stakeholder comments...meeting the carb’s ghg goals, and procurement is needed near-term to allow...

Energy Storage Roadmap

ENERGY STORAGE ROADMAP COMMENTS: ALTON ENERGY 1

Stakeholder Comments Submitted by Company Date Submitted

Jonathan Word

Director of Strategic Operations

[email protected]

602-540-6309

Alton Energy September 18, 2014

Presentation materials and background information discussed during the September 4, 2014 workshop may be found at:

http://www.caiso.com/informed/Pages/CleanGrid/EnergyStorageRoadmap.aspx

Please provide your comments regarding each of the storage barrier categories below that were discussed during the workshop. In particular, please direct your comments towards actions that need to be taken (and by whom) in order to further facilitate deployment of storage in California and provide feedback on the priority of the actions that are needed.

We have limited our Comments to the last section: Additional Barriers

Please use this template to provide your comments on the presentation and discussion

from the California Energy Storage Roadmap workshop held on September 4, 2014.

Submit comments to [email protected]

Comments are due September 18, 2014 by 5:00pm



Additional Barriers

Recorded Workshop Findings:

At the end of the stakeholder meeting, there was an open discussion of additional barriers. Five issues were suggested as potential barriers that have not yet been covered:

• Greenhouse gas impacts and policy • Silo-ed proceedings at the CPUC on issues that pertain to demand and demand management:

energy efficiency; demand response; storage; LTPP. It was suggested that the new CPUC proceeding on distribution resources plans (R.14-08-013) would be a venue to address issues that cut across these different distributed resource types.

• Difficult to participate in existing markets for non-generating resources • Lack of an articulated need for market products and system flexibility from the CAISO and IOUs • The roadmap should provide a vision based on consideration of alternative scenarios, to help set

priorities among the issues and identify “least regrets” actions that will be needed across all scenarios.

Alton Energy Comments:

INTRODUCTION. Alton Energy is respectful of the complexities of the methodologies in the CAISO

Transmission Planning Process and the CPUC LTPP and other agency efforts, and appreciates the substantial efforts working toward achieving reliability in the most cost effective manner.

The planning focus of this California Energy Storage Roadmap, coinciding with the

LTPP, and other CAISO and CEC studies, must recognize and incorporate state policy emanating from the California Air Resources Board’s (“CARB”) green house gas (“GHG”) reduction goals, and convert them into rational and effective electric sector procurement policies through 2030. In recent past LTPP cycles, achieving 33% renewables portfolio standard (“RPS”) compliance has been a critical consideration, which has been successfully achieved. However, procurement to meet the CARB’s 2030 goals, on its trajectory to 2050 goals1, requires carbon-free primary energy that amounts to approximately 55% renewable energy penetration.2 In addition to zero carbon energy generation needs, meaningful procurement of bulk energy storage, specifically pumped hydro, is critically needed to achieve the level of reliable cost-effective firm energy required beyond 2020 to be compliant with the CARB’s GHG reduction goals. The scope and nature of this Energy Storage Roadmap should aim to recognize the full scale of carbon-free resources required by 2030, and the important role for bulk energy storage, specifically pumped hydro.

1 CARB Goal to reduce California CO2 emissions by 80% from 1990 levels. 2 Note California 2030 Low Carbon Grid Study. http://www.lowcarbongrid2030.org



The CPUC has done well by bringing CAISO and the CEC into recent proceedings more

directly. However, direct involvement and coordination with the CARB is missing in a comparable role, and due to the dominance and urgency of their state goals, the CARB should be a major participant in this energy planning processes. However, the CARB has sufficiently documented its GHG goals publically, such that those goals must and can be converted into procurement related values and quantities suitable for decisions in this planning study. We provide references in these comments to the substantial analysis we have done of the CARB’s GHG goals, as well as linking to the recent Phase 1 results of the California 2030 Low Carbon Grid Study3, as examples of the electric sector focused analysis that is required here.

CARB GHG GOALS ARE KEY STATE POLICY THAT NEED TO GUIDE ENERGY PLANNING AND PROCUREMENT.

A business-as-usual energy procurement trajectory will fail to meet the CARB’s GHG goals beyond 2020, and that short fall will increase to dramatically fall short thereafter. This is a totally unacceptable outcome that this study must recognize, and adapt to so that the near term energy and environmental needs of the state will be achieved.

