Integrated Energy Policy Report 2008

8/14/2019 Integrated Energy Policy Report 2008

1/146

2008 Integrated Energy Policy report UPDATE

Arnold Schwarzenegger, Governor


2/146


3/146

2008 IEPR UPDATE

Caliornia Energy Commission

Chairman

Jackalyne Pannenstiel

Vice Chair

James D. Boyd

Commissioners:

Arthur H. Roseneld

Jerey Byron

Karen Douglas

Executive Director

Melissa Jones

Principal Authors

Jim Bartridge

Gerry BraunPamela Doughman

Judy Grau

Michael Jaske

Chris Kavalec

Kae Lewis

Rachel MacDonald

Jamie Patterson

Mike Ringer

David Vidaver

Jennier Williams

Project Manager

Suzanne Korosec


4/146

2008 IEPR UPDATE

Please cite this report as:

Caliornia Energy Commission 2008, 2008 Integrated Energy Policy Report Update, CEC-100-2008-008-CMF.


5/146

2008 IEPR UPDATE

This report is dedicated to the memory o

JANE HUGHES TURNBULLJune 13, 1932 October 18, 2008

With gratitude or her tireless devotion and invaluable contribu-

tions to the development o Caliornias energy policies on behal

o the League o Women Voters and all the residents o Caliornia


6/146


7/146

2008 IEPR UPDATE

AbstractThe 2008 Integrated Energy Policy Report Updateaddresses the ollowing ve topics related to Caliornias energy

systems:

What physical, operational, and market changes will be needed or Caliornias electric system to1.

support a minimum o 33 percent renewables by 2020.

How the states energy eciency goals and programs interact with the Energy Commissions electricity2.

and natural gas demand orecasting methods.

Recommended changes to electricity procurement practices to standardize assumptions, extend the3.

period o analysis, and more adequately incorporate risk in the portolio o projected resources.

Potential vulnerability o Diablo Canyon Power Plant and San Onore Nuclear Generating Station nuclear4.

power plants to a major disruption rom a major seismic event or plant aging, as required by Assembly

Bill 1632.

Evaluation o the Caliornia Public Utilities Commissions Sel-Generation Incentive Program to5.

determine the costs and benets o providing ratepayers subsidies or renewable and ossil uel

ultraclean and low-emission distributed generation as required by Assembly Bill 2778.

Status report on recommendations made in past Integrated Energy Policy Reports.6.

Key WordsRenewables Portolio Standard, Renewable Energy Transmission Initiative, renewable energy, energy eciency,

demand orecast, electricity procurement, portolio planning, social discount rate, nuclear power plants, aging

power plants, once-through cooling, Sel-Generation Incentive Program, distributed generation, combined

heat and power.


8/146


9/146

2008 IEPR UPDATE

Executive Summar 1

Caliornias Renewable Future 2

Energy Eciency and Demand Forecasting 3

Electricity Procurement Practices and Resource Planning Activities 4

Assessment o Caliornias Operating Nuclear Plants 6

Evaluation o the Sel-Generation Incentive Program 7

State Progress on Key Integrated Energy Policy Report Recommendations 8

Chapter 1: Caliornias Renewable Energ Future 9

Introduction 9

Barriers to Renewable Development 10

Addressing Transmission Barriers

Addressing Integration Barriers

Addressing Contracting Issues

Addressing Price Impacts

Addressing Environmental Issues

Recommendations 27

Endnotes 31

Chapter 2: Energ Efcienc and Demand Forecasting 37

Introduction 37

Measurement and Attribution Challenges 38

Incorporating Eciency in the Demand Forecast 40

Rening and Improving Eciency Measurement and Attribution in the Demand Forecast 44

Utility Progress Under Assembly Bill 2021 47

Conclusions 49

Recommendations 49

Endnotes 51

Table o Contents


10/146

2008 IEPR UPDATE

Chapter 3: Electricit Procurement Practices and Resource Planning Activities 53

Introduction 53

Long-Term Procurement Plans 54

Aging Plants and Transitioning From Once-Through Cooling 58

Procurement and the Siting Process 59

Recommendations 59

Endnotes 63

Chapter 4: Assessment o Caliornias Operating Nuclear Plants 65

Introduction 65

Seismic Vulnerability Assessment 66

Aging Plant Issues

Impacts o Major Disruption 71

Economic, Environmental, and Policy Issues 74

Nuclear Waste Disposal and Storage Issues 74

Power Generation Options 76

License Renewal Issues 77

Recommendations 78

Endnotes 83

Chapter 5: Evaluation o the Sel-Generation Incentive Program 85

Introduction 85

Analysis Approach and Method

Results 90

Recommendations 94

Endnotes 97


11/146

2008 IEPR UPDATE

Chapter 6: State Progress on Ke Integrated Energ Polic Report Recommendations 99

Electricity and Procurement 99

Energy Eciency 101

Demand Response 102

Renewable Energy 103

Electric Distribution System andCombined Heat and Power 106

Nuclear Power 108

Transmission 109

Natural Gas 112

Transportation Energy 113

Petroleum Inrastructure 116

Land Use 117

Water and Energy Use

Endnotes 121

Glossar o Acronms 123

Appendix A: Aging and Once-through Cooling Power Plants, November 2008 125


12/146


13/146

1

2008 IEPR UPDATEExEcUTIvE SUmmARy

Senate Bill 1389 (Bowen, Chapter 568, Statutes o 2002) requires the Caliornia Energy Commission (EnergyCommission) to conduct assessments and orecasts o all aspects o energy industry supply, production, trans-

portation, delivery and distribution, demand, and prices. The Energy Commission uses these assessments and

orecasts to develop energy policies that conserve resources, protect the environment, ensure energy reliability,

enhance the states economy, and protect public health and saety. The Energy Commission prepares these

assessments and associated policy recommendations every two years in the Integrated Energy Policy Report,

with updates in alternate years.

The 2008 Integrated Energy Policy Report Updateassesses progress on the energy programs and policy recom-

mendations that are critical to meeting Caliornias energy and related environmental goals. The Energy Com-

missions Integrated Energy Policy Report Committee identied critical topics or the 2008 Integrated Energy

Policy Report Updateat a public scoping hearing on April 28, 2008. Ater considering stakeholder eedback, the

Committee ocused on the ollowing ve areas:

Executive Summary

Physical, operational, and market changes1.

necessary or Caliornias electric system to

support a minimum o 33 percent renewables

by 2020.

Evaluation o the interaction between the2.

states energy eciency goals and programs

with the Energy Commissions demand ore-

casting methods.

Status o recommended changes to electricity3.

procurement practices to standardize assump-

tions, extend the period o analysis, and more

adequately incorporate risk in the portolio o

projected resources.

Assessment o the Diablo Canyon Power4.

Plant and San Onore Nuclear Generating

Station nuclear power plants, as required by

Assembly Bill 1632 (Blakeslee, Chapter 722,

Statutes o 2006), to determine potential vul-

nerabilities to a major disruption rom a major

seismic event or plant aging.

Evaluation o the Caliornia Public Utilities5.

Commissions Sel-Generation Incentive Pro-gram to determine the costs and benets o

providing ratepayer subsidies or renewable

and ossil uel ultraclean and low-emission

distributed generation as required by

Assembly Bill 2778 (Lieber, Statutes o 2006,

Chapter 617).

The 2008 Integrated Energy Policy Report Updatealso reports on the states progress in implementing policy

recommendations rom past Integrated Energy Policy Reports. This review is intended to ensure that Caliornia

is on track in meeting the states energy policy goals while meeting Caliornias need or aordable, sae, and

environmentally acceptable energy choices.


14/146

2


Caliornias Renewable FutureSince 2002, Caliornia has had a mandate to increase

the use o renewable generation to 20 percent o re-

tail electricity sales by 2010. On November 17, 2008,

Governor Schwarzenegger signed Executive Order

S-14-08, which raises Caliornias renewable energy

goals to 33 percent by 2020.1 This enhanced targetwill help Caliornia meet the aggressive greenhouse

gas emission reduction target o 1990 levels by 2020.

