BILL ANALYSIS Ó AB 2868 Page 1 Date of Hearing: April 20, 2016 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Mike Gatto, Chair AB 2868 (Gatto) - As Amended March 17, 2016 SUBJECT: Energy storage SUMMARY: Requires the California Public Utilities Commission (CPUC) to direct electrical corporations to file applications for programs and investments to accelerate widespread deployment of distributed energy storage systems. Specifically, this bill: 1)Requires the CPUC, in consultation with the State Air Resources Board and the State Energy Resources Conservation and Development Commission, to direct electrical corporations to file applications for programs and investments to accelerate widespread deployment of distributed energy storage systems. 2)Requires the CPUC to first approve programs and investments that provide distributed energy storage systems to industrial, commercial, and low-income customers and, beginning January 1, 2019, authorizes the CPUC to approve programs and investments for residential customers who enroll in time-variant pricing. EXISTING LAW: AB 2868 Page 2 1)Authorizes, beginning January 1, 2018, the CPUC to require or authorize an electrical corporation to employ default time-of-use pricing for residential customers. (Public Utilities Code Section 745) 1)Requires the CPUC to determine appropriate targets, if any, for each load-serving entity to procure viable and cost-effective energy storage systems to be achieved by December 31, 2015, and December 31, 2020. (Public Utilities Code Section 2836) FISCAL EFFECT: Unknown. COMMENTS: 1)Author's Statement: "Energy storage, the act of disconnecting energy from when it is created and when it is used, is critical to creating a reliable and efficient electrical grid. Traditionally, storage has been accomplished via large water pumping projects that pump water into a reservoir during the hours when demand for electricity is low and then release water to generate electricity during hours of peak electricity demand. As renewable energy technologies (such as solar and wind) become more prevalent, local, customer-side storage solutions provide an opportunity to capture excess energy and store it for use until it is called on by the customer. Similarly, storage technologies provide an opportunity to shift a portion or a building's energy demand from on-peak to off-peak times (load shifting). Use of energy storage technology not only increases the reliability of California's AB 2868 Page 3 grid, but it increases the utility of renewable energy and can reduce electricity bills. Increased demand for energy storage technologies will ease energy costs for large energy users, will drive new business opportunities, and will help keep and create manufacturing and industrial jobs in California." 2)Background: On October 17, 2013, the CPUC approved D. 13-10-040 to establish storage procurement targets and policies for load-serving entities (investor-owned utility (IOU) and non-utility): For the IOUs, the CPUC set the following targets for the IOUs: 1,325 megawatts (MW) of storage by 2020 in four biennial solicitations (starting December 2014), as follows: Pacific Gas and Electric (PG&E), 580 MW; Southern California Edison (SCE), 580 MW; San Diego Gas and Electric (SDG&E), 165 MW. The CPUC divided the targets into three "storage grid domains": Transmission-connected, Distribution-level and Customer-Side of the Meter applications. For customer-side of the meter applications, the CPUC included bill management/permanent load shifting, power quality, and electric vehicle charging within energy storage. The CPUC set total procurement targets on the customer-side of the meter at 85 MW for SCE, 85 MW for PG&E, and 30 MW for SDG&E. a) According to SCE, it has procured approximately 171 MW of customer-side storage through 2014 and has plans an additional 50 MW. b) According to PG&E, it has procured approximately 91 MW of customer-side storage through 2014 and has a target of 120 MW in 2016. c) According to SDG&E it has procured 4.66 MW of AB 2868 Page 4 customer-side storage in 2014 and has 20.29 MW pending approval for 2016 with a target of 30 MW. 3)Neither an Incentive Program or a Procurement Program: Current programs to develop energy storage are limited to the ratepayer-funded incentives provided by the Self-Generation Incentive Program and utility procurement solicitations. This bill does not require either an incentive or a procurement solicitation. It allows a utility to design a program that benefits ratepayers and provides utility customers a way to better manage their energy bills. Initially this bill is limited to industrial, commercial, and low income programs. This bill does not specify the structure of the program or the size of the program, which would allow the utilities to develop a program that tailored to meet customer needs and ratepayer benefits. Further, this bill is silent on the extent a utility may partner with third-party energy storage providers. To that extent, it allows the utilities to design the program. This bill requires that the costs be in the interest of ratepayers in order for a utility to qualify for cost recovery. 4)Time of Use Rates: In an attempt to reduce peak loads and/or shift loads from peak to off-peak periods, utilities have implemented "time-of-use" (TOU) rate structures that charge for energy depending on the dime of day and season of the year in which the energy is used. Industrial and commercial customers are subject to the TOU tariffs of the load-serving entity providing electric services, some of which also include demand charges. Similarly, Public Utilities Code Section 745 authorizes the CPUC to require or authorize an electrical AB 2868 Page 5 corporation to employ default time-of-use pricing for residential customers. Although TOU structures are effective, because of the nature of their operations, industrial and commercial customers often have challenges modifying their businesses to manage their electricity consumption and costs. More common, however, are responsive changes in customer electricity usage, which modify the peak time for electricity demand and effect demand charges in rate design. Properly designed and dispatched energy storage systems will help customers manage energy costs, help reduce overall system peak energy demands, improve public health, and assist in achieving greenhouse gas emissions goals. The CPUC is not required to implement residential customer time of use rates until 2018. 5)Sunset Date: This bill requires the CPUC to first approve those programs and investments that provide distributed energy storage systems to industrial, commercial, and low-income customers. After January 1, 2019, the CPUC may approve programs and investments offered to residential customers who enroll in time-variant pricing pursuant to Public Utilities Code Section 745. This bill sunsets January 1, 2020. 6)Arguments in Support: Supporters state that this bill will significantly accelerate the deployment of energy storage resources in California, where energy storage resources still require further support to become mainstream resources available for use in grid's and by electricity customers. REGISTERED SUPPORT / OPPOSITION: AB 2868 Page 6 Support California Energy Storage Alliance SolarCity Opposition None on file. Analysis Prepared by:Sue Kateley / U. & C. / (916) 319-2083