Parties' comments can be divided into the following main topics:
1. Proceeding Focus
2. Barriers to Energy Storage Deployment
3. Procurement Targets
Additionally, several parties raised concerns regarding the need to establish funding for pilot and research and development (R&D) projects and the integration with California's renewables portfolio standard (RPS) mandates.
4.1. Proceeding Focus
There is general agreement from parties that the focus of this proceeding should be technology neutral and provide a framework to analyze energy storage and how energy storage integrates with other proceedings and initiatives both at the Commission and at other state and federal agencies. To this end, SCE had presented an applications-based approach at the June 28 workshop. This approach would bundle certain operational benefits as applied to the electric system and match each application to storage technology types.8 SCE proposes that identification of specific applications and associated uses/value streams of storage would allow the Commission and parties to identify the issues and impediments presented for each application and the responsible regulatory agency (Commission, Federal Energy Regulatory Commission (FERC), CAISO, etc.). This analysis would then allow the Commission to assess and prioritize whether and how it could assist in resolving the application-specific issues. SCE notes that each application has unique issues based on its location and operational uses and the benefits of the application cannot be evaluated without taking this into consideration. "[C]onsidering how storage will actually be used on the electric system, rather than addressing storage as a nebulous concept, is necessary to identify barriers and evaluating costs and benefits as the Commission hopes to do in this proceeding. Considering applications for storage is also technology neutral, both as to whether energy storage is the best solution to solve a particular problem and as to what storage technology is the best fit when storage is the right answer."9
Parties' comments suggest that there is general agreement with SCE's application-based approach. DRA agrees with SCE that "opportunities and barriers to energy storage should be evaluated using an application-specific approach, and that this methodology should be a central and common first step for addressing storage related issues."10 CFC notes "an application specific approach can be an important step to avoid unnecessary spending."11 Similarly, Green Power states "in order to develop fair tariffs the first step has to be to identify applications for specific kinds of installations."12
Nonetheless, some parties expressed concern with an application-based approach. Sierra Club believes that an application-based approach would "result in a perpetual undervaluing of the multiple benefits of energy storage, since IOUs [investor-owned utilities] would be limited to looking only at specific applications outside the context of the Commission's power to establish a general value for purposes of rate recovery for energy storage."13 It further notes: "By matching energy storage to one specific application, the multifunctional role of energy storage is limited to a single or preferred task, and the additional functions may be overlooked or lack a market to monetize the value of the additional function."14 VoteSolar believes SCE's application-based approach is "overly cautious" and believes that "[a] number of best fit/least regret ESS promoting actions can be taken now, rather than waiting until after the conclusion of what seems to be an extremely deliberative and time intensive process proposed by SCE."15
Several parties also maintain that the focus of the proceeding should not be simply "more storage" as an end result, but rather how storage could be used to address certain problems. SCE asserts that "energy storage may provide means to solve particular challenges, but it is not an end in itself. The focus of any energy storage policy should be the potential of energy storage as a useful tool to address problems or satisfy broader policy goals, thus providing value to customers, not simply to require a specific amount of energy storage."16 Similarly, SDG&E supports "implementing energy storage in the most efficient and effective manner that allows the State to achieve its desired goals, while minimizing any barriers that could impede the usage and development of ESS, and ultimately increase cost to the customer."17
There is also disagreement over whether this proceeding should be proactively assisting in the commercial deployment of operational energy storage projects18 or considering all storage and non-storage alternatives equally.19 A similar disagreement exists over whether energy storage should be added to the loading order. In advocating its addition, CESA states "[e]nergy storage is a valuable asset class that can improve overall electric power system efficiency, much in the same way that [demand response] can improve overall system efficiency by reducing super peaks in demand and managing load as a balancing resource."20 DRA disagrees with CESA's recommendation to add storage to the loading order, as "[storage] benefits must be determined for specific application(s), on a case by case basis."21
4.2. Barriers to Energy Storage Deployment
Parties identified a number of perceived impediments or barriers to the deployment of energy storage technologies. While not all of the identified barriers are within the Commission's jurisdiction, the Commission may still assist in resolving them. The barriers identified by parties can be grouped into the following nine categories.