The Energy Commission believes the state can reach

the 33 percent renewables target by 2020. There

are, however, major barriers to achieving this goal,

including: the need or transmission additions and

upgrades to access renewable resource areas; the

challenges associated with integrating large amounts

o renewable resources into the states electricity

system; the impacts o renewable contract delays or

cancellations; potential cost and rate impacts o add-

ing renewables to the system; and permitting issues

or renewable generation acilities in environmentally

sensitive areas.

The Renewable Energy Transmission Initiative was

established to help address transmission barriers by

identiying and ranking renewable resource zones

and broadly identiying the transmission needed to

access those zones. Because environmental and land

use issues can delay the development o transmis-

sion projects, the Energy Commission will continueto work closely with stakeholders in the Renewable

Energy Transmission Initiative process to ensure

that these issues are evaluated and considered. The

Energy Commission also recognizes the importance

and benets o joint transmission projects between

investor-owned and publicly owned utilities and will

use the 2009 Integrated Energy Policy Reportorum to

identiy strategies to reduce barriers to these joint

projects. In addition, the Energy Commission believes

that transmission-related research, development, and

demonstration eorts and unding should be signi-

cantly increased to identiy technologies and strate-gies that can help integrate renewable resources.

Integrating large amounts o variable and intermit-

tent resources like wind into Caliornias electricity

system is challenging. The state should ocus on

identiying energy storage technologies with the

most promise o providing grid stability and im-

proved operations, reducing the costs o those tech-

nologies, and accelerating their commercialization.

Improved orecasting techniques are also needed to

give grid operators inormation to make real-time

decisions about electricity scheduling and dispatch.The state also needs to expand eorts to include

renewable generation at the distribution level, such

as community-scale photovoltaics or small wind, to

reduce electricity loads and the need or upgrades

to the transmission system. Similarly, increased use

o renewable technologies or heating and cooling,

like solar thermal water heating and geothermal

ground-source heat pumps, could reduce electricity

loads while also decreasing the use o ossil uels and

emissions o greenhouse gases.

Contract delays or cancellations or renewable proj-

ects continue to be a barrier to meeting Caliornias

renewable goals. Thirty ve percent o the contracts

signed under the Renewables Portolio Standard

have been either delayed (25 percent) or cancelled

(10 percent). There also continues to be a need or

greater transparency in the evaluation and selection

o electricity providers. Independent parties, such as

the Caliornia Public Utilities Commission or inde-

pendent evaluators and not utilities, should review,

select, and rank renewable procurement proposals.

The investor-owned utilities should also be required

to provide aggregated inormation on Renewables

Portolio Standard contract prices to assure policy

makers that these contracts are meeting state energy

policy goals and providing economic value to the

state. In addition, the Caliornia Public Utilities Com-

mission should make public the aggregate amount

o above-market unds that are being allocated to

Renewables Portolio Standard contracts. To help

encourage renewable development and provide

price certainty to renewable developers, the Calior-

nia Public Utilities Commission should immediately

implement a program to provide standardized con-tracts and prices or renewable projects smaller than

20 megawatts while continuing to evaluate expand-

ing such a program to renewable projects larger than

20 megawatts.


15/146

3


The Energy Commission will evaluate impacts o a

33 percent renewable target on natural gas demand

and prices, as well as the impacts o regional changes

in natural gas supply and demand on Caliornias

natural gas market, to better understand the cost

and price impacts o higher renewable targets. The

Energy Commission will also continue to work on theCost o Generation Model to regularly update chang-

ing technology costs over time. Finally, the Energy

Commission will work with the Caliornia Public Utili-

ties Commission to estimate potential price impacts

o the 33 percent renewable target.

The number and size o proposed large-scale renew-

able power plants makes environmental permitting

an increasing concern. Many o these new acilities

are proposed in ecologically sensitive areas that could

require habitat mitigation and restoration, which

must be actored into the costs o the projects. En-

vironmental mitigation issues can also aect project

development schedules and project success. To help

address these issues, Governor Schwarzeneggers

Executive Order S-14-08 establishes the Renewable

Energy Action Team to create a one-stop process

or permitting renewable energy acilities. Also, the

Energy Commission will continue participating in e-

orts with the Department o Energy and the Bureau

o Land Management to evaluate environmental

impacts associated with permitting solar thermal a-

cilities in Caliornia. In addition, the Caliornia Public

Utilities Commission should direct investor-owned

utilities to consider the eect o the environmental

permitting process on project schedules, milestones,

and costs.

Energy Efciency andDemand ForecastingIn the 2007 Integrated Energy Policy Report, the

Energy Commission identied the need to clariy

and rene its Caliornia Energy Demand orecast.

Accordingly, the 2008 Integrated Energy Policy ReportUpdatediscusses the challenges involved in measur-

ing and attributing electricity savings rom energy

eciency programs and other market impacts, such

as prices, within the Energy Commissions Caliornia

Energy Demand Forecast process. It also provides

The Energy Commission sta has begun a pro-

cess to make eciency attribution and measure-

ment more transparent to users o the demand

orecast, rene and improve modeling methods,

and develop eciency measurement capabili-

ties beyond what is part o the current orecast-ing process. During the 2009 Integrated Energy

Policy Report cycle, sta will:

Develop standard denitions o terms

encompassing all major concepts applying

to eciency potential studies and energy

demand orecasts (September - November

2008).

Organize and participate in a stakeholder

working group designed to address technical

eciency issues and to develop consistent

metrics or eciency analysis across utilities

and various agencies (Organized September

2008).

Review and compare the modeling methods,

inputs, and data sources used in Energy Com-

mission orecasts o eciency savings with

the Itron Asset Model, and compare interim

savings estimates rom the Energy Commis-

sions demand orecast and the Itron Asset

Model or selected programs given commonsets o input and modeling assumptions (Sep-

tember - November 2008).

Rene and improve the Energy Commissions

orecasting models to allow more detailed

and complete output o committed eciency

savings (December - June, 2009).

Investigate alternative orecasting methods

(Ongoing).

Develop the capability to make projections

o uncommitted energy eciency (June-July,

2009).


16/146

4


Electricity Procurement Practicesand Resource Planning ActivitiesThe 2007 Integrated Energy Policy Reportraised con-

cerns about electricity procurement in Caliornia and

made recommendations to address those concerns.

The 2008 Integrated Energy Policy Report Updatediscusses progress made in implementing those

recommendations. The report also outlines reliability

and resource adequacy issues associated with moving

away rom the use o once-through cooling in power

plants, as well as the relationship between electricity

procurement and the Energy Commissions power

plant siting process.

Every two years, the major investor-owned utilities

must submit 10-year plans to the Caliornia Public

Utilities Commission or procuring electricity. Various

parties criticized the plans submitted in December

2006 or 2007 through 2016 because they did not

allow or comparison across utilities, nor did they

adequately evaluate high natural gas prices and

greenhouse gas regulation that represent signicant

ratepayer risk. The Caliornia Public Utilities Com-

mission acknowledged the shortcomings in the

procurement planning process and in the 2008 long-

term procurement plan proceeding is directing the

investor-owned utilities to provide a set o plans in

2010 that can be compared and aggregated and that

also consider ratepayer risks. The Caliornia Public

Utilities Commission has developed a set o principles

that refect their desire to evaluate utility portolios

using a standardized, transparent methodology that

refects uncertainties like uture natural gas prices

and carbon costs.

The Energy Commission sta should continue to col-

laborate in the Caliornia Public Utilities Commissions

long-term procurement plan proceeding. In addition,

the 2009 Integrated Energy Policy Reportshould assess

longer-run (20-year) uncertainties related to electric-

ity demand and natural gas prices and supply. As theCaliornia Public Utilities Commissions 2008 procure-

ment proceeding moves orward, other issues related

to resource planning beyond 2020 may also need

an overview o methods currently used by Energy

Commission sta to incorporate energy eciency

programs into the orecast. The chapter then identi-

es the approach sta will use to clariy the eciency

assumptions in the demand orecast within the 2009

Integrated Energy Policy Reportcycle and beyond asrecommended in the 2007 Integrated Energy Policy

Report. Finally, the chapter reports on progress

made by Caliornia utilities in ullling the eciency

requirements o Assembly Bill 2021 (Levine, Chapter

734, Statutes o 2006), which set a statewide goal o

reducing total orecasted electricity consumption by

10 percent over the next 10 years.

