BILL ANALYSIS
AB 2514
Page 1
Date of Hearing: April 19, 2010
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 2514 (Skinner) - As Amended: April 14, 2010
SUBJECT : Energy storage systems.
SUMMARY : Requires the California Public Utilities Commission
(CPUC) to open a proceeding to establish procurement targets for
each investor-owned utility (IOU), and requires the governing
board of each publicly owned utility (POU) to adopt energy
storage system procurement targets and report their progress to
the California Energy Commission (CEC). Specifically, this
bill :
1)Requires the California Energy Commission (CEC) to include in
its Integrated Energy Policy Report (IEPR), an evaluation of
the best energy storage systems in the state, and identify and
recommend locations for energy storage facilities.
2)Declares, among other things, that energy storage systems are
necessary and that there is inadequate evaluation of the use
of energy storage and inadequate statutory and regulatory
support.
3)Prescribes the characteristics of an energy storage system,
including: the technical characteristics it could use to store
energy, and a system that would be commercially available and
becomes operational after January 1, 2010.
4)On or before April 1, 2011, requires the CPUC to open a
proceeding to establish procurement targets for each IOU for
viable and cost-effective energy storage systems.
5)On or before January 1, 2013, requires the CPUC to adopt
energy storage system procurement targets to be achieved by
each IOU by January 1, 2015, and a second target to be
achieved by January 1, 2020.
6)On or before April 1, 2011, requires the governing board of
each POU to initiate a process to establish procurement
targets for the utility for viable and cost-effective energy
storage systems.
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7)On or before January 1, 2013, requires the governing board to
adopt energy storage system procurement targets to be achieved
by January 1, 2015, and a second target to be achieved by
January 1, 2020.
8)Requires a POU to report to the CEC regarding the energy
storage system procurement targets and report any
modifications made to those targets.
9)Requires the CPUC to consider existing results of testing and
trial pilot projects from existing energy storage facilities,
consider available information from the California Independent
System Operator (CAISO), and consider the integration of
energy storage technologies with other programs including
energy efficiency or other means of reducing electrical demand
that will result in the most efficient use of generation
resources and cost-effective energy efficient grid integration
and management.
10)Requires the CPUC to ensure that the energy storage system
procurement targets that are established are technologically
viable and cost-effective.
11)On or before July 1, 2011, requires the CEC to adopt
regulations specifying procedures for enforcement of the
energy storage portfolio standard.
12)Requires the CEC to include a summary of the information
reported in its IEPR.
EXISTING LAW :
1) Requires both IOUs and POUs to first acquire all
available energy efficiency and demand reduction resources
that are cost-effective, reliable, and feasible.
2) Requires each IOU to purchase energy according to a
procurement plan which is subject to approval by the CPUC.
3) Requires all utilities to increase procurement from
eligible renewable energy resources until they reach 20% by
2010.
4) Requires the adoption of a statewide greenhouse gas
(GHG) emissions limit equivalent to 1990 levels by 2020,
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pursuant of AB 32 (Nu?ez), by creating regulations to
achieve maximum technologically feasible and cost-effective
GHG emission reductions.
5) Requires the CEC to conduct assessments and forecasts of
all aspects of the energy industry, and compile the IEPR
that shall present policy recommendations based on an
in-depth and integrated analysis of the most current and
pressing energy issues facing the state.
FISCAL EFFECT : None.
COMMENTS : According to the author, the purpose of this bill is
to increase the use of energy storage to decrease emissions from
peaker plants. The author quotes a Pew Center study that states
that energy storage accounts for 2.5% of the total energy
generated in the United States, while storage in Japan and
Europe accounts for 15% and 10% of generated energy
respectively.
1) Background : California law requires all retail sellers of
electricity to meet at least 20% of the retail sales using
electricity from renewable resources by 2010; a Renewable
Portfolio Standard (RPS). ARB has identified an advancement of
the RPS to 33% by 2020 as one of the key actions needed to be
taken in order to meet the GHG reduction goals of AB 32 (Nunez),
Chapter 488, Statutes of 2006. Two bills were introduced last
year (AB 64 and SB 14), and one has been amended this
legislative session to create the 33% RPS goal, SB 722
(Simitian).
While several studies have determined that a 33% RPS is
achievable, it can only be met with a heavy reliance on wind and
solar energy, which are intermittent. In order to ensure
reliability, these generation resources need to be "firmed" to
ensure electricity is dispatched when it is scheduled to serve
load.
