California’s Energy Future: Generation, Integration, Storage and Transportation

1. California’s Energy Future: Generation, Integration, Storage and Transportation Roy Kuga IEP Annual Meeting September 24, 2010

2. Looking Back at How We Saw the Future Our 1990 Electric Supply Strategy • Maximize the deployment of all cost-effective customer energy efficiency programs • Implement efficiency and environmental quality improvements to existing transmission and generation assets • Capture regional electric generation efficiencies • Continue leadership role in advancing cost competitive commercial development of environmentally preferred renewables and highly efficient advanced technologies • Encourage and take advantage of the development of true market competition among potential generation supplies

3. Looking to the Future Policy initiatives, market design, technology and operational considerations will shape the energy market and utility portfolio mix FEDERAL ENERGY POLICIES EPA Emissions Policy GHG Cap-and- Trade Plug-In Electric Vehicles Smart Grid Technology Advancements/ Breakthroughs Investment Incentives, Loan Guarantees & Tax Credits FERC Initiatives CALIFORNIA ENERGY POLICIES CA Solar Initiative REGIONAL ENERGY POLICIES QF Summit Wind Integration Policies Demand Bidding Peak Day Pricing Energy Action Plan Renewable Portfolio Standard RenewableTransmission Development British Columbia Energy Plan AB32 GHG Reduction Once- Through Cooling Retail Competition

4. Considerations for the Electric Supply Portfolio Demand-Side • More than half of future load growth met through energy efficiency • Market-based pricing for demand response, and time of use pricing for retail customers Supply-Side • Increasing central station and distributed intermittent renewable resources • Continuing dependency on large transmission upgrades • Increasing amounts of new baseload, combined heat and power (CHP) • Continuing permit challenges • Continuing to be on the verge on major technological breakthroughs • Increasing amounts of surplus during off-peak and ramp hours

5. Implications for Future Procurement • Greater need for operationally flexible, rapid response ramp-up and ramp-down resources • Higher operating and planning reserves to maintain reliability • Greater need/value for physical curtailment rights on supply resources • Greater need for load shifting/load creation • Opportunities for cost-effective energy storage

6. Operational Implications: Wind Generation While the average is looks fine, the hourly/daily variability is great MW 700 April 2005 in Tehachapi WRA Each Day is a different color. 600 • Day 29 500 • Day 9 400 • Day 5 • Day 26 300 Average 200 100 0 3 4 7 11 12 17 19 22 1 2 5 6 8 9 10 13 14 15 16 18 20 21 23 24 Hour Source: CAISO

7. Operational Implications: PV Generation Source: AES

8. Operational Implications: Ramping Up & Down MW Case Study: 4000 MW Solar and 6000 MW Wind 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 -500 Source: CAISO

9. ramp up ramp down 400 300 200 100 0 -100 -200 -300 -400 -500 2006 2012 2020 Operational Implications: Ramp Rate Requirements (MW per Minute) Rapid response, operationally flexible resources needed to provide regulation and load following MW/min Source: Renewable Issues Forum 2010: Product and Market Review, CAISO, July 16, 2010

10. Ramp Rates A number of different technologies have fast ramp rates and therefore can provide ancillary services Types of Ramp Units Ramp Rate (MW/minute) 1. Estimates for the Department of Energy CAES Application.

11. Rapid Response, Operationally Flexible Resource Spectrum Higher Cost Batteries Thermal Storage Next Generation Pumped Storage Compressed Air Storage Demand Response Next Generation Gas Turbines Next Generation Combined Cycles Existing Pumped Storage Conventional Combined Cycle Conventional Gas Turbines Legacy Steam Existing Hydro Gas Storage New Load Applications (PHEV) Lower Cost Physical Curtailment Rights Surplus Sales Conventional Newer Technologies

12. Different Storage Technologies Have Different Capabilities Demo Projects Tested Source: Electricity Storage Association

13. Why Compressed Air and Pumped Storage? Meeting Utility-Scale Needs Source: Same as prior graph by Electricity Storage Association (converted to normal scale by Rick Miller, HDR | DTA)

14. Compressed Air Energy Storage • Proposed CAES Site • Close to wind generation • Close to transmission lines • Good geologic characteristics • Tehachapi • 4,500 MW of new wind generation to be developed over the next 4 to 5 years

15. Sodium-Sulfur (NaS) Battery • Rationale for Deployment: • Placement of NaS batteries on T&D lines can improve reliability and power quality • Secondary benefits include load shaping and ancillary services • Potential role in integrating solar photovoltaic • Opportunity: • One of the most advanced battery technologies • High energy density, high efficiency, and large capacity • Capable of both fast discharge

16. Summary: Future Procurement • Greater need for operationally flexible, rapid response ramp-up and ramp-down resources • Higher operating and planning reserves to maintain reliability • Greater need/value for physical curtailment rights on supply resources • Greater need for load shifting/load creation • Opportunities for cost-effective energy storage • Critical that integrated energy policy and planning approach be employed vs. a piecemeal “set-aside” programmatic approach, in order to minimize costs