The downside of being home to one of the most thriving distributed energy markets in the country is that it comes with a lot of complexity, as those working in California know well.
The Golden State currently has more than 635,000 distributed solar customers, representing nearly 5,000 megawatts of installed capacity. California has become the leading market for home energy storage and electric vehicles. The state is also driving the conversation on smart inverter standards and community-owned renewable energy projects.
There are a multitude of regulatory proceedings, laws, pilot projects and business deals tied to all of that, and labeled with an alphabet soup of acronyms.
“It’s pretty complicated,” said Michael Picker, president of the California Public Utilities Commission, in an interview last week.
Picker — who will be speaking at GTM’s California’s Distributed Energy Future event next month in San Francisco — said the state’s Distributed Energy Resources Action Plan has helped provide a framework for how disparate regulatory proceedings relate to the state’s broader climate and energy goals.
The Action Plan, endorsed by the CPUC last November, was particularly useful in aligning Picker’s Distribution Resources Plan proceeding and former Commissioner Michael Florio’s Integrated Distributed Energy Resources proceeding. The former was created to address the infrastructure upgrades needed to support more renewables on the distribution grid; the latter was created to address how those upgrades and DER projects should be paid for.
“The challenge that we were facing is that [the proceedings] were so tied to each other that we needed to have a roadmap so we could keep track of how we were coordinating without breaching any of the confidentiality and ex parte rules that we have,” said Picker. “So this way, we could continue along our separate paths, but have a pretty good idea of where things were going.”
The problem wasn’t limited to the interaction between Picker’s DRP proceeding and Florio’s IDER initiative. There are several other DER proceedings taking place in parallel on energy storage, demand response, energy efficiency and other topics. In addition, there’s the Integrated Resources Plans proceeding that was ordered under the landmark clean energy law SB 350.
The DER Action Plan “shows how the different DER proceedings relate to one another,” said Matthew Tisdale, executive director of More Than Smart. “In addition, it puts out a statement on the overarching goals and objectives [to] be accomplished in each proceeding, under a certain timeline.”
This year, two new commissioners joined the CPUC — Martha Guzman-Aceves and Clifford Rechtschaffen — replacing Florio and Commissioner Catherine Sandoval. According to Picker, the DER Action Plan has proved valuable as the new regulators start to pick up some of the work. With Florio’s departure, California commissioners are going to have “a long discussion and a workshop” about the roadmap to see who wants to take up the IDER proceeding, Picker said.
The IDER proceeding is likely where the CPUC is going to address the social cost of carbon (SCC), which is one of the key pieces in determining the value of DERs, he added. The SCC calculates the economic cost of a ton of carbon emissions in a given year, and the benefits of emissions reductions. So with respect to DERs, if a resource is found to reduce emissions, it could be compensated through California’s cap-and-trade program, said Picker.
“Or we at least might set a cost, because so far what we’ve used [for compensation] is the avoided cost of building a new power plant,” Picker said. “If the avoided cost is of new greenhouse gas emissions, you get a different figure.”
As California regulators move ahead with their assessment of the SCC, a recently leaked memo revealed that the Trump administration could soon end the use of the SCC calculation at the federal level. If that takes place, California’s clean energy market leadership could take on an even more significant role.
Another item on Picker’s agenda is to advance the DRP proceeding, possibly by adding an analysis of distributed energy resource management systems, or DERMS. An examination of DERMS would look at what types of software systems are needed to manage the distribution grid, and which entity would own and control it — a utility or a third party?
As the CPUC works its way through the DER roadmap, the roadmap itself is likely to change, said Picker. At the same time, regulators will need to address barriers that crop up along the way.
One barrier, according to Tisdale, is access to data. DER providers in California are being called upon to better target the customers they work with, so they don’t create an unnecessary burden on the grid. But in order to be more targeted with customer selection, DER providers need more ready access to data on grid needs and about customers. Right now, that data is hard to come by.
“That’s something I think will definitely be a regulatory barrier that needs to be addressed,” said Tisdale.
Another regulatory barrier relates to how solicitations are run, such as those for the DER pilot projects that were recently approved as part of the IDER proceeding. The solicitation process typically takes a developer a lot of time and comes with a high transaction cost, because the parameters are unclear, said Tisdale. If a bid is non-conforming and the utility has to go back and renegotiate with the bidder, it adds time and expense.
Stakeholders worked hard to set up solicitations under the IDER proceeding so that DER providers knew what to prepare in advance, “but whether or not that works in practice is a big regulatory challenge,” Tisdale said.
Regulatory and technology experts will delve deeper into the challenges and opportunities DER stakeholders are facing in the Golden State at California’s Distributed Energy Future, a GTM event taking place in San Francisco on March 8-9.
The conference kicks off on March 8 with a half-day workshop on the latest DER policy and market developments in California, hosted by More Than Smart. A welcome reception will follow. March 9 offers a jam-packed day of in-depth panel sessions, including speakers from Southern California Edison, SolarCity, Pacific Gas & Electric, the Department of Energy, Siemens, BMW, Enphase and the CPUC, including President Picker.
“There will be free beer, dancing, and Manu Chao will be MC,” Picker said.
Well, at least there will be free beer.
Join GTM for actionable conversations on the future of electricity in one of our nation's most innovative states. California's Distributed Energy Future 2017 will be held in San Francisco March 8-9. Learn more here.