One way to resolve this reliability problem is to build more
peaker plants, which can be ramped up and down quickly to
complement the solar and wind. Most peaker plants run on
natural gas and are less efficient that some of the baseload
plants. Thus, the peaker plants may cause more air emissions
per each kWh of electricity generated. The ARB has recommended
finding ways to store the electrical output of renewable
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facilities to use at a later time or date to decrease reliance
on the peaker plants.
2) What is energy storage : The most common form of energy
storage device in use today is batteries. However, there are no
commercially available batteries that could cost-effectively
store the large amounts of electricity that can be produced by
large-scale wind farms or solar facilities. Another form of
electricity storage that is already in use in California is pump
storage, where water is pumped into a reservoir at night and
then released through turbines during the day to produce
electricity. Additional research is taking place to develop
other storage devices using compressed air, flywheels, fuel
cells, and other innovative technologies.
According to the CAISO, peak demand in its service territory was
50,270 MW in July 2006. This equates into about 67,000 MW
statewide. (The load would have higher had demand-response
customers not been called upon.) This bill would require both
IOUs and POUs to attain a 2.25% energy storage standard by 2014,
which would equal a capacity of 1,500 MW to be held in the form
of storage, and 3,400 MW or more thereafter depending on
increases in peak demand. The CEC forecasts an increase in peak
demand, which would increase the required capacity the energy
storage beyond 3,400 MW.
3) Hypothetical evaluations : An energy storage model created by
the National Renewable Energy Laboratory (NREL) recently
examined the use of wind-generated energy storage within the
current electrical grid. NREL determined that incorporating 30
gigawatts (GW) of wind energy storage at the present time would
result in the utilization of 50 GW of additional wind power by
2050, equaling a 17% increase in wind-generated power utilizing
storage. NREL estimated that this would result in a 56%
reduction GHG emissions per kWh due to eliminating the need for
fossil fuel-fired peaker plants.
4) Actual Evaluations: Since May 2008, the CAISO has been
coordinating a stakeholder process to identify the issues
associated with integrating different types of energy storage
technology on the electric power grid. The CAISO launched
18-month pilot projects in July 2009, and is expected to be
complete by December 2010. The three IOUs are running a study
to develop cost-effectiveness methods for storage (permanent
load shifting) and ways to deliver incentives to end-use
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customers to motivate customer investments in demand-side
storage.
Some new technologies PG&E is piloting includes the following:
A 4 MW Sodium Sulphur (NaS) battery project, which is
intended to be placed on a distribution line to improve
reliability and power quality, reduce peak demand,
integrate intermittent renewable resources and provide
ancillary services to support the grid. PG&E states that
the cost is "extremely expensive" at about $4 million per
MW.
A 300 MW compressed air energy storage (CAES) Kern
Demonstration Project that uses a porous rock reservoir in
Kern County near where 4,500 MW of new wind is projected
to connect to the grid. PG&E was awarded a $25 million
grant from the federal Department of Energy and matching
funds from California sources in 2009 to pilot this
project. The total cost of the facility is estimated to
be $356 million.
A renewable integration pilot project using numerous
commercial and industrial facilities, jointly with the
Lawrence Berkeley National Laboratory.
In addition, PG&E is working with the Lawrence Berkeley National
Laboratory to implement renewable energy integration using
commercial and industrial facilities. It is also partnering
with the Electric Power Research Institute to control the charge
rate of plug-in hybrid vehicles and electric vehicles as a means
to potentially integrate renewable energy.
SCE is engaged in three energy storage pilots. They are
scheduled to be complete in 2012, 2014, and 2015. SCE believes
that after some studies are completed and others are 1 to 2
years along there should be adequate information to make some
solid recommendations. However, at this time it is premature to
mandate an energy storage portfolio.
According to the CEC, research and development is ongoing for
all areas of energy storage. There are advanced sodium/sulfur,
zinc/bromine, and lithium/air batteries nearing commercial
readiness and offer promise for future utility application.
Flywheels continue to be developed and improved.
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Superconducting magnetic energy storage systems and
supercapacitors are under development, however, PG&E experts
assert that these are far from being available in commercial
packages. The CEC notes that while there are a vast array of
products and applications which utilize energy storage of up to
a duration of 60 minutes, there are relatively few applications
employed for peak shaving and load leveling.
5) Cash for cache : Both rebates and grants are available for
energy storage facilities. Recently, the CPUC has authorized
the use of the Self Generation Incentive Program subsidies to
provide up to $2 a watt when energy storage facilities are
coupled with an eligible (fuel cell or wind) technology.
