1. The Role of Energy Storage as a Renewable Integration Solution under a 50% RPS Joint California Energy Commission and California Public Utilities Commission Long-Term Procurement Plan Workshop on Bulk Energy Storage November 20, 2015 Sacramento, California Arne Olson, Partner

2. 2 Storage is understood to be a key renewable integration solution It is widely assumed that dedicated grid storage will be needed at high levels of wind and solar penetration Studies to date have included storage as a renewable integration solution but have not provided clarity on when storage is needed, or what type E3’s Investigating a Higher RPS study estimated benefits from 5,000 MW of energy storage as a solution case E3’s Western Interconnection Flexibility Assessment tested benefits of 6,000 MW of energy storage as a solution case CEERT’s Low Carbon Grid study assumed 7,400 MW of grid storage in all cases CAISO investigating 500 MW of storage in 2014 LTPP case

3. 3 Overgeneration is the main challenge at 50% RPS Studies show that the potential for over- generation becomes significant at higher renewable penetrations Renewable energy production is concentrated during relatively few hours of the year California will need to find ways to use, export or store surplus renewable energy 3

4. 4 Value of integration solutions is driven by the cost of overbuilding renewables Renewable curtailment requires “overbuild” of renewable resources to replace curtailed energy Increases the cost of RPS compliance Integration solutions reduce curtailment and overbuild costs Optimal level of integration solutions minimizes balances the overbuild costs with solution costs Least cost portfolio of solutions and renewable overbuild

5. 5 E3’s Investigating a Higher RPS: storage provides value but is higher-cost than other solutions Low-cost pumped hydro reduces average retail rate by 0.6¢/kWh under Large Solar case Assumes no other solutions are implemented!

6. 6 CAISO-CEC Integration Solutions Study Study purpose: explore renewable integration solutions Previous studies have identified the need for solutions to integration challenges at 50% RPS E3’s Higher RPS study evaluated several individual solutions CEERT Low Carbon Grid study assumed all solutions in place This study seeks to identify how much of which solutions are needed, and when Evaluate solutions needed for different combinations of renewable portfolio and operating regimes Renewable Integration Solutions (RESOLVE) Model adds storage or other solutions if cost-effective

7. 7 Bulk storage provides two types of renewable integration services Long duration services: storing energy during one period and providing it back to the grid during another Value from energy arbitrage and hourly ramps Particularly valuable when charging can occur during overgeneration conditions Short duration services: providing ancillary services for meeting grid needs within the operating hour (Regulation, Load Following, Spin, Non-Spin) Particularly valuable during overgeneration conditions Both services can be provided by multiple types of storage Li-ion batteries, flow batteries, pumped hydro

8. 8 Long-duration services Storage charges during daylight hours and generates at night to displace fossil generation and meet evening ramps Example April day

9. 9 Short duration services Storage provides within-hour reserves, reducing the need for thermal generation to run This provides highest value during overgeneration hours by reducing renewable curtailment Renewables Scheduled Curtailment Load following reserve requirements Gross Load Net Load Using storage for Load Following reserves reduces the need for thermal generation

10. 10 Storage costs are a big driver of results TechnologyRound-Trip Efficiency Li Battery85% Flow Battery70% Pumped Hydro75% RESOLVE builds energy storage if it reduces the cost of RPS compliance Independently solves for optimal discharge capacity (MW) and energy storage (MWh) Battery costs for bulk grid needs are not well understood today and are more uncertain in the future More storage added under aggressive cost reductions Storage costs are traded off against overbuild cost “Mid” storage costs assumptions ($/kW-yr) 6-hr Li-ion battery 6-hr flow battery 12-hr pumped storage 2-hr flow battery 2-hr Li-ion battery

11. 11 Observations from preliminary RESOLVE runs Significant quantities of storage resources are added under high-solar cases without other solutions Implementation of other solutions can delay and reduce the need for energy storage Some storage is needed for long duration services above 55% RPS in nearly all cases Quantity, type and duration of storage depends on the relative costs

12. 12 “Pocket Guide” to Integration Solutions Integration solutionFindings Regional coordination More efficient dispatch and reduced curtailment Time of use ratesShifts energy consumption toward daylight hours Subhourly renewable dispatch Allows system to operate with fewer thermal resources during overgeneration events Renewable portfolio diversity Avoids curtailment by spreading renewable production over more hours of the year Flexible loads Advanced DR Shifts energy consumption toward hours with overgeneration, but cost and potential are unknown Additional storageReduces curtailment but requires significant investment Gas retrofitsMakes existing resources more flexible at a low cost New flexible gas resources Provides limited dispatch flexibility at a high cost Energy efficiency Provides significant cost and GHG savings but may not reduce curtailment Conventional demand response Provides cost savings but does not significantly reduce curtailment Low cost solutions with potentially large benefits Costs and benefits should be evaluated on specific project or program basis Valuable, though not as much for integration Solutions with the highest identified renewable integration value Net benefits even w/o renewables

13. Thank You! Energy and Environmental Economics, Inc. (E3) 101 Montgomery Street, Suite 1600 San Francisco, CA 94104 Tel 415-391-5100 www.ethree.com www.ethree.com Arne Olson, Partner (arne@ethree.com)arne@ethree.com