State Initiatives Supporting Renewable Energy Priorities, Challenges, and Opportunities

1. State Initiatives Supporting Renewable EnergyPriorities, Challenges, and Opportunities Commissioner Catherine J.K. SandovalCalifornia Public Utilities CommissionSouthern California Energy Summit 2012October 4-5, 2012

2. Outline • Climate Change • RPS Overview • DG Programs • System Side • Customer Side • Removing Barriers • Interconnection • Cost • Zero Net Energy Programs • Leveraging Local Government • Conclusions

3. Climate Change • Extreme weather events make the state's power supply more vulnerable  • Key transmission corridors are vulnerable to wildfire, and coastal power plants are vulnerable to flooding. Electrical transmission lines lose 7 percent to 8 percent of their transmitting capacity in high temperatures, just when demand rises • California will continue to get hotter. Expected temperature increases, less cool down at night affects people, crops, transformers, and power resources • Statewide average temperatures increased by about 1.7 degrees Fahrenheit from 1895 to 2011. Temperatures are expected to rise by 2.7 degrees above 2000 averages by 2050.  Wildfire risk will be higher, possibly more than doubling before 2085 in some areas. • California will get drier. Less snow pack limits water resources and power generation • By the latter half of this century, dry water years are expected to increase by 8 percent in the Sacramento Valley and by 32 percent in the San Joaquin Valley, compared to the latter half of the 20th century.  • California will see accelerated rising sea levels.  • Sea level along California’s coastline rose about 7 inches in the last century. The rate is expected to accelerate. By 2050, sea level could be 10 to 18 inches higher than in 2000. • Limiting carbon emissions will improve health of Californians and may forestall climate change Source: CPUC Energy Division Quarterly Compliance Report

4. Energy Sector Role in GHG Reductions by 2020 AB 32 GHG Reductions from Electricity Generation (in MMTCO2E) Source: ARB

5. Greenhouse Gas Rulemaking Update Between 2013 and 2020 IOUs will receive approximately 470 million allowances pursuant to the ARB’s Cap & Trade regulation Per the Cap & Trade regulation, the IOUs are required to consign 100% of these allowances to auction The sale of these allowances will generate an estimated $13 billion over the 2013 to 2020 period In March of 2011, CPUC opened Rulemaking 11-03-012 to address three issue areas: Use of Cap & Trade allowance revenues Use of revenues generated from sale of Low Carbon Fuel Standard Credits that may accrue to the IOUs GHG-related compliance issues for the gas utilities Auction proceeds and allowance value shall be used exclusively for the benefit of retail ratepayers, consistent with the goals of AB 32 (ARB Regulation, Section 95892(d)(2-5) Source: CPUC Update to the Legislature, August 7, 2012

6. 33% RPS Implementation Update • CPUC milestones in implementing the new 33% RPS law signed by Governor Brown, Senate Bill (1X) (Simitian, 2011) • Established 33% Procurement Targets—Decision adopted December 2011 • Implemented Portfolio Content Categories—Decision adopted December 2011 • Established New Compliance Plan—Decision Adopted June 2012 • Large IOUs achieved overall 20% RPS in 2011 (up from 18% in 2011) • PG&E: 19.3% (17.7% in 2010) • SCE: 20.7% (19.4% in 2010) • SDG&E: 20.8% (11.9% in 2010) Source: CPUC Energy Division Quarterly Compliance Report

7. Forecast Compliance Position, Not Risk Adjusted Contracted for RPS Projects Online and In Development California Public Utilities Commission, May 2012 For planning purposes, the Commission assumes that less than 100% of contracted projects will achieve commercial operation

8. Current and Projected RPS Resource Mix (GWh) 2011 Generation: Approximately 34,000 GWh

9. DG and Renewables Policies and Programs

10. Refinement of Procurement Policies and Long-Term Procurement Plans • On March 22, 2012 Commission ALJ Ruling determined scope, schedule, and need to ensure a reliable and cost effective electricity supply in California (R.12-03-014). • Three major tracks cover: 1) local reliability, 2) system needs and 3) procurement rules and bundled procurement. • As to first track, scoping memo covers many pertinent questions including, but not limited to, need for additional capacity and flexible capacity, assumptions regarding retirement of OTC plants, use of resources outside of conventional generation (e.g. uncommitted energy efficiency, demand response, energy storage and distributed generation resources), cost allocation, and related rules. • Second and third tracks will highlight longer term issues including the identification of scenarios that form the basis for long-term reliability and transmission planning process. They will also address the potential for shutdown of nuclear power plants that would impact reliability. • Many proceedings overlap and must be carefully managed to ensure optimal and timely decision results: LTPP, RA, GHG, SONGS OII, etc.

11. Feed-in Tariffs (Re-MAT) Contract Term Length: Long-term contract (10, 15, or 20-yr) Project size limit: 3.0 MW Price: Based on renewable market adjusting tariff (Re-MAT) a mechanism that allows the price to adjust in real-time based on market conditions Pricing applies to three different product-types: Baseload (e.g. bioenergy, geothermal) Peaking as-available (e.g. solar) Non-peaking as available (e.g. wind) Program size: 750 MW (statewide) Tariffs transfer Renewable Energy Credits (RECs) from generator to utility Two options under tariff (depending on customer’s choice): Full sale of production Excess sales (after onsite usage)

12. Renewable Auction Mechanism On December 16, 2010, the Commission approved the Renewable Auction Mechanism (RAM) for small renewable generators up to 20 MW RAM is a competitive auction process with standard contract for RPS projects that requires the IOUs to hold two auctions per year First RAM auction closed January 2012 with strong response from market; second RAM occurred in May, 2012. Key Program Design Elements: Standard Contract - simple, non-negotiable contract Project Viability - seller must meet minimum criteria to participate in the auction Market-Based Pricing - bids are selected on price, starting with the lowest price bid until the auction capacity cap is reached

