BILL ANALYSIS Ó AB 2700 Page A Date of Hearing: April 6, 2016 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Mike Gatto, Chair AB 2700 (Salas) - As Amended March 17, 2016 SUBJECT: Electrical corporation: California Renewables Portfolio Standard Program: procurement plans SUMMARY: Revises the Renewable Portfolio Standard (RPS) related to job creation and requires the California Public Utilities Commission (CPUC) to update criteria used to rank RPS projects. Specifically, this bill: 1)Revises existing provision related to job creation that is to be used in the ranking of RPS projects to include consideration of jobs retained that are associated with contracting for existing eligible renewable energy resources. 2)Requires the CPUC to update the criteria it uses to rank RPS projects relative to the additional job creation provisions added by this bill and to identify the value of maintaining existing baseload resources to achieve the goal of a balanced portfolio of eligible renewable energy resources. EXISTING LAW: AB 2700 Page B 1)Establishes requirements for electric service providers to procure 50% of their electricity supplies from renewable energy by 2030, otherwise known as the RPS. (Public Utilities Code Section 399.12) 2)Requires the CPUC, in implementing the RPS to adopt, by rulemaking, criteria for the ranking and selection of least-cost and best-fit (LCBF) eligible renewable energy on a total cost and best-fit basis that takes into account estimates of indirect costs associated with needed transmission investments; the cost impact of procuring the eligible renewable energy resources on the electrical corporation's electricity portfolio; the viability of the project to construct and reliably operate the eligible renewable energy resource, including the developer's experience, the feasibility of the technology used to generate electricity, and the risk that the facility will not be built, or that construction will be delayed, with the result that electricity will not be supplied as required by the contract; workforce recruitment, training, and retention efforts, including the employment growth associated with the construction and operation of eligible renewable energy resources and goals for recruitment and training of women, minorities, and disabled veterans, and; estimates of electrical corporation expenses resulting from integrating and operating eligible renewable energy resources, including, but not limited to, any additional wholesale energy and capacity costs associated with integrating each eligible renewable resource. (Public Utilities Code Section 399.12 (a)(4)(A)) 3)Requires the CPUC to establish, no later than December 31, 2015, a method for determining expenses resulting from integrating and operating eligible renewable energy resources. (Public Utilities Code Section 399.12 (a)(4)(A)) AB 2700 Page C FISCAL EFFECT: Unknown. COMMENTS: 1)Author's Statement: "It is important to promote a policy that will help ensure the state's renewable portfolio standard procurement process creates a more level playing field and evaluates all renewable resources comprehensively. The result will be a more diverse and cost-effective portfolio of renewable energy resources, which will help to balance the grid and maintain reliability while keeping consumer electric rates affordable. "AB 2700 requires the CPUC to update the LCBF criteria so that this analysis comprehensively reflects the values appropriately outlined in statute of particular renewable resources. This is significant given the range of renewable procurement options available to California public utilities." 2)Belly of the Duck: The new infamous "duck chart" developed by the California Independent System Operator (CAISO) shows that, left unaddressed, generation from renewable power will grow to a point where there will be excess generation on the electric grid both in mid-day and days when demand for electricity is low (spring and fall). This is driven mainly by the selection of primarily one generation technology in the RPS contract process: the CPUC's most recent RPS report shows that as much as 75% of all RPS procurement coming on line in 2015 is solar technology.<1> The belly of the duck represents the net load for electricity after all generation and load is taken into account. The tail and neck of the duck represents the speed at which generation must be made available as the sun sets and --------------------------- <1> http://www.cpuc.ca.gov/uploadedFiles/CPUC_Website/Content/Utiliti es_and_Industries/Energy/Reports_and_White_Papers/FINAL12302015Se ction913_6Report.pdf AB 2700 Page D the solar projects stop generating. For the most part, the electricity needed for the ramps will be provided by natural gas generation facilities. This could lead to problems with maintaining a reliable transmission system due to the need to respond quickly to the changing real-time conditions because natural gas generators take time to start up (several hours or more). As a result, gas generators must be held in standby-mode to be ready when called upon to replace the output that was previously provided by the solar projects. (Note that simultaneous with the renewable "overgeneration" California is importing electricity from out of state). Another way to address the ramp, though, would be to diversify RPS procurement so that the belly fills and the tail and neck flatten - which would have the effect of reducing the ramps at help with reliable operation of the transmission system. Other forms of renewable generation, such as biomass and geothermal facilities are both capable of generating electricity at any time of the day. Certain biomass facilities have been unable to secure new contracts with utilities because the utilities have satisfied their RPS procurement requirements using other resources. Thus, leading to closure and loss of jobs in their communities. Utilities are also planning not to renew geothermal projects and new geothermal projects have not ranked favorably in the RPS selection process. This bill seeks balanced procurement selection by encouraging the CPUC to rank existing renewable projects in a more favorable manner relative to existing jobs and to identify the value of maintaining existing baseload resources. 3)Support: Supporters state that a LCBF criteria reflected is an important recognition of the distinct value brought by AB 2700 Page E biomass facilities, helping to diversify an increasingly homogenous renewable portfolio and lead to a more level playing field. Further, they state that this bill will lead to more use of biomass for electric generation and assist with lowering the risk of wildfires. REGISTERED SUPPORT / OPPOSITION: Support Associated California Loggers California Farm Bureau Federation CalForests Humboldt/Mendocino Redwood Companies Pacific Ultrapower Chinese Station (11 employees of) Opposition None on file AB 2700 Page F Analysis Prepared by:Sue Kateley / U. & C. / (916) 319-2083