BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                        SB 886|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
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                                   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))








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          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  








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            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  








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          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  








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          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








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          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


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