California’s Energy Future: California’s Energy Future: Generation, Integration, Generation, Integration,

Storage and TransportationStorage and Transportation

Roy KugaIEP Annual Meeting

September 24, 2010

2

Looking Back at How We Saw the Future

Our 1990 Electric Supply Strategy

Maximize the deployment of all cost-effective customer energy efficiency programs

Implement efficiency and environmental quality improvements to existing transmission and generation assets

Capture regional electric generation efficiencies

Continue leadership role in advancing cost competitive commercial development of environmentally preferred renewables and highly efficient advanced technologies

Encourage and take advantage of the development of true market competition among potential generation supplies

3

Looking to the Future

Policy initiatives, market design, technology and operational considerations will shape the energy market and utility portfolio mix

GHGCap-and-

Trade

GHGCap-and-

Trade

FERC Initiatives

FERC Initiatives

FEDERAL ENERGY POLICIESFEDERAL ENERGY POLICIES

Wind Integration

Policies

Wind Integration

Policies

RenewableTransmission Development

RenewableTransmission Development

British ColumbiaEnergy Plan

British ColumbiaEnergy Plan

Energy Action Plan

Energy Action Plan

CA Solar InitiativeCA Solar Initiative

Renewable Portfolio Standard

Renewable Portfolio Standard

AB32 GHGReduction AB32 GHGReduction Once-

Through Cooling

Once-Through Cooling

CALIFORNIA ENERGY POLICIES

CALIFORNIA ENERGY POLICIES

REGIONAL ENERGY POLICIES

REGIONAL ENERGY POLICIES

EPAEmissions

Policy

EPAEmissions

Policy

Plug-In ElectricVehicles

Plug-In ElectricVehicles

Investment Incentives, Loan

Guarantees & Tax Credits

Investment Incentives, Loan

Guarantees & Tax Credits

Smart GridTechnology

Advancements/ Breakthroughs

Smart GridTechnology

Advancements/ Breakthroughs

Demand Bidding Peak Day Pricing

Demand Bidding Peak Day Pricing

QF SummitQF Summit

Retail Competition

Retail Competition

4

Considerations for the Electric Supply Portfolio

Demand-Side More than half of future load growth met through energy efficiency

Market-based pricing for demand response, and time of use pricing for retail customers

Supply-Side Increasing central station and distributed intermittent renewable

resources

Continuing dependency on large transmission upgrades

Increasing amounts of new baseload, combined heat and power (CHP)

Continuing permit challenges

Continuing to be on the verge on major technological breakthroughs

Increasing amounts of surplus during off-peak and ramp hours

5

Implications for Future Procurement

Greater need for operationally flexible, rapid response ramp-up and ramp-down resources

Higher operating and planning reserves to maintain reliability

Greater need/value for physical curtailment rights on supply resources

Greater need for load shifting/load creation

Opportunities for cost-effective energy storage

6

Operational Implications: Wind Generation

While the average is looks fine, the hourly/daily variability is great

0

100

200

300

400

500

600

700

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hour

MW

Average

Each Day is a different color.

Day 29

Day 5 Day 26

Day 9

Source: CAISOSource: CAISO

April 2005 in Tehachapi WRA

7

Operational Implications: PV Generation

Source: AES

8

Operational Implications: Ramping Up & Down

Case Study: 4000 MW Solar and 6000 MW Wind5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

-500

MW

Source: CAISOSource: CAISO

9

Operational Implications: Ramp Rate Requirements (MW per Minute)

Source: Renewable Issues Forum 2010: Product and Market Review, CAISO, July 16, 2010

Rapid response, operationally flexible resources needed to provide regulation and load following

MW/min

-500-400-300-200-100

0100200300400

2006 2012 2020

ramp up ramp down

10

Ramp Rates

Ramp Rate (MW/minute)Ramp Rate (MW/minute)Types of Ramp UnitsTypes of Ramp Units

Conventional Steam Generation 3 - 10

Conventional Peaker 10

Conventional Combined Cycle 12 - 15

Next Generation Fast Ramp Combined Cycle 30

Next Generation Fast Ramp Peaker 30

Pumped Storage 40

Compressed Air Energy Storage (CAES)1 90

Battery Technology Depends on size and technology

1. Estimates for the Department of Energy CAES Application.1. Estimates for the Department of Energy CAES Application.

A number of different technologies have fast ramp rates and therefore can provide ancillary services A number of different technologies have fast ramp rates and therefore can provide ancillary services

11

Rapid Response, Operationally Flexible Resource Spectrum

Higher Cost

Lower Cost

Conventional Newer Technologies

Existing Pumped StorageConventional Combined Cycle

Conventional Gas TurbinesLegacy SteamExisting Hydro

Gas Storage

Next Generation Gas TurbinesNext Generation Combined Cycles

Next Generation Pumped StorageCompressed Air Storage

Physical Curtailment RightsSurplus Sales

Demand Response

Batteries

Thermal Storage

New Load Applications (PHEV)

12Source: Electricity Storage AssociationSource: Electricity Storage Association

Tested

Demo Projects

Different Storage Technologies Have Different Capabilities

13Source: Same as prior graph by Electricity Storage Association (converted to normal scale by Rick Miller, HDR | DTA)

Why Compressed Air and Pumped Storage? Meeting Utility-Scale Needs

14

Compressed Air Energy Storage

Tehachapi

•4,500 MW of new wind generation to be developed over the next 4 to 5 years

Proposed CAES Site

•Close to wind generation

•Close to transmission lines

•Good geologic characteristics

15

Sodium-Sulfur (NaS) Battery

Rationale for Deployment:

• Placement of NaS batteries on T&D lines can improve reliability and power quality

• Secondary benefits include load shaping and ancillary services

• Potential role in integrating solar photovoltaic

Opportunity:

• One of the most advanced battery technologies

• High energy density, high efficiency, and large capacity

• Capable of both fast discharge

16

Summary: Future Procurement

Greater need for operationally flexible, rapid response ramp-up and ramp-down resources

Higher operating and planning reserves to maintain reliability

Greater need/value for physical curtailment rights on supply resources

Greater need for load shifting/load creation

Opportunities for cost-effective energy storage

Critical that integrated energy policy and planning approach be employed vs. a piecemeal “set-aside” programmatic approach, in order to minimize costs