4.2.1. Lack of Definitive Operational Needs
Parties note that operational needs are under consideration in other Commission proceedings (e.g., the long-term procurement planning (LTPP) and the RPS proceedings) and have not yet been determined. While there is general agreement that this uncertainty impacts the development and deployment of ESS, parties differ in how this barrier should be addressed.
Brookfield recommends that operational requirements to maintain California's electric grid system should be analyzed and determined before any ESS products and services can be defined.22 It believes that this would allow the Commission to better anticipate future needs that would promote the development and deployment of larger-scale ESS. Similarly, Sierra Club proposes that energy storage procurement targets adopted in this proceeding should serve as an input for the LTPP proceeding planning assumptions.23
DRA disagrees with this proposition and states that any need for a specific procurement target should be addressed as part of the LTPP or Resource Adequacy (RA) proceedings.24 PG&E argues that once a resource need is determined, "a competitive procurement process will determine what combination for resource (supply or demand-side), including energy storage, is best able to meet the identified resource need."25
4.2.2. Lack of Cohesive Regulatory Framework
Parties note that California's electricity markets are under the jurisdiction of various regulatory state and federal agencies. Consequently, there is a risk that the value of utilizing energy storage is not fully recognized.
As noted by SDG&E, "the different functions storage may provide are not mutually exclusive, and may come under different regulatory structures, including CPUC, FERC, CAISO, etc. The existing inadequate markets under these jurisdictions for these projects could impede realizing the value of all the services that or [sic] cost-effective energy storage systems are capable of achieving."26 Sierra Club echoes this conclusion, noting "the current regulatory framework for energy policy in California does not recognize the benefits of energy storage."27
SCE disagree that the overlap of regulatory agencies presents a barrier. "Insofar as [the CAISO and the Commission] continue to coordinate efforts, this [overlap of jurisdiction] should not represent a barrier to energy storage."28 SCE therefore recommends that the Commission focus on addressing barriers that fall within the Commission's jurisdiction, while supporting coordination with agencies that have jurisdiction over other barriers, rather than prioritizing the order in which barriers should be addressed.29
4.2.3. Evolving Markets and Market Production Definitions
Several parties note that the electricity market is currently defined by a variety of products, with each product subject to different rules and, quite often, regulated by different agencies. However, they believe that energy storage often does not fall clearly under the current market product definitions. As a result, parties contend it is not possible to consider energy storage consistently across various proceedings. As PG&E notes, "the types of products and markets that will be available in the future are evolving. ... While these potential new products may expand opportunities for participation by energy storage devices, the precise set of products available in the future is uncertain."30
4.2.4. Resource Adequacy Accounting
A large number of parties identified the RA accounting rules as a barrier to more widespread energy storage deployment. SCE notes that there are no rules "for determining how to establish [RA] capacity value for a storage device."31 Brookfield echoes this statement, noting "the current process of procuring only generic capacity through the RA process will not ensure that specialized needs of the grid are met under the 33% RPS, including any specific value that can be provided by ESS."32
Parties generally agree that this barrier should be addressed in the Commission's RA proceeding, but note that there should be coordination with this proceeding. CESA urges that "protocols be developed and approved through the annual [RA] proceedings to allow storage devices that meet the relevant standards to participate."33 SCE further advocates that "[a]ny rules that emerge from the annual RA proceeding for energy storage should also vary by energy storage application."