To improve the Energy Commissions demand ore-

cast in the uture, the 2009 Integrated Energy Policy

Reportshould compare how end-use impacts are

characterized in the Energy Commissions demand

orecast and in eciency program planning. Ignoring

potential overlap will result in misleading estimates o

how much can be achieved through uture eciency

strategies. In addition, investor-owned utilities and

publicly owned utilities, regulatory agencies, and

other interested stakeholders should participate in

the working group established in September 2008

that is ocusing on technical issues and eectively

communicating results to all interested stakeholders.

Further, independent eorts to investigate and evalu-

ate alternate orecasting methods should be contin-

ued in the 2009 Integrated Energy Policy Reportand

ocus on matching methods to the various purposes

to which the demand orecast is applied.

The Energy Commission sta should continue to

work with publicly owned utilities to understand the

processes used by individual utilities to estimate their

remaining economic energy eciency potential and

set eciency targets. The Energy Commission sta

should also continue to assist the publicly owned

utilities in achieving their eciency goals through

workshops and collaborative eorts, while also en-couraging them to identiy all unding sources avail-

able to meet those goals to refect the states policy

o energy eciency as the top resource or meeting

the states energy needs.


17/146

5


to be included in the 2009 Integrated Energy Policy

Report, such as how to overcome utility constraints to

reducing their portolios carbon ootprint over the

long run.

A second issue related to procurement that was iden-

tied in the 2007 Integrated Energy Policy Reportwashow the discount rate used to estimate uture natural

gas uel costs makes these costs appear unrealistically

inexpensive. This could lead to increased depen-

dence on natural gas-based generation because

alternatives such as renewables and eciency would

be undervalued. The 2007 Integrated Energy Policy

Reportrecommended applying a 3 percent social

discount rate (lower than the current discount rate

which is based on a utilitys cost o capital) to uture

natural gas costs to more accurately refect the risks

o cost volatility o natural gas-based generation. For

the 2008 Integrated Energy Policy Report Update, the

Integrated Energy Policy Report Committee directed

sta to explore the consequences o using a social

discount rate.

There is general agreement about the importance

o incorporating uncertainty and risk, including

uel price uncertainty, into the overall planning and

decision-making process. The Energy Commission

anticipates that the Caliornia Public Utilities Com-

mission will require the next round o long-term

procurement plans to incorporate risk-based portolio

analysis by refecting a wide range o uture natural

gas prices and associated gas price risk. The Energy

Commission sta will continue to collaborate with

Caliornia Public Utilities Commission sta to ensure

that uel price risk is properly considered in con-

structing utility portolios. The Energy Commission

believes that the planning process is a more direct

and transparent method to account or potential gas

price risk than the adjustment o discount rates, and

recommends that social discount rates should not be

used to incorporate natural gas price risks. However,

the Caliornia Public Utilities Commission should con-sider using risk-adjusted discount rates to compare

projects selected in utility solicitations when they

rene the bid evaluation process in the long-term

procurement proceeding.

A third major issue related to electricity procurement

is the potential eect on electricity reliability o retire-

ment or repowering o aging power plants combined

with restrictions on the use o once-through cooling

in existing and new power plants. In March 2008,

the State Water Resources Control Board issued a

drat proposal calling or the phased elimination oonce-through cooling between 2015 and 2021. A

nal proposal is expected in January 2009. Accom-

plishing this could require the retting, repowering,

replacement, or retirement o 19 power plants rep-

resenting nearly 40 percent o the states electricity

generating capacity.

Aging plant retirement, or repowering and trans-

mission line upgrades, are subjects o an ongoing

Caliornia Independent System Operator study to

be completed in early 2009. Additional analysis is

needed on the implications o replacing much o

the once-through cooling capacity with preerred

resources, like renewables, and natural gas-red gen-

eration that can be dispatched on demand to meet

local capacity and grid stability needs. The 2009 Inte-

grated Energy Policy Reportmay need to evaluate how

repowering, replacement or retirement o aging and

once-through cooling plants interacts with the de-

velopment o preerred resources like renewables, as

well as the consequences o relying on once-through

cooling and aging plants or energy and local capac-

ity needs, particularly in the Los Angeles basin.

The nal procurement issue relates to how utilities

consider progress in the permitting process when

evaluating what projects to select or procurement.

In the past, investor-owned utilities selected some

projects to receive contracts that later aced signi-

cant siting and environmental issues that threatened

project viability, timely construction, or cost. Projects

competing in a solicitation should understand the

siting-related criteria that will be used to judge them.

In addition, projects should have a high probability

o being permitted in the required time rame with-out major environmentally-related modications or

cost increases.


18/146

6


The Caliornia Public Utilities Commission should

develop and implement a ully transparent method

o ranking projects in the bid evaluation phase o

solicitations that is air, objective, and transparent;

considers environmental impacts, the likelihood o

obtaining permits, and prior success o bidders in

ullling contract oerings; encourages competitiveoerings, is open to all bidders, and prevents cir-

cumvention; avoids unnecessary administrative and

transaction costs; expressly identies how project

permitting is considered; and protects commercially

competitive inormation.

Assessment o CaliorniasOperating Nuclear PlantsAssembly Bill 1632 directed the Energy Commis-

sion to assess the potential vulnerability o large

baseload generation acilities o 1,700 megawatts or

greater to a major disruption due to a seismic event

or plant age-related issues. The Energy Commission

was directed to adopt this assessment on or beore

November 1, 2008, and include it in the 2008 Inte-

grated Energy Policy Report Update.

The Energy Commissions Electricity and Natural Gas

Committee developed the AB 1632 Assessment o

Caliornias Operating Nuclear Plants: AB 1632 Report

based on a consultant report prepared by MRW &

Associates that evaluated seismic and age-related is-sues along with other issues like reliability, economic

impacts, and waste storage and disposal. The 2008

Integrated Energy Policy Report Updateincludes a sum-

mary o the ndings and recommendations rom the

AB 1632 Report.

Caliornias two operating nuclear acilities, the Dia-

blo Canyon Power Plant and the San Onore Nuclear

Generating Station, all under the Assembly Bill 1632

requirement. Although two natural-gas red acilities

in Caliornia Alamitos and Moss Landing have

a nameplate capacity greater than 1,700 megawatts,these acilities operate below a 60 percent capacity

actor and are not considered baseload acilities.

Diablo Canyon and San Onore represent 12 percent o

Caliornias overall electricity supply. A major disrup-

tion because o an earthquake or plant aging could

shut down one or both plants anywhere rom several

months up to a year or even cause the retirement o a

plants reactor.

Each plant aces seismic hazards, which can include

uncertainties about the type o ault zone near the

plant, potential impacts rom earthquakes directly

below the plants, or ground motion resulting rom

an earthquake rupture. Non-saety related systems

and structures, such as electrical switchyards, are the

most vulnerable to damage rom earthquake and

could result in plant outages lasting weeks or months.

A seismic event also poses a risk to spent uel storage

acilities at the plants.

Because o the importance o these acilities to the

states electricity supply, the Energy Commission be-

lieves Pacic Gas and Electric Company and Southern

Caliornia Edison should report in the 2009 Integrated

Energy Policy Reporton their seismic research eorts. In

particular, Southern Caliornia Edison should develop

an active seismic hazards research program similar to

Pacic Gas and Electrics Long Term Seismic Program.

Age-related degradation is also a concern because

these plants are approaching their ourth decade o

operation. Eective maintenance programs and regu-

latory oversight are essential in identiying aging plant

equipment and components since ailure to do so

could have serious long-term implications. The Energy

Commission recommends that eective saety culture

and plant maintenance programs be maintained at

the nuclear plants along with enhanced oversight

mechanisms by the Energy Commission, the Nuclear

Regulatory Commission, and the Institute or Nuclear

Power Operations.

An earthquake, age-related plant or equipment ailure,

or other event could lead to one or both o Caliorniasnuclear plants going o-line or extended periods,

requiring replacement power rom other sources. The

reliability, cost, and environmental implications o


19/146

7


Evaluation o the Sel-GenerationIncentive ProgramAssembly Bill 2778 requires the Energy Commission

to include an evaluation in the Integrated Energy

Policy Report o the Caliornia Public Utilities Com-

missions Sel-Generation Incentive Program and the

costs and benets o expanding eligibility or theprogram to renewable and ossil uel distributed gen-

eration. The evaluation is to be done in consultation

with the Caliornia Public Utilities Commission and

the Caliornia Air Resources Board.

