Influencing energy storage policy in California

by Phil Carson , Intelligent Utility Daily

The trick here is delivering a coherent exegesis within a 750-word format on the myriad perspectives on the issues surrounding energy storage policy in California.

That means links to primary documents and past discussions for background and a representative sampling of those perspectives that will entertain, inform or, possibly, outrage readers. So I’ll provide here a sampling of the latest comments on the California Public Utility Commission’s (CPUC) proceeding. And yesterday’s column, which provides the primary documents and past discussions, is "Energy Storage and Policy."

If you dip into the comments themselves, you’ll quickly see that deep complexities attend the policy analysis and technical and financial merits of storage. I urge you to go to specific comments for the detailed recommendations on such complex matters as suggested procurement targets, how storage’s cost-effectiveness should be measured, etc. All I can do here is to provide a rough sense of the parties’ positions and a few statements. This may or may not be helpful.

First, I’ll generalize here, based on my reading and past discussions. Consumer advocates want energy storage in place if it’s cost-effective, helps with grid efficiencies and helps citizens save or manage energy use. Environmental groups think procurement targets will provide real-world deployments that will speed attainment of renewable portfolio and environmental goals. Energy storage vendors want procurement targets in place because that’ll help develop the market and provide financial support to their industry. Utilities, generally, don’t want procurement targets because it forces their hand while they explore possible roles for (and alternatives to) the technology and possible business cases to support it. I’m still working on understanding the California Independent System Operator’s position.

The deadline for the various parties to respond to each other’s filed comments is Feb. 21 and a revised, "final" staff proposal is due March 31, to provide a couple upcoming milestones.

First, the CPUC staff’s "Framework Proposal" said that a Resource Adequacy (RA) value and long-term procurement process (LTPP) be developed for storage to participate in utility procurements. The staff proposal also said more analysis is needed.

The staff proposal incorporates parties’ wide range of "distinct challenges for consideration," which it grouped into categories:

    Lack of definitive operational needs
    Lack of cohesive regulatory framework
    Evolving markets and market production definition
    Resource Adequacy accounting
    Lack of cost-effectiveness evaluation methods
    Lack of cost recovery policy
    Lack of cost transparency and price signals (wholesale and retail)
    Lack of commercial operating experience
    Lack of a well-defined interconnection process 

In addition, the staff proposal identified "Next Steps," and asked interested parties to respond. The "Next Steps" identified were a regulatory framework, cost-effectiveness, a roadmap and procurement objectives. These four categories generally created the format for parties’ comments in response.

I omit the specifics around the California utilities’ responses, as we’ve covered them in-depth in prior columns. (Please see the links in yesterday’s column for direction to that coverage.) It’s worth noting, however, that San Diego Gas & Electric, for instance, called attention to its current work rather than fighting procurement targets.

The Consumer Federation of California (CFC) stated that energy storage systems must be cost competitive.

"California ratepayers are stakeholders in this investment and need assurances that energy storage will result in lower utility bills and better energy management and efficiency. Adopting energy storage technologies will eventually boil down to these questions: Are these technologies cost competitive? Will energy storage be more efficient than other viable energy management substitutes at a lower cost?"

The CFC said that energy storage might lessen the difference in price between peak and off-peak pricing, making EV charging more expensive than necessary as EV charging has been touted as a way to utilize wind power at the latter’s peak of production, which is overnight, and cheapest under many utility scenarios.

Energy storage needs a "valuation framework" so it can be assessed for cost effectiveness, the CFC said, particularly given "the multiple values and overlapping nature of energy storage’s benefits." But the process should include a cost recovery model that avoids multiple avenues for cost recovery, given that energy storage’s "tentacles" reach into so many other proceedings, including permanent load-shifting, demand response, resource adequacy, dynamic pricing, electric vehicles, long-term procurement planning, etc. If utilities finance energy storage, regardless of its many applications, they should only recover their cost once, the CFC said.

A vendor, Megawatt Storage Farms, and an environmental group, the Sierra Club, both used the term "kick the can down the road" to describe the CPUC staff’s recommendations, which focus on further analysis and a roadmap for addressing various hurdles to adoption. Both Megawatt Storage Farms and the Sierra Club offered their own specific procurement plans.

"The [staff proposal] states that its purpose "is not to resolve any of the barriers at this point in time, but rather outline a roadmap for how they can be addressed," the Sierra Club said. Instead, the Sierra Club proffers a procurement plan and points to the statement in the California Energy Commission’s PIER report ("2020 Strategic Analysis of Energy Storage in California") that "the state can boost appropriate deployment of energy storage by setting targets for procurement under AB 2514, ideally in a two-phase process with short-term and long-term targets."

Megawatt Storage Farms said that without procurement targets, storage cannot be properly evaluated in a long-term procurement process (LTPP) designed for fossil fuel resources, renewables, energy efficiency and demand response projects.

"Unless storage procurement targets are defined quickly, fossil fuel plants will be deployed for renewables integration and storage will not contribute its unique services of fast response, locations close to the load, low environment impact and increased local reliably at a lower cost when considered as an element of the overall fossil, demand response, energy efficiency and renewable portfolio," Megawatt Storage Farms wrote.

"The feedback from the deployments will provide much better real world information on storage on the California grid than ‘end use’ analysis ever can and will avoid ‘paralysis by analysis.’

"In summary, the staff proposal will further delay the development of cost-effective
storage needed in California in support of 33 percent renewables and greenhouse gas policy," Megawatt Storage Farms concluded. "The staff proposal should be rejected as it frustrates the clear intent of the governor and the legislature, as expressed in AB 2514, to make storage an integral part of California’s grid, just as renewables are today."

As forewarned, the devil is in the details, which you’ll find in the primary documents. Hopefully, this too-long write-up gives you the flavor of the debate, without over-simplification. I invite your comments, particularly with regard to the CAISO’s role and position in energy storage.