BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 886 Hearing Date: 4/19/2016
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|Author: |Pavley |
|-----------+-----------------------------------------------------|
|Version: |4/12/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Electricity: energy storage systems
DIGEST: This bill requires the California Public Utilities
Commission (CPUC) to adopt energy storage system procurement
targets applicable to every load-serving entity and the
governing board of each local publicly owned electric utility to
adopt comparable energy storage procurement targets; requires
each load-serving entity and locally owned public electric
utility to plan for the procurement of energy storage systems
before fossil-fuel-based generation; and requires each
electrical corporation to propose measures to encourage
customers to install energy storage systems.
ANALYSIS:
Existing law:
1)Defines "load-serving entity" (LSE) as an electrical
corporation (investor-owned utility, or IOU), energy service
providers (ESP) or community choice aggregators (CCA).
(Public Utilities Code §380(k))
2)Requires each LSE and local publicly owned electric utility
(POU) to increase purchases of renewable energy such that at
least 50 percent of retail sales are procured from renewable
energy resources by December 31, 2030. This is known as the
Renewable Portfolio Standard (RPS). (Public Utilities Code
§399.11 et seq.)
3)Requires the CPUC to adopt a process for each IOU to file an
integrated resource plan (IRP) to ensure IOUs meet the
SB 886 (Pavley) PageB of?
greenhouse gas (GHG) emissions reduction targets for the
electricity sector; procure at least 50 percent eligible
renewable energy resources by December 31, 2030; enable each
IOU to fulfill its obligation to serve its customers at just
and reasonable rates; minimize impacts on ratepayers' bills;
ensure system and local reliability; strengthen the diversity,
sustainability, and resilience of the bulk transmission and
distribution systems, and local communities; enhance
distribution systems and demand-side energy management; and
minimize localized air pollutants and other GHG emissions,
with early priority on disadvantaged communities. (Public
Resources Code §454.52)
4)Requires each POU to adopt and regularly update an IRP
substantially similar required of the IRPs developed by LSEs,
to be reviewed by the California Energy Commission (CEC).
(Public Utilities Code §9321)
5)Directs the CEC and the CPUC, where feasible, to authorize
procurement of resources to provide grid reliability services
that minimize reliance on system power and fossil fuel
resources and, where feasible, cost effective, and consistent
with other state policy objectives, increase the use of large-
and small-scale energy storage. (Public Utilities Code §400)
6)Requires the CPUC to determine appropriate targets, if any,
for LSEs to procure energy storage systems. Requires LSEs to
meet any targets adopted by the CPUC by 2015 and 2020.
Requires POUs to set their own targets for the procurement of
energy storage and then meet those targets by 2016 and 2021.
(Public Utilities Code §2835 et seq.)
This bill:
1)Requires the CPUC to adopt, by January 1, 2018, energy storage
system procurement targets applicable to each LSE, to be
achieved by December 1, 2030.
2)Directs the CPUC to require each IOU, by January 1, 2017, to
propose new tariffs or programs to encourage customers to
install energy storage systems on the customer side of the
meter.
3)Requires the CPUC, by March 1, 2017, to require each LSE, in
developing its IRP, to consider the full benefits of procuring
SB 886 (Pavley) PageC of?
energy storage systems; requires the CPUC, in approving an
LSE's IRP, to require the IRP to provide for the procurement
of comparably priced, equally effective energy storage systems
before fossil-fuel-based generation.
4)Requires the governing board of each POU, in planning for
future procurement of resources, to consider the benefits of
procuring energy storage systems and to procure comparably
priced, equally effective energy storage systems before
fossil-fuel-based generation.
Background
Up a duck's neck, quickly. California utilities have procured
increasing amounts of electricity from renewable resources, in
response to the state's RPS mandates. Much of this electricity
has come from solar and wind energy resources. Such resources
can be described as intermittent, meaning that they are not
available at all times of the day and can experience
difficult-to-predict upward or downward swings in electricity
production. This intermittency creates challenges for
management of the electric grid, one of which is the need to
quickly respond to changes in demand for energy.
