to the bill that are essentially the same as the relevant language now included in the bill. Subsequent to U&E’s passage of the bill, the author amended it to include the assessment language.

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

Date of Hearing: June 24, 2019

ASSEMBLY COMMITTEE ON NATURAL RESOURCES

Laura Friedman, Chair

SBPCA Bill Id:SB 49

Author:(Skinner) – As Amended Ver:May 7, 2019

SENATE VOTE: 30-8

SUBJECT: Energy efficiency

SUMMARY: Expands the California Energy Commission (CEC) authority to develop standards for appliances to facilitate the deployment of flexible demand (i.e., demand response) technologies, and requires that energy efficiency standards developed by CEC reduce greenhouse gas (GHG) emissions.

EXISTING LAW:

1. Requires CEC to establish building design and construction standards that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings.
2. Requires CEC’s building efficiency standards to be cost-effective when taken in their entirety and amortized over the economic life of the structure compared with historic practice. When determining cost-effectiveness, the CEC must consider the value of the water or energy saved, impact on product efficacy for the consumer, the life-cycle cost of complying with the standard, and other relevant factors, including, but not limited to, the standards’ cost on household costs, the total statewide costs and benefits of the standard over its lifetime, economic impacts on California businesses, and alternative approaches and their associated costs.
3. Requires CEC to establish appliance efficiency standards based on a reasonable use pattern. CEC may prescribe other cost-effective measures, including incentive programs, fleet averaging, energy and water consumption labeling not preempted by federal labeling law, and consumer education programs, to promote the use of energy and water efficient appliances whose use requires a significant amount of energy or water use on a statewide basis. An appliance manufactured on or after the effective date of these standards may not be offered for sale in California unless it complies with the standards.
4. Authorizes CEC to establish an administrative enforcement process for appliance efficiency violations and allows CEC to assess a civil penalty up to $2,500 for each violation. Penalties assessed for appliance efficiency violations are deposited into the CEC’s Appliance Efficiency Enforcement Subaccount and fund the CEC’s appliance efficiency enforcement activities upon appropriation by the Legislature.
5. Requires the Air Resources Board (ARB), pursuant to California Global Warming Solutions Act of 2006 [AB 32 (Núñez), Chapter 488, Statutes of 2006], to adopt a statewide GHG emissions limit equivalent to 1990 levels by 2020 and adopt regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. AB 32 authorizes ARB to permit the use of market-based compliance mechanisms (i.e. cap-and-trade) to comply with GHG reduction regulations once specified conditions are met. Requires ARB to approve a statewide GHG emissions limit equivalent to 40% below the 1990 level by 2030.
6. Establishes a Renewable Portfolio Standard (RPS) target that requires retail sellers and publicly owned utilities (POUs) to procure 60% of their retail electricity sales from eligible renewable energy resources by 2030 and thereafter, including interim targets of 33% by 2020, 44% by 2024, and 52% by 2027.
7. Establishes state policy that RPS-eligible and zero-carbon resources supply 100% of all retail sales of electricity to California end-use customers no later than December 31, 2045, and directs the Public Utilities Commission (PUC), CEC, and the ARB to incorporate this policy into all relevant planning and programs.

THIS BILL:

1. Requires the CEC to reduce the GHG emissions associated with energy consumption when carrying out its duties pursuant to Section 25402 of the Public Resources Code (PRC), including developing and promulgating appliance and building standards.
2. Requires the CEC to establish, and periodically update, regulations and standards to facilitate the deployment of flexible-demand appliances that can allow for a building’s load profile to be scheduled, shifted, or curtailed and thereby reduce GHG emissions from electricity use.
3. Requires the CEC to consider the life-cycle costs, including the avoided electricity system costs, of flexible demand appliances to ensure that the regulations and standards are cost-effective for consumers to purchase, maintain, and meaningfully affect GHG emissions.
4. Allows the CEC to consider the social cost of GHG emissions after making a finding to the Legislature that demonstrates that flexible demand appliance standards that incorporate such a cost do not unreasonably impact the ability of Californians to purchase compliant appliances.
5. Extends the authority of the CEC to assess enforcement penalties to flexible-demand appliance regulations.

FISCAL EFFECT: According to the Senate Appropriations Committee, this bill has ongoing special fund costs (Energy Resources Program Account) of $600,000 annually for the CEC to develop, update, and enforce flexible demand appliance standards.

COMMENTS:

1. Author’s statement:

To implement SB 100, California will need to integrate more renewable resources into the grid that produce power only at certain times of the day – like solar and wind. California still uses fossil fuel – mostly natural gas – to provide energy when demand is highest and renewable resources are not able to produce. This means energy providers often have to build twice – building renewable energy facilities that provide power during the day and using natural gas facilities to provide energy at night when energy demand is high. The cost of double-building is passed on to the ratepayer.

To avoid the ratepayer cost of double-building and still keep the lights on, California needs to do two things. First, California needs to reduce unnecessary energy use. And second, California needs to better match the supply of energy (from solar and wind) with the demand for energy (coming from your plug, your fridge, or your electric car). Clarifying the [CEC’s] authority to consider GHGs when setting appliance and building standards, and directing CEC to use this authority to set standards, will ensure that the state is making progress toward better and more cost-effectively integrating renewable energy into the grid.

1. California appliance and building efficiency standards. The CEC is required to promulgate energy efficiency and conservation standards for appliances and buildings pursuant to the Warren-Alquist Act.

For an appliance to be sold or offered for sale in California, it must be certified to the CEC which then allows it to appear on the publicly accessible "Appliance Efficiency Database." Certifying an appliance requires manufacturers to test an appliance's performance and submit the data collected to the CEC's Appliance Efficiency Program. A regulated appliance that is not certified cannot be legally sold or offered for sale in the state of California.

The California Energy Code (California Code of Regulations, Title 24, Part 6) contains energy conservation standards applicable to most residential and nonresidential buildings throughout California, including schools. The standards are periodically updated by the CEC to allow consideration and possible incorporation of new energy efficiency technologies and methods.

The building standards contain energy and water efficiency requirements (and indoor air quality requirements) for newly constructed buildings, additions to existing buildings, and alterations to existing buildings. The standards are designed to reduce wasteful, uneconomic, inefficient or unnecessary consumption of energy, and enhance outdoor and indoor environmental quality. Standards ensure that builders use the most energy efficient and energy conserving technologies and construction practices, while being cost effective for homeowners over the 30-year lifespan of a building.

Single-family homes built with the 2019 building standards will use about 7 percent less energy due to energy efficiency measures versus those built under the 2016 standards. On average, the 2019 standards will increase the cost of constructing a new home by about $9,500 but will save $19,000 in energy and maintenance costs over 30 years. Based on a 30-year mortgage, the CEC estimates that the standards will add about $40 per month for the average home, but save consumers $80 per month on heating, cooling and lighting bills.

