BILL ANALYSIS                                                                                                                                                                                                              1
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                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                 ALEX PADILLA, CHAIR
          

          AB 2514 -  Skinner       Hearing Date:  June 29, 2010        A
          As Amended:         June 21, 2010                 FISCAL       B
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                                      DESCRIPTION
           
           Current law  requires investor-owned utilities (IOUs) and energy  
          service providers (ESPs) to increase existing purchases of  
          renewable energy by 1% of sales per year such that 20% of retail  
          sales, as measured by usage, are procured from eligible  
          renewable resources by December 31, 2010.  This is known as the  
          Renewable Portfolio Standard (RPS).  

           Current law  exempts publicly owned utilities (POUs) from the  
          state RPS program and instead requires these utilities to  
          implement and enforce their own renewable energy purchase  
          programs that recognize the intent of the Legislature to  
          encourage increasing use of renewable resources.

           Current law  expresses that the policy of the state is to  
          modernize the transmission and electrical grid and achieve the  
          deployment and integration of cost-effective advanced  
          electricity storage and peak-shaving technologies, including  
          plug-in electric and hybrid electric vehicles, and  
          thermal-storage air-conditioning which are all part of a smart  
          grid.

           This bill  requires the California Public Utilities Commission  
          (CPUC) to determine appropriate targets, if any, for load  
          serving entities (LSEs) to procure viable and cost-effective  
          energy storage systems by 2013 and for the LSEs to meet those  
          goals by 2015 and 2020.  POUs would also be required to  
          establish targets by 2014 and meet to meet those targets, if  
          any, by 2016 and 2021. 

           Current law  requires each IOU to submit a procurement plan to  
          the CPUC to ensure a reliable and cost-effective electricity  











          supply in California and to procure renewable energy resources  
          with the goal of ensuring that at least an additional 1% per  
          year of retail sales are secured from renewable resources.

           This bill  requires the IOUs to incorporate energy storage into  
          their RPS procurement plans and address the acquisition and use  
          of energy storage systems in order to achieve specified purposes  
          and to consider and incorporate the CEC's evaluation of energy  
          storage systems, including locations where the interconnections  
          on the transmission and distribution grid can be minimized.




                                      BACKGROUND
           
          What is Energy Storage? - One of the distinctive characteristics  
          of the electric power sector is that the amount of electricity  
          that can be generated is relatively fixed over short periods of  
          time, although demand for electricity fluctuates throughout the  
          day. Developing technology to store electrical energy so it can  
          be available to meet demand whenever needed would represent a  
          major breakthrough in electricity distribution. Helping to try  
          and meet this goal, electricity storage devices can manage the  
          amount of power required to supply customers at times when need  
          is greatest, which is during peak load. These devices can also  
          help make renewable energy, the output of which cannot be  
          controlled by grid operators, smooth and dispatchable.  Storage  
          devices can provide frequency regulation to maintain the balance  
          between the network's load and power generated.  Thus, energy  
          storage holds substantial promise for transforming the electric  
          power industry.

          Types of Energy Storage - Battery storage and pump hydro storage  
          systems have been around for many years, so the concept of  
          energy storage is not new. Large pump storage facilities have  
          been proven to be very effective in shifting large quantities of  
          low-cost, off-peak energy production to delivery during high  
          cost on-peak energy periods by using excess electricity to pump  
          water uphill into a reservoir.  When power is needed, the water  
          can run down through turbines, much like a traditional  
          hydroelectric dam. However, large pump hydro storage facilities  
          are quite costly, and there are very few locations where they  
          can be built.











          California has a number of pump storage facilities. One of the  
          largest facilities is the Helms Pump Storage Facility that was  
          built in the early 1980s with three units. Each unit is rated at  
          400 MW in generation mode and 310 MW in pumping mode for a total  
          of 1,200 MW generating mode and -930 MW pumping mode.  The  
          facility is owned and operated by PG&E.

          Pump hydro storage is the largest and most viable storage  
          technology available with nearly 123,000 MW deployed around the  
          world.  Excluding pump hydro storage only 2,128 of installed  
          energy storage technologies exist worldwide which include:

                 Batteries - electrical energy is stored for later use in  
               chemical form;
                 Thermal Storage - air conditioners create ice at night  
               then power rates are low.  This stored ice then runs a  
               cooling system during the afternoon, when power costs are  
               highest and the power grid is most stressed;
                 Flywheels - convert electrical energy to kinetic energy  
               then back again very rapidly; and
                 Compressed Air - electricity is used to compress air  
               into storage tanks or a large underground cavern.  The  
               compressed air is used to spin turbines when electricity is  
               needed.