The California Independent System Operator (CAISO) depicted the
challenges created by energy intermittency in its now-famous (or
infamous) calculation of net electricity load, that is,
forecasted load minus forecasted electricity production from
wind and solar generation resources. The chart has become known
as the "the duck curve," in which the duck's "neck" represents
an increase in the relative demand for electricity in the late
afternoon and early evening.
According to CAISO<1>, the phenomena that result in the duck
create a number of challenging conditions for grid management:
Short, Steep Ramps - when CAISO must bring on or shut
--------------------------
<1>
https://www.caiso.com/Documents/FlexibleResourcesHelpRenewables_F
astFacts.pdf.
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down generation resources to meet an increasing or
decreasing electricity demand quickly, over a short period
of time.
Overgeneration Risk - when more electricity is supplied
than is needed to satisfy real-time electricity
requirements.
Decreased Frequency Response - when fewer resources are
operating and available to automatically adjust electricity
production to maintain grid reliability.
The CAISO reports that, to reliably manage the electricity grid
under increasingly duck-like conditions, it needs flexible
resources with certain characteristics. According to CAISO,
those characteristics include the ability to perform the
following functions:
Sustain upward or downward ramp.
Respond for a defined period of time.
Change ramp directions quickly.
Store energy or modify use.
React quickly and meet expected operating levels.
Start with short notice from a zero or low-electricity
operating level.
Start and stop multiple times per day.
Accurately forecast operating capability.
One flexible resource that provides many of the characteristics
CAISO says will be needed to reliably manage the electricity
grid is natural-gas-fired powerplants, especially "peaker
plants" that can quickly ramp up and down. So, ironically, as
the state increases its supply of renewable energy resources, it
might remain reliant on electricity produced by natural gas, or
become even more reliant on it. As made abundantly clear by the
recent, prolonged and massive leak of natural gas from the Aliso
Canyon Storage Facility - one of the largest natural gas
facilities in the country, owned and operated by the Southern
California Gas Company (SoCal Gas) - profound reliance on
natural gas as an energy resource necessarily entails risks to
the environment and to human health and wellbeing.
There has got to be another way. Another potential method to
manage the electric grid of the future is through the use of
energy storage systems. This bill encourages the procurement of
energy storage systems in a number of ways. Most significantly,
it requires all electricity providers - IOUs, ESPs and CCAs, as
SB 886 (Pavley) PageE of?
well as POUs - to adopt energy-storage-system procurement
targets, to be achieved by the end of 2030. This bill also
requires the same entities, when developing their IRPs -
comprehensive planning documents all LSEs must prepare that
detail how the LSE will achieve the state's environmental and
energy goals - to consider the benefits of energy storage
systems. Finally, this bill requires IOUs to propose new
tariffs or programs to encourage customers to install energy
storage systems on the customer side of the meter.
State already pushing procurement of energy storage. If it
becomes law, this bill would not represent the first time the
Legislature has mandated the procurement of energy storage
systems. AB 2514 (Skinner, 2010), similar to this bill,
required CPUC to determine appropriate targets, if any, for LSEs
to procure energy storage systems by 2015 and 2020, and directed
POUs to set their own comparable energy storage system
procurement targets. The CPUC, in implementing AB 2514,
established the following energy storage system procurement
targets applicable to the state's three largest electric IOUs:
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| |
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|-----------------------------------+----+----+----+----+-----|
|Energy Storage Procurement Targets |2014|2016|2018|2020|Total|
| | | | | | |
|-----------------------------------+----+----+----+----+-----|
|Southern California Edison | | | | | |
|-----------------------------------+----+----+----+----+-----|
|Transmission | 50| 65| 85| 110| 310|
|-----------------------------------+----+----+----+----+-----|
|Distribution | 30| 40| 50| 65| 185|
|-----------------------------------+----+----+----+----+-----|
|Customer | 10| 15| 25| 35| 85|