4.2.5. Lack of Cost-Effectiveness Evaluation Method
Many parties believe that the unique operational aspects of energy storage pose a challenge in recognizing all relevant benefits, as many of these benefits are not part of current calculation methods. Parties argue that as a result, the total benefit of energy storage is significantly underestimated.34 SDG&E further notes that the multi-functionality of energy storage "limits the ability of establishing a single process" for valuing storage. "Establishing a generic approach could mislead the evaluation process or stall the investment on this type of infrastructure."35
There is general consensus that development of an evaluation methodology should be included in the second phase of this proceeding. PG&E notes "the industry needs valuation methodologies that can be used in planning processes that reflect the true operational benefits to the electric system."36 Sierra Club further notes that developing a methodology to value energy storage's multiple benefits is needed to comply with AB 2514.37
SCE disagrees that the lack of a methodology for determining cost effectiveness represents a barrier to the deployment of energy storage. "[C]ost effectiveness is largely a function of technology development and maturity relative to other technologies that can provide comparable services, and as such, it should not be classified as a `barrier.'"38 CESA disputes this assertion, arguing that increased grid reliability is a value that needs to b accounted for through a cost-benefit methodology. CESA contends that distribution system planners need to use a valuation methodology to give proper weight to reliability benefits.39 PG&E argues "[t]he industry needs valuation methodologies that can be used in planning processes that reflect the true operational benefits to the electric system."40 Sierra Club also notes "[b]y developing a mechanism that values energy storage, the Commission can assess the cost-effectiveness of energy storage."41
4.2.6. Lack of Cost Recovery Policy
The ability for energy storage to meet transmission, generation and distribution needs also means that its services can be recovered under cost-based or market-based rates. Sierra Club maintains that "[w]ithout a mechanism for fitting energy storage into the existing regulatory and cost recovery structure, there will be regulatory barriers and inadequate methods for valuing and paying for energy storage."42 PG&E contends that this issue does not need to be addressed here, noting "because of the potential for certain storage technologies to provide multiple services, and the possibility that storage could simultaneously recover costs under both cost-based and market-based rates, FERC has asked for comments on whether current accounting and reporting requirements for activities and costs relating to the operation of new electric energy storage resources provide sufficient transparency."43
A major concern giving rise to this perceived barrier appears to be the need for energy storage developers to have long-term, financeable revenue streams. Consequently, several parties advocate that the Commission adopt long-term contracts for energy storage. Brookfield states that "without adequate procurement channels and incentives that allow purchases to secure and reflect the value provided by these features, and without the ability of developers to receive sufficient compensation for their development efforts, developers will not commit capital and lenders will not finance these large scale projects."44 DRA also states "[a]llowing storage to enter into long-term contracts is consistent with DRA's position to remove any barriers that prevent storage from competing directly with other resources."45
SCE disagrees with adopting a long-term contracting mechanism for energy storage. While long-term contracting is an issue on which the Commission needs to focus, "it does not represent a unique barrier for storage technologies, and to the extent the Commission wishes to address this issue, it should do so in a separate and new Commission proceeding.46
4.2.7. Lack of Cost Transparency and Price Signals
Parties identifying this potential barrier believe that more cost transparency and more accurate price signals could "level the playing field" for energy storage to address system needs. SDG&E believes that "[e]nsuring that parties see the actual cost and prices for storage will allow parties to determine the appropriate values for case specific energy storage applications."47 Due to the ability for energy storage to be utilized at both the generation and customer level, parties note there is a need consider both wholesale and retail price signals.
188.8.131.52. Wholesale Price Signals
Parties note that within the CAISO wholesale market, prices do not reflect the true value of energy storage. According to SCE, "storage systems are not currently rewarded for speed or accuracy under current CAISO ancillary service product definitions."48
There is further concern that current wholesale markets do not properly value how energy storage addresses the intermittent nature of some renewable resources. For example, CESA notes that the RPS procurement process does not address the differential values between a "firmed, shaped, or dispatched" renewable product with storage and a "pure renewable product" without firming, shaping, and dispatch capability.49 PG&E believes that existing CAISO market practices mask the value that energy storage can provide toward integrating intermittent renewable generation.50
Parties generally recognize that technical and tariff changes are needed to allow energy storage to participate in the CAISO markets.51 However, these changes lie within the CAISO's jurisdiction. Therefore, parties recommend that the Commission work with the CAISO to provide for greater transparency for integration charges.52
184.108.40.206. Retail Price Signals
