California Public Utility Commission's Storage Rulemaking: the Targets

Use case category, by utility	2014	2016	2018	2020	Total
SCE
Transmission	50	65	85	110	310
Distribution	30	40	50	65	185
Customer	10	15	25	35	85
Subtotal SCE	90	120	160	210	580
PG&E
Transmission	50	65	85	110	310
Distribution	30	40	50	65	185
Customer	10	15	25	35	85
Subtotal PG&E	90	120	160	210	580
SDG&E
Transmission	10	15	22	33	80
Distribution	7	10	15	23	55
Customer	3	5	8	14	30
Subtotal SDG&E	20	30	45	70	165
Total	200	270	365	490	1,325

 

California Public Utility Commission (CPUC) has recently put out the Proposed Decision for Energy Storage Rulemaking (R. 10-12-007) with the above Procurement Targets for each Investor-owned Utility (IOU) in California. In responding to stakeholder's concerns that there's no demonstrated need for additional resources, CPUC stated that,

"In other policy areas promoting preferred resources, such as renewables, the California Solar Initiative and demand response, the Commission has not set targets based on a system need determination, but rather administratively determined procurement requirements to meet public policy objectives. To the extent that energy storage is treated akin to a “preferred resource,” as it has been designated in D.13-02-015, the Commission has clear precedent to administratively establish storage procurement targets without a system needs determination." (from sec. 4.4.3).

As a renewable energy/energy storage enthusiast, it's quite difficult to take a stand on such statement. It is a chicken and egg problem. The market does not procure energy storage because it is still too expensive; energy storage technologies cannot become cheaper by economies of scale if there isn't a big enough market. CPUC is trying to create the market with the procurement target. But stating that it's not necessary to figure out the system needs because that's the way we have been doing things is hardly convincing.

In this case, CPUC is concerned with treating all Preferred Resources equally: if renewables and Demand Response (DR) had administratively determined procurement targets, Energy Storage shouldn't have to go through the system needs evaluation but should have an administrative target as well. We all know the consequences of setting targets without knowing the actual need: we either end up building too much or realizing that the target is not enough. Such administratively determined procurement target gives room for stakeholders to argue both ways: the target can be too low for some and too high for others.

To be fair, CPUC did ask the IOUs to include in the bi-annual solicitation application,

Reference to 1) needs study by the California Independent System Operator for the IOU’s system, local, and flexible needs, if available, or 2) upgrade needs identified in the IOU’s transmission or distribution planning studies; 

CPUC does believe in making a decision based on analysis, but probably is very afraid of paralysis by analysis. That being said, the lack of scientific reasoning (system need) or economic reasoning (how big the market needs to be for Energy Storage to become cost-effective) behind the arbitrary numbers is worrisome. It makes you wonder: how did CPUC come up with the targets for renewables and DR?