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Energy Storage and Renewable Integration

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Presentation on theme: "Energy Storage and Renewable Integration"— Presentation transcript:

1 Energy Storage and Renewable Integration
Prepared for the 2011 IEP Annual Meeting Don Liddell, CESA General Counsel October 5, 2011

2 Stay With Me…. “Storage is a potential “game changer” to how we have viewed renewable energy integration thus far. Storage has the potential to provide grid operational support, enable electric energy shifting, provide load following capabilities, etc. While IEP is supportive of including storage in the mix of resources that can be procured to provide the ancillary services, grid reliability and load following characteristics that will be needed to integrate renewable energy resources, storage should be viewed as only one of the resources that can provide these needed services and products. In fact, other flexible, fast-ramping technologies, e.g. gas-fired generators or gas paired with Variable Energy Resources, can provide many of these “products” as well.” Independent Energy Producers Association Comments on the 2011 Integrated Energy Policy Report Committee Workshop on Energy Storage for Renewable Integration, convened April 28, 2011.

3 About CESA Core principles for a healthy market: Technology neutrality
Our Mission: Expand the role of storage technology to promote the growth of renewable energy and create a cleaner, more affordable and reliable electric power system Core principles for a healthy market: Technology neutrality Ownership/business model neutrality No advocacy for advocacy sake. We are seeking tangible market results Explicit support of renewable energy in our mission…and our membership Philosophy of coalition building with all stakeholders – strength in diversity Resources are limited, and so must be very focused in our efforts California Legislature CPUC CAISO CEC FERC 3

4 CESA – Strength Through Diversity & Collaboration
Steering Committee General Members 4

5 CESA is advocating results-oriented change in all of these areas
Why California? Energy Storage is fundamental to many key California policy initiatives BIG: 13% of US GDP, 8th largest economy in the world Foundational Legislation Energy Storage Procurement Targets (AB 2514) Renewables Portfolio Standard (SB X1-2) Solar Energy System Incentives (SB 1) Self-Generation Incentive Program (SB 412, AB1150) Global Warming Solutions Act of 2006 (AB 32) Pro-storage policy makers in the Legislature and at key agencies CPUC Incentives available for customer-sited applications CAISO Renewable Integration Stakeholder Process Many energy storage projects currently underway in California California is a target market because storage is a fundamental part of all key energy policy initiatives being undertaken right now. Several important legislations are being implemented and decided on in real time. These include: An unprecedented Energy Storage Portfolio Standard, which I will discuss in more detail in minute An incentive program specifically for distributed storage Smart Grid implementation GHG legislation that will push utilities to look to storage to replace dirty, peak-shaving turbines Finally, solar incentive programs and a 33% Renewable Portfolio Standard that are quickly driving the need for grid integration using energy storage The California Public Utilities Commission is implementing all of this, and storage is the common denominator. SGIP The California Independent System Operator or CAISO is holding stakeholder sessions to ensure that California will allow this application for storage as well. (PJM market already allows storage to be used for ancillary services) Demo projects CESA is involved in all of these areas to promote storage! CESA is advocating results-oriented change in all of these areas

6 Energy Storage Is A Very Broad Asset Class
Sodium Sulfur Battery Electrical energy is stored for later use in chemical form. Existing battery technologies are being improved, and new battery technologies are becoming available. Example: 34 MW Sodium Sulfur Battery — 51 MW wind farm, Japan (NGK) Ice Storage Air conditioners create ice at night, when power rates are low. This stored ice then runs a cooling system during the afternoon, when power costs are highest and the power grid is most stressed. Example: 12 kW Thermal Storage — Napa Community College (Ice Energy) High Speed Flywheel Flywheels convert electrical energy to kinetic energy, then back again very rapidly. Flywheels are ideal for power conditioning and short-term storage. Example: 3 MW Mechanical Storage for Ancillary Services — NE ISO (Beacon Power) Below Ground Compressed Air Electricity is used to compress air into small or large modular storage tanks or a large underground cavern. The compressed air is used to spin turbines when electricity is needed. Example: 115 MW Compressed Air Energy Storage — McIntosh, Alabama Pumped Hydro Excess electricity is used to pump water uphill into a reservoir. When power is needed, the water can run down through turbines, much like a traditional hydroelectric dam. Example: 1,532 MW Pumped Hydro — TVA’s Raccoon Mountain Technology Classes Energy Storage Technologies Chemical Storage Thermal Storage Mechanical Bulk Mechanical Storage Bulk Gravitational