Similar to their concerns at the wholesale level, parties believe that retail prices do not properly reflect the value of energy storage. As noted by SDG&E: "Energy storage could play different roles in the market place due to its multifunctional characteristics. However, not all of these roles operate in markets that have accurate or efficient price signals."53 SCE also notes "retail rates do not reflect time-based variations in the market price of electricity."54
Some parties advocate changes in retail rate design that would include time-variant rates. Sierra Club identifies rate design as the "biggest and most immediate barrier, since storage will only be built if it is paid for."55 PG&E and DRA both caution that while time of use (TOU) rates could impact the cost-effectiveness analysis for energy storage, TOU rate design should not be considered within this proceeding.56
In an effort to address this barrier, CESA recommends that the Commission and the California Energy Commission work together to "develop load management standards and associated tariffs that incentivize deployment of energy storage."57
4.2.8. Lack of Commercial Operating Experience
Parties note that many energy storage technologies are yet to be used on a commercial scale. "The nascent nature of some storage technologies and the lack of detailed information about application-specific costs ... present barriers to more widespread understanding of storage systems."58 There is general consensus that this barrier will diminish over time, as utilities gain more experience with energy storage. PG&E notes that it "currently has several pilot projects and programs to build experience and incent development of storage."59
Some parties have proposed that additional support for the development of emerging technologies, such as ESS, should be through pilot systems and R&D programs. The means by which this would occur, however, is in dispute. CESA contends "the Commission should order the utilities to open an immediate market opportunity to begin incorporating energy storage into its procurement planning by initiating pilot competitive solicitation process."60 In contrast, PG&E recommends that the Commission continue to support pilot projects and fund feasibility studies for long lead-time storage technologies to enable implementations options if and when future resources needs and cost-effectiveness are determined.61
4.2.9. Lack of Well-Defined Interconnection Processes
Parties state that as a result of overlapping tariffs at the Commission (Rule 21) and the FERC (WDAT) and evolving technical standards, there is a lack of a well-defined interconnection process. However, parties further note that issues concerning interconnection should not be addressed in this proceeding. "[I]ssues concerning interconnection to the system are not necessarily unique to the storage applications."62
4.3. Procurement Targets
AB 2514 directs the Commission "to determine appropriate targets, if any, for each load-serving entity to procure viable and cost-effective energy storage systems to be achieved by December 31, 2015, and December 31, 2020."63 Parties in favor of having the Commission establish procurement targets argue that it would assist in the widespread deployment of energy storage. CESA states that "it generally does support procurement targets, as a broad policy tool as the procurement targets imposed on load serving entities by California's Renewables Portfolio Standard program have proven quite effective to date."64 Sierra Club further notes that these targets do not necessarily need to be based on a certain quantity of energy storage. Rather, it believes other criteria, such as reduced peak load or reduction in certain air pollutants, could be used.65
SCE, PG&E, and SDG&E all oppose setting specific procurement targets. SCE argues that a procurement mandate would not address legal and regulatory barriers, but rather would only serve to increase the return on investment of private storage developers. "Procurement mandates and subsidies may have short-term investment impacts, but in the long term are counterproductive by creating a cycle of dependency for storage developers and diverting efforts from technological development to regulatory affairs."66 SDG&E echoes this statement, arguing that adoption of a procurement mandate "could be a likely barrier for cost-effective development of energy storage systems."67 DRA also cautions against setting a procurement target. "Picking arbitrary procurement levels, such as a MW [megawatt] level or a percentage level would most likely result in sub-optimal market solutions and increase costs to ratepayers without yielding commensurate benefits."68
8 ALJ July 21 Ruling, Attachment C.
9 Reply Comments of Southern California Edison Company on Administrative Law Judge's Ruling Entering Documents into Record and Seeking Comments in R.10-12-007 (SCE Sept. 16 Comments), filed September 16, 2011, at 5.
10 Comments of Division of Ratepayer Advocates on Administrative Law Judge's Ruling Entering Document into Record and Seeking Comments (DRA Aug. 29 Comments), filed August 29, 2011, at 3.
11 Opening Comments of the Consumer Federation of California to Administrative Law Judge's Ruling Entering Document into Record and Seeking Comments (CFC Aug. 29 Comments), filed August 29, 2011, at 5.
12 Comments of the Green Power Institute in Response to the ALJ's Ruling on Barriers to Storage (Green Power Aug. 29 Comments), filed August 29, 2011, at 2.
13 Reply Comments of Sierra Club California on Administrative Law Judge's July 21, 2011 Ruling Entering Documents into Record and Seeking Comments (Sierra Club Sept. 16 Comments), filed September 16, 2011, at 7.
14 Sierra Club Sept. 16 Comments at 8.
15 Comments of the Vote Solar Initiative (VoteSolar Aug. 29 Comments), filed August 29, 2011, at 2.
16 SCE Sept. 16 Comments at 5.
17 Comments of the San Diego Gas & Electric Company on Administrative Law Judge's Ruling Entering Document into Record and Seeking Comments (SDG&E Aug. 29 Comments), filed August 29, 2011, at 3.
