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Self-Generation Incentive Program Staff Proposal Workshop

Self-Generation Incentive Program Staff Proposal Workshop. The SGIP Staff Proposal Background. Senate Bill (SB) 412: Authorizes the CPUC to determine what technologies to include in SGIP based on GHG reductions Jan 2010: Workshop held to take ideas on how to modify SGIP per SB 412

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Self-Generation Incentive Program Staff Proposal Workshop

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  1. Self-Generation Incentive Program Staff Proposal Workshop

  2. The SGIP Staff Proposal Background • Senate Bill (SB) 412: Authorizes the CPUC to determine what technologies to include in SGIP based on GHG reductions • Jan 2010: Workshop held to take ideas on how to modify SGIP per SB 412 • Energy Division staff considered parties’ comments, conducted additional analyses, and developed recommendations on how to modify SGIP per SB 412 • Sept 2010 Ruling: Set schedule for filing written comments and issued the SGIP Staff Proposal with Energy Division’s preliminary recommendations • Intent of this workshop is to solicit feedback from parties on inputs and recommendations prior to filing written comments • No final decisions have been made regarding modifications to SGIP

  3. SGIP should only support DER technologies that are cost-effective. SGIP should only support technologies that produce fewer GHG emissions than they avoid from the grid. SGIP incentives should provide sufficient payment to stimulate DER technology deployment without overpaying. SGIP incentives should not be provided to technologies that do not need them to earn a reasonable return on investment. SGIP should support behind the meter “self-generation” DER technologies. SGIP should only support commercially available technologies. SGIP should target best of class DER by paying for performance. SGIP incentives should focus on projects that efficiently utilize the existing transmission and distribution system. SGIP should complement the structure of and be coordinated with existing ratepayer supported programs, especially the California Solar Initiative. SGIP Guiding Principles

  4. Methodology: Expected lifecycle emissions of each DER technology are compared with emissions avoided by that technology: Net Avoided Emissions = Avoided Emissions – Emissions ProducedDER Technologies with a positive Net Avoided Emissions pass the screen Technologies with a negative Net Avoided Emissions failed the screen GHG Emissions Analysis

  5. Net Avoided Emissions = Avoided EmissionsElectricity + Avoided EmissionsHeat - Emissions ProducedDER Natural Gas-fueled DER Methodology ARB Electricity Sector Emissions Assumptions • Natural gas technology assumptions: • Project Life - 10 years • Capacity Factor - 80% • Electrical Efficiency Degradation - 1% annually • Efficiency of avoided boiler (for CHP technologies) - 80% • Total System Efficiency Minimum Requirements = 62% • Conversion of natural gas to GHG emissions - 0.05317 Tonne CO2E/MMBTU (conversion factor based on CO2E content of natural gas) • Line losses added to grid electricity avoided – 7.8% • Industry supplied estimates used for electrical efficiency assumptions

  6. Energy Storage DER Methodology Net Avoided Emissions = EmissionsDischarging – EmissionsCharging Grid Emissions Factors for Energy Storage • Energy Storage technology assumptions: • Efficiency Degradation - 1% annually • Round trip efficiency was assumed to degrade by 1% per year • Line losses – 7.8% • Line losses were assumed both in charging and discharging

  7. Example: GHG Analysis for Gas Turbines

  8. GHG Screening Results *Depends on the roundtrip efficiency and the assumption that storage offsets a combustion turbine on peak.

  9. Technology Cost Analysis Installed Costs One time, up front capital costs Wind, FC, GT, ICE, and MT use SGIP data Total cost divided by total capacity for each technology to arrive at average $/W Data used: completed projects through end of 2009 Renewable fuel clean up – adder of $2,500/kW Provided by California Bioenergy Waste heat, Organic Rankine Cycle, and Pressure reduction turbines Provided by TAS, Waste Heat Solutions, and Zeropex

  10. Technology Cost Analysis On-going Costs Operations & Maintenance (O&M) (O&M) costs provided by Itron in June, 2010 In the case of wind & CHP FCs, O&M figure which best represented SGIP size projects was used For example, Itron provided O&M figures for two sizes of wind turbines: $0.002/kWh for a 10kW turbine, and $0.008/kWh for a 1MW turbine CPUC uses the larger figure as it is more of SGIP projects In the case of GTs and ICEs, average of O&M figures used For example, Itron provided O&M figures for two sizes of GTs using NG: $0.021/kWh for a 1MW GT, and $0.017/kWh for 3.5MW GT CPUC uses the average of these two figures, $0.0195/kWh

