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Public Interest Energy Research Program (PIER)

Presented to California Manufacturers and Technology Association

July 27, 2006

Martha Krebs, Ph.D.Deputy Director

Energy R & D Division

California Energy Commission

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California Public Interest Energy Research Framework

Eff

icie

ncy

Ren

ewab

les

Cle

an F

oss

il

DemandResponse

Distributed Generation

Infrastructure, T&D

Environmental Assessment

Tra

nsp

ort

atio

n

• PIER was established in 1997 as part of Electricity Restructuring– $62.5 M annual funding for

electricity research – Expanded in 2005 by CPUC rule

to include natural gas research; will provide $24M by 2009

– Maintains capacity for applied energy research of benefit to electricity and natural gas ratepayers

– Leverages public and private investments to advance energy-related S&T to inform California decision makers and provide Californians with clean, affordable energy services

California’s PIER Program is directed by law and CEC policy guidance.

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2005 Integrated Energy Energy Action Plan II Policy Report

• Demand-Side Resources, Distributed Generation and Other Electricity Supplies

• Integrated Water and Energy Strategies

• Renewable Resources for Electricity

• Electricity Needs and Procurement Policies

• Transmission

• Natural Gas

• Transportation Fuels

• Global Climate Change

• Border Energy

• Energy Efficiency

• Demand Response

• Renewables

• Electricity Adequacy, Reliability and Infrastructure

• Electricity Market Structure

• Natural Gas Supply, Demand, and Infrastructure

• Transportation Fuels Supply, Demand, and Infrastructure

• Research, Development, and Demonstration

• Climate Change

California Energy Policy Framework

California energy policy supports CHP for California benefits.

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PIER R&D Successes- Integrated Combined Cooling, Heating and Power (CCHP) Module Reduces Emissions

• Integrated HVAC system for commercial and light industrial applications

• Generates electricity and manages engine heat to meet thermal loads and optimize absorption chiller performance

• 60% system efficiency

• Emissions below 2007 CARB limits

• Standardized factory assembly reduces cost

• Powered by 260 kW natural gas internal combustion engine (ICE)

• Field testing at Normandie Casino in Los Angeles

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PIER R&D Successes - Gas Driven Heat Pump Saves Electricity & Natural Gas

• Technology uses low-quality heat or waste heat to produce cooling without compression and provides heat for on-site processes.

• First 10 ton demonstration system installed in April 2004 at a chicken processing plant in Modesto.

• Recent Independent Test Results: From November 2005 through January 2006 the system averaged 28% savings per week in natural gas and 69% in electricity use.

• In December 2005 Foster Farms installed a 100 ton system. Other possible users: fruit, vegetable & meat processors, dairies and breweries. Utilities interested in technology to meet energy saving goals.

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CA Interconnection Time (Days)

0.0

50.0

100.0150.0

200.0

250.0

300.0350.0

400.0

450.0

2000 2001 2002 2003

Days toInterconnect

Days pastrequestedon-line date

New Rule

• Standardization is yielding real results

• Time to interconnect has decreased by over factor of 5

• Fees have dropped significantly also from over $5,000 down to $800 - $1,400 per application

– DG customers have saved over $26M and growing

• Collaborative, consensus driven process between government, utilities and DG industry is key to success

PIER R&D Successes - Interconnection Rule Standardization Reduces Costs and Improves Timelines

R&D has supported the CPUC and Energy Commission effort to develop standardized interconnection rules for distributed generation.

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• Establishes laboratory testing facility:– Diverse DG technology types– Penetration level– Grid stability– Interoperability

• Can simulate various feeder designs• Includes 3 test bays with complete data

acquisition and control• Results thus far have resulted in major

revisions to UL 1741 standard to ensure DG does not affect safety or reliability of T&D system

• Results also benefiting manufacturers by gaining understanding of how their interconnected systems interact with T&D system

• Next steps – voltage stability

DR-1

R

L

C

S1

S2

Distribution Transformer

S3 S4 Utility

DR-n

DR-2

Utility Measurement #1

Utility Measurement #2

Load Measurements

DR Measurements

Grid Effects Testing Success – DUIT Program

The DUIT project is providing the factual technical basis for all stakeholders to further refine and reduce the cost and time for interconnection.

