The California Public Utilities Commission on Sept. 20 issued a final written approval, following a review of the matter at a Sept. 15 commission meeting, on four energy storage agreements for Pacific Gas and Electric (PG&E) and three energy storage agreements for Southern California Edison (SCE).
Two purchase and sale agreements for Pacific Gas and Electric were not approved. The commission determined that Southern California Edison has met its 2014 energy storage targets with approval of these contracts, but that Pacific Gas and Electric has not yet met its 2014 targets.
In December 2010, the commission opened a rulemaking to implement the provisions of Assembly Bill (AB) 2514. AB 2514 directed the commission to determine appropriate targets, if any, for each Load-Serving Entity to procure viable and cost-effective energy storage systems and set dates for any targets deemed appropriate to be achieved. In response to this mandate, the commission adopted a biennial storage procurement program.
In December 2015, Southern California Edison and Pacific Gas and Electric filed applications seeking approval of the results of their 2014 Energy Storage Request for Offers. SCE sought approval for three contracts for a total of 16.3 MW of distribution-connected storage. PG&E sought approval for four energy storage agreements whose function is generation/market participation and two purchase and sale agreements whose purpose is distribution deferral for a total of 72 MW.
Although PG&E‘s short-listed bidders included resources in all three grid domains (transmission, distribution, and behind the meter), the contracted resources connect only at the transmission and distribution level.
SCE received 404 offers for a total offered project capacity of 2,892 MW. SCE sought two types of energy storage products: facilities able to provide Resource Adequacy (RA) benefits, while retaining all other operational benefits that are not associated with RA; and facilities that provided resource adequacy benefits and had a “put” option to provide all other energy and ancillary service attributes from the facility at the seller‘s election on a yearly basis. SCE‘s proposed agreements were for a total of 16.3 MW for three Resource Adequacy Only contracts. Under these contracts, SCE will not control the dispatch rights under the Stanton Energy Contract and does not receive any energy or ancillary service benefits. However, under the Resource Adequacy Only agreement, the resource must bid into the California Independent System Operator (CAISO) market as a resource adequacy resource pursuant to the CAISO tariff.
- SCE selected one offer from Stanton Energy Reliability Center LLC, a wholly-owned subsidiary of W Power LLC, a California certified woman-and-minority owned business enterprise. The contract is for 1.3 MW of General Electric-sourced lithium-ion battery storage capable of providing its Contract Capacity for a 4-hour period. The delivery period is expected to begin on June 1, 2020, and end on May 31, 2030. The project is located in Stanton, California, and the interconnection point will be at the Barre substation.
- SCE also selected one offer from Western Grid Development LLC for 15 MW of EOS Energy Storage-sourced battery storage, which resulted in two contracts – one for 10 MW and one for 5 MW – capable of providing its Contract Capacity for a 4-hour period. The projects are located in Santa Paula, California, and the interconnection point will be at the SCE Wakefield Substation. The Western Grid offer included two projects in a single offer that involved the same location, online date, and technology. The only difference between the projects is size and the interconnections, which were split between two separate circuits (but still feeding up to the same substation) because neither circuit, at current capacity, could handle the entire 15 MW project. The delivery period is expected to begin on Jan. 1, 2020, and end on Dec. 31, 2034.
PG&E sought two types of energy storage services: market bundled storage; and distribution reliability storage. To procure market bundled storage, PG&E pursued Energy Storage Agreements with energy storage system sellers who will operate the system at PG&E‘s direction to store and discharge energy to the market. To procure distribution reliability storage, PG&E pursued Purchase and Sale Agreements with energy storage developers to design, develop, and construct storage facilities and transfer the project to PG&E after the developer meets the closing conditions.
PG&E received over 200 offers consisting of more than 700 variations from more than 50 separate participants, which totaled over 5,000 MW of energy storage capability (including offer variations). PG&E‘s proposed agreements were for four Energy Storage Agreements totaling 70 MW, and two Purchase and Sale Agreements totaling 2 MW.
- PG&E selected one offer from Amber Kinetics Inc., a 20 MW transmission-connected, stand-alone flywheel energy storage resource with a discharge duration of four hours. It will be located in Fresno, California, and the delivery point will be the New Kearney Substation. The expected initial delivery date is May 1, 2020, with a term of 20 years.