By requiring the CEC to reduce the emission of greenhouse gases associated with energy consumption when carrying out the duties outlined in PRC Section 25402, this bill may provide authority to the CEC to develop and promulgate appliance and building standards that reduce GHG emissions associated with energy consumption.

1. Managing renewable generation. The CEC estimates that 34% of California’s retail electricity sales were from renewable sources in 2018, which is already ahead of the 2020 RPS goal of 33%. Renewable generation is set to continue to grow as the state advances to the 2030 RPS target of 60%. The rapid growth in renewable generation, particularly solar generation, has a significant impact on California’s generation profile. The daily solar generation is tied to the diurnal solar cycle, which peaks in the middle of the day, and is accompanied by two periods of rapidly increasing the decreasing generation. Electricity demand peaks in the evening as ratepayers return home and increase their electricity use. The interplay between the solar (and wind) generation profile and the demand lends a shape to the net electricity load (load minus solar and wind generation) that has been referred to as the “duck curve.”

The California Independent System Operator (ISO) has recognized the need for additional flexible dispatchable resources to accommodate the morning and late-afternoon ramps in net electricity load. There are a variety of options that can be utilized to address the technical and market challenges associated with managing high renewable penetration. Fundamentally, greater diversity of resources—both in geography and technology—can reduce the coincidence of production patterns. In addition, multiple recent studies^{[1], [2]} have found that over-building solar photovoltaic (PV) generation and “supply-shaping” through curtailment of PV oversupply is possibly the most cost-effective way to reduce electricity prices in a high-renewable grid. The steady price decline of solar PV has the potential to reduce the amount of energy storage needed to keep electricity rates low.

1. Demand response (DR) and load management technologies. While the future of high-renewable grids might include greater curtailment or more cost-effective energy storage technologies, currently grid-operators dispatch peaking power plants, which have significant GHG emissions associated with them, to balance the net load and meet the ramping requirements associated with the “duck curve”. DR offers a sensible pathway to use the already existing energy storage capacity of heating, ventilation, and air conditioning (HVAC) systems and other dispatchable appliances to shift and shape the energy use of ratepayers. HVAC systems and appliances such as water heaters and refrigerators have an inherent “thermal mass” associated with them. This thermal mass (e.g. the air inside the building or refrigerator, or the water in a water heater) can be used as an energy storage mechanism (e.g. pre-cooling/heating when there is more renewable generation on the grid). This principle is applicable to other appliances where the time-of-use can be deferred without significant impact to the customer (e.g. washing machines, dish washers, electric vehicle charging, etc.).

The CEC staff has indicated the significant potential to achieve GHG emission reductions by setting appliance standards that require manufacturers to include: DR capabilities for their certified appliances; and manufacturer-default appliance settings that will maximize emission reductions. While individual customers could participate in DR markets through appliances that are smart-meter compatible, not all customers with smart-meters have access to time-of-use rates that would achieve significant GHG reductions. The rates available to residential customers are not the same as the wholesale market rates, which include the complete information about available grid resources. However, retail customers can be aggregated by third-party DR aggregators (e.g., OhmConnect, one of the supporters of this bill) who can bid the aggregated DR load into wholesale markets to provide more significant cost-savings for individual customers. CEC staff has indicated that, in considering the life-cycle benefits of DR technologies, they will account for the potential of aggregated DR loads and consider: the ratepayer benefits of avoided utility investments in meeting the 2030 RPS goals; and the reduced need for additional fossil fuel generation.

1. Double referral. This bill was also referred to the Assembly Utilities and Energy Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

California Efficiency + Demand Management Council 
East Bay Community Energy 
Natural Resources Defense Council
OhmConnect Incorporated

Opposition

None

Analysis Prepared by: Achintya Madduri / NAT. RES. /

1. Overbuilding & curtailment: The cost-effective enablers of firm PV generation, Perez, Marc, et. al., Solar Energy, March 2019, Vol. 180, Pg. 412-422, https://doi.org/10.1016/j.solener.2018.12.074 ↑

2. Minnesota Solar Potential Analysis Report, November 15, 2018, http://mnsolarpathways.org/spa/ ↑

 THIRD READING  

Bill No: SB 49

Author: Skinner (D)

Amended: 5/7/19

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 11-1, 4/10/19

AYES: Hueso, Bradford, Chang, Dodd, Hertzberg, Hill, McGuire, Rubio, Skinner, Stern, Wiener

NOES: Stone

NO VOTE RECORDED: Moorlach

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-1, 4/24/19

AYES: Allen, Hill, Skinner, Stern, Wieckowski

NOES: Bates

NO VOTE RECORDED: Stone

SENATE APPROPRIATIONS COMMITTEE: 4-2, 5/16/19

AYES: Portantino, Bradford, Hill, Wieckowski

NOES: Bates, Jones

SUBJECT: Energy efficiency

SOURCE: Author

DIGEST:

This bill expands and clarifies the California Energy Commission’s (CEC’s) appliance energy efficiency regulatory authority to allow the CEC to establish appliance efficiency standards that facilitate the deployment of flexible demand technologies.

ANALYSIS:

Existing law:

1. Requires the CEC to establish building and appliance standards to reduce the wasteful, uneconomic, inefficient, or unnecessary consumption of energy, including the energy associated with the use of water. (Public Resources Code §25402)
2. Requires the CEC to establish appliance efficiency standards based on a reasonable use pattern. The CEC may prescribe other cost-effective measures, including incentive programs, fleet averaging, energy and water consumption labeling not preempted by federal labeling law, and consumer education programs, to promote the use of energy and water efficient appliances whose use requires a significant amount of energy or water use on a statewide basis. An appliance manufactured on or after the effective date of these standards may not be offered for sale in California unless it complies with the standards. (Public Resources Code §25402(c)(1))
3. Prohibits appliance standards from resulting in any added total costs for consumers over the designed life of the appliances concerned. When determining cost-effectiveness, the CEC must consider the value of the water or energy saved, impact on product efficacy for the consumer, and the life cycle cost to the consumer of complying with the standard. The CEC must consider other relevant factors, including, but not limited to, the impact on housing costs, the total statewide costs and benefits of the standard over its lifetime, economic impact on California businesses, and alternative approaches and their associated costs. (Public Resources Code §25402(c)(1)(C))
4. Authorizes the CEC to adopt regulations establishing an administrative enforcement process for appliance efficiency violations and allows the CEC to assess a civil money penalty for violations up to $2,500 for each violation. Penalties assessed for appliance efficiency violations are deposited into the CEC’s Appliance Efficiency Enforcement Subaccount and fund the CEC’s appliance efficiency enforcement activities upon appropriation by the Legislature. (Public Resources Code §25402.11)

This bill:

1. Expands the purpose the CEC’s building and appliance efficiency standards to the reduction of emissions of greenhouse gases (GHG) associated with energy consumption.
2. Expands the CEC’s appliance efficiency regulatory authority by requiring the CEC to establish and periodically update standards for appliances to facilitate to promote the use of demand-flexible appliances, the use of which, has an effect on a building’s load profile, as determined by the CEC. These regulations can include other cost-effective measures, including, but not limited to the following:
   1. Incentive programs
   2. Fleet averaging
   3. Labeling
   4. Consumer education programs
3. Requires flexible demand appliance standards to be based on feasible and attainable efficiencies or feasible improvements enabling appliance operations to be scheduled, shifted, or curtailed to reduce GHG emissions associated with electricity generation.
4. Establishes new cost-effectiveness requirements for flexible demand appliance standards that allow the CEC to consider the cost of demand responsive appliances relative to non-responsive appliances, the value of GHG emissions associated with the timing of an appliance’s use, the life cycle cost to the consumer of a compliant product, and benefits of avoided electricity system costs. The CEC may consider the social cost of GHG emissions as part of the flexible demand appliance standards after first making a finding, submitted to the Legislature, demonstrating that the standards do not unreasonably or unnecessarily impact the ability of Californians to purchase compliant appliances. The CEC must also consider the impact on housing costs, the total statewide costs and benefits of the standard over its lifetime, economic impact on California businesses, and alternative approaches and their associated costs.
5. Authorizes the CEC to use its appliance standard enforcement authority to enforce flexible demand appliance standards adopted pursuant to this bill.

Background

Demand response and its potential to reduce greenhouse gas emissions. Demand response is a resource enabling electricity customers to reduce or shift their electricity usage in response to a price signal, a financial incentive, an environmental condition, or a reliability signal. Demand response has the capacity to reduce GHG emissions and increase ratepayer savings by lowering, shifting, and shaping demand for electricity at critical times in ways that can defer the need for additional fossil fuel generation, electricity infrastructure upgrades, and excess resource procurement. The load management capabilities of demand response resources can also help customers shift portions of their electricity use to times of the day when retail prices for electricity are lower, which can help lower a customer’s electricity bill.

Demand response is a critical component of facilitating building electrification in a manner that does not result in emissions shifts from the building sector to the electricity sector. In the 2018 update to the Integrated Energy Policy Report (IEPR), the CEC noted that building electrification by itself is not sufficient to lower GHG emissions from buildings in a way that is meaningful for California’s climate goals. Without additional planning to incorporate mechanisms to ensure that electricity use does not increase during peak demand periods, electrification could also increase demand for electricity at times which natural gas generation supplies a larger portion of the total electricity mix. The IEPR states: “Electrification needs to be coupled with strategies such as time-of-use rates and demand response to shift the timing of energy consumption to maximize the use of renewable energy and achieve zero-emission buildings.”

Demand response systems can be especially helpful in buildings with large energy consumption, including large residential multifamily and nonresidential commercial and industrial facilities. Demand responsive systems can automate energy efficiency systems such as lighting and heating, ventilation and air conditioning controls to modify energy use of these systems in response to grid needs and price signals. Even in smaller residential buildings, demand responsive smart thermostats and appliances that communicate with the thermostat can help reduce energy consumption in response to price signals.

The CEC’s appliance standards authority. This bill expands the purpose of the CEC’s authority to establish building and appliance efficiency standards to include reductions in GHG emissions. The CEC has the authority to establish building and appliance efficiency standards for the purpose of reducing energy consumption. Existing law authorizes the CEC to establish energy efficiency standards for buildings that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings. The CEC may also separately establish regulations that set a minimum operating efficiency standards for appliances to promote the use of energy and water efficient appliances that consume a significant amount of energy or water on a statewide basis. While a demand responsive appliance may not reduce overall energy use, it can reduce GHG emissions and provide cost savings associated with water and energy use by allowing the consumer to schedule an electric appliance’s operation for times when the energy supply is cleaner and cheaper.

Cost effectiveness requirements. This bill establishes cost-effectiveness criteria for flexible demand appliance standards that differ from cost-effectiveness requirements for other appliance standards in several ways. This bill allows the CEC to consider the cost of demand responsive appliances relative to non-responsive appliances, the value of GHG emissions associated with the timing of an appliance’s use, the life cycle cost to the consumer of a compliant product, and benefits of avoided electricity system costs when evaluating whether a standard is cost effective. This bill also allows the CEC to consider the social cost of GHG emissions after submitting a finding to the Legislature that demonstrates that the standards do not unreasonably or unnecessarily impact the ability of Californians to purchase compliant appliances.

Currently, the CEC uses social costs of emissions as part of its methodology for valuing energy end uses in buildings. The CEC applies this cost to hourly use of natural gas appliances as well as the electric generation costs for electric appliances in buildings. However, the CEC only uses the social cost factor for building standards and does not include it as part of appliance cost-effectiveness evaluations. The CEC may be using a social cost factor similar to one developed by the California Public Utilities Commission (CPUC); however, the CPUC is piloting the use of a methodology accounting for the social cost of GHG emissions and does not currently use these emissions social cost calculations for decision-making purposes. Some of the appliances for which the CEC could promulgate flexible demand standards are necessary for the health and safety of Californians. As a result, ensuring that compliant appliances are accessible is critical.

To the extent that a demand responsive appliance is sufficiently cost effective to produce savings for consumers, it will provide these savings in a manner that differs from those of non-responsive appliances. While non-responsive appliances may decrease the total energy consumption based on operating efficiencies, demand responsive appliances can provide savings by shifting and shaping electricity use to match utility price signals.

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

According to the Senate Appropriations Committee, ongoing special fund costs (Energy Resources Program Account) of $600,000 annually for the CEC to develop, update, and enforce flexible demand appliance standards.

SUPPORT: (Verified 5/16/19)

California Efficiency + Demand Management

East Bay Community Energy

Natural Resources Defense Council

OhmConnect

OPPOSITION: (Verified 5/16/19)

None received

ARGUMENTS IN SUPPORT: According to the author:

To implement SB 100 (De León, 2018), California will need to integrate more renewable resources into the grid that produce power only at certain times of the day – like solar and wind. California still uses fossil fuel – mostly natural gas – to provide energy when demand is highest and renewable resources are not able to produce. This means energy providers often have to build twice – building renewable energy facilities that provide power during the day and using natural gas facilities to provide energy at night when energy demand is high. The cost of double-building is passed on to the ratepayer.

To avoid the ratepayer cost of double-building and still keep the lights on, California needs to do two things. First, California needs to reduce unnecessary energy use. And second, California needs to better match the supply of energy (from solar and wind) with the demand for energy (coming from your plug, your fridge, or your electric car). Clarifying the CEC’s authority to consider GHGs when setting appliance standards, and directing the CEC to use this authority to set standards, will ensure that the state is making progress toward better and more cost-effectively integrating renewable energy into the grid.

