4. ERRP Projects

4.1. Solar Center

PG&E has requested $2 million to support advanced solar technologies through the California Solar Testing Center at the University of California Merced. This proposed solar testing center would test utility-scale advanced solar technologies, which fall into two categories: solar electric technologies and solar thermal or concentrating solar power (CSP). Solar electric technologies include thin-film photovoltaic (PV) and CSP technologies include dish engine, power tower, and trough. PG&E states that the Solar Center project will assess and provide independent evaluations of the effectiveness of solar equipment systems. PG&E explains there are few such testing facilities in the world, and the two accredited facilities in the United States are experiencing a backlog.¹¹

PG&E's funding request of $2 million represents 20% of the facility's required budget of $8 million over the next five years. PG&E proposed to structure the arrangement so that 75% of its $2 million contribution requires formal commitments for matching funds by other sources.¹² In addition, PG&E expects the Solar Center will charge fees-for-service that will provide additional funding. In return for its contribution, PG&E will receive solar testing services from the Solar Center and expert consultation for the next five years. As a result of this project, PG&E expects to receive critical information related to performance, safety and reliability from a broader range of solar technologies than under commercial use today.

We agree this is a project that could help meet RPS goals. PG&E argues that the Solar Center project could reduce the cost of solar technology, accelerate market entry, and demonstrate the potential for commercial applications. Since California leads the country with the most installed megawatts (MW) of solar thermal and solar PV, California ratepayers could benefit from a solar testing facility located within the state that helps accelerate deployment of new, cost-effective technologies. The untapped solar potential in the state is substantial.¹³ On a statewide basis, National Renewable Energy Laborabory estimates the potential of advanced solar thermal technologies to be 877 gigawatts of capacity, or over 2 million gigawatt hours (GWh).¹⁴

The center could benefit all three investor-owned utilities (IOUs) since they all have a good solar resource within their territories. Other publicly-owned utilities can benefit as well since the solar resource is distributed throughout the state. The information provided by the solar testing center could help the IOUs and other utilities exploit the sun's potential and help the state meet its long-term renewable and GHG goals. Despite these potential benefits, we are not persuaded that there is a significant need for public funding in this area given the significant amount of private equity being invested in solar research at this time.

4.2. Wastewater Biomethane Demonstration Project

SDG&E has requested $4 million to fund the WBD project that would test and commission biogas cleaning equipment at one or more installations in order to produce pipeline quality biomethane. SDG&E states this project is intended to upgrade biogas from 55%-75% methane to 97% methane and also remove trace components so that the biogas can be used in natural gas pipelines. SDG&E notes that wastewater biogas has been demonstrated in Europe, but not commercially in California. While California can learn from Europe's experience, the technology is not completely transferable since California has different air quality standards and the composition of the wastewater is site-specific. SDG&E explains that the WBD project will further the potential for cost reductions due to increased economies of scale, and address permitting, quality control and monitoring standards. SDG&E also points out that the WBD project will utilize an existing resource, help meet GHG targets, and can be used in existing natural gas-fueled generators.

SDG&E estimates that there are 20 potential sites within SDG&E and Southern California Gas Company service territories that can use this technology. Depending on the size of the plant, the total potential at these twenty sites is between 10-100 GWh ¹⁵ of Electric Energy Equivalent.¹⁶ According to the CEC's PIER preliminary roadmap for development of biomass in California,¹⁷ the statewide potential for wastewater biomethane is approximately 10 trillion Btu, or approximately 1,400 GWh of Electric Energy Equivalent.

While the WBD project could potentially help the state meet RPS and GHG goals, applicants have failed to demonstrate that there is a need for ratepayer funding of this kind of early stage research for this technology at this time.

4.3. WaveConnect

PG&E proposes to document the feasibility of a facility that converts wave energy into electricity by using wave energy conversion (WEC) devices in the open ocean adjacent to PG&E's service territory. PG&E explains that WEC devices have been tested in Europe and Hawaii but have not been demonstrated for commercial viability. PG&E believes that wave power is a viable energy source along California's coast, and received preliminary Federal Energy Regulatory Commission (FERC) permits in March 2008.

PG&E proposes that WaveConnect will be funded in three stages. The first stage includes all of the feasibility and licensing work for the two wave sites and is estimated to cost $6 million over three to five years. These costs include fees for consultants, legal services, engineering and technical consultants, environmental studies, design and planning for WEC devices and costs for the deployment of a limited number of WEC devices for testing. The second stage, estimated to cost between $15-$20 million per site over two to four years, includes development of infrastructure, undersea cabling, and greater numbers of WEC devices.¹⁸ During Stage 3, the most promising WEC devices will be deployed in larger quantities up to 40 MW per site and connected to the grid. PG&E does not have a cost estimate for Stage 3. In the Application, PG&E is only requesting funding for Stage 1. PG&E states it will request funding for Stages 2 and 3 either in separate applications or through subsequent ERRP AL filings. A description of proposed activities for Stage 1 is provided below:

Table 2: Proposed WaveConnect activities for Stage 1, Years 1-5¹⁹

Year 1 Initial Assessment	Year 1 - continued Detailed Assessment	Years 2-3 License Application Development	Years 4-5
Begin discussions with stakeholders	Continue detailed discussions with stakeholders	Continue discussions with stakeholders	Continue environmental and other studies to support license application
Begin competitive selection process	Conduct detailed resource analysis	Finalize technology selection and design	Anticipate FERC development license granted
Begin wave resource studies	Identify and quantify site constraints	Perform technology testing
Begin initial siting analysis	Develop construction and interconnection strategy for potential sites	Continue environmental and other studies needed for license activities
Identify preliminary shortlist of deployment sites within permitted area	Begin WEC device evaluation	File license application
Identify preliminary studies and begin preliminary work on those studies	Continue and expand environmental studies	Possibly install limited number of test devices to support licensing activities
	Develop energy yield analysis
	Develop initial financial models
	Compile information for and file NOI/PAD