Until now, an energy supply resulting from meeting the 20% RPS and then the 33% RPS,

along with energy efficiency and demand response goals, set the appropriate targets and trajectories for energy procurement planning. That is no longer the case. It is the CARB’s GHG goals defined currently by 2020 targets and trajectory toward 2050 that set a dominant definition of policy requirements that must be established to set appropriate mid-term targets for 2030. This study must adapt to, and focus these dominant state policies and goals in order to define the trajectory of the energy supplies that are needed in near-term procurement. The CARB’s goals are already established, are public, and can readily be converted into the normal planning units used in this proceeding.

For noteworthy reference, the California 2030 Low Carbon Grid Study (LCGS) explores how the electric sector can cost-effectively support deep, statewide reductions in GHG emissions. According to Phase I modeling results, the California grid can reduce emissions by more than 50% below 2012 levels by the year 2030 with minimal rate impact, minimal curtailment to renewables, and without compromising reliability. These findings are significant because they illustrate an affordable, reliable, and practical trajectory toward meeting California’s ambitious 2050 GHG emissions goals.

3 California 2030 Low Carbon Grid Study: http://www.lowcarbongrid2030.org



CARB GHG GOALS FOR 2020-2030 CAN BE DETERMINED AND INCORPORATED INTO ALL PLANNING STUDIES.

The CARB Scoping Plan Update Discussion Draft Figure 6 4 lays out the GHG emissions limits in MMT CO2e, which Alton then converted to MWh electrical units. Figure 6 includes the existing, adopted trajectory, as well as the more stringent draft goals. Conversion data demonstrates that gas-fired generation (GFG) must be increasingly limited and restricted in order to achieve the CARB’s GHG emissions trajectory goals.

MAJOR CHANGES IN THE STATE’S ENERGY MIX ARE REQUIRED TO SUCCESSFULLY MEET 2020-2030 PROCUREMENT NEEDS.

Through analysis specifically focused on the electric sector, Alton Energy comes to the conclusion that it is not possible to meet the CARB’s trajectories for 2030 without substantial and continued integration of large utility-scale carbon-free wind and solar that is firmed and shaped by dispatchable bulk energy storage. Solar rooftops, distributed energy storage, energy efficiency, demand response, distributed generation, and smart inverters are all important, but their impact does not fully address the scope and scale of what is required.

4 http://www.arb.ca.gov/cc/scopingplan/document/updatedscopingplan2013.htm



Alton Energy submits the below graphic to demonstrate the massive scale of the zero-carbon energy that is needed by 2030, increasing on the trajectory toward 2050.5

This analysis incorporates the electric sector assumptions used in the Low Carbon Grid Study (LCGS), and overlays the LCGS 2030 Scenarios, where the LCGS through their modeling by NREL demonstrates that their Target Case 55% Renewable Penetration Scenario provides the level of zero-carbon energy addition needed to achieve the emissions reduction necessary to meet the 2030 ARB target. The Target case effectively lowers electric sector emissions from 78 MMT to 40 MMT, providing a total emissions reduction of 58% below 2012 GHG levels. This Target Case, in order to stay on the ARB target for 2030 requires 177 TWh of zero-carbon energy additions, a 67 TWh increase from the Baseline Case.

Beyond 33% renewables, the variability of the most cost-effective zero-carbon GHG compliant resources will need to be firmed and shaped increasingly by bulk energy storage. The combination of the variable resources plus the needed firming can be very cost-effective, if the

5 Following this Chart Alton lists approximate ranges of zero-‐carbon procurement needed to provide a range of sensitivities for analysis needed in the LTPP to guide procurement planning.



LTPP starts the process timely, now, to procure significant bulk energy storage. Delay will reduce the number of cost-effective alternatives and raise costs.

There are limited viable solutions to meet the increasingly stringent CARB 2030-2050

emission goals. Such is possible with meaningful integration of bulk energy storage coupled with zero-carbon energy, but it will not be possible under business-as-usual. If gas power continues to be procured and dispatched as the default, the emissions impact will preclude the possibility of reaching the CARB’s emissions reduction goals and cause substantial stranded cost later down the road as procurement planning awakens and shifts to a zero-carbon focus.