PIER R&D Successes – Integration Testing Addresses Utility Concerns While Improving Safety Standards

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Market potential analysis for CHP identified cost/benefits, MW additions and policies necessary.

NPV Benefits through 2020 (2005$)

$(4,000)

$(2,000)

$-

$2,000

$4,000

$6,000

$8,000

$10,000

Bas

e C

ase

No

Ince

ntiv

es

Str

eam

linin

g

Hi R

&D

Incr

ease

dIn

cent

ives

Mod

erat

e M

arke

t

Agg

ress

ive

Mar

ket

Hig

h D

eplo

ymen

t

Mill

ion

s (2

005$

)

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

2020

Cu

mu

lati

ve C

HP

Pen

etra

tio

n (

MW

)

Total CHP Owner savings

Total utility operating margin lost

Total Societal Net Benefits

Cumulative MW

Wholesale Export Facilitated

Wholesale Export Difficult

Source: Assessment of California CHP Market and Policy Options For Increased Penetration, California Energy Commission, Publication #CEC-500-2005-173, November 2005.

PIER R&D Successes – Analysis of Policy Scenarios for Greater CHP Adoption Informs 2005 IEPR

2005 IEPR adopted policies consistent with this scenario.

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• These policy options include:– Electricity export, particularly for large CHP installations, through

approach similar to ‘net metering’ for renewables but at wholesale electricity price

– Transmission and distribution (T&D) payment through operating agreement for DG or CHP with physical assurance in capacity constrained areas

– Payment for availability during system peak times based on generation capacity value to improve resource adequacy

– Payment based on CO2 mitigation for CHP through production tax credit in $/kwh

PIER R&D Successes – Analysis of Policy Scenarios for Greater CHP Adoption Informs 2005 IEPR

Commission adopted policy recommendations to encourage beneficial CHP applications for California.

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Comparison of PG&E E20 S Electric Rates and Study Premised Gas Rates6/1/05 to 2/1/06

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

Demand6/1/2005

$/kw

Demand1/1/2006

$/kw

Energy 5/1/2005 ¢/kwh

Energy 1/1/2006 ¢/kwh

Gas 5/1/2005 $/MMBtu

Gas 1/1/2006 $/MMBtu

Pri

ce

(Un

its

on

X A

xis)

Summer Peak Summer Part Peak Summer Off-Peak Summer Non-Coincident Gas Price

Shifting in recent tariffs from Energy to Demand Rates with Increasing Gas Prices discourages CHP investment.

Demand RatesIncreased

Energy RatesDecreased

Gas PricesIncreased

PIER R&D Successes – Analysis of Rates and Tariffs Assesses Impact on Customer Business Case for CHP

Source: Evaluation of Policy Impacts On the Economic Viability of California-Based Combined Heat and Power From a Project Owner’s Perspective, California Energy Commission, Publication #CEC-500-2006-068, July 2006.

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• Standardize the structures of tariffs from utility to utility– Or new standard statewide structure for CHP

• Ensure that energy/generation component of tariff includes all energy and other variable costs

– Consider off-peak and NEM pricing based on “marginal” energy cost not average ¢/kwh

– Establish energy cost recovery mechanisms that synchronize with gas prices• Modify methods of assessment of demand charges

– Longer intervals - Perhaps weekly or daily– Minimize emphasis on “non-coincident” demand charges

• Apply exemptions from departing load charges to the 1st 1000kw– Rather than exempting only projects under 1000 kiwi

• Modify SGIP program to include operating incentives• Establish criteria for CHP Facilities that provide “net societal benefit”

– Provide special considerations for those facilities– Consider waiver of standby charges– Consider programs that can add further incentives for externalities

• Maintain ongoing and proactive analysis of impact of tariff considerations on owner’s economics

PIER R&D Successes – Analysis of Rates and Tariffs Assesses Impact on Customer Business Case for CHP

Study recommendations are consistent with IEPR recommendations but provide new more refined actions for California to consider.

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• PIER takes a balanced portfolio research approach across many topics

• CHP related research is both technology and analysis based

• Technology research is reducing capital costs while improving efficiency and emissions

• Analysis research is serving to inform policy makers in California to enact policies that

promote beneficial CHP deployment

Summary