The History of Rule 21 Working Group Presentation for CPUC June 20, 2008

1. The History of Rule 21 Working Group Presentation for CPUCJune 20, 2008 Distributed Energy Resources Integration Steve Ghadiri Bernard Treanton Distribution Program Linda Kelly

2. What is Rule 21? A term commonly referred to as interconnection rules Specific rule contained in the electricity tariff booklets of the utilities under CPUC jurisdiction Provides technical and non-technical criteria for connecting generation equipment to the utility systems Rule is technology and size neutral Policy Reasons SmartGrid of future needs smart rules for its connectivity.

3. Why Did It Need Refining? Rule was not designed for small-scale DG interconnections It Increased cost to DG manufacturers Larger degree of customization required It did not obligate utilities to review applications within a particular timeframe or provide any detailed cost estimate to applicant. Policy Reasons SmartGrid of future needs smart rules for its connectivity.

4. What were the guiding principles in developing the Rule? Rules, protocols and processes should be clear and transparent Rules should be technology neutral, except when differences fully justified Level playing field should be established for all DG providers Rules should be uniform throughout California Utilities should be fairly compensated for distribution services that support DG installations and customers Policy Reasons SmartGrid of future needs smart rules for its connectivity.

5. How was this accomplished? Stakeholder working group was created in late 1999 to create standardized interconnection rule in California Over 250 people on the email distribution list with 25-30 members attending monthly meetings Meetings focus on rule refinements, standardized agreements, and specific issues as directed by policymakers Residual benefit of meetings: Helped shape expectations between utilities and DG developers Policy Reasons SmartGrid of future needs smart rules for its connectivity.

6. For the last seven years, the California Energy Commission’s Public Interest Energy Research (PIER) program has supported the important work of Rule 21 Working Group. The common visions of the Rule 21 streamlining are: Customer integration of renewables Increased reliability Contribution to SmartGrid of the future Relationship to Policy CEC’s advocated policy revolves around efficiency and renewable goals.

7. IEPR’s Direction The IEPR Directions that CEC has been pursuing to address challenges of California’s Distributed Generation systems are: • Develop State Policy for modernization of the Distribution Grid • Establish an integrated transparent distribution planning process • Establish a Distribution Program, similar to CEC’s Transmission Program • Fund Distribution research through PIER program • Develop policies and research to provide open data architecture

8. The California Energy Commission, with support from the FOCUS team, has taken a leadership role in developing revised, streamlined requirements for interconnection of electric power generators to the California electricity distribution system. CEC orchestrated the revisions by a consensus-building process through a Rule 21 Working Group, an open forum comprised of: Utilities DG developers Equipment manufacturers Consultants Industrial, Commercial, and Residential DG Users CEC’s Role CEC’s advocated policy revolves around efficiency and renewable goals.

9. Figure 1. Time and Cost Reductions

10. Compared to pre-Revised Rule 21, a DG developer’s relative interconnection cost for units less than 1MW have reduced by 50% to 75%. The Revised Rule 21 has been adopted by several major municipal utilities in California, and has become a model for utilities in other states and other countries. The Rule 21 process and documents have : Assisted the IEEE with development of interconnection standards improved relationships between developers and utilities Lowered interconnection cost of resources Relationship to Policy SmartGrid of the future also needs smart rules for its connections and operations.

11. Our Vision into the future The Grid will be incapable of expansion because of • NIMBY and BANANA suspicion of power facilities interconnection • Unsustainability of Central systems expansions and utilities control • Lowered interconnection cost of resources will increase demand and entry Therefore, The Smart Microgrids will be having their place. The Economics of Microgrids are similar to those of Grid-scale systems: DG resources will play a more pronounced role due to pertaining legislation • SB 1 • AB 32 SmartGrid is a strategy for integrating and optimizing grid and customer resources; Microgrids is a local tactical deployment of that strategy.

12. = Distribution Substations = Load (Commercial, Industrial and Residential) = Distributed Energy Resource Interconnection = Smart Metering Technologies (AMI) = Real Time Communications = Real Time Sensors = VAR Compensator = Distributed Generation = Combined Heat and Power = Demand Response Enabled S VAR DG S CHP DR Central Control Future Grid Vision DR CHP DR S Microgrid with large commercial customers S Plug in Hybrid Vehicle Stations S VAR S DR DG S Sustainable Communities with storage and the ability to island S Microgrid with residential and commercial customers Utility Operated Storage with Solar Tie Switch

13. More recent progress to Rule 21: It has recently been expanded to include multiple generators with multiple tariffs at a single location. It has added a process for interconnection to more complex utility lines, and It has also streamlined dispute resolution process. It is fair to say that: “The process of working together to revise Rule 21 has increased all stakeholders’ understanding of DG systems and how they may be integrated into the distribution system. Communications with the utilities have improved considerably, and interconnections are now proceeding more rapidly and smoothly.” Relationship to Policy SmartGrid of the future also needs smart rules for its connections and operations.

14. Future Works What is Remaining: • Rate Structure and Distribution Planning • Stand-by Charges • Need to integrate the DG into the California Grid • Regulatory Nature of the Rule

15. Conclusion CEC’s Recommendations are: • 1) the CPUC take the leadership role of the Rule 21 Working Group from the CEC, and • (2) the CPUC to open a rulemaking process to address the actions necessary to establish firm goals for the increased application of efficient distributed generation in California that reduces green house gas production.