An innovative Arizona concept to align renewable energy output with electricity demand could hit the bigtime in California.
Proposed legislation from key California lawmakers would require an increasing proportion of peak demand electricity to be served by renewable resources like wind and solar.
If enacted, backers say the bills would drive growth for renewables, battery storage and demand management, as well as help the state reduce the need for fossil fuel peaker plants.
“Addressing peak demand is really a way to ensure that clean energy resources are used in a way that makes the renewable and GHG standards achievable,” said California Assembly Speaker Pro Tem Kevin Mullin, who authored the the bill introduced in his chamber (AB 1405).
The bill and its Senate companion (SB 338) echo Arizona’s Clean Peak Standard (CPS), a proposal introduced last year by the state consumer advocate that would amend the state’s renewable portfolio standard to require utilities to obtain a specific portion of their peak demand generation from “clean peak resources.”
“In Arizona, the CPS would address costs related to peak demand growth,” said Lon Huber, senior director at energy consultancy Strategen and author of the Arizona proposal. “In California, it will use renewable over-generation to mitigate the costs and emissions of flexibility and reliability services from fossil fuel generation.”
Early reaction to the CPS concept from sector stakeholders, particularly renewable and distributed energy providers, has been largely positive, backers say. But California policymakers are still debating how to proceed, with the two bills proposing markedly different approaches to implementation.
The Clean Peak Standard concept
The California clean peak bills grew out of a concept outlined by Huber in a white paper for Arizona’s Residential Utility Consumer Office in December of 2016.
The proposal is still under consideration there in an ongoing regulatory docket considering reforms to the state’s renewable portfolio standard. But in recent months, the concept has attracted attention in several states, and Mullin consulted with Huber on the design of the California bills.
The CPS "is intended to accomplish two things with one policy,” Huber said. “It adds more renewables, but it adds renewables when the system most needs capacity, so it also saves ratepayers money when electricity prices are highest.”
Peak power needs would be met with what the white paper terms “clean peak resources.” They include renewables paired with storage and dispatchable demand side management methods that can show verifiable reductions in power usage.
“This is about evolving technology solutions with technology-agnostic price signals that make our renewables smarter,” Huber said.
Traditional renewable energy standards mandate a certain amount of capacity or generation be served by clean resources, but do not determine when they should be delivered, the paper notes. But states with high wind and solar penetrations are seeing periods of renewable over-generation that is curtailed when electricity demand is low.
The result is “diminishing returns of a simple MWh-based approach,” according to the paper. Its new approach requires that “a certain percent of energy delivered to customers during peak load hours must be derived from clean energy sources.”
“This introduces a policy framework for capacity, not just energy,” Huber said. It could also, he added, create a clean flexible standard for procurement of clean peak resources to provide ancillary and ramping services to the grid.
The California Assembly bill
Assemblyman Mullin’s bill, the Clean Peak Energy Standard (AB 1405), would require the CPUC to set, by the end of 2018, a percentage of kWh from clean peak resources to be delivered by each California load-serving entity.
The power would be delivered during a pre-defined 4-hour “peak load time period” at least 15 days of each month. The time period, also set by the CPUC, would be defined as the four-hour period that includes the one hour prior to and the two hours following the peak demand hour.
“The idea behind 15 days every month is to provide LSEs with flexibility because some days don’t have adequate clean peak resources,” said Andrew Zingale, policy director for Assemblyman Mullin. “The RPS is not measured daily and if the utilities are reaching this at least at least half the time that’s a sufficient goal to spur the deployment of clean technology.”
Clean peak resources are defined as “eligible renewable energy resources or energy storage systems” under existing California law. Their contribution toward the required percentage must meet performance measurement standards outlined by the California Independent System Operator.
The CPUC is charged by the bill with guaranteeing the clean peak resources provide benefits to the grid. For determining compliance, the bill proposes tradeable Clean Capacity Credits (CCCs), similar to the tradeable renewable energy credits used to demonstrate RPS compliance.
The peak load time period is intentionally variable and built around the hour of each day that has the highest peak demand, Zingale said. “It recognizes that each day is different and doesn’t just lock into a certain peak at a certain time.”