PROCUREMENT FRAMEWORK FOR LARGE-SCALE BULK ENERGY STORAGE TO FIRM AND SHAPE ZERO-CARBON ENERGY SUPPLY

Bulk energy storage, and specifically pumped hydro, is the most cost-effective, proven, reliable energy storage technology to integrate the magnitude of low cost carbon-free wind and solar energy needed to meet the growing requirement established in the above referenced charts. California is fortunate to have available several large-scale cost-effective pumped storage projects6 that are well along in the development process. These are of high importance for meeting the CARB’s GHG goals, and procurement is needed near-term to allow for a rational timeframe for construction and availability before 2024.

An advanced bulk energy storage procurement framework needs to be adopted to allow

for the procurement of large-scale resources from the CPUC LTPP process7. Other planning studies need to evaluate and support this initiative, and interagency collaboration is critical in order to design a procurement and methodology and interconnection process that is suitable to support valuable long-life assets such as pumped hydro.

It is important that pumped hydro storage be evaluated on a level playing field in the

LTPP and CAISO planning processes, so that is can compete fairly with all forms of capacity and generation. When barriers are broken down, pumped hydro storage proves itself to be a very cost-effective solution to solve the large-scale issues facing the evolving electric grid, especially when coupled with large volumes of carbon-free wind and solar energy.

6 Alton develops Bison Peak Pumped Storage, 1,000+MW, at major TRTP & Path 26 transmission. 7 Longer-‐duration bulk dispatchable technologies that are able to cost-‐effectively compete directly with gas, such large-‐scale pumped hydro storage, have been excluded from the ES OIR (above 50 MW), but the Commission has encouraged pumped hydro procurement, particularly in the context of the LTPP.



EFFECTIVE PROCUREMENT FRAMEWORK AND STUDY PROCESSES FOR LARGE-SCALE BULK ENERGY STORAGE: NEED TO FOCUS ON AVOIDED COST AND EMISSIONS REDUCTION

There is a huge opportunity for bulk energy storage, specifically pumped hydro storage and strategically sited distributed storage, to displace a very significant portion of the inefficient high heat rate peaking plant dispatch, and also to displace the lesser efficient CCGT plants.

There are substantial CO2 emissions reductions, and increased economic value through

avoided variable cost of the inefficient gas generators. This occurs simply by charging during off-peak hours and nominally increasing the capacity factor of the most efficient marginal gas power that will be economically dispatched when needed. This avoids the on-peak emissions of the otherwise dispatched gas capacity that is normally highly polluting with a high variable cost due to its very high heat rate, and inefficient dispatching cycles.

In 2011, there was 6,500 MW of less efficient non-cogen gas power plants with a heat

rate of 8,000 Btu/kWh or higher, which amount to over 33% of the total Non-Cogen gas plant fleet in California. There is over 3,100 MW of non-cogen gas plants with heat rates higher than 11,000 Btu/kWh. There are still quite a few gas plants that are operating with extremely high heat rates ranging from 15,000 to over 20,000 Btu/kWh.8

The following chart9 demonstrates the point that total emissions output varies greatly from hour by hour in California, in direct correspondence with peak load, and the inefficient dispatch of high heat rate generators on the margin:

8 Analysis of EIA and SNL Energy Data 9 Chart generated SNL (w/ general conceptual storage overlay added – NOT intended to quantify actual emissions reductions)


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EFFECTIVE PROCUREMENT FRAMEWORK AND STUDY PROCESSES FOR LARGE-SCALE BULK ENERGY STORAGE: NEED TO FOCUS ON AVOIDED COST AND EMISSIONS REDUCTION

There is a huge opportunity for bulk energy storage, specifically pumped hydro storage and strategically sited distributed storage, to displace a very significant portion of the inefficient high heat rate peaking plant dispatch, and also to displace the lesser efficient CCGT plants.

There are substantial CO2 emissions reductions, and increased economic value through

avoided variable cost of the inefficient gas generators. This occurs simply by charging during off-peak hours and nominally increasing the capacity factor of the most efficient marginal gas power that will be economically dispatched when needed. This avoids the on-peak emissions of the otherwise dispatched gas capacity that is normally highly polluting with a high variable cost due to its very high heat rate, and inefficient dispatching cycles.

