integrated energy policy report 2008
TRANSCRIPT
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2008 Integrated Energy Policy report UPDATE
Arnold Schwarzenegger, Governor
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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
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2008 IEPR UPDATE
Please cite this report as:
Caliornia Energy Commission 2008, 2008 Integrated Energy Policy Report Update, CEC-100-2008-008-CMF.
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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
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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.
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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
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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
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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
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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.
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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.
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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).
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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.
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2008 IEPR UPDATEExEcUTIvE SUmmARy
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.
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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
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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.
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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.
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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
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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.
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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
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2008 IEPR UPDATEchAPTER 1
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
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2008 IEPR UPDATEchAPTER 1
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-
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2008 IEPR UPDATEchAPTER 1
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
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2008 IEPR UPDATEchAPTER 1
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
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2008 IEPR UPDATEchAPTER 1
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
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2008 IEPR UPDATEchAPTER 1
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
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2008 IEPR UPDATEchAPTER 1
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-
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2008 IEPR UPDATEchAPTER 1
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
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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