The Sel-Generation Incentive Program was estab-

lished in 2001 and is one o the largest distributed

generation incentive programs in the United States,

with approximately 1,200 projects totaling 300

megawatts on-line at the end o 2007. The program

originally included microturbines, small gas turbines,

wind turbines, solar photovoltaics, uel cells, and

internal combustion engines; however, as o January

2008, only uel cells and wind energy technologies

are eligible or the program.

The Energy Commission selected TIAX, LLC to

conduct the evaluation, which is presented in the

consultant report Cost Beneft Analysis o the Sel-

Generation Incentive Program. Based on ndings and

inormation rom that report, the Energy Commission

recommends that eligibility or the Sel-Generation

Incentive Program should be based on the overall

eciency and perormance o systems regardless o

uel type. In addition, the Caliornia Public Utilities

Commission should consider re-instituting ormerly

eligible technologies that operate on landll gas,

digester gas rom dairy waste or waste-water treat-

ment processes, or biodiesel. TIAXs review o other

technologies and uel types also suggests that the

Caliornia Public Utilities Commission should consider

providing sel-generation incentives or energy stor-

age technologies, since these technologies provide

capacity benets.

Distributed generation can have location-specic grid

benets when sized correctly. The transmission and

distribution costs avoided by installing such systems

can be quantied with highly accurate customer and

utility data. There should be urther study in this area

to better quantiy the locational benets o distrib-

using replacement power will depend on the time o

the outage and type o replacement power available.

The Energy Commission, the Caliornia Public Utilities

Commission, and the Caliornia Independent System

Operator should evaluate the uncertainties o losing

the electricity supplied by the states nuclear plants

and modiy the long-term planning and procure-ment processes to ensure that replacement resources

are acquired in a timely way.

Diablo Canyon and San Onore have been operating

or roughly hal o their 40-year initial license periods,

and Pacic Gas and Electric and Southern Caliornia

Edison are exploring the easibility o seeking 20-year

license renewals rom the Nuclear Regulatory Com-

mission. Diablo Canyon Unit 1s operating license ex-

pires in 2024 and Unit 2s expires in 2025, while San

Onore Nuclear Generating Station Units 2 and 3s

operating licenses expire in 2022. I license renewals

are granted, these acilities could continue to operate

until the early to mid 2040s.

These plants produce signicant quantities o radio-

active waste in the orm o spent uel and other ra-

dioactively contaminated materials. The plants must

careully handle, store, transport, and dispose o the

waste to protect humans and the environment rom

exposure to radioactive materials. As part o license

renewal easibility studies, Pacic Gas and Electric and

Southern Caliornia Edison should evaluate the costs

o disposing o low-level nuclear waste generated

during a 20-year license extension and provide inor-

mation on plans or storage and disposal o low-level

waste and spent uel through plant decommissioning.

In addition, the Energy Commission should work

with the Caliornia Public Utilities Commission, as

part o that agencys authority to und and oversee

plant relicensing easibility studies, to develop a list

o issues the utilities should address in those studies,

including plant maintenance programs, saety cul-

tures, waste storage, transport, and disposal; seismichazards; lie cycle comparison to alternative generat-

ing and transmission resources; contingency plans

or prolonged outages; grid reliability; and overall

economic and environmental costs and benets o

license extension. The utilities should report on the

status and results o the easibility studies in uture

Integrated Energy Policy Reports, beginning in 2009.


20/146

8


uted generation, but in the meantime the Caliornia

Public Utilities Commission should require investor-

owned utilities to meet a portion o their distribution

system upgrades by procuring distributed generation

or combined heat and power in areas that provide

these benets to the distribution system.

State Progress on KeyIntegrated Energy Policy ReportRecommendationsThe 2008 Integrated Energy Policy Report Updateis a

real-time, public orum or continuing dialog about

Caliornias energy policies. This update examines

the progress the state has made in addressing 45 key

recommendations made in past Integrated Energy

Policy Reports on electricity and procurement issues,

energy eciency requirements, demand response,load management standards, renewable energy

issues and goals, distribution system and combined

heat and power, nuclear power, transmission, natural

gas, transportation, petroleum inrastructure, land

use, and water/energy. The 2008 Integrated Energy

Policy Report Updateranks the progress o each rec-

ommendation as substantial, on track, or needs

improvement, and describes progress to date on

each recommendation.


21/146

9

IntroductionCaliornia has made electricity generation rom

renewable resources a priority since the 1970s and

leads the nation in biomass, geothermal, and solar

capacity and generation. In addition to the environ-

mental benets rom reducing the burning o ossil

uels, using renewable resources reduces the risks

and costs associated with high and volatile natural

gas prices while also decreasing the states reliance

on imported natural gas as a uel or electricity

generation. Renewable resources also provide other

benets such as economic development and new

employment opportunities.

Renewable energy is an essential component o the

states loading order or meeting growing energy

needs: rst, with energy eciency and demand re-

sponse; second, with renewable energy and distrib-

uted generation; and third, with clean ossil-ueled

sources and inrastructure improvements. Caliornia

has had a Renewables Portolio Standard (RPS) since

2002 that requires electric utilities to increase the

use o renewable generation to 20 percent o retail

electricity sales by 2010. On November 17, 2008,

Governor Schwarzenegger signed Executive Order

S-14-08 that raises Caliornias renewable energy

goals to 33 percent by 2020.2 This higher target has

capter 1Caliornias RenewableEnergy Future


22/146

10

2008 IEPR UPDATEchAPTER 1

Barriers to Renewable DevelopmentThe primary barrier to increased development o

renewable resources continues to be lack o transmis-

sion to access these resources, particularly in remote

areas o the state. The Renewable Energy Transmis-

sion Initiative (RETI), discussed later in the chapter,

was put in place to address this barrier by acilitatingand coordinating the planning and permitting o

transmission and generating projects that are needed

to urther the states renewable policy goals.

There are also emerging technologies that can be

used to improve the operation o the existing trans-

mission system by increasing the carrying capacity o

existing lines or by providing real-time inormation

to grid operators about system outages or potential

areas o congestion to allow better management

o the grid. In addition, using a smart grid can

improve eciency, reliability, and cost-eectiveness

o the transmission and distribution system by us-

ing advanced sensing, communication, and control

technologies.

Another major barrier to meeting the 33 percent

goal is how to integrate large amounts o vari-

able and intermittent renewable resources, such as

wind and solar, into Caliornias electricity system.

These technologies pose challenges to traditional

reliability planning and resource adequacy require-

ments because they cannot be relied on to meet

rapid changes in load and supply during peak hours

and generally must be backed up with dispatchable

resources. Also, wind resources can produce large

amounts o energy during low demand times, which,

when combined with generation rom existing con-

ventional baseload plants with must-run contracts

and baseload nuclear power plants, can lead to an

overgeneration problem. Energy storage technolo-

gies can help rm up variable technologies, while

data management and display systems can give grid

operators real-time inormation to allow them to re-

spond to the unpredicted changes in output that arecharacteristic o some renewable technologies.

There is also the potential or wide-scale use o

renewable generation at the distribution level, such

as community-scale photovoltaics or small wind.

been identied by the Caliornia Air Resources Board

(ARB) as a key strategy or meeting the states aggres-

sive greenhouse gas (GHG) emission reduction target

o 1990 levels by 2020.3 To help meet the Governors

goal to reduce GHG emissions to 80 percent below

1990 levels by 2050,4 Caliornia may need to achieve

even higher renewable targets depending on theelectricity sectors ultimate share o GHG reductions.

The 2007 Integrated Energy Policy Report(2007IEPR)

ound that the 33 percent goal by 2020 is easible,

but only i the state commits to signicant invest-

ments in transmission inrastructure and makes some

key changes in policy. The priority now is to identiy

the obstacles to reaching that goal and determine

how to overcome those obstacles. The state needs

to develop an appropriate package o policy reorms

that will help get it on track or meeting the 33 per-

cent RPS target while continuing to deliver reliable

and aordable power to Caliornians.

