BILL ANALYSIS AB 2514 Page 1 Date of Hearing: April 22, 2010 ASSEMBLY COMMITTEE ON NATURAL RESOURCES Wesley Chesbro, Chair AB 2514 (Skinner) - As Amended: April 14, 2010 SUBJECT : Energy storage systems SUMMARY : Requires the California Public Utilities Commission (PUC) to open a proceeding to establish procurement targets for each investor-owned utility (IOU), and requires each publicly-owned utility (POU) to adopt energy storage system procurement targets and report their progress to the California Energy Commission (CEC). EXISTING LAW : 1)Requires the PUC to review and approve a procurement plan for each IOU. 2)Requires both IOUs and POUs to first acquire all available energy efficiency and demand reduction resources that are cost-effective, reliable, and feasible. 3)Pursuant to the California Global Warming Solutions Act (AB 32), requires the Air Resources Board (ARB) to adopt a statewide greenhouse gas (GHG) emissions limit equivalent to 1990 levels by 2020 and to adopt rules and regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. 4)Requires IOUs and POUs to achieve a 20 percent renewable portfolio by 2010 and establishes a detailed process and standards for renewable energy procurement by IOUs. THIS BILL : 1)Declares that expanding the current use of energy storage systems can: a) Aid IOUs in integrating increased amounts of renewable energy resources into the electrical grid in a manner that minimizes the emission of GHGs. b) Optimize and accelerate the integration of significant AB 2514 Page 2 amounts of variable, intermittent, and offpeak electrical generation from wind and solar energy sources. c) Reduce energy costs by avoiding or deferring the need for fossil fuel-powered peaking power plants, which can have substantial co-benefits from reduced emissions. 2)Declares there exist significant barriers to realizing the benefits energy storage including inadequate evaluation of the technology and resource planning on how it may fit more efficiently into the electrical grid, a lack of recognition of current storage technologies and storage market advancements, and inadequate statutory and regulatory support. 3)Requires the PUC, on or before April 1, 2011, to open a proceeding to establish procurement targets for each IOU for viable and cost-effective energy storage systems. 4)Requires the PUC by January 1, 2013, to adopt energy storage system procurement targets to be achieved by each IOU by January 1, 2015 and January 1, 2020. 5)Requires each POU, on or before April 1, 2011 to initiate a process to establish procurement targets for the utility for viable and cost-effective energy storage systems, and by January 1, 2013, to adopt energy storage system procurement targets to be achieved by January 1, 2015 and January 1, 2020. 6)Requires each POU to report to the CEC regarding the energy storage system procurement targets and report any modifications made to those targets. 7)Requires the PUC to consider existing results of testing and trial pilot projects from existing energy storage facilities, to consider information provided by the California Independent System Operator (CAISO), and to consider the integration of energy storage technologies with other programs including energy efficiency or other means of reducing electrical demand that will result in the most efficient use of generation resources and cost-effective energy efficient grid integration and management. 8)Requires the PUC to ensure that the energy storage system procurement targets that are established are technologically viable and cost-effective. AB 2514 Page 3 FISCAL EFFECT : Unknown COMMENTS : 1)Renewables, peakers and storage. California law requires utilities and other retail sellers of electricity to meet at least 20 percent of the retail sales using electricity from renewable resources by 2010; a Renewable Portfolio Standard (RPS). ARB has identified an advancement of the RPS to 33 percent by 2020 as one of the key actions needed to be taken in order to meet the GHG reduction goals of AB 32. Several bills have been introduced in order to address the 33 percent RPS goal, including SB 722 (Simitian), which requires utilities to procure at least 33 percent of electricity delivered to their retail customers from renewable resources by 2020. While several studies have determined that a 33 percent RPS is achievable, it is predicted that this goal can only be met with a heavy reliance on wind and solar energy, which are intermittent resources. Historically, utilities have increased electricity production to meet increasing peak load needs by building fossil fuel-powered peaker plants, which can be ramped up and down quickly. Most peaker plants run on