7 The Grid-Connected Energy Storage Market is Large
Estimated Global Installed Capacity of Energy Storage Non-Pumped Hydro Total: 16,295 MW Global Total: 138,683 MW Source: Strategen Consulting, LLC 7 DRAFT

8 Application Lifetime Value ($/kW for 10yr Project Life)
U.S. Energy Storage Market Projections The U.S. Market is Estimated at $238B Over 10 Years, but Certain Applications Dominate Ease of Deployment Application Lifetime Value ($/kW for 10yr Project Life) Source: SANDIA Report SAND , Energy Storage for the Electricity Grid: Benefits and Market Potential Assessment Guide, Jim Eyer & Garth Corey (February 2010) 8 DRAFT

9 Overview of Energy Storage and Solar
Solar + Storage Potential Value Streams Base load Load & Solar Generation Net Load is Still Coincident with Peak Demand Charges Storage to Shift Net Peak Load to Off-Peak Periods Charge during off-peak and discharge during peak to reduce demand charges. Potential to leverage 30% FITC for both technologies Firm up additional demand savings from renewables Share inverter / power conditioning equipment with solar and other renewables Potential to provide emergency back-up capabilities Now we’ll shift away from the standalone energy storage base case and talk about storage + PV. On the left is a conceptual overview of what occurs when we combine the two technologies. [Talk through the graphs]: We don’t just have an intermittent generation issue, we have TOD issue. Many new value streams emerge from coupling storage with PV. Some of them include: Capturing new California incentives: $2/W SGIP 30% FITC Share power electronics equipment Synergies between PV being coincident with peak until the afternoon, then storage can kick in to continue to shave peak, while smoothing PV generation throughout the day This means that a storage system paired with PV doesn’t have to discharge the entire time during peak, day in and day out

10 Energy Storage is Needed to Meet 33% Renewable Integration Goals
*Memorandum to CAISO Board of Governors, August 18, 2011.

11 Energy Storage is a Key Component of the Brown Administration’s Clean Energy Plan
California-based RPS Procurement Build 8,000 MW of large-scale renewable generation Plan and permit new necessary transmission within 3 years Energy Efficiency Adopt Load management standards Adopt stronger efficiency standards Make existing buildings more efficient California-based Clean Distributed Energy Resources Program Build 12,000 MW of localized renewable energy generation Increase combined heat and power production by 6,500 MW Deal with peak energy needs and developing energy storage

12 Regulatory Policy Intervention is Needed
The Key Barrier for Grid-Connected Energy Storage is the Existing Regulatory Framework Storage is both blessed and cursed with its ability to provide many benefits throughout the electric power system While energy storage is an established industry, grid-connected storage is a new application, with limited organized resources to advocate for regulatory change Multiple jurisdictions regulate energy storage systems, and thus compensation mechanisms FERC CPUC CAISO CEC Regulatory proceedings are typically divided into specific asset classes, but storage spans all asset classes Regulatory Policy Intervention is Needed 12

