California Investor-Owned Utilities Launch 2014 Energy Storage RFOs

Wilson Sonsini Goodrich & Rosati

On December 1, 2014, California's three large investor-owned utilities (IOUs)—Pacific Gas & Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E)—issued Requests for Offers (RFOs) for a total of approximately 95 MW of energy storage in California. These RFOs are the first competitive solicitation under California's AB 2514 energy storage procurement program, which requires the IOUs to procure a total of 1.325 GW of energy storage resources by 2020.


PG&E expects to procure 74 MW of energy storage projects in this 2014 solicitation, 50 MW of which will be connected to the transmission grid and 24 MW of which will be connected to the distribution grid. PG&E is accepting both energy-only projects (i.e., not fully deliverable) and Resource Adequacy projects (fully deliverable under California Independent System Operator (CAISO) tariff requirements). Although PG&E has procured 9 MWs of its 10 MW target for customer-sided projects, it is accepting bids for customer-sided projects in this RFO. The minimum project size is 1 MW, although multiple resources may be aggregated to meet this size under certain conditions. In addition, PG&E is not requiring bidders to have submitted an interconnection study prior to submitting an offer, but an interconnection agreement must be in place prior to commercial operation.

PG&E will hold a participants conference on December 18, 2014, and interested participants must register by December 16. Attendance is limited and will be granted on a first-come, first-served basis, so interested participants are encouraged to register now. Notices of Intent (NOIs) are due on January 5, 2015, and offers are due by 1 p.m. PT on February 17, 2015. Bidders must pre-register in order to bid. Additional information on PG&E's energy storage RFO can be found on PG&E's website.


SCE plans to procure at least 16.3 MW of energy storage projects in this 2014 solicitation. SCE is exclusively seeking offers that provide System, Local, and/or Flexible Resource Adequacy attributes only, or System, Local, and/or Flexible Resource Adequacy attributes with an embedded put option for energy dispatch and ancillary services. To be eligible, a project must be at least 1 MW in capacity and must be fully deliverable transmission or distribution-connected market resources. Customer-sided energy storage projects will not be procured in this RFO. SCE is accepting offers for projects within the CAISO control area, but has expressed a preference for local capacity requirements (LCR) projects in the Western Los Angeles Basin. Bidders will be required to submit either a completed Phase I interconnection study, a signed interconnection agreement, or an equivalent or better interconnection study, agreement, process, or exemption in order to be eligible.

SCE will hold a bidders conference on December 17. Non-binding NOIs to submit offers are due on February 2, 2015, and indicative offers are due on April 1, 2015. Additional information on SCE's RFO can be found on SCE's website.


Although SDG&E has already procured enough energy storage to meet its 2014 procurement target under the AB 2514 program, the utility sought authorization from the California Public Utilities Commission (CPUC or Commission) to procure an additional 16 MW of energy storage projects in 2014 to meet its 2016 and 2018 targets. Of this, 12 MW were to be Local and Flexible Capacity (up to 10 MW at the transmission level and up to 2 MW at the distribution level) and up to 4 MW would be energy storage assets that fulfill "distribution reliability" and/or "power quality" needs. Separately, however, as part of its Local Capacity Requirements (LCR) to satisfy capacity needs in the San Diego area, SDG&E was authorized to procure a minimum of 25 MW and up to a potential maximum of 800 MW of energy storage in its territory.1 To that end, SDG&E issued an "all source" RFO on September 5, 2014, for its LCR procurement, and intends that the 12 MW of Local and Flexible Capacity procured under that RFO would count toward its AB 2514 energy storage procurement targets. Offers under that RFO are due January 5, 2015. For the remaining 4 MW, SDG&E has issued an RFO to pre-registered bidders. That separate Energy Storage System RFO is for projects that provide distribution reliability services, and all projects procured will be utility-owned. Offers for that RFO are due March 31, 2015. Additional information on SDG&E's Energy Storage System RFO can be found by emailing the contact provided on SDG&E's website and entering into a nondisclosure agreement.

Eligibility Requirements

Under AB 2514, an "energy storage system" means "commercially available technology that is capable of absorbing energy, storing it for a period of time, and thereafter dispatching the energy," and must do one or more of the following:

  1. Use mechanical, chemical, or thermal processes to store energy that was generated at one time for use at a later time.
  2. Store thermal energy for direct use for heating or cooling at a later time in a manner that avoids the need to use electricity at that later time.
  3. Use mechanical, chemical, or thermal processes to store energy generated from renewable resources for use at a later time.
  4. Use mechanical, chemical, or thermal processes to store energy generated from mechanical processes that would otherwise be wasted for delivery at a later time.

Cal. Pub. Util. Code §2835(a). In addition, in order to be eligible, a project must be cost effective and must meet one of the following goals: (1) reduce emissions of greenhouse gases; (2) reduce demand for peak electrical generation; (3) defer or substitute for an investment in generation, transmission, or distribution assets; or (4) improve the reliable operation of the electrical transmission or distribution grid.2

In its framework decision on the AB 2514 storage procurement program, D.13-10-040, the CPUC excluded pumped storage projects greater than 50 MW in capacity from eligibility for the AB 2514 program and provided that projects must have been installed after January 1, 2010, and must be in operation by December 31, 2024. In Decision 14-10-045 (D.14-10-045), the CPUC's more recent decision with respect to this 2014 solicitation cycle, the Commission examined other eligibility issues, and determined that eligible projects include two-way electric vehicle charging with discharging back to the grid (V2G), but not one-way EV charging, where the stored energy is only used for off-grid purposes, such as powering the vehicle (V1G). The CPUC also found that the eligible energy storage components paired, co-located, or integrated with existing biogas, solar thermal, or hybrid thermal generators are eligible under this procurement program, whereas the non-storage components of such projects (such as a natural gas pipeline), or new generators paired with storage, are ineligible for these 2014 RFOs. D.14-10-045 directed the IOUs to take a balanced portfolio approach to procurement, to promote "a mix of technologies and contract terms."

Bid Evaluation Criteria

D.14-10-045 approved proprietary bid evaluation methodologies to be used by the IOUs to evaluate bids received in the 2014 energy storage RFOs. Some information regarding these methodologies and the cost-effectiveness calculations to be used by the IOUs is provided in the IOUs' RFO materials and applications filed with the CPUC. The Commission also reviewed a proposed "Consistent Evaluation Protocol" to be used for reporting and benchmarking purposes. The decision required the IOUs to modify this protocol to give weight to factors such as greenhouse gas impacts, energy storage duration, and costs of aggregation of multiple energy storage projects, and to clarify how concurrent benefits provided by energy storage resources will be quantified and evaluated.

Next Steps

See above and the RFO website links provided for information on each of the IOUs' energy storage RFOs, key dates, bidders' conferences, and deadlines.

1 CPUC Decision 14-03-004.

2 Id.; see also Decision 13-10-040 (concluding that to be eligible for the AB 2514 procurement targets, a project must "demonstrate[] its ability to meet one or more of the following purposes: grid optimization, integration of renewable energy, or reduction of greenhouse gas emissions.").

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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