natural gas and are less efficient than typical baseload plants, and may cause more air emissions per each kWh of electricity generated compared to renewable energy sources. While a new natural gas peaker plant may adequately address an increase in peak electrical demand, the resulting increase in GHG emissions does not address the RPS requirement issue. The ARB, in collaboration with research done at Lawrence Berkeley National Laboratory in 2008, has recommended finding ways to store the electrical output of renewable facilities to use at a later time or date to decrease reliance on the peaker plants. Based upon current and historical peak demand energy use in California, the CEC predicts that peak energy demand load will increase 1.3 percent per year, resulting in a total of 15 percent increase in peak load by the year 2020. 2)Energy storage has been used for over a century. The first electric energy storage facility was a pumped hydroelectric facility in Europe built in 1890. Historically, the vast majority of energy storage facilities have been pumped hydro, and have been used by fossil fuel power plants for load AB 2514 Page 4 balancing, where low-cost, off-peak power is used to pump water from low elevations to a higher elevation reservoir. Subsequently when energy demand is high and the cost of power increases, water from the reservoir is released through a turbine to generate power that can be sold at a higher rate, while providing electricity during high-demand (peak) electricity time periods that supplements fossil fuel power plants. In recent years, energy storage has begun to play an important role in the integration of renewable energy sources into the electrical grid. Many renewable energy sources generate power intermittently, and by nature are not able to produce energy in a way that mirrors energy demand. For example, wind-generated power is often produced during the night when the demand for energy is low. If energy storage is utilized to store the excess wind energy during off-peak hours, the energy can be discharged for use the next day during peak hours, or whenever it is next needed. Photovoltaic (PV) energy produced by the sun presents another example. Power generated by solar energy over the course of one day in Springerville, AZ, was measured at 10 second intervals by a Carnegie Mellon Research group. The curve as a whole represents the MW generated from the sun between sunrise and sunset, while each "blip" in the curve represents a cloud passing between the sun and the solar panel (Fig. 1). The figure shows the two dimensions of the intermittent quality of solar generated energy. The first is that solar energy is only generated during the day when the sun is shining, and without an energy storage system, solar energy alone would not be able to provide electricity during the evening and night hours for necessary uses such as lighting and refrigeration. While this solar energy generation pattern closely mirrors electricity demand in shape, the energy generation curve is often interrupted by quick and temporary decreases in power generation, or blips, which demonstrate the effect of a cloud passing between the PV panel array and the sun on power generation. If solar-generated energy is utilized without energy storage, power is only available for use during certain hours of the day. In addition, each time a cloud passed between the PV array and the sun, the available power would suddenly decrease, leading to temporary blackouts and subsequent electrical issues. In tandem with a statewide electrical grid, the energy stored from this intermittent renewable resource can be more reliably incorporated into the grid as a supplemental energy source to accommodate peak shaping and load leveling. This strategy may reduce the need AB 2514 Page 5 to build and power new fossil fuel peaker plants to meet California's growing peak energy demand needs. Figure 1. Diurnal photovoltaic power (MW) generated by the sun in Springerville, Arizona during one day on February 25, 2007. Measurements were taken at 10 second intervals. The curve as a whole represents the MW generated from the sun between sunrise and sunset, while each "blip" in the curve represents a cloud passing between the sun and the solar panel. 