Prepared by: Sarah Smith / E., U., & C. / (916) 651-4107

5/18/19 12:00:33

**** END ****

 THIRD READING  

Bill No: SB 49

Author: Skinner (D)

Amended: 5/7/19

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 11-1, 4/10/19

AYES: Hueso, Bradford, Chang, Dodd, Hertzberg, Hill, McGuire, Rubio, Skinner, Stern, Wiener

NOES: Stone

NO VOTE RECORDED: Moorlach

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-1, 4/24/19

AYES: Allen, Hill, Skinner, Stern, Wieckowski

NOES: Bates

NO VOTE RECORDED: Stone

SENATE APPROPRIATIONS COMMITTEE: 4-2, 5/16/19

AYES: Portantino, Bradford, Hill, Wieckowski

NOES: Bates, Jones

SUBJECT: Energy efficiency

SOURCE: Author

DIGEST:

This bill expands and clarifies the California Energy Commission’s (CEC’s) appliance energy efficiency regulatory authority to allow the CEC to establish appliance efficiency standards that facilitate the deployment of flexible demand technologies.

ANALYSIS:

Existing law:

1. Requires the CEC to establish building and appliance standards to reduce the wasteful, uneconomic, inefficient, or unnecessary consumption of energy, including the energy associated with the use of water. (Public Resources Code §25402)
2. Requires the CEC to establish appliance efficiency standards based on a reasonable use pattern. The CEC may prescribe other cost-effective measures, including incentive programs, fleet averaging, energy and water consumption labeling not preempted by federal labeling law, and consumer education programs, to promote the use of energy and water efficient appliances whose use requires a significant amount of energy or water use on a statewide basis. An appliance manufactured on or after the effective date of these standards may not be offered for sale in California unless it complies with the standards. (Public Resources Code §25402(c)(1))
3. Prohibits appliance standards from resulting in any added total costs for consumers over the designed life of the appliances concerned. When determining cost-effectiveness, the CEC must consider the value of the water or energy saved, impact on product efficacy for the consumer, and the life cycle cost to the consumer of complying with the standard. The CEC must consider other relevant factors, including, but not limited to, the impact on housing costs, the total statewide costs and benefits of the standard over its lifetime, economic impact on California businesses, and alternative approaches and their associated costs. (Public Resources Code §25402(c)(1)(C))
4. Authorizes the CEC to adopt regulations establishing an administrative enforcement process for appliance efficiency violations and allows the CEC to assess a civil money penalty for violations up to $2,500 for each violation. Penalties assessed for appliance efficiency violations are deposited into the CEC’s Appliance Efficiency Enforcement Subaccount and fund the CEC’s appliance efficiency enforcement activities upon appropriation by the Legislature. (Public Resources Code §25402.11)

This bill:

1. Expands the purpose the CEC’s building and appliance efficiency standards to the reduction of emissions of greenhouse gases (GHG) associated with energy consumption.
2. Expands the CEC’s appliance efficiency regulatory authority by requiring the CEC to establish and periodically update standards for appliances to facilitate to promote the use of demand-flexible appliances, the use of which, has an effect on a building’s load profile, as determined by the CEC. These regulations can include other cost-effective measures, including, but not limited to the following:
   1. Incentive programs
   2. Fleet averaging
   3. Labeling
   4. Consumer education programs
3. Requires flexible demand appliance standards to be based on feasible and attainable efficiencies or feasible improvements enabling appliance operations to be scheduled, shifted, or curtailed to reduce GHG emissions associated with electricity generation.
4. Establishes new cost-effectiveness requirements for flexible demand appliance standards that allow the CEC to consider the cost of demand responsive appliances relative to non-responsive appliances, the value of GHG emissions associated with the timing of an appliance’s use, the life cycle cost to the consumer of a compliant product, and benefits of avoided electricity system costs. The CEC may consider the social cost of GHG emissions as part of the flexible demand appliance standards after first making a finding, submitted to the Legislature, demonstrating that the standards do not unreasonably or unnecessarily impact the ability of Californians to purchase compliant appliances. The CEC must also consider the impact on housing costs, the total statewide costs and benefits of the standard over its lifetime, economic impact on California businesses, and alternative approaches and their associated costs.
5. Authorizes the CEC to use its appliance standard enforcement authority to enforce flexible demand appliance standards adopted pursuant to this bill.

Background

Demand response and its potential to reduce greenhouse gas emissions. Demand response is a resource enabling electricity customers to reduce or shift their electricity usage in response to a price signal, a financial incentive, an environmental condition, or a reliability signal. Demand response has the capacity to reduce GHG emissions and increase ratepayer savings by lowering, shifting, and shaping demand for electricity at critical times in ways that can defer the need for additional fossil fuel generation, electricity infrastructure upgrades, and excess resource procurement. The load management capabilities of demand response resources can also help customers shift portions of their electricity use to times of the day when retail prices for electricity are lower, which can help lower a customer’s electricity bill.

Demand response is a critical component of facilitating building electrification in a manner that does not result in emissions shifts from the building sector to the electricity sector. In the 2018 update to the Integrated Energy Policy Report (IEPR), the CEC noted that building electrification by itself is not sufficient to lower GHG emissions from buildings in a way that is meaningful for California’s climate goals. Without additional planning to incorporate mechanisms to ensure that electricity use does not increase during peak demand periods, electrification could also increase demand for electricity at times which natural gas generation supplies a larger portion of the total electricity mix. The IEPR states: “Electrification needs to be coupled with strategies such as time-of-use rates and demand response to shift the timing of energy consumption to maximize the use of renewable energy and achieve zero-emission buildings.”

Demand response systems can be especially helpful in buildings with large energy consumption, including large residential multifamily and nonresidential commercial and industrial facilities. Demand responsive systems can automate energy efficiency systems such as lighting and heating, ventilation and air conditioning controls to modify energy use of these systems in response to grid needs and price signals. Even in smaller residential buildings, demand responsive smart thermostats and appliances that communicate with the thermostat can help reduce energy consumption in response to price signals.

The CEC’s appliance standards authority. This bill expands the purpose of the CEC’s authority to establish building and appliance efficiency standards to include reductions in GHG emissions. The CEC has the authority to establish building and appliance efficiency standards for the purpose of reducing energy consumption. Existing law authorizes the CEC to establish energy efficiency standards for buildings that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings. The CEC may also separately establish regulations that set a minimum operating efficiency standards for appliances to promote the use of energy and water efficient appliances that consume a significant amount of energy or water on a statewide basis. While a demand responsive appliance may not reduce overall energy use, it can reduce GHG emissions and provide cost savings associated with water and energy use by allowing the consumer to schedule an electric appliance’s operation for times when the energy supply is cleaner and cheaper.

