6. Discussion

We find that the Final Proposal is a significant step forward in establishing policies for the procurement of viable and cost-effective energy storage. As highlighted in many of the comments, the multi-functional capabilities of energy storage mean that this resource cannot be evaluated and considered on a "one size fits all" basis. As such, we believe that there is a need to divide energy storage applications into separate, discrete functions. At the same time however, we agree with Staff and parties that energy storage attributes must be considered in a comprehensive manner to identify opportunities where storage could provide value to the electric system. Consequently, it is imperative that we develop a process that will allow this to occur. We believe that the Final Proposal does just that.

We commend Staff for their efforts in developing a framework that will allow us to analyze energy storage in a comprehensive manner and determine how this important resource can be integrated with our existing policies and properly valued. The Final Proposal outlines major policy issues for the Storage Proceeding, including establishing a framework for understanding existing policies and barriers facing storage in California.

The Final Proposal has identified a number of significant barriers, including the lack of a cohesive regulatory framework and the difficulty in adopting a comprehensive policy across all regulatory agencies. Some policy barriers that have been identified include the current flux state of policies at both FERC and the CAISO that could provide opportunities for storage in frequency regulation markets, as well as the continuing processes for dealing with renewable energy integration. An important first step in addressing the lack of a cohesive policy has been to identify the major proceedings, both at the Commission and at other agencies, which impact energy storage. This summary, which is found on page 12 of the Staff Proposal, will allow us to ensure consistency within our own proceedings, and identify areas where we should actively participate to influence policy determinations at other agencies.

While parties had been critical of various aspects of staff's initial proposal, the Final Proposal now addresses their main concerns. One of these is including a definition of "energy storage" which will be used as a common starting point for all parties. This definition is the language contained in Pub. Util. Code § 2835(a), which states:

(1) "Energy storage system" means commercially available technology that is capable of absorbing energy, storing it for a period of time, and thereafter dispatching the energy. An "energy storage system" may have any of the characteristics in paragraph (2), shall accomplish one of the purposes in paragraph (3), and shall meet at least one of the characteristics in paragraph (4).

(2) An "energy storage system" may have any of the following characteristics:

(A) Be either centralized or distributed.

(B) Be either owned by a load-serving entity or local publicly owned electric utility, a customer of a load-serving entity or local publicly owned electric utility, or a third party, or is jointly owned by two or more of the above.

(3) An "energy storage system" shall be cost effective and either reduce emissions of greenhouse gases, reduce demand for peak electrical generation, defer or substitute for an investment in generation, transmission, or distribution assets, or improve the reliable operation of the electrical transmission or distribution grid.

(4) An "energy storage system" shall do one or more of the following:

(A) Use mechanical, chemical, or thermal processes to store energy that was generated at one time for use at a later time.

(B) Store thermal energy for direct use for heating or cooling at a later time in a manner that avoids the need to use electricity at that later time.

(C) Use mechanical, chemical, or thermal processes to store energy generated from renewable resources for use at a later time.

(D) Use mechanical, chemical, or thermal processes to store energy generated from mechanical processes that would otherwise be wasted for delivery at a later time.

We agree with Staff that this is the appropriate definition to be used. As with the objectives in the proceeding, this definition is technology-neutral and focuses on the attributes of energy storage and potential applications throughout the electric system.

We realize that several parties are concerned that the proposed framework and iterative nature of the analysis approach could delay the implementation of energy storage systems. However, we believe that this concern has been addressed thorough the prioritization of end-uses. This prioritization would allow us to evaluate energy storage opportunities in a manageable manner. We believe that focusing on the end uses, and applying them to specific scenarios will reduce the risk that this potential resource will be undervalued. More importantly, this approach will allow us to identify those relevant situations where storage could be utilized and whether it would be appropriate to set targets to encourage the cost-effective deployment of energy storage systems. Identification of relevant situations will facilitate the inclusion of energy storage as needs are identified in other proceedings, such as RA, RPS and LTPP. Therefore, the proposed framework should not prevent progress in policies for individual end-uses or applications, as analyses and results become available, while the larger evaluation continues.

Due to the variety of applications for storage and the lack of a cohesive regulatory framework, it would be difficult if not impossible to develop a single unifying policy for energy storage. However, the proposed scenarios in the Final Proposal would allow focused analysis of barriers and policy options. This approach will also allow us to consider whether one ownership model (i.e., ownership of the ESS by utility, end-use customer, third-party entity or some combination via joint ownership) is more beneficial in certain situations than others. Moreover, this approach would allow for the development of a cost-effectiveness methodology that properly addresses the unique characteristics of energy storage.

We agree that the recommended scenarios contained in the Final Proposal represent the appropriate starting point for Phase 2 of this proceeding. This determination is based in part on Staff's willingness to revisit and revise priorities as they gain additional information on the end-uses. Further, the priority scenarios identified in the Staff Proposal may need to be revised and/or re-prioritized in response to changing needs or new developments.

For these reasons, we adopt the Final Proposal. A second phase of this proceeding shall be initiated to analyze the priority scenarios contained in the Staff Proposal.