The CEC provides grants. Southern California Edison (SCE) notes
that several energy storage projects have qualified for CEC
grants from the American Reinvestment and Recovery Act funds,
including a grant for the Tehachapi project.
Energy storage facilities are also eligible for CEC Renewables
grants (when coupled with an eligible renewable technology) and
Public Interest Energy Research grants. In May 2009, the CEC
funded a project by San Diego Gas & Electric (SDG&E) to add
energy storage and controls to coordinate the high-proportion of
roof-top solar systems in Borrego Springs, California, an area
with an average of nine blackouts per year. SDG&E will evaluate
the microgrid performance to apply lessons learned to the
implementation of the smart grid using energy storage as an
element.
The CEC provided more than $1.5 million to the Sacramento
Municipal Utility District (SMUD) to demonstrate and validate
the technologies developed under CEC-funded microgrid pilot
project that uses energy storage as well as renewable
technologies. The CEC also provided $1 million to UC San Diego
to demonstrate a semi-autonomous smart grid controller that
manages a community-scale smart grid and integrates energy
storage technologies.
6) Cost-effective is in the eye of the beholder : The
cost-effectiveness of energy storage varies depending on
numerous factors, including: the technology used, the expected
life of the system, the expected cost and frequency of ongoing
maintenance, the dispatchability of the technology, the location
of the system, and how much can be incorporated into the
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electrical grid. A previous version of this bill prescribes the
factors required to be used to determine cost-effectiveness and
requires the CPUC or governing body of a POU to "value all
lifetime avoided costs of the energy storage system, including
avoided environmental costs." The bill also required the CPUC
and POUs to "consider and value all of the purposes served by a
system."
Factors such as avoided costs, environmental costs, and all
purposes, are subjective and can vary greatly depending on the
evaluator. In addition, all lifetime avoided costs may or may
not be applicable for this specific application. One of the
most variable and subjective factors used when evaluating
cost-effectiveness is the present value of potential future
benefits, or the net-present value. If the evaluator chooses to
use a low discount rate, it would imply that the expected
benefits in out years are sure to materialize and would result
in a high net-present value (or high benefits). A high discount
rate, on the other hand, would imply the evaluator is skeptical
of the potential benefits in out years and the resulting
net-present value of the asset would be low. Although these
evaluations might be helpful and relevant for larger policy
discussions, mandating that lifetime benefits be quantified or
considered could be arbitrary and unreliable for a financial
determination.
According to the CEC, properly configured energy storage
benefits include improved power quality and reliability
("premium" power), "Green Power" dispatch/purchase options,
energy/demand cost savings from load leveling, and decreased
transmission and distribution infrastructure investment. The
CEC states that the weaknesses of energy storage include the
high cost for a long duration storage system, parasitic power
losses required to keep the unit charged, and high maintenance
(e.g. frequent testing, charge assessment for batteries). The
CEC does not quantify these benefits or costs.
Current law requires IOUs to first meet its unmet resource needs
through available energy efficiency and demand reduction
resources that are cost-effective, reliable, and reasonable.
Current law is silent on the factors the CPUC must consider to
be deemed "cost-effective." To determine cost-effectiveness,
the CPUC uses a long-standing cost-effectiveness analysis
methodology, enshrined in the "Standard Practice Manual" more
than 20 years ago. This includes various cost-effectiveness
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tests from the perspectives of the participant and the utility
program administrator. The CPUC also applies a Total Resource
Cost test that evaluates the combined costs of ratepayers and
participating customers, and a Societal Test that has the
ability to apply a different social discount rate, and count
certain externalities like greenhouse-gas reduction values. The
input values are periodically updated, such as avoided energy
costs, the reference marginal resource type (currently a
combined cycle gas turbine), retail prices, assumptions on the
value per ton of carbon saved, and other quantifiable values.
This version of the bill appropriately leaves silent the factors
that should be considered, which defaults to the CPUC evaluation
of cost-effectiveness.
7) Opposition : SCE, in a filing to the CAISO, stated that
there is a significant need to understand the impacts of energy
storage technology and how it integrates at the distribution
level. This is still "at a nascent stage." To help address
SCE's need for understanding on how energy storage technology
resources integrate on the system, SCE has a Renewable
Integration and Advancement (RIA) application pending before the
CPUC that would allow for the development of research and
development projects at the distribution level for this type of
technology. SCE states, "A mandate to purchase before we have
determined best uses of the technologies and appropriate grid
integration is a costly and risky proposal. We continue to
advocate for a bill requiring guided study and trialing and
regulatory recommendations based on those results as the best
legislative approach."