Cost effectiveness requirements. This bill establishes cost-effectiveness criteria for flexible demand appliance standards that differ from cost-effectiveness requirements for other appliance standards in several ways. This bill allows the CEC to consider the cost of demand responsive appliances relative to non-responsive appliances, the value of GHG emissions associated with the timing of an appliance’s use, the life cycle cost to the consumer of a compliant product, and benefits of avoided electricity system costs when evaluating whether a standard is cost effective. This bill also allows the CEC to consider the social cost of GHG emissions after submitting a finding to the Legislature that demonstrates that the standards do not unreasonably or unnecessarily impact the ability of Californians to purchase compliant appliances.

Currently, the CEC uses social costs of emissions as part of its methodology for valuing energy end uses in buildings. The CEC applies this cost to hourly use of natural gas appliances as well as the electric generation costs for electric appliances in buildings. However, the CEC only uses the social cost factor for building standards and does not include it as part of appliance cost-effectiveness evaluations. The CEC may be using a social cost factor similar to one developed by the California Public Utilities Commission (CPUC); however, the CPUC is piloting the use of a methodology accounting for the social cost of GHG emissions and does not currently use these emissions social cost calculations for decision-making purposes. Some of the appliances for which the CEC could promulgate flexible demand standards are necessary for the health and safety of Californians. As a result, ensuring that compliant appliances are accessible is critical.

To the extent that a demand responsive appliance is sufficiently cost effective to produce savings for consumers, it will provide these savings in a manner that differs from those of non-responsive appliances. While non-responsive appliances may decrease the total energy consumption based on operating efficiencies, demand responsive appliances can provide savings by shifting and shaping electricity use to match utility price signals.

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

According to the Senate Appropriations Committee, ongoing special fund costs (Energy Resources Program Account) of $600,000 annually for the CEC to develop, update, and enforce flexible demand appliance standards.

SUPPORT: (Verified 5/16/19)

California Efficiency + Demand Management

East Bay Community Energy

Natural Resources Defense Council

OhmConnect

OPPOSITION: (Verified 5/16/19)

None received

ARGUMENTS IN SUPPORT: According to the author:

To implement SB 100 (De León, 2018), California will need to integrate more renewable resources into the grid that produce power only at certain times of the day – like solar and wind. California still uses fossil fuel – mostly natural gas – to provide energy when demand is highest and renewable resources are not able to produce. This means energy providers often have to build twice – building renewable energy facilities that provide power during the day and using natural gas facilities to provide energy at night when energy demand is high. The cost of double-building is passed on to the ratepayer.

To avoid the ratepayer cost of double-building and still keep the lights on, California needs to do two things. First, California needs to reduce unnecessary energy use. And second, California needs to better match the supply of energy (from solar and wind) with the demand for energy (coming from your plug, your fridge, or your electric car). Clarifying the CEC’s authority to consider GHGs when setting appliance standards, and directing the CEC to use this authority to set standards, will ensure that the state is making progress toward better and more cost-effectively integrating renewable energy into the grid.

Prepared by: Sarah Smith / E., U., & C. / (916) 651-4107

5/18/19 12:05:18

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SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 49 (Skinner) - Energy efficiency

Bill Summary:

This bill would require the California Energy Commission (CEC) to develop standards for appliances to facilitate the deployment of flexible demand technologies, and also require that energy efficiency standards developed by CEC reduce greenhouse gas (GHG) emissions.

Fiscal Impact:

Ongoing special fund costs (Energy Resources Program Account) of $600,000 annually for the CEC to develop, update, and enforce flexible demand appliance standards.

Background:

Current law requires the CEC to establish building design and construction standards that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings. The standards must be be cost-effective when taken in their entirety and amortized over the economic life of the structure compared with historic practice. When determining cost-effectiveness, the CEC must consider the value of the water or energy saved, impact on product efficacy for the consumer, and the life-cycle cost of complying with the standard. The CEC must consider other relevant factors, including, but not limited to the standards’ cost on house costs, the total statewide costs and benefits of the standard over its lifetime, economic impacts on California businesses, and alternative approaches and their associated costs.

CEC is also required to establish appliance efficiency standards based on a reasonable use pattern. The CEC may prescribe other cost-effective measures, including incentive programs, fleet averaging, energy and water consumption labeling not preempted by federal labeling law, and consumer education programs, to promote the use of energy and water efficient appliances whose use requires a significant amount of energy or water use on a statewide basis. An appliance manufactured on or after the effective date of these standards may not be offered for sale in California unless it complies with the standards.

CEC is authorized to adopt regulations establishing an administrative enforcement process for appliance efficiency violations and allows the CEC to assess a civil money penalty for violations up to $2,500 for each violation. Penalties assessed for appliance efficiency violations are deposited into the CEC’s Appliance Efficiency Enforcement Subaccount and fund the CEC’s appliance efficiency enforcement activities upon appropriation by the Legislature.

Proposed Law:

This bill would require CEC to prescribe, by regulation, standards for appliances to facilitate the deployment of flexible demand technologies. The bill would also require any energy efficiency standards developed by CEC, including appliance efficiency standards, should also reduce GHG emissions associated with unnecessary energy consumption. The bill would authorize the commission to establish an administrative enforcement process to enforce the standards for appliances to facilitate the deployment of flexible demand technologies and to assess an administrative civil penalty not to exceed $2,500 for each violation.

Staff Comments:

According to CEC, this bill assigns new duties to the commission beyond current legislative requirements, resulting in the need for additional staff. Specifically, CEC estimated additional staff at around $600,000 annually to develop, update, and enforce flexible demand appliance standards. Activities would involve administering the rulemaking process, determining the appropriate analysis inputs, running the model, and vetting the results. CEC identified that funding for implementing this bill will come from its primary operating account, the Energy Resources Program Account, which is currently in a structural deficit and cannot absorb these costs.

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SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Allen, Chair

2019 - 2020 Regular

Bill No: SB 49

SUBJECT: Energy efficiency

DIGEST: This bill tasks the California Energy Commission (CEC) with assessing and adopting regulations, including but not limited to specified policies, pertaining to demand response in order to reduce wasteful energy consumption and associated greenhouse gas (GHG) emissions.