In the 2008 Integrated Energy Policy Report Update

(2008 IEPR Update), the Energy Commission concen-

trated on what useul inormation can be gleaned

rom prior or ongoing studies on this topic, what

analysis is needed to better understand how the

2020 system should be structured to accommo-

date higher levels o renewables, identiying major

barriers to renewable development, what research

and development eorts will be needed to support

higher renewable targets, and how the states energy

agencies can coordinate eorts to develop strategies

to overcome barriers.

In addition to the investor-owned utilities (IOUs) role

in meeting the states renewable energy goals, the

role o publicly owned utilities is also extremely sig-

nicant. These entities provide 2530 percent o the

retail electricity sold in Caliornia, making their par-

ticipation essential to meeting statewide renewable

and GHG reduction goals. There is, thereore, a need

to work with the publicly owned utilities to under-stand their plans or helping the state to meet the 33

percent goal by 2020, and their views on challenges,

opportunities, and changes needed to achieve even

higher levels o renewables.


23/146

11


to reduce the potential impacts o these projects will

be a challenge depending on the species impacted,

while uncertainty about how to account or the costs

o mitigation measures is a major concern or renew-

able project developers.

In addition, with recent increased interest rom inves-tors in renewable energy as a result o climate change

concerns and high ossil uel prices, new and less-

experienced developers may be entering the market

who are unamiliar with the Caliornia Environmental

Quality Act, plant development issues, and the process

or siting generating acilities in Caliornia. The CPUC

has identied this risk in its quarterly reports to the

Legislature on the RPS, and its April 2008 report noted

that, Many new, inexperienced developers have

diculty understanding and navigating the complex

project development process and many approved

contracts have been resubmitted with price reopeners

possibly because the original bid had simply under-

estimated project development realities.7

Addressing Transmission BarriersEvery two years, the Energy Commission adopts a

strategic plan or the states electric transmission grid

that identies and recommends actions required to

implement investments to ensure reliability, relieve

congestion, and meet uture growth in load and

generation, including renewable resources.

8

The 2007Strategic Transmission Investment Plan (2007 Strategic

Plan) recommended 10 specic near-term transmis-

sion projects that improve system reliability, reduce

congestion, or interconnect renewable resources.

Eight o those projects have the ability to interconnect

renewables or provide operational fexibility to allow

the transmission system to better integrate intermit-

tent generation rom renewables.9

The 2007 Strategic Plan also identies the need to

remove transmission barriers to renewables. The plan

recommended active Energy Commission participa-tion in RETI, a three-phase process which was initi-

ated in September 2007 with the goal o identiying

preerred renewable resource zones or generating

projects and the transmission inrastructure needed

to access those zones.10

Behind-the-meter generation has the same eect as

energy eciency in reducing load and can help avoid

or deer the need or transmission system upgrades.

Similarly, using renewable technologies or heating

and cooling, like solar thermal water heating and

geothermal ground source heat pumps, can reduce

electricity loads while also reducing the use o ossiluels and their associated greenhouse gas emissions.

The risk o renewable contract delays or cancellations

represents another barrier to renewable develop-

ment. As o September 2008, the Caliornia Public

Utilities Commission (CPUC) had approved 90 con-

tracts or 6,800 megawatts (MW) o new, repow-

ered, and re-started renewable generating capacity

signed since 2002. However, only about 570 MW

o that contracted capacity is operational. Approxi-

mately 35 percent o these contracts are not online

because o delays (25 percent) or cancellations (10

percent), making it extremely unlikely that the state

will meet the 2010 goals.5

A urther barrier to renewable development is the

concern that higher levels o renewables will result

in higher costs to ratepayers. However, the issue

here is how to compare the incremental costs o a

33 percent uture with potential cost increases that

may occur even without added renewables, depend-

ing on uture natural gas prices, potential costs o

carbon regulation, generation costs in general, and

needed upgrades to the transmission and distribu-

tion system.

Environmental permitting issues related to large-scale

renewable development remain a major concern.

Many energy projects are being proposed on

public lands overseen by the ederal Bureau o Land

Management (BLM). As o July 2008, the BLM had

received 75 solar applications and 94 wind applica-

tions totaling about 1.3 million acres o land.6 For

comparison, 1,441 acres have been impacted by

power plants (primarily natural-gas red) currentlyoperating or under construction that have been

permitted by the Energy Commission since 1996.

Given the sensitive nature o some o these lands,

there may be signicant habitat impacts requiring

mitigation measures. Identiying enough habitat land


24/146

12


transmission projects between publicly owned utili-

ties and IOUs. Second, with regard to transmission

siting, the state must continue to actively address

environmental, land use, and local public opposition

issues by working closely with stakeholders.

Stakeholders agreed that RETI is a valuable orumor reaching consensus on the high-priority renew-

able energy zones and the necessary transmission to

reach them. Stakeholders also noted the potential or

overlap between RETI and other orums and the lim-

ited amount o resources available to devote to the

many orums, and encouraged coordination between

eorts to avoid duplication. The Energy Commission

agrees that RETI should be coordinated with all appli-

cable transmission planning eorts, both in Caliornia

and throughout the Western Electricity Coordinating

Councils service territory.

Joint Transission ProjetsCaliornias publicly owned utilities have raised

concerns about obstacles to joint transmission de-

velopment in the West between the states publicly

owned utilities and IOUs subject to the Caliornia

Independent System Operators (Caliornia ISO) tar-

is. According to the publicly owned utilities, unless

these concerns are resolved, they will not be able to

develop joint transmission projects that could help

achieve the states renewable and GHG reduction

policy goals. Parties discussed this issue at the July

23, 2008, IEPR sta workshop on transmission issues,

and there was general consensus among multiple

parties that this is an institutional barrier that needs

to be addressed and resolved to achieve state policy

objectives.12

Following the workshop, the Caliornia Municipal

Utilities Association (CMUA), the Imperial Irrigation

District (IID), the Los Angeles Department o Water

and Power (LADWP), and the Sacramento Municipal

Utility District (SMUD) led joint comments describ-ing some o the legal and market obstacles to joint

ownership. The joint commenters noted that publicly

owned utilities typically negotiate contract-based

transmission rates or joint projects and contend

that the constantly changing nature o the Caliornia

Phase 1 o RETI, to be completed in all 2008, will

screen and rank potential renewable resource zones

and broadly identiy transmission needed to access

these zones. Phase 1 has been subdivided into two

tasks: Phase 1A, to dene the resource assessment

method, study assumptions, and resources to be

considered in the project-level analysis; and Phase1B, to use the method developed in Phase 1A to

group the identied resources into renewable energy

zones. Phase 2, to be completed in spring 2009, will

examine generation and transmission in more detail

and will develop transmission plans in concept to ac-

cess the top ranking zones. Phase 3, to be completed

in 2010, will fesh out those conceptual plans and

support transmission owners in developing detailed

plans o service or commercially viable transmission

projects and establish the basis or regulatory ap-

provals o specic transmission projects.

The Energy Commissions participation in RETI is

crucial in ensuring that the plans resulting rom RETI

refect environmental, siting, and permitting per-

spectives to reduce impacts that could delay renew-

able energy projects.

The 2007 Strategic Plan also recommended that the

Energy Commission encourage corridor applications

that would provide access to renewable resource

areas. The Energy Commission is responsible or

designating transmission corridors on non-ederal

lands in advance o need to help streamline uture

permitting o transmission projects and is the lead

agency or preparing an environmental assessment o

proposed transmission corridors.11 In situations where

RETI indicates the need or one or more transmission

lines on non-ederal land, the Energy Commissions

transmission corridor designation process may desig-

nate one or more corridors to expedite the eventual

permitting o such lines.