The California Coalition of Utility Employees (CCUE) is opposed
and states, "We are not aware of any analysis that points to a
specific level of storage that is ideal to better operate and
balance the system. In addition, we are very concerned that is
mandate is being proposed in a vacuum without any thoughtful
analysis of the cost implications of such a mandate."
The California Large Energy Consumers Association (CLECA) is
concerned about the costs. It states that although the bill
references attributes that should be considered and valued when
determining if a system is cost-effective, there is no
requirement that it be cost-effective. In addition, CLECA is
opposed to the provision that grants utilities a higher rate of
return for storage projects. When this higher return is added
to costs of operation and maintenance, it results in a higher
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cost of generation than that of generation by existing
facilities.
Other opposition believes that energy storage is a complementary
product and would add significant value "on the natural" to
already premium renewable energy due to RPS mandates. A
renewable generator that can deliver more power when it's
needed, instead of during off-peak times or intermittently by
using storage, will likely get a higher priced contract and be
considered a priority when bidding into the IOUs' RPS
solicitations. Storage would increase the renewable generator's
value due to its dispatachability and ability to firm renewable
generation.
8) The cart doing deliveries before the horse is bridled : This
bill requires the CEC to identify and recommend locations where
the interconnection costs for energy storage systems located on
the transmission and distribution grid would be minimized in its
biennial IEPR. The CEC completes a full IEPR every
odd-numbered year, and provides an update to the previous IEPR
on even-numbered years. The next full IEPR is expected to be
complete in the November 1, 2011.
This bill requires the CPUC to develop targets, which could be
zero if storage systems are not technologically viable or
cost-effective, by January 1, 2013. The next IEPR will be
produced in the November 1, 2011, then two years later by
November 1, 2013. It is unclear how or why the CEC could
recommend optimal locations for energy storage systems, when the
CPUC has not yet determined whether storage systems would be
best for ratepayers in light of all other energy efficiency and
demand reduction efforts.
In addition, current law requires the CEC to conduct assessments
and forecasts of all aspects of the energy industry, and have
the IEPR present policy recommendations based on an in-depth and
integrated analysis of the most current and pressing energy
issues facing the state. It is unclear whether energy storage
systems would make the top pressing issues that warrant
inclusion in the IEPR. If they do, the CEC already has
authority to include them.
This bill could be requiring a tremendous amount of limited CEC
resources to be expended for naught. As such, this committee
may wish to delete the provision that the CEC include in its
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IEPR an evaluation of the best energy storage systems in the
state, and an identification and recommendation for energy
storage facilities.
REGISTERED SUPPORT / OPPOSITION :
Support
A123 Systems, Inc.
Altairnano Inc.
Breathe California
California Attorney General (Sponsor)
California Energy Storage Alliance
CALMAC Manufacturing Corporation
Clean Power Campaign (if amended)
Coalition to Advance Renewable Energy through Bulk Storage
(CAREBS)
Debenham Energy, LLC
Dow Kokam, LLC
ElectronVault, Inc.
Energy Company, Panasonic Corporation
EnerSys
EnerVault Corporation
EVAPCO, Inc.
FAFCO Inc.
Fluidic Energy, Inc.
Ice Energy, Inc.
MegaWatt Storage Farms, Inc.
Mohr Davidow Ventures
Natgun Corporation
Pearl Street Liquidity Advisors, LLC.
Polaris Venture Partners
PowerGenix Systems, Inc.
Prudent Energy International, Inc.
PVT Solar, Inc.
Rockport Capital Partners
SAIL Venture Partners
Samsung SDIA, Inc.
SANYO North America Corporation
SEEO, Inc.
SustainX, Inc.
Union of Concerned Scientist (UCS)
XtremePower
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Opposition
California Manufacturers & Technology Association (CMTA)
California Municipal Utilities Association (CMUA)
California Association of Small and Multi-jurisdictional
Utilities (CASMU)
California Coalition of Utility Employees (CCUE)
California Large Energy Consumers Association (CLECA) (unless
amended)
Division of Ratepayer Advocates (DRA) (unless amended)
Northern California Power Agency (NCPA)
Pacific Gas and Electric Company (PG&E) (unless amended)
San Diego Gas & Electric (SDG&E) (unless amended)
Southern California Edison (SCE) (unless amended)
The Utility Reform Network (TURN)
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083