The following is a contributed article by Nick Chaset, CEO of East Bay Community Energy, and Cisco DeVries, CEO of OhmConnect.
The extreme heat storms that hit California this August and September stressed our electricity systems in ways our energy planning agencies did not expect or plan for, forcing us to rethink the quantity and type of electric capacity needed to meet customers' demand. The energy challenges caused by climate change require solutions that address near term needs to "keep the lights on," while not worsening an already dire situation by burning more fossil fuel.
Over the coming months, the California Public Utilities Commission (CPUC), the California Energy Commission (CEC) and the California Independent System Operator (CAISO), must make changes to prepare for summer of 2021 and beyond. While some will offer comprehensive long-term policy changes, there are immediate opportunities to improve the Resource Adequacy program that the State developed in the wake of the 2000-2001 energy crisis to ensure there is adequate electricity to meet demand at all times. Before embarking on mandates to procure new capacity, we urge the California energy agencies make four common-sense changes that maximize the value and market opportunity for clean resources, like energy storage and demand response – or rewarded conservation.
California has the technology, existing resources and demonstrated capability to deliver clean, reliable energy by next summer. Now is the time to update regulations that have limited significant quantities of clean resources from serving California during heat storms, power shutoffs or other emergencies and periods of high prices.
Provide value certainty for four-hour energy storage resources: Currently, entities that supply power to the grid — like East Bay Community Energy — have signed contracts for hundreds of megawatts of new energy storage projects, many of them paired with solar energy. One of the most significant risks that these projects face is that the value of energy storage projects will erode over time as new duration requirements are implemented. This jeopardizes the ability to invest in the quantities of storage resources that the state’s planning processes indicate are required to ensure reliability. To fix this, the CPUC should guarantee the value of existing energy storage resources at the time of development for a minimum of ten years.
Maximize the value of behind-the-meter energy storage: Homes and businesses across California have increasingly been installing battery storage paired with rooftop solar to provide backup power during the seasonal power shutoff events. When aggregated together and intelligently dispatched in response to strained grid conditions, these solar-charged behind-the-meter batteries can provide hundreds of megawatt-hours of clean peaking energy generation to help alleviate power shortages. But right now, California does not have policies and programs in place to allow us to make full use of this storage capacity to help the grid during power shortages and for customers to be fairly compensated for that service. The state should enable residential battery customers to provide capacity at the same value as that assigned to large-scale batteries and fossil power plants.
Eliminate limitations on the procurement of demand response: The cheapest way to meet our need for electricity is not to generate more of it, but to reward customers for conserving electricity – particularly during the peak, early evening hours. But the CPUC recently capped procurement of conservation resources by load-serving entities (LSEs) at 8.3% of their total energy production requirement. As an immediate step, the CPUC should suspend this procurement cap for 2021.
Streamline and simplify CPUC processes to incentivize conservation and behind-the-meter energy storage: The energy market is rapidly changing, innovating and becoming more decentralized. But many CPUC decision-making processes remain geared to the old energy world, in which utilities generated and provided all electricity to customers. The state should take steps to reduce the cost and barriers to entry for non-utility conservation and battery storage providers to unleash innovation that can dramatically reduce our need for more electricity.
As California works to build an electricity system that is ready for the challenges that climate change has in store, it’s imperative that we immediately implement these common-sense changes that can not only help stabilize the grid by 2021, but save consumers on their electricity bills while also having the benefit of reducing air pollution and GHG-emissions from burning more natural gas.