BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 886| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 886 Author: Pavley (D) Amended: 5/31/16 Vote: 21 SENATE ENERGY, U. & C. COMMITTEE: 8-3, 4/19/16 AYES: Hueso, Hertzberg, Hill, Lara, Leyva, McGuire, Pavley, Wolk NOES: Morrell, Cannella, Gaines SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16 AYES: Lara, Beall, Hill, McGuire, Mendoza NOES: Bates, Nielsen SUBJECT: Electricity: energy storage systems SOURCE: Author DIGEST: This bill requires appropriate energy storage system 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)) SB 886 Page 2 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 California Public Utilities Commission (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.) 4)Requires the CPUC to adopt a process for each load-serving entity to file an integrated resource plan (IRP), to be approved by the CPUC, to ensure they meet the greenhouse gas emissions reduction targets for the electricity sector; procure at least 50 percent eligible renewable energy resources by December 31, 2030; and meet other statutory requirements. Requires the plan of a CCA be submitted to its governing board for approval and provided to the CPUC for certification. (Public Resources Code §454.52) 5)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) 6)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) This bill: 1)Requires the CPUC to determine, by January 1, 2018, energy storage system procurement targets, if any, applicable to each SB 886 Page 3 LSE, to be achieved by December 1, 2030. Requires the governing board of each CCA to determine appropriate energy storage procurement targets, if any, applicable to the CCA. 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, 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)States that the CPUC, in certifying an IRP of a CCA, to act according to existing law regarding CCAs, IRPs and energy resources procurement. 5)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 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. According to the California Independent System Operator (CAISO), this energy resource intermittency and rapid ramping in demand create a number of challenging conditions for grid management, including short, steep ramps, risk of overgeneration, and decreased ability to automatically adjust electricity production SB 886 Page 4 to maintain grid reliability. [https://www.caiso.com/Documents/FlexibleResources HelpRenewables_FastFacts.pdf.] The CAISO reports that, to reliably manage the electricity grid under these conditions, it needs flexible resources with certain characteristics. 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. 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 the CPUC to determine appropriate energy storage system targets, if any, for IOUs and ESPs, to be achieved by the end of 2030. This bill makes parallel requirements of the governing board of each CCA and POU. 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. 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 state has also provided financial $42 million in incentives to nearly 1,200 to energy storage systems through the Self-Generation Incentive Program. Related/Prior Legislation AB 1258 (Skinner, 2013) would have required the CEC to perform a technical analysis of the potential uses of existing hydro-electric and pumped storage facilities to provide SB 886 Page 5 additional operational flexibility to integrate eligible renewable energy sources into the grid. The bill was held in the Assembly Committee on Appropriations. 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 POUs to set their own targets for the procurement of energy storage and then meet those targets by 2016 and 2021. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee, there is a one-time cost up to $339,288 (Public Utilities Commission Utilities Reimbursement Account) for staffing necessary to determine cost-effective storage targets, review investor owned utility tariff filings, develop a policy for prioritizing storage procurement before fossil generation, monitor procurement filings, and to manage a new track of an existing proceeding or to manage a new proceeding. SUPPORT: (Verified5/27/16) California Energy Storage Alliance Consumer Attorneys of California Environmental Defense Fund SolarCity South Coast Air Quality Management District OPPOSITION: (Verified5/27/16) California Chamber of Commerce Pacific Gas and Electric Company San Diego Gas & Electric SB 886 Page 6 Southern California Edison ARGUMENTS IN SUPPORT: According to the author, 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. Prepared by:Jay Dickenson / E., U., & C. / (916) 651-4107 5/31/16 21:58:36 **** END ****