In 2011, there was 6,500 MW of less efficient non-cogen gas power plants with a heat

rate of 8,000 Btu/kWh or higher, which amount to over 33% of the total Non-Cogen gas plant fleet in California. There is over 3,100 MW of non-cogen gas plants with heat rates higher than 11,000 Btu/kWh. There are still quite a few gas plants that are operating with extremely high heat rates ranging from 15,000 to over 20,000 Btu/kWh.8

The following chart9 demonstrates the point that total emissions output varies greatly from hour by hour in California, in direct correspondence with peak load, and the inefficient dispatch of high heat rate generators on the margin:

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!:!$3)*9717!(2![\$!)3.!D@B![3-,I9!_)+)!=!#E),+!I-3-,)+-.!D@B!]CH!I-3-,)*!0(30-F+/)*!7+(,)I-!(>-,*)9!)..-.!`!@4P!13+-3.-.!+(!a/)3+129!)0+/)*!-61771(37!,-./0+1(37^!



Taking into consideration the round-trip efficiency of ~80% of a new pumped hydro storage plant, analysis shows that even if it were to pump with electricity sourced from 100% gas power, specifically sourced from the most efficient CCGTs with a heat rate of 7,000, this would provide substantial CO2 emissions and variable cost avoidance when compared with all other CA non-cogen gas plants with a heat rate of 9,000 or higher. This is demonstrated in the following chart.

The chart below starts by assuming that the pumped hydro storage plant has a round-trip efficiency

of 80%. It assumes a scenario where the energy needed for pumping is sourced from 100% gas content, essentially increasing the capacity factor of the existing most efficient marginal gas with a heat rate of 7,000. The chart compares the emissions of the pumped hydro plant with that of the gas generators of equal or higher heat rate. The first point at the bottom of the curve shows a negative -25% emissions avoidance compared with if the PHS plant was to displace another gas generator with the same heat rate as that of the gas generator that the PHS plant uses to charge. In this case, due to the round-trip efficiency loss of the PHS plant, it would create more emissions per MWh of output. As the emissions and variable cost avoidance curve moves up and to the right, it compares the emissions and variable cost of the PHS charging energy to that of the avoided energy that would have otherwise been dispatched from the higher heat rate generators that it is displacing. Under the 100% gas scenario, the chart shows if the PHS plant were displacing a generator with a 12,000 heat rate it would avoid the equivalent of 27% of the per unit CO2 emissions of the 12,000 heat rate generator, and likewise would avoid 27% variable cost compared with the higher heat rate plant. This shifts to a 63.5% improvement if the pumping is sourced from 50% zero-carbon content.

It is clear that we are rapidly approaching a new era of significant integration of variable renewable generation, quickly approaching the RPS target of 33%, and possibly more in the near future. Additionally, California already has a very meaningful portion of its total net electricity generation from



near-zero carbon sources, amounting to over 50% of the total net generation of utility-scale power plants being sourced from near-zero carbon plants.10 This total amount shifts as nuclear is retired and conventional hydro generation declines due to drought, but will be positively offset over time as additional renewables are added to the system.

While bulk energy storage can avoid substantial CO2 emissions and variable cost in a scenario of

100% gas power sourced for its charging, in the evolving California energy mix scenario, with significant integration of carbon free renewables, energy storage's contribution towards reducing California's GHG Emissions can be substantially enhanced. The positive increase is especially the case if there is over-generation of renewables as the system exceeds 33% renewables penetration.

Long-term planning procedures must also account for the increased capacity value available from

renewables if substantial energy storage is deployed, and thus encourage the continued development of renewables as a fundamental value towards capacity, reserves, and lowest carbon ancillary services. In addition to proper valuation needed for the many ancillary service and fast ramping flexible capacity attributes of bulk energy storage, we urge the CPUC, CAISO, CEC and other agencies and utilities to consider bulk energy storage as a powerful tool for avoiding emissions and variable costs. It is also important to evaluate the avoided transmission and distribution (T&D) cost associated with bulk energy storage projects that could replace the need for otherwise costly T&D investments.

