Advanced Energy Management Alliance (“AEMA”) and other Demand Response (“DR”) Advocates oppose two decisions issued by the California Public Utilities Commission (CPUC) on November 24th and 30th that are inconsistent with the state’s desire to displace fossil-based generation with cleaner, preferred resources.
EnerNOC filed an application for rehearing on December 23rd on the CPUC’s decision adopting Southern California Edison’s (SCE) procurement of resources to replace the San Onofre Nuclear Generating Station (SONGS) as well as older fossil-fueled plants. SCE requested approval of over 1,800 MW of new capacity, of which 75% of those replacements come from new fossil-fueled plants. SCE’s solicitation resulted in less than 10% of the capacity coming from preferred resources (demand response, energy efficiency and renewable DG) and about 15% of the capacity coming from storage. While storage is not defined as a preferred resource, the addition of storage would reduce carbon emissions.
While SCE failed to acquire the minimum amount of preferred resources (550 MW), as required by Commission Decisions[1] by a significant margin (383 MW), the CPUC did not require SCE to make up the deficit and left it to SCE’s discretion whether or not to pursue additional preferred resources procurement.
Shortly thereafter, on December 30th, AEMA Members joined together as the Joint Demand Response Parties to file an application for rehearing of another CPUC decision that would eliminate nearly 500 MW of capacity value for demand response resources, a preferred resource by both Commission precedent and statute, by January 1, 2018.
The primary reason for eliminating resource value for the existing DR capacity is the Commission’s failure to adopt a mechanism that would result in DR being dispatched under certain conditions and to transition these resources into the CAISO’s wholesale market. While parties have worked diligently for many years, but especially during most of last year, to identify barriers and provide solutions to enable DR participation in the wholesale market, that process is not yet complete and parties never expected that encouraging wholesale market participation depended on diminishing the value of the existing resource base.
The Commission has launched its first pilot of the DR Auction Mechanism (DRAM), which is a bright spot—but it will take time before this mechanism is proven viable. Successful bidders in the DRAM were notified on November 30. In exchange for a capacity payment from the utility, the DR providers will have to bid the DR resource into the wholesale energy market, consistent with the requirements established by the CPUC and the CAISO.
The DRAM may be successful; but we won’t know what the results will be until after the first of two pilots has concluded in early 2017. It is premature to eliminate all of the value of existing capacity with the hope that the wholesale market and the DRAM will succeed. AEMA prefers that we have some real experience with the market before we start eliminating the value of the resources we have built.
As Governor Brown returns from the Paris Climate talks where he encouraged the world to follow California’s example, he continues to demonstrate his commitment to addressing greenhouse gas emissions reductions following the signing of SB 350 into law on October 7. SB 350 requires the state to increase electricity generation from renewable resources to 50% by 2030 and doubling the state’s energy efficiency savings in that same time frame. This bill will be critical to keep California on track to meet the Governor’s goal of reducing greenhouse gas emissions by 40% by 2030, which builds on the success of a landmark greenhouse gas emissions bill (AB 32) passed by the state in 2006. AB 32 required the state to reduce emissions from fossil fuels by 20% by 2020, relative to 1990 levels.
These decisions do not demonstrate the Commission’s commitment to the development of preferred resources or toward meeting the state’s greenhouse gas emissions goals. We are disappointed by both of these decisions, but AEMA and other advocates will continue to engage to move the needle for demand response.
[1] D.13-02-015 and D.14-03-004.