18 Opening Comments of the California Energy Storage Alliance to Administrative Law Judge's Ruling Entering Document into Record and Seeking Comments (CESA Aug. 29 Comments), filed August 29, 2011, at 4.
19 See, e.g., Comments of Pacific Gas and Electric Company on Presentations Made at the June 28, 2011 Workshop in the Energy Storage OIR (PG&E Aug. 29 Comments), filed August 29, 2011, at 4.
20 Reply Comments of the California Energy Storage Alliance to Administrative Law Judge's Ruling Entering Document into Record and Seeking Comments (CESA Sept. 16 Comments), filed September 16, 2011, at 6.
21 DRA Aug. 29 Comments at 5.
22 Comments of Brookfield Renewable Power Inc. on July 21, 2011 Ruling Entering Documents into Record and Seeking Comments (Brookfield Aug. 29 Comments), filed August 29, 2011, at 1-2.
23 Sierra Club Sept. 16 Comments at 6.
24 DRA Aug. 29 Comments at 1.
25 Reply Comments of Pacific Gas and Electric Company to Comments Submitted on August 29, 2011 for the Energy Storage OIR (PG&E Sept. 16 Comments), filed September 16, 2011, at 10.
26 SDG&E Aug. 29 Comments at 5.
27 Comments of Sierra Club California on Administrative Law Judge's July 21, 2011 Ruling Entering Documents into Record and Seeking Comments (Sierra Club Aug. 29 Comments), filed August 29, 2011, at 2.
28 SCE Aug. 29 Comments at Appendix B, at 1.
29 Comments of Southern California Edison Company to the California Public Utilities Commission on Administrative Law Judge's Ruling Entering Documents into Record and Seeking Comments in R.10-12-007 (SCE Aug. 29 Comments), filed August 29, 2011, at 2.
30 PG&E Aug. 29 Comments at 5-6.
31 SCE Aug. 29 Comments at 3.
32 Brookfield Aug. 29 Comments at 5.
33 CESA Sept. 16 Comments at 4.
34 See, e.g., DRA Aug. 29 Comments at 6; PG&E Aug 29 Comments at 4.
35 SDG&E Aug 29 Comments at 5.
36 PG&E Sept. 16 Comments at 6.
37 Sierra Club Sept. 16 Comments at 1.
38 SCE Aug. 29 Comments at Appendix B, at 1.
39 CESA Sept. 16 Comments at 7.
40 PG&E Sept. 16 Comments at 6.
41 Sierra Club Sept. 16 Comments at 1.
42 Sierra Club Aug. 29 Comments at 3.
43 PG&E Aug. 29 Comments at 7.
44 Brookfield Aug. 29 Comments at 5.
45 DRA Aug. 29 Comments at 2.
46 SCE Sept. 16 Comments at 12.
47 SDG&E Aug. 29 Comments at 4.
48 SCE Aug. 29 Comments at 12.
49 CESA Aug. 29 Comments at 6.
50 PG&E Aug. 29 Comments at 8.
51 See, e.g., DRA Aug. 29 Comments at 4; SCE Aug. 29 Comments at 3; CESA Aug. 29 Comments at 5.
52 See, e.g., PG&E Aug. 29 Comments at 8; CESA Aug. 29 Comments at 5.
53 SDG&E Aug. 29 Comments at 5.
54 SCE Aug. 29 Comments at 11.
55 Sierra Club Aug. 29 Comments at 3.
56 DRA Aug. 29 Comments at 3; PG&E Sept. 16 Comments at 3. See also, SCE Sept. 16 Comments at 10.
57 CESA Aug. 29 Comments at 5.
58 DRA Aug. 29 Comments at 6.
59 PG&E Sept. 16 Comments at 5.
60 CESA Aug. 29 Comments at 4.
61 PG&E Aug. 29 Comments at 9.
62 SCE Aug. 29 Comments at 11; see also VoteSolar Aug. 29 Comments at 3.
63 Pub. Util. Code § 2836, subd. (a)(1).
64 CESA Sept. 16 Comments at 3.
65 Sierra Club Sept. 16 Comments at 12.
66 SCE Aug. 29 Comments at 16.
67 SDG&E Aug. 29 Comments at 3.
68 DRA Aug. 29 Comments at 3.