California PUC rejects 4-MW energy storage contract of Pacific Gas and Electric

Saying the contract is not cost-effective, the California Public Utilities Commission on Dec. 6 issued a final order rejecting an energy storage agreement proposed by Pacific Gas and Electric as part of its 2014 Request for Offers.

The Dec. 6 decision determines that Pacific Gas and Electric (PG&E) has not met its 2014 energy storage procurement targets and that the 2016 storage target should be increased by 4 MW to account for this shortfall.

In December 2010, the commission opened a rulemaking to implement the provisions of Assembly Bill (AB) 2514, which 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. The energy storage framework and procurement applications for the 2014 biennial period were subsequently approved.

PG&E sought approval for an agreement with Stem Energy Northern California LLC to provide PG&E with a total of 4 MW of resource adequacy resources aggregated from behind-the-meter storage devices. Protests were filed by the Office of Ratepayer Advocates (ORA) and jointly by Marin Clean Energy and Sonoma Clean Power Authority. A response was filed by the Green Power Institute.

In its Dec. 5 decision, the commission said given the legal requirement for energy storage projects to be cost-effective, it concludes that the Stem agreement should not be approved. The decision added: “In comments on the proposed decision, Stem encourages the Commission to compare how its project compares to other, similarly situated behind-the-meter projects, and that the unique benefits of this agreement should be considered and evaluated. We disagree. The investor-owned utilities were given a wide degree of freedom to propose their own methodologies to evaluate the range of costs and benefits of energy storage bids. As part of the 2014 energy storage procurement plan proceeding, parties had the opportunity to vet PG&E’s proposed Portfolio Adjusted Value cost-effectiveness methodology, which was later adopted by the Commission in D.14-10-045, and used to evaluate PG&E’s first application for its 2014 storage contracts in D.16-09-004. Amending PG&E’s cost-effectiveness methodology at this stage, after bids have already been short-listed, not only conflicts with the Commission’s previous established policies, but would set an inconsistent standard to evaluate whether a project is cost-effective, as required by Pub. Util. Code §§ 2835 et seq, and would be unfair to other potential 2014 energy storage providers that participated in PG&E’s process.

“Moving forward, we encourage PG&E to continue to seek new and innovative storage projects, and to work with bidders so that contracts may be structured in a way that aligns with PG&E’s portfolio needs. We also remind PG&E that it is always free to pursue projects it believes are cost-effective within its normal planning and acquisition framework and support the reasonableness of those costs through ex-post reasonableness review as needed. From that perspective, there is also nothing prohibiting PG&E from working with Stem to restructure the contract and refile the project in the next application cycle. If such a filing were to be made, we would consider the new filing on its own merits, and based on PG&E’s approved cost-effectiveness methodology.”

The commission agreed that in light of the fact that the resulting shortfall is only 4 MW, the simplest and most logical outcome is to add 4 MW to the adopted 2016 energy storage target for PG&E, resulting in a new 2016 target of 119.3 MW. 

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.