The CPUC would be required to increase the percentage of electricity output delivered by clean resources by 5% in 2020 and by 6% “every third year thereafter until December 31, 2029, or until 40% of demand during the peak load time period is supplied by clean peak resources,” the bill reads.
“The fundamental idea is to have a gradual increase from a measured baseline,” Zingale said. The periodic increases to the end of 2029 are meant to coincide with California’s 50%-by-2030 renewable energy mandate.
The bill stipulates that only energy from an energy storage system that was generated by renewables counts as a clean peak resource.
The intent, Zingale said, “is to set up a technology agnostic framework, and let the LSEs work with CAISO and the CPUC to work out the details, and let market players buy into that.”
Finally, the bill instructs the CPUC to “consider clean flexible capacity procurement targets to encourage deployment of clean peak resources to provide additional ancillary and ramping services.”
“We want the CPUC to start thinking about mechanisms to compensate renewables and clean peak resources for more flexibility services,” Zingale said.
Recent research showed that renewable power plants retrofitted with smart inverters can cost-effectively provide frequency control, voltage control, and ramping capacity “at least as well if not better than, conventional energy plants,” he added.
The Senate’s different approach
The Senate version of the clean peak proposal (SB 338) is noticeably less prescriptive than the Assembly bill.
The Net Load Peak Energy Bill would require the CPUC and the California Energy Commission (CEC) to work with CAISO to set up, by the end of 2019, “policies or procedures” through which LSEs meet “net peak load” energy and reliability needs “while minimizing the use of fossil fuels and utilizing low-carbon technologies and electrical grid management strategies.”
It would also require the CPUC to make a progress report on this “low-cost, low-carbon reliability requirement” to the legislature “no later than January 1, 2022, and every 4 years thereafter.” The report is required to include the percentage net peak load energy from fossil fuel generation and the commission’s efforts to reduce it.
The goal is to reduce costs to ratepayers by eliminating as much costly new generation and unnecessary new transmission as possible, said State Sen. Nancy Skinner (D), author of the bill.
“It’s projected that by 2020 we could be producing 20% more energy or electricity than we need and that cost of double-building is passed on to the ratepayer,” Skinner told Utility Dive. “If we can minimize that double-building, we can reduce those ratepayer pressures.”
“Net-load peak” is defined as “the daily period of three or more consecutive hours in which the latest of the three hours is the hour of peak demand for electricity.” It is a “netted” calculation because it excludes demand met by customers’ onsite generation.
The bill offers the CPUC and the CEC the option of setting “targets or requirements for energy technology that minimizes the percent of load met by fossil fuels during net-load peak energy demand and maximizes the use of low-carbon technologies.”
The targets or requirements can include but are not limited to energy storage, demand response or demand management technology, and energy efficiency.
“I spell out efficiency, demand management, and storage but I do not specify that is should be ‘X’ or ‘Y’ percent of those things,” Skinner said. “My bill would require the CPUC and the CEC to develop policies.”
The non-prescriptive, technology-neutral nature of her bill is strategic, she added.
Skinner was the legislative force behind the California’s energy storage mandate (AB 2514) in 2010, the nation’s first. She said her work on that bill taught her that being overly prescriptive prevents capturing “a new circumstance or a new technology or other innovation.”
The storage law mandated that the CPUC open a proceeding to consider a target and a range for utility procurement of storage, “but it let them factor in a variety of criteria,” she said.
At the CPUC, the mandate was assigned to Commissioner Carla Peterman, who won recognition for work that obtained significant cooperation from the state’s investor-owned utilities.
“Sometimes giving the regulatory agency flexibility achieves an even better outcome than being overly prescriptive,” Skinner said. “And we have oversight authority if the agency doesn’t handle the statue the way we intended.”
California’s historic AB 32 climate change legislation was put in place in a similar way, she added. “Where we can do that type of statute, it is very wise. It gives the agency an opportunity to buy in, which is especially important if that agency will be implementing or enforcing the statute.”