                                       COMMENTS
           
           1)Author's Purpose  .  California often experiences peak  
            electricity demand growth that increases at a rate faster than  
            electricity can be generated.  Currently, backup fossil fuel  
            electricity generation is frequently used to keep up with the  
            demand.  The California Energy Commission predicts that this  
            peak electricity demand will increase by 15% by the year 2020.  
             

            AB 2514 will encourage California to incorporate energy  
            storage to the energy grid thereby decreasing our reliance on  
            fossil fuels, coping with increasing energy demand, and  
            advancing California toward its renewable energy goals.   
            Renewable energy sources such as solar-generated photo-voltaic  
            power and wind-generated power are widely used globally, but  
            these renewable resources generate power intermittently.  This  










            energy is not used efficiently due to California's electricity  
            grid design which does not utilize storage.  AB 2514 will help  
            integrate energy storage into utility planning and procurement  
            which will help California reach the renewable energy goals it  
            has committed to.

           2)If You Mandate It, They Will Come  .  This bill began as a hard  
            mandate for the purchase of a specified percentage of storage  
            technologies.  The author and sponsor believe that viable  
            storage technologies are lurking in small applications and  
            ready for broad scale deployment and that the agencies and  
            utilities need a big nudge to stimulate deployment which will  
            advantage ratepayers.  Critics opine that any mandate is  
            premature - that the industry is still emerging and  
            commercially viable storage technologies are available in  
            limited quantities and applications, and the operating  
            characteristics and potential costs are unknown.  The author  
            responded to this criticism by eliminating a mandated  
            procurement percentage and now the bill requires the CPUC and  
            the POUs to determine appropriate targets, if any, and that  
            the targets must be cost-effective.  This leaves open the  
            possibility that the appropriate targets could be zero.

           3)Where Does the Mandate Belong  ?  It is not yet clear whether  
            electricity storage should be directly linked to renewable  
            installations or be procured by the California ISO as an  
            ancillary service on behalf of the system as a whole and, more  
            critically, how those technologies should be priced.  Answers  
            to these questions will affect the state's generation resource  
            planning.  The location of the storage (at the renewable  
            resource's location or elsewhere) will affect the planning of  
            future power transmission lines as well. 

            Energy storage technology is rapidly advancing and has been  
            facilitated by stimulus funding for many projects and  
            technology development.  However integration into electricity  
            markets, operations, transmission controls and planning all  
            lag.  There is a clear need for demonstration of value and a  
            need for a means to monetize costs.  This bill does not  
            address this issue but jumps ahead of the answers to those  
            questions in an attempt to speed development and deployment.

           4)Outstanding Issues - Potential Amendments  .  There are several  
            issues with the bill which the committee and author may wish  










            to address through amendments: 

             a)   Small IOUs - There are 4 IOUs with less than 60,000  
               service connections.  Those utilities have requested an  
               exemption from the bill because deployment of storage for  
               their customers is disproportionately more expensive for  
               their ratepayers than those of larger utilities.

             b)   Definition of Storage - Eligible energy storage is  
               limited to those mechanical, chemical or thermal processes  
               that "do not substantially rely on fossil fuels."  PG&E has  
               a 300 MW demonstration project of compressed air storage  
               which utilizes fossil-fueled generation to move the stored  
               energy.  PG&E is concerned that this bill would limit the  
               eligibility of that technology.  (Page 5, lines 23 through  
               37).

             c)   Resource Adequacy - This bill requires the IOUs and POUs  
               to use storage to meet resource adequacy.  This should be  
               permissive and left to the determination of the CPUC and  
               the governing boards of the POUs as they deem appropriate.   
               (Page 7, line 35, strike "shall and insert "may"; page 7,  
               line 38, strike "shall" and insert "may."