ANALYSIS:

Existing law:

1. Requires the CEC to establish building design and construction standards that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings. The CEC must periodically update the standards. (Public Resources Code §25402(a)(1))
2. Requires the CEC’s building efficiency standards to be cost-effective when taken in their entirety and amortized over the economic life of the structure compared with historic practice. When determining cost-effectiveness, the CEC must consider the value of the water or energy saved, impact on product efficacy for the consumer, and the life-cycle cost of complying with the standard. The CEC must consider other relevant factors, including, but not limited to the standards’ cost on house costs, the total statewide costs and benefits of the standard over its lifetime, economic impacts on California businesses, and alternative approaches and their associated costs. (PRC §25402(b)(3))
   
3. Requires the CEC to establish appliance efficiency standards based on a reasonable use pattern. The CEC may prescribe other cost-effective measures, including incentive programs, fleet averaging, energy and water consumption labeling not preempted by federal labeling law, and consumer education programs, to promote the use of energy and water efficient appliances whose use requires a significant amount of energy or water use on a statewide basis. An appliance manufactured on or after the effective date of these standards may not be offered for sale in California unless it complies with the standards. (PRC §25402(c)(1))
4. Authorizes the CEC to adopt regulations establishing an administrative enforcement process for appliance efficiency violations and allows the CEC to assess a civil money penalty for violations up to $2,500 for each violation. Penalties assessed for appliance efficiency violations are deposited into the CEC’s Appliance Efficiency Enforcement Subaccount and fund the CEC’s appliance efficiency enforcement activities upon appropriation by the Legislature. (PRC §25402.11)
   
5. Requires, under the California Global Warming Solutions Act of 2006 (also known as AB 32), the state Air Resources Board (ARB) to (1) determine the 1990 statewide greenhouse gas (GHG) emissions level and approve a statewide GHG emissions limit that is equivalent to that level to be achieved by 2020; (2) ensure that statewide GHG emissions are reduced to at least 40% below the 1990 level by December 31, 2030 (i.e., SB 32); and (3) adopt regulations, until December 31, 2030, that utilize market-based compliance mechanisms to reduce GHG emissions (i.e., the cap-and-trade program). (Health and Safety Code §38500 et seq.)
   
6. Requires, under the Renewable Portfolio Standard (RPS) investor-owned utilities (IOUs), publicly owned utilities (POUs) and certain other retail sellers of electricity to achieve 33% of their energy sales from an eligible renewable electrical generation facility by December 31, 2020, and establishes portfolio requirements and a timeline for procurement quantities of three product categories. (Public Utilities Code §399.11 et seq.)
   
7. States, under The 100 Percent Clean Energy Act of 2018 (SB 100, De León, Chapter 312, Statutes of 2018), that it is the policy of the state that eligible renewable energy resources and zero-carbon resources supply 100% of retail sales of electricity to California end-use customers and 100% of electricity procured to serve all state agencies by December 31, 2045.
   

This bill, with regards to reducing unnecessary consumption of energy and associated GHG emissions, requires the CEC to:

1. Establish, as deemed appropriate and considering technologies as specified, regulatory standards for appliances and buildings to facilitate load management. These technology standards will enable appliances’ and/or buildings’ operations to be scheduled, shifted, or curtailed to minimize electricity generation-associated GHG emissions.
   
2. Ensure the above regulations are cost effective for consumers to purchase, maintain, and meaningfully affect GHG emissions.
   
3. Require future updates and revisions of the above regulations as necessary for achieving energy and GHG goals.
   

Background

1. Implementing AB 32: The California Global Warming Solutions Act of 2006. In 2006, AB 32 (Núñez and Pavley, Chapter 488, Statutes of 2006) was signed into law, which requires ARB to determine the 1990 statewide GHG emission level and achieve a reduction in GHG emissions to that level by 2020. In addition to calling on ARB to inventory GHGs in California (including carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride) and approve the aforementioned statewide GHG emissions limit.
   
   AB 32 also requires ARB to (1) implement regulations that achieve the maximum technologically feasible and cost-effective reduction of GHG emissions; (2) identify and adopt regulations for discrete early-action measures; and (3) prepare and approve a scoping plan, to be updated at least once every five years, to achieve the maximum technologically feasible and cost-effective reduction of GHG emissions. Due to a variety of factors, most importantly being the great recession that started in 2008, California will achieve the goals of AB 32 in advance of the 2020 deadline.
   
   In 2016, the Legislature approved, and the Governor signed, SB 32 (Pavley, Chapter 249, Statutes of 2016), which requires ARB to ensure that statewide GHG emissions are reduced to at least 40% below the 1990 level by December 31, 2030. This new goal is known as the SB 32 target.
   
2. GHG reductions from electricity production. A December 2018 report from the Legislative Analyst’s Office titled “Assessing California’s Climate Policies – An Overview” identifies different economic sectors’ contributions to GHG emissions. The report finds that electricity generation has driven the greatest proportion of emission reductions, due to a shift towards renewable energy.
   
3. Renewable electricity and California’s grid. Achieving the state’s GHG emission and renewable resource use goals will require further decarbonization of electricity generation. Solar and wind power in particular are already being widely implemented to shift away from fossil fuel-derived electricity, but these renewable resources do not have the same consistent availability across the day as fossil fuel sources.
   
   The interplay of renewable power availability and consumer electricity demand is often shown in a plot of grid load and hour of the day, colloquially known as a “duck curve”. Solar and wind power is most available, and may often be oversupplied, during the day when demand is low. Between 5:00 and 8:00 PM, there is a sharp increase in electricity demand at the same time renewables are decreasing their supply. To fulfil this demand, utilities typically use peaking power plants burning fossil fuels.
   
   In order to achieve the state’s renewable portfolio goals and continue to decrease the GHG emissions associated with electricity generation, California must reconcile the energy needs of the state with the inherent challenges of using wind and solar power. This challenge of renewable integration has been approached through applying “demand response” where changes are made to the power consumption of an electric utility customer to better match the demand for power with the supply.
   
4. Demand response technology. There is a wide range of policy, market, and infrastructure changes that may help the state achieve greater renewable integration through demand response. SB 49 specifies the CEC consider solutions, including but not limited to, incentive programs, fleet averaging, labeling, and consumer education programs to achieve demand response goals.
   
   OhmConnect, one of SB 49’s supporters, is a company that informs utility customers of upcoming predicted high-demand times and incentivizes them with cash payments to reduce electricity use during that time. These services would fall within the scope of CEC’s regulatory consideration under SB 49.

Comments

1. Purpose of Bill. According to the author, “To implement SB 100 (DeLeon, 2018), California will need to integrate more renewable resources into the grid that produce power only at certain times of the day – like solar and wind. California still uses fossil fuel – mostly natural gas – to provide energy when demand is highest and renewable resources are not able to produce. This means energy providers often have to build twice – building renewable energy facilities that provide power during the day and using natural gas facilities to provide energy at night when energy demand is high. The cost of double-building is passed on to the ratepayer.

“To avoid the ratepayer cost of double-building and still keep the lights on, California needs to do two things. First, CA needs to reduce unnecessary energy use. And second, California needs to better match the supply of energy (from solar and wind) with the demand for energy (coming from your plug, your fridge, or your electric car). Clarifying the Energy Commission’s (CEC) authority to consider GHGs when setting appliance and building standards, and directing the CEC to use this authority to set standards, will ensure that the state is making progress toward better and more cost-effectively integrating renewable energy into the grid.”