- Hecate Energy Molino LLC, a subsidiary of Hecate Energy LLC, is a 10-MW transmission-connected, stand-alone lithium ion battery energy storage resource with a discharge duration of four hours located in the city of Sebastopol, California. The interconnection point will be at the Molino Substation. The expected initial delivery date is May 1, 2020, with a term of ten years.
- PG&E selected a Golden Hills Energy Storage LLC project located in the city of Livermore, with the delivery point being the Tesla 115 kV substation. The project is a 30-MW transmission-connected, stand-alone lithium-ion battery energy storage resource with a 30 minute discharge. The expected initial delivery date is Jan. 1, 2019, with a term of ten years.
- Henrietta D Energy Storage LLC, a project wholly-owned by Convergent Energy and Power LLC, is a 10-MW distribution-connected, stand-alone zinc-air battery energy storage resource with a discharge duration of four hours. It will be located in the city of Lemoore in Kings County, and the delivery point will be the Henrietta Substation. The expected initial delivery date is May 1, 2020, with a term of 20 years.
The commission said there were issues with PG&E purchase and sale deals
PG&E‘s purchase and sale agreements are structured to have third-party developers develop and construct energy storage facilities to PG&E‘s specifications and bring them to commercial operation, at which point PG&E will take ownership of the projects. These agreements have a contractual cost between PG&E and the developer, as well as PG&E project oversight and integration costs. The projects are designed to provide distribution reliability by enabling PG&E to lower the load on a specific distribution feeder at times when the associated transformer could otherwise be expected to be overloaded.
The more traditional approach to maintaining distribution reliability at these sites would have been to upgrade the capacity of the transformers. Instead, these projects would use a battery to charge from the grid and discharge into the utility‘s distribution system to defer the cost of the transformer upgrade.
PG&E selected two purchase and sale agreements, each to be developed by Hecate Energy LLC. Each project would be for a 1-MW lithium ion energy storage resource with discharge durations of two hours. One of the projects would be located in Fresno, California, and interconnect with a distribution feeder from the Old Kearney substation. The other project would be located in Redwood Valley, in Mendocino County, California, and interconnect with a distribution feeder from the Mendocino substation. The expected initial delivery date for both projects is May 1, 2018.
Said the Sept. 20 commission decision: “With regard to the purchase and sale agreements, the Independent Evaluator reports that these projects should have a reasonable prospect for success, and recommends Commission approval for the purchase and sale agreements. The Independent Evaluator adds that including the purchase and sale agreement projects to the portfolio added a configuration with significant diversity features — mainly the unique application of energy storage to defer substation upgrades — and relatively early start-date. The Independent Evaluator goes on to say that the unique application of energy storage to defer substation upgrades provided an opportunity to accelerate learning about deferring costly substation upgrades with storage investments. We note that the Independent Evaluator report did not include Final Valuation Results for the purchase and sale agreements like it did for the energy storage agreements. [The Office of Ratepayer Advocates (ORA)] recommends that the Commission not approve the purchase and sale agreements because they are not cost-effective, were not competitive compared to other offers, and fail to ensure reliable service in their distribution deferral function. … PG&E indicates that the guaranteed commercial operation date of these two contracts is May 1, 2018, [allows it] to defer by ten years the need to invest in additional transformers at Mendocino and Old Kearney substations.
“However, information included in Exhibit ORA-2C demonstrates that the transformers at these two locations may become overloaded prior to the commercial operation date of the purchase and sale agreements. PG&E‘s primary arguments in favor of the purchase and sale agreements are that they introduce additional diversity into PG&E‘s storage portfolio and provide a low cost means to gain experience utilizing storage as a distribution deferral method. PG&E concedes that on the basis of cost alone, these projects would likely not be selected, but argues that the Independent Evaluator agreed with the diversity benefits that these projects bring to the storage portfolio. While we agree that there is value in adding diversity to the portfolio and gaining experience with using storage to support distribution deferral, given that the proposed purchase and sale agreements are not cost-effective, and also fail to guarantee the necessary capacity to meet forecasted overloads at the Old Kearney and Mendocino substations based on their online dates, we find that these agreements should not be approved. We remind PG&E that it is always free to pursue projects it believes are cost-effective within its normal distribution planning and acquisition framework and support the reasonableness of those costs through ex-post reasonableness review as needed.”