The Energy Commission sta held a workshop on July

23, 2008, to discuss transmission barriers or renew-ables and identiy key issues or the 2009 Strategic

Transmission Investment Plan. Workshop participants

identied two major transmission-related barriers to

achieving the states renewable goals. First, there is

a need or mechanisms to remove barriers to joint


25/146

13


es this mission through tari provisions that incorpo-

rate system operations and planning goals based on

transparent reliability and economic objectives, and

simultaneously provide mechanisms to accommodate

jointly owned projects governed by bilateral agree-

ments between the Caliornia ISO or its participating

transmission owners and other parties. It also notedthat its Location Constrained Resource Interconnec-

tion tari provisions require it to avoid duplication o

acilities and to coordinate with neighboring control

areas i the new transmission acility is in a region that

also connects to the Caliornia ISO system.14

The Caliornia ISO also submitted written comments

ater the workshop to emphasize its position. In those

comments, Caliornia ISO stated that key principles in

carrying out its day-to-day operations and transmis-

sion responsibilities include: costs borne by Cali-

ornia ISO ratepayers must provide commensurate

benets; existing transmission should be ully used

beore new transmission expands the environmen-

tal ootprint; and continued cooperation across the

West is critical. Caliornia ISO also stated that its tari

specically provides or bilateral agreements between

owners o transmission under the Caliornia ISOs

control and other parties, including publicly owned

utilities.

The Energy Commission recognizes the importance

and benets o joint projects, especially to access

renewable resources. In the 2007 Strategic Transmis-

sion Investment Plan, the Energy Commissionnoted

its concern that SCEs Tehachapi Renewable Trans-

mission Plan and LADWPs Tehachapi Project could

be duplicative unless the plans are coordinated and

encouraged the two utilities to work together to

avoid any overlap. Because there are both legal and

market obstacles that hinder the development o

joint projects, the Energy Commission believes that

the state should play a role in resolving these issues.

Enironental and Land Use IssuesAt the July 23, 2008, IEPR sta workshop, the Cali-

ornia ISO presented the results o its conceptual

transmission planning study or connecting renew-

able generation to meet a 33 percent goal or the

ISO tari does not provide the same degree o cost

certainty, rate predictability, and asset optimization

as bilateral contract agreements. The joint com-

menters also noted that the Caliornia ISO is moving

toward locational marginal pricing that uses nancial

rights, such as congestion revenue rights13 that can

be risky and speculative, rather than rm physicalrights to a specied amount o transmission line

capacity. Furthermore, publicly owned utilities are

concerned about the Caliornia ISOs insistence on

having ull control o joint-ownership lines, as well as

its requirement that all individual owner capacity and

associated use must be subject to the Caliornia ISO

tari. The CMUA believes that this provision is being

interpreted to bar joint ownership unless the line

is within the electric ootprint o the Caliornia ISO

balancing authority.

The IID, LADWP, SMUD, Turlock Irrigation District

(TID), and the Western Area Power Administration in-

cluded their July 2008 white paper titled Experiences

with Joint Transmission-Project Development in the West

in their joint comments. The paper describes recent

joint development challenges aced by the Green

Path Southwest and Green Path North projects and

proposes a hybrid model or bridging the dierences

between the Caliornia ISO tari and a contract-

based arrangement.

The joint parties comments and white paper were

the ocus o a roundtable discussion at the August 21,

2008, joint IEPR and Renewables Committee work-

shop on achieving higher levels o renewables in Cali-

ornias electricity system. Roundtable participants

included SMUD, LADWP, IID, TID, and Caliornia ISO

representatives. The publicly owned utility panel

participants described the diculties with the Green

Path Southwest and Green Path North projects and

identied the Caliornia ISO tari requirements as

one reason or the ailure o these projects to go

orward as joint projects.

The Caliornia ISO noted that its mission is to ensure

the ull and ecient use o transmission assets and

promote inrastructure expansion and development

to achieve the greatest benets or Caliornia and Cal-

iornia ISO ratepayers. The Caliornia ISO accomplish-


26/146

14


local agencies, stakeholders, and the public in the

planning process, well beore a route is proposed. In

addition, local agency participants in the 2007 IEPR

emphasized their lack o expertise and experience

with renewable energy development.18 The League o

Women Voters oered that its 70 local leagues could

assist local governments in developing energy ele-ments or their general plans.19

A coordinated and proactive eort to acilitate local

land use planning or renewable energy-related

transmission inrastructure would help reduce

permitting diculties and ensure that local plan-

ning eorts are inormed by RETI and infuenced by

the states renewable and greenhouse gas reduction

strategies, goals, and requirements. For example,

general plans containing energy and transmission

elements could establish transmission corridors and

energy zones that could acilitate the development o

renewable energy at the local level, particularly in ar-

eas with the greatest potential or renewable energy.

Inormed local planning decisions regarding renew-

able energy development would be coordinated

with the Energy Commissions Transmission Corridor

Designation Program in order to preserve transmis-

sion corridors as necessary.

However, local agencies generally lack the unds,

stang, and expertise to carry out coordinated re-

newable energy, electric transmission, and local level

land use planning. Thereore, technical and nancial

assistance to local governments would be required,

particularly or local governments containing areas

targeted or renewable development and related

transmission corridors.

A priority should be placed on reactivating the

Energy Commissions Local Agency Siting and Permit

Assistance Program by re-establishing the Energy

Resources Programs Account unding pursuant to

Public Resources Code section 25616.20 This program

should be employed to assist local governmentswith the development o general plan transmission

and energy elements that are consistent with RETI,

recognize the importance o statewide renewable

and greenhouse gas reduction requirements and

goals, and are coordinated with the Transmission

states three IOUs.15 The study identied the need or

six new 500 kV transmission lines to meet the 33 per-

cent goal through 2028 to 2030 at an estimated cost

o about $6.5 billion.16 Although these projects are

conceptual only and will be rened as the RETI Phase

1B Drat Resource Reportand Phase 2 results become

available, they provide stakeholders with a sense othe scope, location, length, size, cost, and timing o

possible transmission additions needed to meet the

IOUs portion o a statewide 33 percent renewables

goal in 12 years.

However, many o the stakeholders at the workshop

agreed that environmental and land use barriers are

generally the biggest obstacles to the timely devel-

opment o transmission projects. One stakeholder

characterized the importance o understanding land

use issues and environmental concerns during the

transmission planning process this way: [W]e can

all look at perorming power fows till our aces are

blue. But the real issue is going to be siting o that

transmission acility.17

As noted earlier, in the 2007 Strategic Plan the Energy

Commission recommended that sta participate

actively in RETI to ensure the resulting plan or

preerred renewable resource zones or genera-

tion and electric transmission inrastructure refects

environmental, siting, and permitting perspectives.

The Energy Commission will need to work closely

with stakeholders during the RETI Phase 2 conceptual

transmission planning process to ensure that they

evaluate and consider land use issues and environ-

mental concerns when planning conceptual projects

to access renewable resource areas.

Other stakeholders at the workshop noted that local

opposition at both individual and institutional levels

can make it dicult, i not impossible, to permit

transmission projects that would be necessary to

meet statewide policy goals. Parties stressed the

need to educate the public and local governmentson the importance o achieving the states renew-

able and GHG reduction goals and the dicult

choices that must be made to accomplish those

goals. Regarding transmission projects, parties noted

the need to communicate and work with aected


27/146

15


losses. Using renewable resources to meet heating

and cooling needs can also reduce electricity and

natural gas loads while also reducing associated

GHG emissions.

There are also a number o emerging technologies

that can help integrate renewables into the electric-ity system, including energy storage technologies,

better orecasting o variable resources, and tech-

nologies to improve the operation o the existing

transmission system.

In the 2009 IEPR, the Energy Commission intends

to coordinate its analyses o integration issues with

other eorts such as the Caliornias ISOs study o

the operational impacts o integrating 33 percent

renewables and SCEs Renewable Integration and Ad-

vancement Project. The Energy Commission will also

consider the costs o changes needed to integrate

higher levels o renewables.

Results ro Prior Integration StudiesAt the IEPR workshops on achieving higher levels

o renewables, Energy Commission sta summa-

rized the ndings rom two recent studies on grid

integration issues: the Energy Commissions 2007

Intermittency Analysis Project21 and the Consortium

or Electric Reliability Technology Solutions/Electric

Power Groups (CERTS/EPG) Renewable Resource In-

tegration Project Scoping Study o Strategic Transmis-

sion, Operations, and Reliability Issues.22 The Caliornia

ISO also discussed its November 2007 study on the

transmission and operational requirements to meet

the 20 percent by 2010 renewable goal and plans or

a study on the requirements to meet a 33 percent

renewable scenario.