1. Working towards renewable integration. SB 49 was amended in the Senate Energy, Utilities, and Communications Committee to clarify the scope of the practices the CEC may consider in their resulting regulations, ensure the standards are periodically reviewed and updated, and consider life-cycle benefits of avoiding electricity system costs. These clarifications should ensure the resulting CEC regulations adequately assess feasible demand response technologies.
   
   Given the track record of electricity generation for reducing state GHG emissions, the challenges of renewable integration into the current grid, and the role the specified technologies can play in improving demand response, the committee may wish to consider supporting this bill.
   
2. Author amendment. The author would like to propose, in order to clarify the bill is not impacting the Commission’s authority to require utilities to do load management, minor changes to the language in Section 1 of the bill (25402(f)).
   
   The committee may wish to approve this technical and clarifying author’s amendment.

Double Referral:

This measure was heard in the Senate Energy, Utilities, and Communications Committee on April 10, 2019, and passed out of committee with a vote of 11-1.

Related/Prior Legislation

SB 1414 (Wolk, Chapter 627, Statutes of 2014) required utilities to include demand response in resource adequacy plans and required the CPUC to establish a mechanism to value load-modifying demand response resources that can reduce a load serving entity’s resource adequacy obligation.

SOURCE:

Author

SUPPORT:

California Efficiency + Demand Management Council

East Bay Community Energy

Natural Resources Defense Council

OhmConnect

OPPOSITION:

None received

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SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2019 - 2020 Regular

Bill No: SB 49 Hearing Date: 4/10/2019

SUBJECT: Energy efficiency

DIGEST: This bill expands and clarifies the California Energy Commission’s (CEC’s) building and appliance energy efficiency regulatory authority to allow the CEC to establish building and appliance efficiency standards that facilitate load management, and it allows the CEC to establish an enforcement process for these standards.

ANALYSIS:

Existing law:

1. Requires the CEC to establish building design and construction standards that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings. The CEC must periodically update the standards. Six months after the CEC certifies an energy conservation manual, cities, counties, and state agencies are prohibited from issuing a building permit for a building that does not comply with the current standards created by the CEC. The CEC must demonstrate that any water efficiency standards are necessary to save energy. (Public Resources Code §25402(a)(1))
2. Requires the CEC and the Department of Housing and Community Development to issue a joint finding that a building water efficiency standard is equivalent or superior in performance, safety, and for the protection of life, health, and general welfare to existing standards. The finding must also ensure that the standard does not unreasonably or unnecessarily impact Californians’ ability to purchase or rent affordable house by taking into account the overall benefit derived from the standard. (Public Resources Code §25402(a)(2))
3. Requires the CEC’s building efficiency standards to be cost-effective when taken in their entirety and amortized over the economic life of the structure compared with historic practice. When determining cost-effectiveness, the CEC must consider the value of the water or energy saved, impact on product efficacy for the consumer, and the life-cycle cost of complying with the standard. The CEC must consider other relevant factors, including, but not limited to the standards’ cost on house costs, the total statewide costs and benefits of the standard over its lifetime, economic impacts on California businesses, and alternative approaches and their associated costs. (Public Resources Code §25402(b)(3))
4. Requires the CEC to establish appliance efficiency standards based on a reasonable use pattern. The CEC may prescribe other cost-effective measures, including incentive programs, fleet averaging, energy and water consumption labeling not preempted by federal labeling law, and consumer education programs, to promote the use of energy and water efficient appliances whose use requires a significant amount of energy or water use on a statewide basis. An appliance manufactured on or after the effective date of these standards may not be offered for sale in California unless it complies with the standards. (Public Resources Code §25402(c)(1))
5. Authorizes the CEC to adopt regulations establishing an administrative enforcement process for appliance efficiency violations and allows the CEC to assess a civil money penalty for violations up to $2,500 for each violation. Penalties assessed for appliance efficiency violations are deposited into the CEC’s Appliance Efficiency Enforcement Subaccount and fund the CEC’s appliance efficiency enforcement activities upon appropriation by the Legislature. (Public Resources Code §25402.11)

This bill:

1. Expands the purpose the CEC’s building and appliance efficiency standards to the reduction of emissions of greenhouse gases (GHG) associated with energy consumption.
2. Expands the CEC’s building and appliance efficiency regulatory authority by requiring the CEC to establish standards for appliances and buildings to facilitate load management to promote the use of demand-flexible appliances, the use of which, has an effect on a building’s load profile, as determined by the CEC. These regulations can include other cost-effective measures, including, but not limited to the following:
   1. Incentive programs
   2. Fleet averaging
   3. Labeling
   4. Consumer education programs
3. Establishes new cost-effectiveness requirements for building and appliance load management standards that allow the CEC to consider the cost of demand responsive appliances relative to non-responsive appliances, the value of GHG emissions, the life cycle cost to the consumer of a compliant product, benefits of avoided electricity system costs, and social cost of GHG emissions.
4. Load management requirements established by the CEC shall be based on feasible and attainable efficiencies or feasible improvements enabling appliance and building operations to be scheduled, shifted, or curtailed to reduce GHG emissions associated with electricity generation.
5. Specifies that the building and appliance efficiency requirements for load management shall not become effective until a year after the date of the adoption or revision of the standards.
6. Requires the CEC to periodically update the load management standards to include any revisions it determines is necessary to achieve California energy savings goals and mandates for reducing GHG emissions.
7. Expands the CEC’s authority to adopt enforcement regulations by allowing the CEC to create an enforcement process that enables the CEC to assess civil money penalties for building and appliance load management standard violations.

Background

Demand response and its potential to reduce greenhouse gas emissions. Demand response is a resource enabling electricity customers to reduce or shift their electricity usage in response to a price signal, a financial incentive, an environmental condition, or a reliability signal. Demand response has the capacity to reduce greenhouse gas emissions and increase ratepayer savings by lowering, shifting, and shaping demand for electricity at critical times in ways that can defer the need for additional fossil fuel generation, electricity infrastructure upgrades, and excess resource procurement. The load management capabilities of demand response resources can also help customers shift portions of their electricity use to times of the day when retail prices for electricity are lower, which can help lower a customer’s electricity bill.

Demand response is a critical component of facilitating building electrification in a manner that does not result in emissions shifts from the building sector to the electricity sector. In the 2018 update to the Integrated Energy Policy Report (IEPR), the CEC noted that building electrification by itself is not sufficient to lower GHG emissions from buildings in a way that is meaningful for California’s climate goals. Without additional planning to incorporate mechanisms to ensure that electricity use does not increase during peak demand periods, electrification could also increase demand for electricity at times which natural gas generation supplies a larger portion of the total electricity mix. The IEPR states: “Electrification needs to be coupled with strategies such as time-of-use rates and demand response to shift the timing of energy consumption to maximize the use of renewable energy and achieve zero-emission buildings.”