13 Open FERC Rulemaking Dockets
November 18, 2010, FERC NOPR issued on Variable Energy Resources (RM ) Require intra-hourly scheduling Require VER’s to provide meteorological/forecasting data Create a generic ancillary services rate schedule February 17, 2011 FERC, NOPR issued on Frequency Regulation Compensation (RM ) Require a uniform price for regulation capacity and a performance payment Compensate providers of frequency regulation services based on accuracy May 19, 2011, FERC, NOI issued on Promoting Transmission Investment Through Pricing Reform (RM ) Western Grid qualified battery storage as wholesale transmission facilities. To move away from case by case incentive determination June 16, 2011, FERC issued an NOI on Third-Party Provision of Ancillary Services: Accounting and Financial Reporting for New Electric Storage Technologies (RM ) To facilitate the development of robust competitive markets for ancillary services. Will address the issue of storage asset classification. In January, 2010, FERC issued an order conditionally granted incentive transmission rate incentives, based on a finding that Western Grid Development’s operation of its proposed sodium sulfur battery storage projects as the functional equivalent of capacitors in the CAISO’s 2010 Transmission Plan to provide regulation services would make them wholesale transmission facilities recoverable in transmission tariff rates, including incentive rates available under Section 29 of the Federal Power Act. In June, 2010, FERC staff issued a Request for Comments on Rates, Accounting and Financial Reporting for New Electric Storage Technologies in which staff seeks comment regarding alternatives for categorizing and compensating storage services, and in particular ideas on how best to develop rate policies that accommodate the flexibility of storage, consistent with the Federal Power Act. This month FERC issued a Notice of Proposed Rulemaking to require a uniform price for regulation capacity paid to all qualifying generating and non-generating resources and a performance payment for the provision of frequency regulation reflecting the resources accuracy of performance. CESA filed comments on the Variable Generation NOPR on 3/2/11 (Link) Over 100 sets of comments were filed CESA’s filing addressed three primary themes Supporting comments filed by AWEA Calling for a comprehensive storage NOPR Calling for pay for performance for storage Since then, a second NOPR opened up on frequency regulation (see next item). CESA Frequency Regulation NOPR Comments due 5/2/11 A planning conference call with FERC subgroup participants will be scheduled for next week We’re going to treat this NOPR essentially as if it were a comprehensive storage NOPR “One down, one very much on deck.” 13

14 Recent California Energy Storage Policy Developments
California Legislature: AB 2514 leads to CPUC Energy Storage OIR SB 412 leads to including storage in the Self Generation Incentive Program AB 1150 guarantees storage a place in the SGIP and funding for 3 years CPUC: Energy Storage OIR (R ) DG Interconnection OIR (R ) Resource Adequacy (R ) Long Term Procurement Planning (R )

15 1. AB 2514 (Skinner) - Landmark Energy Storage Legislation
Sponsored by Jerry Brown, former California Attorney General, now Governor, and authored by Assembly Member Nancy Skinner, and enacted September 29, 2010. Requires CPUC to open a proceeding by March , 2012 to determine, by October 1, 2013, appropriate targets, if any, for load serving entities to procure viable and cost-effective energy storage systems by the end of 2015 and the end of 2020. Must be technology neutral, but viable and cost-effective . Allows utility owned, customer-owned, and third party-owned systems to be considered. Must consider information from CAISO and integration of storage with other programs. AB 2514 provides needed regulatory focus on storage

16 2. AB 2514 (Skinner) - Landmark Energy Storage Legislation
With a one year lag, requires the same determinations of governing boards of local publicly owned utilities to open a proceeding by March 1, 2013, and make comparable determinations by the end of September 2014 with possible targets by 2016 and 2021. Energy storage systems may be used to meet resource adequacy requirements established for load serving entities. Applies to systems installed after January 1, 2010.

17 SB 412(Kehoe) SGIP Implementation - D.11-09-015
CPUC decision this month is very favorable to energy storage, providing $2/W for energy storage – stand-alone or paired with renewables Key Comparisons Then Now Eligibility: Cost-Effectiveness GHG Reductions Size Restriction: 5 MW max No min/max: Must meet onsite load Discharge Capacity: 4 hours 2 hours Payment Method: Technology Based No PBI 50 % up front 50 % PBI The tiered incentive rates remained unchanged at 0-1 MW = 100 %; 1-2 MW = 50 %; and 2-3 MW = 25 %. There is a new incentive decline of 10% per year for emerging technologies and 5% per year for all other technologies, beginning 1/1/2013. The actual on-site emission rate that projects must beat to be eligible for SGIP participation is 379 kg CO2/MWH. Eligibility is determined based on a cumulative 10 years performance. Storage Can Access the entire SGIP Budget!