|-----------------------------------+----+----+----+----+-----|
|Subtotal SCE | 90| 120| 160| 210| 580|
|-----------------------------------+----+----+----+----+-----|
|Pacific Gas and Electric | | | | | |
|-----------------------------------+----+----+----+----+-----|
|Transmission | 50| 65| 85| 110| 310|
|-----------------------------------+----+----+----+----+-----|
|Distribution | 30| 40| 50| 65| 185|
|-----------------------------------+----+----+----+----+-----|
|Customer | 10| 15| 25| 35| 85|
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|-----------------------------------+----+----+----+----+-----|
|Subtotal PG&E | 90| 120| 160| 210| 580|
|-----------------------------------+----+----+----+----+-----|
|San Diego Gas and Electric | | | | | |
|-----------------------------------+----+----+----+----+-----|
|Transmission | 10| 15| 22| 33| 80|
|-----------------------------------+----+----+----+----+-----|
|Distribution | 7| 10| 15| 23| 55|
|-----------------------------------+----+----+----+----+-----|
|Customer | 3| 5| 8| 14| 30|
|-----------------------------------+----+----+----+----+-----|
|Subtotal SDG&E | 20| 30| 45| 70| 165|
|-----------------------------------+----+----+----+----+-----|
|Total IOU Energy Storage | 200| 270| 365| 490|1325 |
|Procurement Targets | | | | | |
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The CPUC reports the IOUs have each progressed in meeting their
energy storage procurement goals. However, none has yet met its
final procurement goal in any category, other than SCE, which
has already exceeded the procurement goal for customer-side
storage.
The state has also provided financial incentives to energy
storage systems. Over the last several years, the CPUC reports
that the Self-Generation Incentive Program (SGIP), which the
CPUC administers, has awarded $42 million to nearly 1,200 energy
storage projects.
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|SGIP Awards to Energy Storage Systems |
| |
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|---------+------+------------+----------+------------+-------------|
| Years |Projec| Installed |Incentive | Reserved | Incentives |
|2009-2015| ts | Capacity | Paid | Capacity | Reserved |
| | | (kW) | | (kW) | |
|---------+------+------------+----------+------------+-------------|
| Totals| 1175| |$41,547,42| | |
| | | | 6 | |$149,215,781 |
| | | | | | |
| | | 23 | | 92 | |
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The CPUC is currently considering revisions to SGIP program
eligibility. While the CPUC has yet to make a decision about
program revisions, a staff proposal recommends making energy
storage systems much more likely recipients of SGIP awards.
Given this ongoing progress, and the likely continued subsidy of
energy storage that might bring down its future cost, it is
worth asking whether it is premature to mandate additional
energy storage procurement at this time. The author and
committee might consider amending the bill to provide discretion
to the CPUC, as follows, similar to the discretion provided by
AB 2514:
On or before January 1, 2018, the commission shall adopt
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, 2030.
Energy storage systems procured pursuant to the targets
shall be limited to those that reduce the need for
fossil-fuel-based generation, provide benefits to the
electrical grid, or support the integration of eligible
renewable energy resources procured pursuant to the
California Renewables Portfolio Standard Program (Article
16 (commencing with §399.11) of Chapter 2.3 of Part 1).
Cost-effectiveness is still in the eye of the beholder. AB
2514, like this bill, required CPUC and POUs to adopt
energy-storage-system targets that are viable and
cost-effective. Analysis of AB 2514 noted that
cost-effectiveness is in the "eye of the beholder." That is,
the cost-effectiveness of energy storage systems varies
according to numerous factors, many of which are subjective.
Determination of which energy storage systems are
cost-effective, then, is uncertain.
The CPUC and the governing boards of the POUs, however, have
been down the cost-effectiveness road before. Presumably, the
CPUC will determine the cost-effectiveness of energy storage
systems in a way that is comparable to the way it did in
determining the cost-effectiveness of energy storage systems for
purposes of adopting the existing procurement targets.
Presumably, so too will the governing boards of the POUs. It is
worth noting that many POUs report adopting energy system
procurement targets of zero because, in their determinations,
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energy storage systems are not cost-effective.