             d)   CEC Determination of Interconnection Costs - This bill  
               requires the IOUs to utilize CEC determinations of the  
               locational value of storage on the transmission and  
               distribution grid that would require extensive analysis of  
               the grid.  That information is easily attainable by the  
               IOUs and may also be proprietary.  The analysis is better  
               left with the IOUs.  (Page 8, strike lines 36-40; page 9,  
               strike lines 1-2)

             e)   POU Oversight - This bill requires the CEC to determine  
               whether the POUs have complied with the bill and take  
               specified actions.  Other programs (e.g. California Solar  
               Initiative) require the POUs to report progress but do not  
               give any enforcement authority to the CEC.  These  
               provisions should be deleted to ensure consistency across  
               programs and the authority of the POU governing boards.   
               (Page 9, strike lines 28-39; page 10, strike lines 1  
               through 7)

           5)Ratepayer Impact  .  This bill requires that only cost-effective  










            storage technologies be deployed.  However what is  
            cost-effective in the context of storage is not clear.

           6)Related Legislation  .  The following bills have been introduced  
            in 2010 which affect the RPS program: 

                 SB 722 (Simitian) increases the RPS mandate to 33% by  
               2020 and makes other program changes.  Status: Passed  
               Assembly Utilities & Commerce Committee, June 24, 2010.
                 SB 1247 (Dutton) expands the hyrdroelectric facilities  
               which can count efficiency improvements as RPS eligible.   
               Status: Passed the Senate Committee on Energy, Utilities &  
               Communications June 15, 2010; pending in Senate  
               Appropriations Committee.
                 SB 1367 (Wyland) extends the RPS compliance timeline to  
               20% by 2020.  Status: Referred to, but held in, the Senate  
               Committee on Energy, Utilities & Communications.
                 AB 1954 (Skinner) authorizes the CPUC to permit recovery  
               of transmission interconnection costs not approved by the  
               Federal Energy Regulatory Commission.  Status: Set for  
               hearing in the Senate Committee on Energy, Utilities &  
               Communications; set for hearing June 29, 2010.
                 AB 2378 (Tran) expands the definition of an eligible  
               renewable facility to include a facility that uses two  
               renewable technologies.  Status: Pending on the Senate  
               Floor.
          




                                   ASSEMBLY VOTES
           
          Assembly Utilities & Commerce (failed)                            
           7-6
          Assembly Utilities & Commerce         8-6
          Assembly Natural Resources            6-3
          Assembly Appropriations              12-5
          Assembly Floor                     41-28

                                           
                                      POSITIONS
           
           Sponsor:










           
          Attorney General Jerry Brown

           Support:
           
          A123 Systems
          AIC Labs
          Altairnano
          Applied Intellectual Council
          Balanced Clean Energy Solutions
          Beacon Power
          Breathe California
          California Public Utilities Commission (if amended)
          CALMAC
          California Energy Storage Alliance
          CAREBS
          Clean Power Campaign
          Debenham Energy, LLC
          Dow Kokam
          Electron Vault
          Enersys
          EnerVault
          Evapco, Inc.
          Fafco
          Fluidic Energy
          HDR-DTA
          Green California
          Ice Energy
          Independent Energy Producers
          Large-scale Solar Association
          LightSail Energy
          Mega Watt Storage Farm
          Mohr Davidow Ventures
          Natgun
          NGK-Locke
          Pacific Housing Inc.
          Panasonic
          Pearl Street Liquidity Advisors
          Polaris Venture Partners
          PowerGenix
          Primus Power
           Prudent Energy
          PVT Solar
          ReStore Energy Systems










          Rockport Capital Partners
          Sail Venture Partners
          Samsung SDI America, Inc.
          Sanyo
          Seeo, Inc.
          Sierra Club
          The Solar Alliance
          South Coast Air Quality Management District
          Suntech
          Sunverge
          SustainX
          Velkess Inc.
          The Vote Solar Initiative
          Union of Concerned Scientists
          Wallrich Landi
          Xtreme Power

           Oppose:
           
          Bear Valley Electric Service (unless amended)
          California Manufacturers & Technology Association
          City of Burbank (unless amended)
          Modesto Irrigation District
          Mountain Utilities (unless amended)
          Pacific Power (unless amended)
          Sacramento Municipal Utility District (unless amended)
          Sierra Pacific (unless amended)


          Kellie Smith 
          AB 2514  Analysis
          Hearing Date:  June 29, 2010