13. California Leads the Nation in Installed Solar • Solar in California: 1,322+ MW installed PV at 126,567+ locations • California is over 2/3rds of nation’s solar market and nation’s largest rebate program • California supports solar self-generation with four interrelated state policies: • Rebates • Net energy metering (NEM) • Interconnection policies and • Rate structures (e.g. tiered rates, time of use rates)

14. California Solar Initiative (CSI) Key Aspects of CSI Program Design Launched in 2007, but built on related distributed generation rebate programs. Focus on Performance: Rebates paid on expected OR actual performance. Declining Incentives: Rebates lower in 10 steps based on market demand: Started at $2.50/watt in 2007 and at $0.20/watt in 2012. Higher rebates for non-commercial. CSI Program Includes 5 Sub-Components General Market Program : Provides incentives to all buildings except new homes, includes electric-displacing CSI-Thermal rebates Single-family Affordable Solar Homes (SASH) Program: Provides rebates to low-income customers in deed-restricted single-family homes Multifamily Affordable Solar Housing (MASH) Program: Provides rebates to multifamily affordable housing in deed restricted multi-family residences RD&D Program: Provides up to $50 million in a program for projects related to CSI goals CSI-Thermal Program: Provides rebates for solar water heating and solar heating/cooling technologies

15. CPUC’s California Solar Initiative (CSI) Budget Two Sources of Funds • CSI is funded separately by electric and gas ratepayers • Program Focus • 5 program subcomponents fund solar PV and solar thermal (including solar hot water) technologies Note: CPUC D.06-12-033, FOF 15, p. 28 established goal of the general market program as 1,750 MW. The CPUC decisions on MASH and SASH did not explicitly adopt a 95 MW per program goal; however, the CPUC did adopt a total CSI program goal of 1,940 MW in D.06-12-033. In addition, D.10-01-022 established the CSI Thermal Program pursuant to AB 1470 and SB 1.

16. Net Energy Metering (NEM) Onsite generation provides customer with credit for net monthly power production at the generation portion of their rate Eligible Technologies: Wind, Solar, Biogas-fired generators, and fuel cells Program Guidelines Statewide cap 50 MW Facility capacity cap: 1 MW Current cap is being revisited Cost allocation issues are being addressed through studies and rate design proceeding underway.

17. Self-Generation Incentive Program (SGIP) Incentive Program to offset the upfront capital costs for facilities Eligible Technologies: wind turbines, waste heat to power technologies, pressure reduction turbines, internal combustion engines, microturbines, gas turbines, fuel cells, and advanced energy storage systems Historically biogas fueled Combined Heat and Power (CHP), internal combustion engines, small turbines, and fuel cells Project size limitations: No minimum or maximum size restrictions given that project meets onsite load. Incentive Limitations Incentive payment capped at 3 MW Incentives up to $4.25/W

18. Highlights of the CPUC’s Reformed Rule 21: A Critical Path Between Distributed Generation and the Grid • On September 13, 2012, the CPUC approved a multi-party settlement bringing fundamental reforms to Rule 21. Rule 21 will now better serve the market for distribution-interconnected generating facilities that export their power for sale, including participants in the CPUC’s Feed-In Tariff and Renewable Auction Mechanism programs. The reforms include: • New market-wide information on interconnection locations • New $300 Pre-Application Report provides a first look at a proposed interconnection site • New public integrated queue will show queued applicants to distribution system under both Rule 21 and federal wholesale distribution access tariffs

19. Highlights of the CPUC’s Reformed Rule 21: A Critical Path Between Distributed Generation and the Grid • Increased transparency and accountability in the interconnection process • New, clear deadlines will improve predictability for developers and project viability for utilities • New appointed utility interconnection ombudsman and expedited dispute resolution for timeline-related disputes will help reduce and resolve conflicts • National best practices in distributed generation penetration levels • Aggregate distributed generation capacity is permitted to reach 100% of minimum load on a line segment where safety and reliability tests are met

20. Generation and Distribution Costs Are The Largest Rate Components 2012 Rates Source: CPUC AB 67 Report, 2012

21. Energy Efficiency Strategic Plan: Big Bold Goals • All new residential construction in California will be zero net energy (ZNE) by 2020 • All new commercial construction in California will be zero net energy by 2030 Commercial Goals: • 100% new commercial buildings are ZNE by 2030 • 50% of existing buildings are ZNE by 2030 Visionary Strategies for EE

22. 2013-2014 Energy Efficiency ProgramLeveraging Local Governments • More than 40 cities, counties, and regional governments work as “partners” under contract with the IOUs to deliver energy efficiency programs as services. • Local governments represent about eight percent of the 2010-2012 portfolio budget and four percent of the of the expected energy and demand impacts. • In 2013-2014 Portfolio Guidance Decision, the CPUC invited local governments to work in concert to create Regional Energy Networks (RENs) that would expand opportunities for local governments to promote and support energy efficiency. • Leverage additional state and federal resources so that energy efficiency programs are offered at lower costs to ratepayers; • Address the water/energy nexus; • Develop and deploy new and existing technologies; • Address workforce training issues; and • Address hard-to-reach customer segments such as low to moderate residential households and small to medium sized businesses.

23. Questions? • Commissioner Catherine Sandoval cjs@cpuc.ca.gov • Ditas Katague, Chief of Staff dmk@cpuc.ca.gov • Colette Kersten, Energy Advisor cek@cpuc.ca.gov • Stephen St. Marie, Water and Gas Advisor sst@cpuc.ca.gov • Bill Johnston, Interim Telecommunications Advisor wej@cpuc.ca.gov