BULK ENERGY STORAGE VALUATION TOOL: TRANSFERRED INTO LONG-TERM PROCUREMENT METHODOLOGY

We feel it is critical that a proper valuation tool and methodology be designed that effectively

quantifies the economic benefits of bulk energy storage projects. This tool would properly quantify the potential ancillary service value, capacity value, renewables integration value, avoided T&D value, TOD factors, and avoided emissions and variable cost value. From the quantification of this value, it will be clear that bulk energy storage, specifically pumped hydro, adds far more economic benefit to the ratepayer than it does cost. Although the true benefits of energy storage generally occur on the aggregate system level, this type of cost/benefit analysis methodology on a project level could help to establish an adequate valuation that feeds into the establishment of competitive long-term contracts that allow bulk energy storage plants to be financed and built. This project valuation tool could then be incorporated into a system model with the proper input parameters to demonstrate the net system value with and without the bulk energy storage project. This cost-benefit analysis is important for establishing a procurement methodology for large capital-intensive bulk energy storage assets, which can exceed 1000 MW.

The real rationale and justification for long-term contracts is not just project bankability, but most

importantly it is to procure long-life valuable assets that avoid substantial cost, and to create long-term environmental and economic value that far exceeds the cost to the ratepayer. Over the course of the 75+ year operational life of a pumped hydro storage plant, analysis shows that the total avoided cost and economic benefits to the system and ratepayer is very substantial. This needs to be converted into a methodology and basis for entering into long-term contracts with these valuable system assets. 10 SNL



REFERENCE AND STUDY WORK FROM THE CAISO AND CEC URGENTLY NEEDS TO DIRECTLY FOCUS ON STATE GOALS, AND EFFECTIVELY TRANSFER GOALS INTO FRAMEWORK OF THE LTPP

The need for increased interagency consideration11 is urgent. We compliment the CPUC, CEC, and CAISO for the obvious major improved cooperation and collaboration in the LTPP process. We are concerned, however, that as information is brought into LTPP from sister agencies that it comes in with adequate opportunity for vetting and adapting in the LTPP process, as this is the one forum where the vetting process performs at the highest standard of interaction between parties.

CAISO studies historically used in the LTPP process have been largely from other

processes and purposes due to limited resources, and have fallen short in studying and supplying the critical insight necessary to utilize transmission as an important creative resource in solving the sorts of issues that will be faced in the LTPP. Strong focused input from CAISO on the full range of LTPP considerations is needed. The recent TPP studies fall short of studying the magnitude of zero carbon resources and energy storage needed to meet the CARB’s goals in 2020-2030 timeframe.

The 2013 IEPR has now been adopted. We note that it is heavily focused on energy

efficiency and demand response, and its overall assessments of energy technologies are so broad that cost evaluations in many cases are not aligned with least-cost, proven zero-carbon technologies capable of reliable operations and timely development. The need is to focus on the zero-carbon technologies that can deliver reliable cost effective supply on an appropriately large-scale now. Thus, the increased evaluation of bulk energy storage is needed.

We feel a careful focus in this study is crucial, with near term procurement of pumped

hydro storage, along with adequate wind and solar. This will ensure that the CEC’s higher-level goal is achieved, which we strongly agree with and feel that it is very achievable if action is taken now. As stated in the recent 2013 IEPR:

“To help ensure progress toward its 2050 greenhouse reduction goals, California needs to determine what the electricity system should look like in 2030 as an interim target.” “To achieve its greenhouse gas reduction goals, California must be even more aggressive in developing and implementing these policies. Also, the state needs to be prepared to deal with the effects of climate change on the energy sector itself” … Achieving California’s 2050 greenhouse gas emission reduction goals will require substantial transformation of California’s energy system.”12

11 LTPP 2014 OIR, December 19, 2013, p. 9. 12 CEC 2013 IEPR, Final Commission Report, p. 2, 14, 15.



CONCLUSION

Alton Energy thanks the CAISO for initiating the Energy Storage Roadmap, and looks forward to participating.

Respectfully submitted,

/s/

Jonathan Word

Director of Strategic Operations

ALTON ENERGY, INC.

September 18, 2014

stakeholder comments...meeting the carb’s ghg goals, and procurement is needed near-term to allow...

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