On June 16, 2016, the White House hosted a Summit on Scaling Renewable Energy and Storage with Smart Markets. As a backdrop to the Summit, the Obama Administration announced new executive actions and 33 public and private sector commitments intended to accelerate the grid integration of renewable energy and storage. Together, these actions are expected to result in at least 1.3 gigawatts of energy storage procurement or deployment within the next five years.
By Joshua Bledsoe and Max Friedman
After a lengthy process of policy review and revision, the California Air Resources Board (ARB) re-adopted the state’s Low Carbon Fuel Standard (LCFS) on September 25, 2015. The LCFS is expected to contribute approximately 20% of the statewide greenhouse gas (GHG) reductions required by 2020 under Assembly Bill 32. Moreover, the LCFS has been identified by Governor Brown as a key regulatory tool both to reduce petroleum consumption 50% by 2030…
President Obama recently announced that the Department of Energy (DOE) Loan Program Office (LPO) is expanding support for innovative “distributed energy projects” by adding $1 billion in available loan guarantees to support the deployment of these projects through the existing solicitations for Renewable Energy and Efficient Energy Projects and Advanced Fossil Energy Projects. Eligible projects could include energy storage, smart grid technologies, cogeneration and methane capture for oil and natural gas wells, as well as roof-top solar and energy efficiency technologies that meet certain “innovation” requirements. For example, roof-top solar projects that are combined with storage may be eligible.
The LPO also is targeting distributed energy developers with special supplements to these two pending solicitations that make clear that existing program authority under Title XVII of the Energy Policy Act of 2005 and resources may be used to accelerate the deployment of distributed energy projects. The credit enhancement available through DOE’s LPO traditionally has been used to support utility-scale energy projects. In recognition of the important role of distributed energy in the future of US energy markets, the LPO is making a concerted effort to marshal program resources to support innovation in this growing segment.
On June 10, 2015, the California Independent System Operator (“CAISO”) released a draft final proposal (the “Expanded Metering and Telemetry Options Phase 2, Distributed Energy Resource Provider”) that, if finalized, would represent an initial step towards a regulatory structure that would result in distributed energy resources (“DERs”) competing in California wholesale energy markets. DERs are resources that are physically connected to the distribution grid of an electric utility (e.g., rooftop solar, energy storage, plug-in electric vehicles, and demand response). In order for DERs to sell into the CAISO wholesale markets, they would use the distribution grid of the electric utility to deliver power to or to take power from the transmission grid. Currently, the vast majority of existing renewable resources sell their power to California’s electric utilities. Those distributed resources are compensated by electric utilities for the electricity they generate at a rate far in excess of current CAISO market prices. In addition, those resources do not have the right or the ability to sell power directly into the wholesale market. Absent the California Public Utilities Commission (“CPUC”) adopting a substantially revised regulatory structure that sorts out the thorny jurisdictional, economic and technical issues (e.g., metering and compensation for resources located behind the retail meter), the immediate impact of CAISO’s proposal may be modest at best.
On September 5, 2014, San Diego Gas & Electric (“SDG&E”) issued a 2014 Energy Storage System (“ESS”) Request for Offers (“RFO”) soliciting at least 25 MW—and up to 800 MW—of energy storage (the “2014 ES RFO”). SDG&E’s 2014 ES RFO is among the largest solicitations to date in the U.S. for grid-scale energy storage resources.
On August 14, 2014, the California Public Utilities Commission (“CPUC”) issued an Order Instituting Rulemaking (“Order”) to establish policies, procedures, and rules to guide California investor-owned electric utilities (“IOUs”) in developing their Distribution Resources Plan Proposals (“DRPs”) in accordance with the requirements of Public Utilities Code Section 769. In particular, the rulemaking will evaluate the IOUs’ existing and future electric distribution infrastructure and planning procedures with respect to incorporating Distributed Energy Resources (“DERs”) into the planning and operation of their electric distribution systems. DERs include distributed renewable generation resources, energy efficiency, energy storage, electric vehicles, and demand response technologies.
On August 1, 2014, the California Independent System Operator (“CAISO”) filed proposed tariff changes at the Federal Energy Regulatory Commission (“FERC”) in FERC Docket No. ER14-2574 that would establish new flexible resource adequacy capacity (“FRAC”) and must-offer obligation (“MOO”) requirements aimed at ensuring that adequate flexible capacity is available to address the added variability and net load volatility associated with ongoing and expected future changes on the CAISO-controlled grid. In its filing, the CAISO proposes a November 1, 2014, effective date for the tariff changes establishing the FRAC-MOO so that they will apply to resource adequacy showings beginning in January 2015. FERC has set Friday, August 22, 2014, as the due date for comments on the CAISO’s FRAC-MOO proposal.
The California Independent System Operator (“CAISO”) is moving forward with a stakeholder initiative to examine issues with connecting energy storage facilities to the CAISO controlled grid under the CAISO’s existing interconnection rules, and to develop new policies as needed to clarify and facilitate interconnection of energy storage.
The California Independent System Operator (“CAISO”) has taken a significant step toward proposing a new ancillary service known as the “Flexible Ramping Product” as part of its market design. With increasing levels of variable energy resources on the CAISO-controlled grid, maintaining power balance requires increased ramping capability, as the variable outputs of the renewable resources may increase the magnitude of 5-minute to 5-minute net load changes. In a Straw Proposal issued June 2, 2014, the CAISO proposes to use the Flexible Ramping Product to address these emerging operational challenges relating to maintaining power balance in real-time dispatch. In doing so, the CAISO emphasized that while its existing regulation service product could be called upon to address forecast uncertainties, procuring more regulation service is problematic from an economic and market efficiency perspective both because the generating capacity of some resources must be reserved to provide regulation service and because more real-time dispatch prices will be compensated at administratively-set penalty rates. The CAISO stated that its Flexible Ramping Product is designed to deal with uncertainties that are realized before the binding real-time dispatch using a market-based design to procure ramping capacity in the CAISO’s day-ahead market, fifteen-minute market and real-time dispatch.
On April 25, 2014, the New York Public Service Commission (“NYPSC”) instituted a proceeding it terms “Reforming the Energy Vision” (the “REV Proceeding”) to consider “fundamental changes in the manner in which [electric distribution] utilities provide service” along with related regulatory and ratemaking issues in an effort to “align electric utility practices and [the] regulatory paradigm with technological advances in information management and power generation and distribution.” Order Instituting Rulemaking, Case 14-M-0101, Proceeding on Motion of the Commission in Regard to Reforming the Energy Vision (April 25, 2014) (the “REV Proceeding Order”). At its core, this order is the first step in a regulatory process to “improve system efficiency, empower customer choice, and encourage greater penetration of clean generation and energy efficiency technologies and practices.”