Stakeholder reactions emerge
Zingale said the Assemblyman’s office had been in communication with the CPUC, CAISO, and two of the state’s dominant electric utilities but had not yet had substantive feedback.
“It is too early in the process to expect reactions but we are trying to promote the idea that this is an invitation to stakeholders to be involved,” he said.
Assemblyman Mullin endorsed his staffer’s observation. “The utilities, PUC, and ISO are tasked with meeting our RPS and GHG reduction goals while balancing the grid, so they are all crucial partners,” he said. “This is a great opportunity for the utilities to participate in crafting a policy framework that helps them balance the grid in a way that ensures we’re tapping into California’s strengths.”
A spokesperson for CAISO said the grid operator is in the process of reviewing the bills and “will develop a position in the near future.”
Renewable energy interests, however, were more forthcoming in their support.
Energy Storage Association (ESA) Policy and Advocacy Director Jason Burwen likes the concept because it offers a price signal for clean peak capacity and grid flexibility. It is “a new, important, and innovative idea that warrants regulators’ attention and warrants all stakeholders to engage,” he said.
John V. White, executive director of the Center for Energy Efficiency and Renewable Technologies (CEERT) agreed, saying the bills represent “the beginning of rethinking the RPS and kWh of renewables as the dominant measure of progress.”
The value of “large scale and distributed storage along with traditional renewables” to meet the later evening peak when solar generation is not available “will be increasingly important,” White said.
Tesla, fresh off its acquisition of SolarCity, endorsed Huber’s concept when the white paper was released in December.
“While details of the proposed Clean Peak Standard still need to be discussed, Tesla supports the concept which would enable a cleaner, more resilient, lower cost grid and promote a sustainable energy future,” the company told Utility Dive through a spokesperson.
Stem, like Tesla, stands to benefit from the proposal enactment. Policy Director Ted Ko said he believes the proposals “seem intended to come together as a single bill.”
Setting a standard for procuring clean flexible resources in the same way an RPS sets a standard for procuring renewable energy is necessary, Ko said. “As grids reach high renewables penetrations it begins to matter when the energy is provided and whether it is dispatchable.”
It will be difficult to define exactly when the system needs the clean resources because that depends on what is happening on the grid and what the resources available are, Ko said. “Those things did not matter in the design of the RPS.”
The system operator may, for instance, need to require the clean peak resources to be available ahead of peak demand to prevent the need to start up peaker plants, he suggested. The CPUC and CAISO will need to design answers to questions like that into the policy.
“These laws will benefit all types of energy storage by opening another monetizable value stream that storage can take advantage of by providing low carbon, low cost energy at times the grid needs it,” Ko said. Traditional demand response will also benefit by ramping down consumption on call, he added. And solar and wind will benefit because instead of being curtailed, they can be stored.
Any state reaching a high renewables penetration will benefit from mandating clean flexible peak resources, Ko said. “States like Hawaii, Massachusetts, and New York should consider this kind of idea.”
Making two bills into a law
In California, a bill must obtain committee and floor approvals in its house of origin before it can be considered by the second house. Identical bills in that are not altered in the legislative process may be approved and “conjoined,” Skinner said.
“Bills with similar subject matter may have one piece moved in each house,” she said. “I cannot predict how this will work out.”
The current two-year legislative session just began, she added. “Lawmakers may turn any bill into a two-year bill and that often happens, but it doesn’t have to happen and it is the norm that bills change a great deal as they move through the process.”
SB 338 will be heard in committee by early May and has to be on the Senate floor by early June, Skinner said. “We’ll know it’s disposition in our house by mid-June or so.”
AB 1405 is intended to "generate conversations with all the potential stakeholders,” Zingale said. Mullin’s office expects multiple amendments as the bill moves through a range of Assembly committees.
Elements will added, removed, and changed, Zingale added. “I wouldn’t say that I necessarily expect it to be done in the first year or whether, in the end, it will be a Mullin bill or a Skinner bill.”
The ideas may also be “co-opted into other forms that I can’t even predict right now,” Zingale said. “But our office believes that this will be done in some form in the next two years to three years because the Clean Peak Standard concept is a strong framework that is already attracting stakeholder attention.”