The Energy Commissions Intermittency Analysis

Project Final Reportevaluated what is needed or the

transmission system to accommodate generation

rom 33 percent renewables by 2020. The Intermit-tency Analysis Project (IAP) evaluated reliability, load

ollowing capability, voltage support, and regulation,

among other characteristics, or an assumed resource

mix o 12,700 MW o wind, 5,100 MW o geother-

mal, 3,100 MW o concentrating solar power, 2,900

Corridor Designation Program. It should target local

governments having the greatest renewable energy

development potential and the corridors most likely

to support transmission inrastructure or intercon-

necting renewable energy development to the states

electric grid. Funding or this type o land use plan-

ning would allow local agencies to secure technicalconsultant support with Energy Commission over-

sight. Reactivation o the Siting and Permit Assistance

Program should require ull coordination with the

existing Transmission Corridor Designation Program

to help acilitate preservation o renewable energy-

related transmission corridors. It should also require

ull consideration o RETI results and state renewable

and greenhouse gas reduction strategy, goals, and

requirements.

Addressing Integration BarriersAnother major barrier to increasing the amount o

renewables in Caliornia is how to integrate large

amounts o variable resources, like wind and solar,

into the system while maintaining grid stability, op-

eration, and reliability. Unexpected drops in energy

production require quick-start units to cover the

shortall, while unexpected increases require the abil-

ity to absorb the unscheduled generation. Procuring

additional resources to support intermittent renew-

able resources will be needed, as will better orecast-

ing techniques or wind and solar generation.

It is important to remember that not all renewable

resources are intermittent. Geothermal and biomass

power plants provide reliable, baseload power and

can be integrated into the system without any addi-

tional backup. However, adding large amounts o any

type o renewables to the system can still be prob-

lematic because Caliornias local reliability require-

ments call or load to be met primarily with local

resources, and many renewable resources are located

outside the states 10 load centers.

One way to reduce the impacts o integrating renew-

ables into the electricity system is through the use

o distributed resources, which can reduce overall

load, avoid or deer the need or transmission system

upgrades, and reduce transmission and distribution


28/146

16


the gateways, urther increases in gateway capacity

would be required.

The CERTS/EPG study made the ollowing recom-

mendations:

Further studies should expand the ocus rom

evaluating just the interconnection o remote

renewable resources to the grid to deliver-

ing that renewable energy all the way to the

respective load centers.

Policy makers need to provide guidance on

resource type and location to allow timely

integration o renewables and support

early planning and upgrades o transmission

gateway capacity and deliverability to load

centers, aided by the RETI eort currently

underway.

Transmission owners and the Caliornia ISO

need to move the planning horizon out to

15 to 20 years to dene long-term gateway

requirements, long-term transmission require-

ments rom gateways into load centers, and

interregional transmission requirements.

Transmission owners and the Caliornia ISO

need to initiate studies to expand transmis-

sion gateways and beyond into the load

centers.

Policy makers need inormation associated

with the complete transmission integration

requirement and cost implications or deliver-

ing all remote resources (both renewable and

non-renewable) to the local load centers.

The Caliornia ISO needs to provide utilities

and the CPUC with guidance on the resource

attributes needed or reliable operability o

the grid.

The state should evaluate the transmission

requirements or transer o renewable energy

rom the L.A. Basin area to San Diego and

Northern Caliornia.

MW o solar PV, and 2,000 MW o biomass.23 The

study ound that with signicant expansion o trans-

mission by 2020, it is easible to operate the electric-

ity system with 33 percent renewables. However,

the study suggests that strategies will be needed to

address periods o high and low load and ound that

there may be small additional costs associated withregulation and load ollowing.

At the July 23, 2008, IEPR sta workshop on trans-

mission issues, CERTS/EPG presented the results o its

study to identiy transmission and operating issues

associated with integrating renewables. CERTS/EPG

calculated that Caliornia must integrate 20,000 MW

o renewable capacity additions (relative to a 2006

base) to meet a statewide goal o 33 percent renew-

ables by 2020. The study also suggested that 23,000

MW would be needed to continue to meet the 33

percent target in 2030 due to increased demand

between 2020 and 2030. Furthermore, it ound that

a target o 50 percent renewables by 2030 would

require 40,000 MW o renewable capacity additions.

Based on these ndings, the study ocused on a mid-

range value o 30,000 MW o additional renewables

by 2030 as a reasonable starting point or examining

system upgrades that would be necessary under that

scenario.

CERTS/EPG observed that more than two-thirds o

the 30,000 MW o additions would likely require

delivery to transmission gateways surrounding

the Los Angeles Basin Area.24 The study concluded

that gateway capacity would need to be tripled to

integrate these renewable capacity additions, and

other transmission links between regions would need

to be expanded. From an operational perspective,

local network reinorcements would also be required,

including line upgrades, ault current limiters, break-

ers, and remedial action schemes.25 The system

would also need additional regulation and ramping

ability, which could be addressed by energy stor-

age, demand-side management, and automatic loadcontrol. Local voltage support could be enhanced

by adding capacitors and dynamic voltage control

devices. In addition, i plants in the Los Angeles Basin

retire because o air or water restrictions, or i new

non-renewable generation acilities are built outside


29/146

17


generation sources (such as wind and solar) in the

western interconnection and acilitate the develop-

ment and implementation o solutions that add

value to the WECC members. The subcommittee

will ocus on the regional reliability and market chal-

lenges o renewable energy integration and other

emerging issues.

In addition, the Caliornia ISO suggested that more

can be done to link renewables with demand side

and thermal storage strategies. For example, the

Caliornia ISO would like to see the ability to vary

compressor loads or chillers in large buildings to

help address variations in expected generation rom

wind or other variable renewable resources and sug-

gested the state take a leadership role in retrotting

state buildings to provide this capability. This variable

compressor load should be designed to allow the

Caliornia ISO to send a signal requesting a buildings

compressor load to change in response to changes in

expected generation.28

Resoure Adequa RequireentsCaliornias resource adequacy requirements are

intended to ensure uninterrupted electricity service

to customers. There are two types o requirements,

planning reserve margins and operating reserve mar-

gins. Planning reserve marginsare long-term planning

targets based on either the probability o a loss o

load or the value o service. These targets are used to

determine how much capacity is needed to maintain

real-time operating reserves. Operating reserve mar-

ginsrelate to the ability to handle system fuctuations

and disturbances. Operating reserve margins help

balancing authorities, like the Caliornia ISO, ensure

that voltage levels are maintained to prevent damage

to transmission system components and uncontrolled

cascading outages.29

Under the CPUC and Caliornia ISO resource ad-

equacy requirement, each load-serving entity mustdemonstrate that it has enough generating capacity

to cover 115 percent o expected monthly peak de-

mand.30 Generating resources have pre-established

capacity values based on their perormance, known

as the net qualiying capacity, which is used by load-

In November 2007, the Caliornia ISO conducted a

study on operational changes needed to accommo-

date 20 percent renewables and believes that it can

accommodate that level.26 According to the Caliornia

ISO, to achieve higher levels o renewable penetra-

tion the ollowing areas need urther examination:

Better wind and solar orecasting capability

and better communication between orecast-

ers and Caliornia ISO foor operators.

Better understanding o the amount o ramp-

ing and regulation needed.

Further inormation on the energy storage

technologies that will be available.

Changes to the Caliornia ISO market structure

and taris to incentivize short-term storage or

regulation fexibility.

Whether the gas storage system can accom-

modate rapid swings in conventional genera-

tion needed to back up renewables, and how

to quickly communicate the need or addi-

tional natural gas to the pipeline companies

in response to weather-related drops in wind

generation.

Recent initiatives at the Caliornia ISO and regional

levels are designed to address many o these issues.

The Caliornia ISO has initiated its Integration o

Renewable Resources Program27 with the goal o sup-

porting the integration o renewable resources into

the Caliornia power grid to ulll state policy objec-

tives. The program seeks to leverage the expertise

and resources o agencies and market participants,

including the Energy Commission. The program

will address operational, market, and transmission

planning issues to meet 20 percent renewables and

beyond.

On October 21, 2008, the Joint Guidance Commit-

tee o the Western Electricity Coordinating Council

(WECC) established the Variable Generation Sub-

committee. The purpose o the subcommittee is to

identiy issues and opportunities related to variable


30/146

18


able resources that will need to be integrated into

the electricity system to meet the 33 percent goal.