3)Worldwide installed energy storage capacity totals approximately 122,878 MW. As of March 2010, the California Energy Storage Alliance compiled survey data at the global and California levels in order to determine the extent to which energy storage technologies had penetrated the market. Technologies significantly utilized globally are pumped hydro, thermal, flywheels, batteries (multiple types), flow batteries, compressed air energy storage (CAES), molten salt, superconducting magnetic energy storage (SMES), supercapacitors, hydrogen fuel cells, and turbines. At a given point in time, the U.S. stores approximately 2.5 percent (23 Gigawatts (GW)) of its base energy generation load compared to 10 in Europe and 15 percent in Japan according to a Fraunhofer Institute Environmental, Safety and Energy Technology report in 2008. Storage technologies provide a variety of electrical demand responses. High-speed flywheels and high-power super capacitors, in the 10 kilowatt (kW) to one MW capacity range, and SMES, at 10 MW capacity, are able to discharge stored electricity quickly, with up to the second and/or minute response time, to provide quick peak shaving and load leveling. Various types of batteries utilizing Lithium-ion, Nickel-cadmium, and lead-acid chemistry with capacities that vary from one kW to one MW can discharge power within minutes to meet demand. Metal-air batteries, high-energy super capacitors, flow batteries, pumped hydro, and CAES storage technologies can range in capacity from one kW to one GW, and have a discharge power response time ranging from minutes to hours depending on the storage type. 4)CAISO includes energy storage in its plan to meet its renewable energy integration goals. The CAISO recently released a study investigating the potential to integrate AB 2514 Page 6 renewable resources. For example, they include a significant amount of wind-generated energy into the grid by 2012 and 2020 to help meet RPS goals including the installation of 4,500 MW of newly installed wind generation in 2012 that is in addition to the existing 2,600 MW in the state, plus the corresponding transmission infrastructure. Since wind energy is generally produced during offpeak hours, CAISO proposes to utilize energy storage to help aid the incorporation of wind-generated energy. According to CAISO, peak demand in its service territory was 50,270 MW in July 2006. Since May 2008, CAISO has been evaluating the issues associated with integrating energy storage into the electric power grid including a pilot project that was launched in July 2009, and is expected to be complete by December 2010. The three largest IOUs are also currently involved in studies to develop cost-effective methods for incorporating demand-side energy storage into the grid. 5)Research and development in the field of energy storage . An energy model created by the National Renewable Energy Laboratory (NREL) recently examined the penetration of wind-generated energy into an electrical grid, with or without incorporating energy storage. The model determined that incorporating 30 GW of wind energy storage would result in the utilization of 50 GW wind power within the grid by the year 2050. The comparison demonstrated that the use of energy storage allowed for a 17 percent increase in wind generated power penetration compared to no energy storage. This inclusion of energy storage would also eliminate the need for using natural gas generators to deal with electrical demand variability translating to a 56 percent reduction in GHG emissions per kilowatt-hour (kwh) of electricity. REGISTERED SUPPORT / OPPOSITION : Support A123 Systems, Inc. Altair Nanotechnologies, Inc. Applied Intellectual Capital (AIC) Beacon Power Breathe California California Attorney General California Energy Storage Alliance (CESA) CALMAC Manufacturing Corporation AB 2514 Page 7 Clean Power Campaign Coalition to Advance Renewable Energy through Bulk Storage (CAREBS) Debenham Energy, LLC DOW KOKAM LLC EnerVault Corporation ElectronVault, Inc. EnerSys EVAPCO, Inc. FAFCO Solar Water Heating Inc. Fluidic Energy, Inc. HDR/DTA Ice Energy, Inc. Independent Energy Producers LightSail Energy MegaWatt Storage Farms, Inc. Mohr Davidow Ventures NATGUN Corporation NGK-Locke, Inc. Panasonic Pearl Street Liquidity Advisors, LLC. Polaris Venture Partners Powergenix Prudent Energy International, Inc. PVT Solar, Inc. Rockport Capital Partners SAIL Venture Partners Samsung SDIA, Inc. SANYO North America Corp. SEEO, Inc. The Solar Alliance Suntech SustainX. Inc. Union of Concerned Scientists Vote Solar XtremePower Opposition California Coalition of Utility Employees (CCUE) California Large Energy Consumers Association (CLECA) (unless amended) California Manufacturers & Technology Association (CMTA) California State Association of Electrical Workers Northern California Power Agency (NCPA) AB 2514 Page 8 Pacific Gas and Electric Company (PG&E) (unless amended) San Diego Gas & Electric (SDG&E) (unless amended) Southern California Edison (SCE) (unless amended) Analysis Prepared by : Jessica Westbrook / NAT. RES. / (916) 319-2092