By - Jim Vess

PG&E battery project hits snag as it draws consumer and business protests

Energize Weekly, August 22, 2018

Pacific Gas and Electric Co.’s (PG&E) battery program, which would be the world’s largest, has run into opposition from a California consumer advocate, and industrial and commercial customers.

The California Office of Ratepayer Advocates and the Direct Access Customer Coalition, which represents “commercial, industrial and governmental customers who have opted for direct access for some or all of their loads,” contend that the project is not needed and PG&E has not shown it is cost effective.

The California Public Utilities Commission (CPUC) has extended the review and approval process for the project by 120 days.

PG&E said in a reply letter to the CPUC that the protests are based “on a selective and inaccurate reading of several ordering paragraphs” in the commission’s resolution directing the utility to develop a battery plan.

In July, San Francisco-based PG&E, part of PG&E Corp., proposed a set of four battery projects totaling 567 megawatts (MW) to deal with reliability issues in the area around San Jose. The reliability problem involved Calpine’s Metcalf Energy Center, a 564-MW gas-fired plant in San Jose.

Calpine said the center was no longer economical and with the support of the California Independent System Operator (CAISO), which runs the state’s grid, received a reliability-must-run (RMR) contract to keep the generating station online.

PG&E and the CPUC opposed the RMR contract. The CPUC said that RMR contracts undermine the wholesale electricity market and that there were cleaner and cheaper alternatives, such as battery storage.

In January, the commission authorized PG&E to launch an accelerated solicitation for energy storage projects capable of meeting the reliability needs. The utility selected three projects from third-party developers, totaling 385 MW and proposed building its own 182 MW Tesla lithium-ion battery facility. The batteries would hold 2.3 terawatt-hours of electricity, a four-hour supply.

In a filing, however, the Office of Ratepayer Advocates, the independent consumer advocate within the CPUC, contended that new and planned transmission lines “eliminate the specific deficiency that led the CAISO to an RMR designation of Metcalf.”

“PG&E failed to demonstrate that it coordinated with the CAISO to ensure that the four energy storage projects partially or wholly obviate the need for the Metcalf RMR,” the advocate’s filing said.

New transmission upgrades equal to 1,653 MW are slated for the area. “The Metcalf RMR is no longer necessary after the new and planned transmission projects are online,” the protest said.

“Energy storage systems have discharge limitations—in this case, 4-hour discharge durations,” the advocate said. “Also, battery energy storage systems, such as these four projects, do not generate electricity, they consume it. Thus, these four energy storage projects rely upon external resources to charge. These characteristics may prove incompatible with reliability standards if energy storage must be relied upon for more than four hours.”

PG&E also failed to demonstrate that the four storage projects were cost effective, the advocate said.

The transmission improvements, however, do not guarantee local reliability back-up, PG&E said in its reply.

“The Commission’s goal in ordering this procurement was to identify preferred resources that, along with transmission projects, would create a cost-effective portfolio of resources that would add enough capacity to obviate the need for CAISO to extend or issue additional RMR contracts,” the company said.

The customer coalition in its protest to the CPUC pointed out that the transmission upgrades will be in place by February 2019 and said that the proposed storage contracts would come online too late to deal with reliability issues in 2019 and 2020.

The CPUC authorization called for cost-competitive energy storage or other resources to deal with the reliability issue, the coalition said.

The coalition protest said PG&E failed to provide an analysis comparing the cost of the four battery projects with the cost of the Metcalf RMR contract—at least in its public submission, where some dollar figures and numbers are redacted.

“PG&E does provide the forecast revenue requirement for the 182.5 MW Tesla project of $41.2 million for 2021 and $39.0 million for 2022,” the collation filing said. “For comparison, the annual fixed revenue requirement for the Metcalf Energy Center is $43 million for 2018 and for each year of any extension through 2020.”

PG&E said that it used commission-approved evaluation techniques in assessing the cost-effectiveness of projects and that they were detailed in the confidential submission to the CPUC.

“In general, PG&E found the winning projects in each solicitation to be comparable in contract cost, particularly when taking into account differing online dates,” the utility said.

PG&E said in its reply letter than the environmental benefits and the battery storage project’s role in meeting the state’s climate goals were also an important element in evaluating the proposal—one that is supported by environmental groups.

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