IEP contends that WaveConnect should be denied ERRP funding. IEP argues that PG&E's WaveConnect project would provide project development costs and give PG&E an unfair advantage over independent power producers in a competitive solicitation. IEP recommends that if PG&E wishes to pursue wave energy, it should do so through a competitive wave energy RPS solicitation. In response, PG&E argues that the results of the WaveConnect project will not be known for three to five years, at which time a commercial plant may or may not be proposed. Furthermore, PG&E notes the immediate aim of WaveConnect is not to develop a commercial generating facility to compete against other project developers, but to evaluate the feasibility of extracting energy from ocean waves.

PG&E states that wave energy has tremendous potential as a renewable energy source since California has over 750 miles of coastline, or over 37,000 MW of potential, of which an upper limit of about 20% could be converted into electricity. PG&E estimates that an average 7,460 MW might be expected to generate up to 65 terawatt hours (TWh) per year from California's ocean waves. ²⁰ California's 2005 total energy generated was 288 TWh. Thus, wave energy could potentially provide 23% of California's current electricity consumption.²¹ It should be noted, however, that this estimate is an upper limit, since environmental impacts, land-use, and grid interconnection constraints will likely impose limits on development. The wave potential along the 600 miles of Pacific Ocean coastline in PG&E's service territory is also very good, and has a higher wave energy climate than further south.²²

Other states and countries are in various stages of testing wave energy projects. The State of Oregon has also begun exploring wave energy projects.²³ While these developments suggest wave energy may become a more common energy source, the question remains as to whether we should wait until other possible wave energy developers enter the market, or approve the WaveConnect project as a means of furthering wave energy development now. SB 1078, SB 107, and AB 32 encourage reasonable and cost effective means to increase renewable development and mitigate GHG emissions. Furthermore, as proposed by PG&E, the commercial development of wave energy is not an immediate goal but rather a lengthy study necessary to prove or disprove the potential for wave energy from various WEC devices. On that basis, we believe it important to begin expanding our knowledge and understanding of whether wave energy is a reasonable means for achieving these goals now rather than waiting to see how this market may develop.

In the October, 2008 Resolution E-4196, which rejected a PG&E contract for a 2 MW wave project, the Commission underscored the importance of further study in the area.²⁴ Unlike that proposed wave energy contract, WaveConnect would provide the Commission with a means of testing the relative viability of wave energy technologies. The PG&E WaveConnect project would provide useful information as to the commercial viability of wave energy. We are particularly interested in investigating the potential of a promising renewable option such as ocean energy as a renewable baseload generation, which California is particularly well-situated to cultivate.

As noted previously, in March 2008, FERC granted a preliminary license to the WaveConnect project. If the project is delayed, the FERC licensing timeline could be disrupted. The Commission should take steps to ensure that it does not become an unnecessary obstacle to exploring California's potentially enormous ocean energy resources.

We will therefore conditionally authorize PG&E to begin the WaveConnect project. However we are less certain about the WaveConnect project as proposed over the many years outlined in the Application and WaveConnect information provided in PG&E's Response. We will allow PG&E to move forward with the tasks to complete the goals and milestones in Stage 1, including steps necessary to file the Pre-Application Document by March 2009, which is the next milestone in the FERC licensing process. While PG&E is conducting these activities, ED will review the other activities proposed in Stage 1 from years two through five. As a result, we authorize PG&E to spend up to $4.8 million in funds to cover the expenditures necessary to complete the tasks for Stage 1.

In addition to seeking funding for Stage 1, PG&E indicated that it would seek funding for Stages 2 and 3 through subsequent AL filings or through applications.

4.4. WaveConnect Costs Should Be Recorded in the Appropriate Utility ERRA

WaveConnect expenditures should be recorded in the ERRA, and a new line item be added to the Electric Preliminary Statement Part CP-Energy Resource Recovery Account authorizing a debit or credit entry equal to actual WaveConnect expenses. This method of accounting for WaveConnect costs will provide transparency in tracking WaveConnect actual expenditures against the budgeted amounts and we will adopt it.

PG&E also requests that in the event that any of the outputs from WaveConnect, such as site-development work products, facilities or equipment are later used to support a commercial project owned by PG&E, the owner of the project will be required to acquire the material at the higher cost (or appropriate share thereof) or market value, and the proceeds would be credited to the ERRA account.

Although we agree that WaveConnect work products, facilities or equipment should be identified and included in appropriate accounts, it is premature to adopt accounting for these assets. Instead, we will require PG&E to file an Application with the Commission denoting the specific WaveConnect-related assets to be disposed of and their potential value.

¹¹ Accredited solar testing facilities are available in Arizona and Florida, and similar but non-accredited facilities in New Mexico and Colorado.

¹² PG&E's Response, p. 32.

¹³ See, www.seia.org/yearinreview.php., p. 5.

¹⁴ Id., p. 16.

¹⁵ SDG&E's Response, p. 8.

¹⁶ Electric Energy Equivalent is calculated using a combined cycle heat rate of 7000 British thermal units (Btu) per kilowatt hour.

¹⁷ CEC-500-2006-095 p. 10.

¹⁸ PG&E's Response filing, p. 41.

¹⁹ Id., adapted from information provided on pp. 33-34.

²⁰ PG&E's Response, p. 10.

²¹ Id.

²² Id., p. 13.

²³ PG&E Response, p. 42.

²⁴ See Res E-4196 at 11.