Energy Storage in California’s Grid of the Future

1. Energy Storage in California’s Grid of the Future Don Liddell, Douglass & Liddell Co-Founder and General Counsel, California Energy Storage Alliance ​ Independent Energy Producers Annual Meeting September 2013

2. Steering Committee General Members

3. Overview of AB 2514 (Pub. Util. Code § 2836 et seq.) • Required CPUC to open a proceeding to determine appropriate targets, if any, for each load serving entityto procure viable and cost-effective energy storage systems. • Required CPUC, by October 1, 2013, to adopt an energy storage procurement target, if determined to be appropriate, to be achieved by each load serving entity by December 31, 2015, and a second target to be achieved by December 31, 2020. • Required CPUC to consider a variety of possible policies to encourage the cost-effective deployment of energy storage systems, including refinement of existing procurement methods to properly value energy storage systems. • Required CPUC to reevaluate determinations made in its proceeding not less than once every three years. • Required CEC to establish a comparable scheme by regulation for each publicly owned utility that lags each of the dates applicable to the CPUC by one year.

4. Overview of the CPUC’s Proposed Energy Storage Decision • Establishes policies and mechanisms for procurement of energy storage pursuant to Assembly Bill 2514. • Procurement targets for each of the investorowned utilities and procurement requirements for other load serving entities. • Mechanisms to procure energy storage and means to adjust the targets, as necessary. • Program evaluation criteria. • A target of 1,325 megawatts of energy storage must be procured by PG&E, SCE and SDG&E by 2020, and a schedule is set for solicitation of energy storage. • Utilities must file separate applications containing proposals for their first energy storage solicitations by January 1, 2014.

5. Proposed Decision Overview • Procurement methodology • The utilities must procure energy storage through competitive solicitations. • 2014: first competitive solicitation must be held by December 1, 2014. • Additional biennial solicitations must be held in 2016, 2018, and 2020. • Specific targets for each utility per biennial solicitation. • Each ESPs and CCA must procure storage equivalent to 1% of peak load by 2020. • Energy storage grid domains • Procurement targets split into three interconnection grid domains. • Specific targets per domain for each utilities’ biennial target. • Some flexibility between domains (certain restrictions apply). • Pumped hydro over 50 MW not eligible to count towards targets.

6. Proposed Energy Storage Procurement Targets (in MW)

7. Proposed Energy Storage Grid Domains

8. Flexibility Within Procurement Targets • Utilities are allowed discretion in shifting MWs between transmission and distribution storage grid domains as needed subject to the following limitations: • Up to 80% of MWs assigned to the transmission and distribution grid domains could be shifted to the other domain without a showing. Although no showing is required, shifting is still subject to other restrictions. • No shifting of procurement target MWs is allowed into or out of the customer-side domain. • No portion of procurement targets can be traded among the utilities.

9. Deferment of Procurement Targets • Each utility may request a deferment of up to 80 % of its procurement targets with an affirmative showing of unreasonableness of cost based on approved evaluation methodology or the lack of operationally viable number of bids in energy storage solicitation. • If a request is granted, the procurement target for the next solicitation must be increased to include the deferred amount. • Utilities are expected to fulfill target totals by 2020. • If target totals are not met by 2020, CPUC will consider whether the target date to achieve the MW goals should be extended past 2020.

10. Cost-Effectiveness • CPUC evaluated the cost-effectiveness of energy storage based on methodologies developed by the Electric Power Research Institute (EPRI) and by DNV KEMA Energy & Sustainability (DNV KEMA). • Actual finding of cost-effectiveness must be made in utility applications for approval of energy storage contracts or rate based asset additions using specific projects and actual project inputs. • Utilities must assess the full range of benefits and costs identified in the use-case framework and the EPRI and DNV KEMA reports entered into the record in the proceeding. • Utilities are allowed to propose their own methodology to evaluate the cost and benefits of energy storage proposals.

11. Other Procurement Proceedings • Coordination between LTPP and RPS proceedings and energy storage target fulfillment is expected to increase over time. • Resources procured through LTPP, RPS, and other proceedings will count towards targets after they are operational for one year. • CPUC will consider adjusting targets pursuant to need determinations in LTPP proceedings (in addition to general market experience). • Any improvements to Least-Cost-Best-Fit criteria, as they apply to energy storage attributes, will be accomplished through the RPS proceeding.

12. Next Steps • September 30, 2013: Reply comments on Proposed Decision are due. • October 3, 2013: Proposed Decision is expected to appear on the Agenda for the CPUC’s Regularly Scheduled Business Meeting. Potential postponement to a later meeting is not considered likely. • January 1, 2014:Deadline for utilities to file separate applications containing a proposal for their first energy storage solicitation. • December 1, 2014: Deadline for beginning of first competitive solicitation. The rulemaking proceeding is closed. http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M076/K387/76387883.doc

13. Don Liddell Co-Founder and General Counsel liddell@storagealliance.org www.storagealliance.org (619) 993 9096