Good for the goose. This bill requires CPUC to require each IOU
to propose new tariffs or programs to encourage customers to
install energy storage systems behind the meter. This bill
makes no similar requirement of the other types of LSE, namely
CCAs and ESPs.
Customers of the IOUs are motivated to unbundled their service
from the IOUs for a number of reasons. One of those reasons is
the cost of service. This bill potentially adds a new cost -
new tariffs or programs to encourage energy storage system
installation - to the service provided to the customers of the
IOUs that it does not add to the cost of service to the
customers of the CCAs or ESPs. The author may want to amend
this bill so that the requirements of Section 2 of this bill
apply equally to all LSEs, not just IOUs.
Benefits, or full benefits. As mentioned, this bill makes very
similar requirements of LSEs and POUs in each type of entity's
development and update of its respective IRPs. The
requirements, however, are not exactly alike. Regarding POUs,
this bill requires a consideration of the "benefits" of
procuring energy storage systems. Similarly, this bill requires
the CPUC to require each LSE to consider the "full benefits" of
procuring energy storage systems. Similar, but not identical
requirements.
It is not clear how, as practical matter, a consideration of
"benefits" differs from a consideration of "full benefits." But
it should be clear. The author may wish to amend this bill
either to make identical the two sections of language regarding
consideration of the benefits of energy storage systems or to
distinguish between "benefits" and "full benefits."
Prior/Related Legislation
AB 2514 (Skinner, Chapter 469, Statutes of 2010) required CPUC
to determine appropriate targets, if any, for LSEs to procure
energy storage systems. The bill required LSEs to meet any
targets adopted by the CPUC by 2015 and 2020. The bill required
POU to set their own targets for the procurement of energy
storage and then meet those targets by 2016 and 2021.
AB 1258 (Skinner, 2013) would have required the CEC to perform a
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technical analysis of the potential uses of existing
hydro-electric and pumped storage facilities to provide
additional operational flexibility to integrate eligible
renewable energy sources into the grid. The bill was held in
Assembly Committee on Appropriations.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT:
California Energy Storage Alliance
Consumer Attorneys of California
Environmental Defense Fund
SolarCity
South Coast Air Quality Management District
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: According to the author:
The natural gas storage facility disaster in Aliso Canyon
has shed light on a tenuous statewide grid reliability
policy. Throughout the state, we rely on fossil fuel
storage facilities to deliver critical energy resources for
homes and businesses. Oil and gas companies like SoCal Gas
operate numerous other related facilities: compressor
stations; pipeline infrastructure, and gas well services
infrastructure.
Against this backdrop, the state continues its national and
international efforts to drive a series of important
discussions forward about the future of energy, and the
future of the grid. Last year, Governor Brown signed SB
350 into law, which, among other things, mandated a
statewide RPS of 50 percent by 2030, and instituted a
planning regime under the IRP. The California Solar
Initiative has been critical in bringing down the cost of
solar for residential and commercial use. The CPUC and the
CEC have, as a result of AB 32, instituted a zero net
energy goal for new buildings. CAISO and other balancing
authorities have encouraged the use of a preferred resource
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loading, which, for the case of energy and demand response,
is mandated in regulation.
However, in contrast to and, in some cases as a direct
result of these broad goals, the state also continues to
increase its reliance on fossil fuels. Ironically, as the
state continues to increase its consumption of clean power
from the sun and wind, storage facilities like Aliso Canyon
have become even more critical to grid reliability: thermal
power plants provide fast, flexible, and reliable
generation when the sun goes down, or when the wind dies.
This is a critical complement to the unpredictable peaks
associated with renewable generation.
But if the state is going to meet its RPS requirement, and
its commitments under the Clean Power Plan, it will need to
move away from fossil storage and thermal peakers. Cleaner
storage, through batteries and renewable fuels, holds the
promise of a smoother load curve and less reliance on
facilities like Aliso Canyon to support electricity needs
in Los Angeles and elsewhere in California.
ARGUMENTS IN OPPOSITION: Writing in opposition, the IOUs
contend this bill makes unnecessary, redundant and premature
requirements, muddies the nascent IRP process and fails to treat
all LSEs equally.
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