Energy Law Alert: California Public Utilities Commission Approves 1,325 MW Energy Storage Procurement Target for California Utilities

by Stoel Rives LLP
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At its meeting this morning, the California Public Utilities Commission unanimously approved a decision establishing an energy storage procurement target for California's investor-owned utilities (IOUs), electric service providers (ESPs), and community-choice aggregators (CCAs). The IOUs are required to collectively procure 1,325 MW of energy storage resources by 2020. ESPs and CCAs are required to procure energy storage resources equal to 1% of their peak load by 2020.

We reported here on the Commission's proposed energy storage procurement framework, issued in a proposed decision in early September. The Commission's decision today does not shift significantly from the proposed framework, but revisions made to the proposed decision will nevertheless affect various stakeholders, as described below.

Our previous client alert details the primary elements of the energy storage procurement framework. Additions, clarifications, and revisions to the framework, adopted by the Commission today, include:

  • The IOUs' first energy storage procurement proposal must be submitted to the Commission no later than March 1, 2014, rather than by January 1, 2014
  • The IOUs may hold multiple competitive solicitations in each biennial procurement cycle, rather than a single solicitation every two years
  • The IOUs are required to use a consistent bid evaluation protocol, rather than a common bid evaluation protocol. This means that the IOUs will have similar bid evaluation protocols for assessing bids for benchmarking and general reporting purposes, with the option of also developing utility-specific proprietary evaluation protocols
  • Any over-procurement in one biennial procurement cycle can be banked and used to reduce the IOUs' procurement targets in the next cycle
  • The procurement targets provided for 2014, 2016, 2018, and 2020 for each IOU are based on the number of MW of energy storage projects pending contract, under contract, or installed at the end of each biennial procurement cycle
  • All procured energy storage resources must be installed by 2024. Previously, the framework required that any procured energy storage system must be operational within four years of the solicitation in which it was procured
  • Customer-owned and customer-sited energy storage may count towards procurement targets. In addition, an alternative procurement process, rather than the general competitive solicitation, may be used for customer-owned storage
  • Vehicle-to-grid storage projects may count towards procurement targets
  • Specified storage projects currently under development and storage procured through other Commission programs and proceedings may count towards procurement targets if they were under contract or installed after January 1, 2010 and are operational by the end of 2024
    • Bilateral contracts for storage resources are limited to resources procured through other Commission proceedings
  • Utility-owned storage must be pursued through a competitive process consistent with long-term procurement processes outlined in Decision 07-12-052
    • For utility-owned storage procured outside of this process, the Commission will determine whether a competitive request for offers was infeasible
  • Additional explanation for the exclusion of large-scale pumped hydro projects of more than 50 MW

While the Commission's decision today closes Rulemaking 10-12-007, the Commissioners noted energy storage and its role in the California grid and energy market will continue to be evaluated in other proceedings and through the implementation of the final decision here. In particular, Commissioner Ferron noted three primary issues to be monitored: (1) the development of large-scale pumped hydro energy storage through other procurement mechanisms, (2) the use of a pro forma standard contract for storage projects or other mechanisms to cut transaction costs, and (3) the development of bid evaluation methodologies that ensure that the highest-value energy storage assets are procured. Commissioner Peevey expressed concern over the sufficiency of incentives for customer-sited storage, particularly with existing incentive programs sunsetting. Commissioner Ferron may file a concurrence with the final decision. Commissioner Peevey may file a separate concurrence or join in Commissioner Ferron's concurrence.

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