18 SGIP’s Future is Assured - AB 1150 (Perez)
Authorizes new funding and extends the SGIP through 2016 Enacted September 22, 2011 Authorizes $83M/year of rate payer-based funding (not PGC) through December 31, 2014 ($249 million, total) Clarifies eligibility of energy storage (P.U.Code § a(1)): “It is the intent of the Legislature that the self-generation incentive program increase deployment of distributed generation and energy storage systems to facilitate the integration of those resources into the electrical grid, improve efficiency and reliability of the distribution and transmission system, and reduce emissions of greenhouse gases, peak demand, and ratepayer costs.”

19 Energy Storage OIR - R.10-12-007
Implementing AB 2514 more than 1 year ahead of schedule Scoping Memo issued May 31,2011 Phase 1: Broad Policy issues Phase 2: Cost-Effectiveness Proceeding is very general in scope It will develop a cost-benefit methodology for valuing energy storage technology. Unless additional workshops or requests for comments are required, the next step will be issuance of a Proposed Phase1 Decision for comment.

20 DG Interconnection and Storage OIR - R.11-09-001
September 22, 2011 CPUC Issued an OIR to improve distribution-level interconnection rules. CPUC aims to establish: Interconnection Procedures Queue Policy Data Collection and Reporting Requirements Resource adequacy qualification standards Limits on distributed Generation interconnection penetration Review cost allocation for system upgrades, improve cost certainty, and serve as the forum for the Rule 21 Settlement Process. Comments on the OIR are due on October 27, 2011.

21 Resource Adequacy - R.09-10-032
On October 29, 2009, the CPUC opened a resource adequacy rulemaking to oversee and refine the program and establish local procurement obligations of the utilities. Existing capacity needed decreased from 27,094 MW in 2011 to 26,158 in 2012. CPUC determined that the counting rules for all resource adequacy qualifying resources, including demand response (and storage), require that they must be available for a block of at least 4 consecutive hours on 3 consecutive days. CPUC will open a successor rulemaking proceeding this month In order to provide a forum for future refinements of the RA program, along with local procurement obligations for 2013 and beyond.

22 Long Term Procurement Planning - R.10-05-006
On May 6, 2010, the CPUC opened its long term procurement planning proceeding for the purpose of reviewing and approving the generation and load sides of the utilities’ planning. The LTPP proceedings operate on a two-year cycle with the utilities responsible for submitting procurement plans that project their need, and their action plans for meeting that need, over a ten-year horizon. All resource planning is to be done in the context of Energy Action Plan II. In this cycle, the CPUC is emphasizing standardized resource planning practices, assumptions and analytic techniques; interim standards, uncertain costs of GHG regulations, quantifying energy efficiency in the California Energy Commission’s forecast, firm capacity from demand-side resources, system versus bundled resource need, refinements to the bid evaluation process. The CPUC is expected to issue a proposed decision in a few months that will set out the planning assumptions it intends to use going forward for public comment.

23 1. Energy Storage Activity at CAISO
Long Term Generation Planning Support CAISO devotes considerable resource to working hand-in-hand with the CPUC on long-term procurement planning and resource adequacy. CAISO’s role in long term procurement planning is comprehensive: Support the CPUC to identify long term procurement planning, needs and options Inform CPUC, and other state agency regulatory decisions related  to resource adequacy, RPS rules and once-through cooling schedule Inform CAISO and state-wide transmission planning needs to interconnect 33% renewables 33% Inform design of CAISO’s wholesale markets for energy and ancillary services to facilitate provision of integration capabilities

24 2. Energy Storage Activity at CAISO
Participating Intermittent Resource Program CAISO is updating PIRP eligibility requirements and cost allocation. PIRP will be retained for existing PIRP resources and available to new participation. CAISO will lower the bid floor from -$30/MWh to -$150/MWh in the first year and to -$300/MWh in the following year. The objective of this program change is to foster additional dispatch flexibility over time from thermal and renewable resources as well as new storage technologies. The bid floor is intended to account for the opportunity cost of curtailment faced by wind and solar resources and the scheduling coordinators that bid them into the market.

25 3. Energy Storage-Related Activity at CAISO
Regulation Energy Management (RIMPR, Phase 1) REM – August 22, 2011: CAISO submitted a proposed tariff amendment to allow storage greater participation in CAISO’s ancillary services markets. Without the REM Tariff, storage resources that have less than one hour of storage capacity are severely restricted from participating in CAISO’s ancillary service markets.