Several parties at the IEPR workshops on renewables

asserted that there is tremendous opportunity or

renewable generation at the distribution-level, at or

near substations and on customer sites, or behind

the meter. However, most renewable generationrom distributed resources, with the exception o

acilities that are utility-owned or have specic power

purchase contracts with a utility,33 are not currently

eligible or the states RPS, though these technologies

do reduce retail sales and thereore the amount o

renewable energy that must be procured to meet

the RPS. While the CPUC has determined that 100

percent o the renewable energy credits (RECs) asso-

ciated with renewable behind the meter distribut-

ed generation projects belong to the system owners,

generation rom these systems cannot be counted

toward RPS obligations until the CPUC authorizes the

use o tradeable RECs or RPS compliance.

The Caliornia ISO has noted that when looking at

a 33 percent goal, it is important to consider the

contribution rom behind-the-meter distributed solar

installations that could provide enough energy to

satisy as much as 5 to 8 percent o that goal. In ad-

dition, GreenVolts, a developer o photovoltaic (PV)

systems, reerred to the RETI Phase 1B Drat Resource

Reportwhich identies the potential or 27,500 MW

o distributed solar PV projects, assuming 20 MW

installations could be placed close to existing substa-

tions.34 These projects could generate nearly 60,000

GWh annually, which is signicant given that the

current estimate o 33 percent o retail sales in 2020

is about 102,000 GWh.

In written comments submitted or the IEPR sta

workshop on July 23, 2008, the Alliance or Respon-

sible Energy Policy also stated that Caliornias rush to

identiy competitive renewable energy zones and to

permit new transmission lines has ailed to adequate-

ly consider distributed generation and demand-sidemanagement alternatives.35

Distributed generation is a key component o the

states loading order or meeting new resource

needs.36 The Caliornia Solar Initiative has a target

serving entities when shopping around or electricity

generation to meet resource adequacy requirements.

Load-serving entities must secure 90 percent o their

requirements one year ahead, and then demonstrate

they have acquired the balance o their require-

ments one month ahead o each calendar month.

This approach helps ensure that the Caliornia ISOhas enough resources to cover higher than expected

loads, orced outages, and transmission outages.

This general ramework has important implications

or achieving high levels o renewable generation.

Net qualiying capacity values or generating resourc-

es like wind and central station solar are established

using a ormula based on historic perormance rom

hourly production data.31 For wind resources, these

values can be low because o the poor t between

perormance and peak loads.32 A low net qualiying

capacity value means that load-serving entities will be

reluctant to select these resources to meet their re-

newable requirements unless the economic costs and

benets are better than those o other resource types.

Another acet o resource adequacy requirements is

that, beginning in 2007, load-serving entities must

meet local capacity requirements to ensure that the

capacity needed by the Caliornia ISO is available in

10 separate load centers or pockets throughout the

state. As a general rule, about 75 percent o total

resource adequacy requirements must be satised

with resources within these load pockets. Because

renewable resources are location-specic and oten

remote, this requirement highlights the disadvan-

tages o wind, central solar, geothermal, and biomass

resources outside o these load pockets. Renewable

developers should thereore be encouraged to locate

projects where they can meet local capacity require-

ments, when easible and cost-eective.

Distributed Renewables

Distributed renewable resources do not directlyaddress integration issues such as the need or load

ollowing, ramping, or regulation typically associated

with higher levels o large-scale renewables. Howev-

er, distributed resources do reduce overall electricity

load and thereore the amount o large-scale renew-


31/146

19


customer-side renewable resources has received

much less attention than integrating large central

station renewable resources, it will be important to

consider how to address distribution level integration

o signicant amounts o renewable generation. Also,

there may be a need or day-ahead and hour-ahead

solar and wind orecasting at the distribution leveland even the building level and or new market

mechanisms to eectively value distributed and

customer-side renewables.

Renewable Energ heating and coolingLike distributed renewable resources, renewable heat-

ing and cooling technologies can help reduce overall

electric loads and thereore the ultimate amount o

renewable electricity generating resources needed to

meet Caliornias RPS targets.

Heating and cooling demands by the industrial,

commercial, and residential sectors account or 40

to 50 percent o total global energy use. Around the

world, renewable heating and cooling technologies

that use solar, biomass, and geothermal resources are

used to reduce GHG emissions, electric and natural

gas use, and ossil uel dependency. Current annual

GHG emissions in Caliornia rom space, process, and

water heating and cooling in the commercial, resi-

dential, and industrial sectors are about 25 percent o

total statewide GHG emissions.41 Using these technol-

ogies in Caliornia could thereore provide benets

beyond reducing electricity loads.

China accounts or 75 percent o annual solar water

heating capacity additions, and Germany has in-

stalled the electric equivalent o nearly 5 GW o solar

water heaters. In Europe and North America, there

are more than 2 million ground source heat pumps

in use, and about 30 percent o houses in Sweden

have geothermal heat pumps with a combined

equivalent electric capacity o nearly 4 GW. The solar

share o Germanys residential space heating marketis approaching 50 percent, while many countries

and state and local jurisdictions are mandating solar

water heating or all new residential and commercial

buildings.

o 3,000 MW o new solar generating systems in the

state by 2017.37 In addition, the Governors Bioenergy

Action Plan calls or meeting 20 percent o the overall

RPS target with biopower; all o the current biopower

contribution to the RPS and most o the uture con-

tribution will come rom power plants smaller than

50 MW. Many o these acilities, such as landll gasgenerators and digester gas generators, are located

in load pockets and can be connected at the distribu-

tion level. Further, the 2007 IEPR recommended that

all new residential buildings be net-zero energy by

2020 and all new commercial buildings be net-zero

energy by 2030. Distributed generation resources are

necessary to achieve this goal.

There is also increasing policy attention to the goal o

sustainable communities. More Caliornia communi-

ties are considering renewable generation options as

they explore strategies to become net-zero energy

communities. Options include solar PV, solar thermal

electric, biogas, and wind power plants in the 10 to

50 MW range. Examples o net-zero communities

using renewable energy already exist in Caliornia on

university campuses and in the operations o regional

water agencies. The University o Caliornia at San

Diego generates most o its own electricity and cold

water or space cooling o campus buildings and is

augmenting its natural gas cogeneration combined

heat and power capacity with solar PV and other

renewables.38 Likewise, the Inland Empire Utilities

Agency (IEUA), a regional water agency in San Bernar-

dino County, recently announced the addition o 2

MW o PV capacity to its existing 3 MW o biopower

generated rom dairy manure and ood waste.39

IEUA is close to serving its total electricity demand

or pumping and purication cost-eectively rom

renewable. Many Caliornia schools are also purchas-

ing renewable electricity rom solar electricity systems

installed on school roos.40

Widescale use o renewable generation at the distri-

bution level could also reduce some reliability andoperational concerns associated with meeting the

33 percent by 2020 goals by reducing overall load,

avoiding or deerring transmission system upgrades,

and reducing transmission and distribution losses.

However, because integrating distribution level and


32/146


33/146

21


Increased Capabilit o Forecasting Tools

Higher penetration o wind and solar resources re-

quires improved orecasting tools to inorm electricity

scheduling and dispatch decisions. Accurate orecasts

also help address intermittence and unpredictability

o resources and can increase the value o variable

resources to the system. The Caliornia ISO has beenusing hour-ahead orecasting or wind resources suc-

cessully or several years but believes that orecast-

ing tools need to be expanded to include day-ahead

orecasting and orecasting capability or solar re-

sources.47 Toward this end, it is doing in-depth stud-

ies with three companies to improve wind orecasting

ability. Research and development in this area should

ocus on increasing the accuracy and reliability o

orecasts, expanding orecasting tools to encompass

solar resources, and working with grid operators to

understand their needs in displaying orecast results

to allow real-time decisions to be made.

Snchrophasor Measurement Technologies

Phasor Measurement Units48 can collect and report

critical electrical measurements approximately 30

times per second, providing inormation about grid

conditions to system operators so they can make

time-sensitive decisions. As more renewable re-

sources are integrated into the grid, operators need

this kind o technology to respond to unpredicted

changes in output that are characteristic o so

Integrated Energy Policy Report 2008

Documents

Transcript of Integrated Energy Policy Report 2008