Demand response systems can be especially helpful in buildings with large energy consumption, including large residential multifamily and nonresidential commercial and industrial facilities. Demand responsive systems can automate energy efficiency systems such as lighting and heating, ventilation and air conditioning controls to modify energy use of these systems in response to grid needs and price signals. Even in smaller residential buildings, demand responsive smart thermostats can help reduce energy consumption in response to price signals.

Demand response may be a distributed energy resource (DER), but not all DERs are demand responsive. This bill expands the goals of the CEC’s building and appliance efficiency standards to include GHG reductions associated with energy consumption. This bill would authorize the CEC to establish standards for appliances and buildings to facilitate load management to further the goals of the standards. This bill does not define load-management or specify the types of demand response technologies that may be required in buildings or appliances through regulations created under this bill; however, it is possible that load-management technologies could be interpreted to encompass distributed generation and energy storage.

Existing law contains multiple definitions regarding distributed energy resources. Some definitions may encompass demand response technologies; however, other definitions that specifically apply to distributed energy generation and storage may not include demand responsive systems. While distributed generation, energy storage, and demand response technologies are all considered distributed resources that can serve demand-side energy needs, existing law generally considers these resources separately and investments in these technologies have occurred separately at the administrative level.

Distributed generation and energy storage also may not necessarily serve the same purpose as demand response, which is intended to manage load in a price and grid-responsive manner that defers the need for additional generation, transmission, and distribution resources. Distributed generation and energy storage are not necessarily demand responsive and may not manage load in a manner that defers transmission and distribution upgrades. Distributed generation and energy storage that are not sufficiently efficient and demand responsive can exacerbate transmission and distribution stressors and studies have indicated that it can result in a net increase in greenhouse gas emissions.

The CEC’s appliance and building standards authority. While the CEC has the authority to establish building and appliance efficiency standards, these standards are created separately and enforced separately. Existing law authorizes the CEC to establish energy efficiency standards for buildings that increase the efficiency in the use of energy and water for new residential and new nonresidential buildings. The CEC may also separately establish regulations that set a minimum operating efficiency standards for appliances to promote the use of energy and water efficient appliances that consume a significant amount of energy or water on a statewide basis. Under existing law, building and appliance efficiency standards must be cost effective. However, the requirements for determining the cost effectiveness of building standards differ from the requirements for determining the cost effectiveness of appliance standards. Generally, both must consider costs to consumers and account for the energy and water savings achieved over the life of the appliance or building.

This bill combines the building and appliance efficiency standards for the purpose of load-management requirements, and expands the criteria the CEC may consider when determining whether these standards are cost effective. The expanded criteria would enable the CEC to consider the life-cycle benefits of avoided electricity system costs and the social cost of GHG emissions when determining whether a standard is cost effective. Currently, the CEC uses social costs of emissions as part of its methodology for valuing energy end uses in buildings. The CEC applies this cost to hourly use of natural gas appliances as well as the electric generation costs for electric appliances in buildings. However, the CEC only uses the social cost factor for building standards and does not include it as part of appliance cost-effectiveness evaluations. While the CEC may be borrowing a social cost adder developed by the California Public Utilities Commission (CPUC), the CPUC is piloting the use of a methodology accounting for the social cost of GHG emissions and does not currently use these social cost calculations for decision-making purposes.

Incorporating the social cost of GHG emissions into cost-effectiveness calculations would not necessarily reduce GHG emissions from appliance end uses. Limiting or prohibiting the sale of natural gas appliances in California may lead to more fuel switching from natural gas to electricity; however, these appliances may increase demand for natural-gas powered electricity if they are largely used during peak hours. Even with widespread electrification in newly constructed buildings, the natural gas system will require maintenance to ensure safety and reliability for existing natural gas end uses. To the extent that demand-responsive electric appliances are cost-effective, they have the potential to address to the social cost of GHG emissions from natural gas end uses and generation.

While the CEC’s energy efficiency requirements for buildings are incorporated into the building codes and are enforced by local building officials, the CEC has the authority to enforce appliance efficiency standards at the state level by assessing a civil penalty on entities that sell appliances that do not meet the standards. By combining the CEC’s building and appliance authorities for load-management standards, this bill would allow the CEC to develop an enforcement program for load-management building standards. Currently, the CEC does not use its appliance enforcement authority for any building standards.

Need for amendments. As currently drafted, the term “load management” as used in this bill could encompass distributed generation and storage technologies that may not necessarily shift load, defer electric system costs, or reduce GHG emissions associated with electricity consumed by buildings. Additionally, this bill combines both building and appliance standards in a way that would authorize the CEC to use its appliance efficiency enforcement authority to assess civil money penalties on demand response building code violations. However, building code enforcement is largely managed by local building officials, and the CEC is not resourced to perform enforcement over building code violations. This bill also modifies requirements for the CEC’s cost-effectiveness assessments that could enable the CEC to use a different methodology to calculate the cost effectiveness of demand response standards than is currently used for other appliance and building standards. The author and the committee may wish to amend this bill to do the following:

• Ensure that the CEC’s authority to promulgate standards for appliances and buildings continues to remain separate.
• Clarify that load management standards promulgated under this bill do not encompass distributed generation and storage technologies.
• Ensure that cost-effectiveness assessments are applied consistently within building and appliance standards and permit the CEC to use additional cost-effectiveness methodologies for appliance and building standards only after piloting the methodology and demonstrating, in a report submitted to the Legislature, that the methodology does not unreasonably or unnecessarily impact the ability of Californians to purchase or rent affordable housing.

Double referral. Should this bill be approved by this committee, it will be re-referred to the Senate Committees on Environmental Quality for their consideration.

Prior/Related Legislation

SB 1414 (Wolk, Chapter 627, Statutes of 2014) required utilities to include demand response in resource adequacy plans and required the CPUC to establish a mechanism to value load-modifying demand response resources that can reduce a load serving entity’s resource adequacy obligation.

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

SUPPORT:

California Efficiency + Demand Management

East Bay Community Energy

Natural Resources Defense Council

OhmConnect

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to the author:

To implement SB 100 (De León, 2018), California will need to integrate more renewable resources into the grid that produce power only at certain times of the day – like solar and wind. California still uses fossil fuel – mostly natural gas – to provide energy when demand is highest and renewable resources are not able to produce. This means energy providers often have to build twice – building renewable energy facilities that provide power during the day and using natural gas facilities to provide energy at night when energy demand is high. The cost of double-building is passed on to the ratepayer.

To avoid the ratepayer cost of double-building and still keep the lights on, California needs to do two things. First, California needs to reduce unnecessary energy use. And second, California needs to better match the supply of energy (from solar and wind) with the demand for energy (coming from your plug, your fridge, or your electric car). Clarifying the CEC’s authority to consider GHGs when setting appliance and building standards, and directing the CEC to use this authority to set standards, will ensure that the state is making progress toward better and more cost-effectively integrating renewable energy into the grid.

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