26 4. Energy Storage-Related Activity at CAISO
Pay for Performance Compensation, (RIMPR, Phase 2) CAISO believes that an additional payment to regulation resources should be made based upon movement from their preferred operating point. Revised Straw Proposal includes no reference to pay-for-performance, or mileage payments, as was originally planned. CAISO is waiting for guidance from FERC.

27 Federal Income Taxation
Energy storage MAY be eligible for ITC when integrated with renewables Under current law, integrated energy storage and renewable energy projects should be eligible for the 30% federal investment tax credit 1978 – Congress enacted 10% ITC for equipment that uses solar and wind energy to generate electricity 1980 – IRS regulations issued defining eligible “equipment that uses solar energy to generate electricity, and includes storage devices, power conditioning equipment, transfer equipment, and parts related to the functioning of those items.” Storage eligibility remains unclear … likely still requires private letter rulings. There is no clear meaning of ‘storage device’ as used in Treas. Reg (d)(3) Under Section 48 storage equipment should qualify as Auxiliary Equipment if its use of non-solar energy is 25% or less based on an annual measuring period. Potential ITC for storage 2010 – two storage-focused ITC bills introduced in the House (H.R Thompson) and Senate (S.1091 Wyden) 2011 – new legislation dependent on resolution of current budget issues and bi-partisan support. The Federal Government supports the renewable energy sector through Department of Energy’s Loan Guarantee Program and through various departmental grants. However, the most efficient way the federal government can support the renewable energy sector is through the tax code. The most robust programs include the Investment Tax Credit (ITC), Production Tax Credit (PTC) and the Treasury Grant Program. The 2009 Stimulus Bill (don’t know who your audience is, so you may want to say, “In 2009, the Federal Government passed into law,” because the stimulus bill can be toxic in some circles) added new incentives and funding for renewable projects, as well as extending existing programs.  Federal incentives for renewable energy generation have historically either been a production tax credit “PTC” or an investment tax credit “ITC”.    The Production Tax program began in 1992 and as the principal federal renewable incentive, has been a driver of domestic renewable energy development throughout the country, especially in the wind industry. The PTC is an income tax credit for each kWh of electricity produced by a qualified renewable energy facility.  The PTC was initially set at 1.5 cents per kWh, but is adjusted annually for inflation and reached 2.2 cents for each kWh generated in 2010.  A wind or geothermal facility will generate PTC’s during its first 10 years of operation.  In 2009, the PTC was extended for three years. An Investment Tax Credit (ITC) is a one-time credit against income tax that is based on the amount invested in specified types of assets. Since 2008, ITCs have also been available to electric utilities for some utility-scale projects. Under the 2009 Stimulus Bill, renewable energy projects eligible for PTCs now have the option of receiving an ITC of 30 % of the project’s cost in the year the facility begins commercial operation instead of receiving PTCs over 10 years.  The 2009 Stimulus Bill for the first time also provided for a ‘cash back’ rebate during 2010 in lieu of an ITC if the applicant does not have current tax appetite. This program is called the Treasury Grant Program. Although not a grant, this program allows companies to simplify their project financing by taking their tax credit upfront in the form of a cash grant rather than over years through tax credits. There is no additional cost to the government because they would have eventually received this credit anyway. This program was set to expire in December 2010, but was extended for 1 year in the recently passed tax law. Congress will likely be taking up a tax bill at the end of this year because a variety of other tax provisions will expire on December 31, 2011 and extending the TGP will likely be a part of the discussion. The TGP has been a very popular program across the entire renewable energy space, and according to a report issued last week by the Bipartisan Policy Group, the TGP more effectively allocates subsidies than partnerships with tax equity providers because you’re cutting out the middle man – the banks.  “Reassessing Renewable Energy Subsidies,” Bipartisan Policy Center. March 22, 27

28 General References: Renewable Power in California: Status and Issues, CEC Staff Report, August 2011. Electricity Energy Storage Technology Options, a White Paper Primer on Applications, Costs and Benefits, December 2010. For more information about CESA membership, public filings, and other energy storage educational material, please visit us online at: Any questions?


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