  11. Technology Cost Analysis Performance Inputs Electrical Efficiency Based on HHV provided by industry representatives via comments Performance Degradation kWh production decreases at 1%/year, fuel consumption held constant Avoided electricity cost PG&E’s A-10 TOU yearly average of $0.118/kWh used for 2010 Utility price escalation 2% is used, based on CEC data covering years 1982-2008 Natural gas forecast 2009 CA MPR used, stated in $/MMBtu for 2010-2020 Overall efficiency of 62% (minimum)

  12. Technology Cost Analysis Financial Inputs Federal ITC Applies to most technologies, shown as upfront capital payment Metering costs Net electricity output ($4,300) Waste heat capture ($17,000) Fuel consumption ($7,500) Tariff based metering costs Derived from PG&E’s A10-TOU Discount rate 5% used as baseline Not included: Depreciation, salvage value

  13. Example: CHP MT without incentives

  14. Technology Cost Analysis Results

  15. Issue: SGIP M&E studies have found that many projects have not performed as expected. Many projects have not maintained minimum efficiency requirements during project life How can SGIP incentivize high-performing projects? Recommendation: Hybrid PBI: Upfront capacity payment = 25% of incentive Annual performance payments = 15% of incentive paid for five years Hybrid Performance Based Incentive(Section 4.4.3)

  16. Issue: Declining incentives can facilitate market transformation for DER technologies. Declining incentive model has proven successful in the CSI Program Should a similar model be used in SGIP to further encourage market penetration? Recommendation: Jan 1, 2012: SGIP decline by 10% Incentives continue to decline each following year by 10% Declining Incentives Based on Market Penetration Volumes (Section 4.4.6)

  17. Issue: The current budget designations – “Level 2” and “Level 3” – are outdated. Based when the program included more technologies, such as solar Should the CPUC maintain carve-outs for renewable and non-renewable technologies? Recommendations: “Level 2” and “Level 3” designations should be eliminated and replaced with “Renewable” and “Non-renewable” categories Energy storage coupled with a renewable DG technology should be funded out of the renewable budget category All other Energy Storage projects should be funded out of the non-renewable budget category SGIP Budget Allocation amongst Technologies(Section 4.4.7)

  18. Issue: Accurate metering and monitoring data is needed for evaluation and PBI payment purposes Recommendations: All SGIP projects must install metering equipment that records the following 15-minute interval data on generation output Fuel input (where applicable) Heat output (for CHP) System charging and discharging (for storage) All SGIP projects are required to provide interval data to the SGIP PAs on total energy consumption for project sites for a period of 5 years Metering Requirements (Section 4.5.2)

  19. Issue: Parties have proposed that SGIP technologies be able to export electricity to the grid and also receive incentives Recommendations: Staff recommends against providing incentives that export electricity on a net basis. SGIP’s purpose is to facilitate self-generation that offsets customer load. For consideration: Allow SGIP projects to export a up to 25% of their output to the gird in order to optimize system sizing Allow Renewable Energy Self-Generation Bill Credit Transfer (RES-BCT) program participants to receive SGIP incentives up to 1 MW Export of Electricity to the Grid (Section 4.5.4)

  20. Issues: A significant number of projects have held reservations beyond the 18-month time limit The SGIP PAs do not have a consistent process for granting extensions Recommendations: The SGIP PAs should submit a quarterly report listing all of the projects that exceeded the 18-month reservation time and list the reasons for the extensions Maximum Reservation Hold Time(Section 4.5.6)

  21. Issue: Cancelled applications that re-apply for incentives create additional processing work and administrative costs for the SGIP PAs Currently, there is no dis-incentive for developers to cancel and re-apply For consideration: Should there be an application fee for SGIP projects? What would be an appropriate application fee scale? Should the fee be a fixed amount or a percentage of the total system cost? Application Fees (Section 4.5.7)

  22. Issue 1: Wind Turbines and Coordination with ERP To date, only 6 SGIP wind projects have been completed The CEC’s Emerging Renewables Program (ERP) has provided the vast majority of incentives for wind projects (466 projects) For Consideration: Consolidate the wind turbine incentives into one program in coordination with the CEC Issue 2: Budget Carve-out for Competitive Grants SGIP incentives may not be the best mechanism to promote the adoption of less commercially advanced technologies For consideration: Dedicate funds from the SGIP budget for a competitive grant program for less advanced technologies Issues for Additional Consideration (Section 4.5.8)

  23. Cost-Effectiveness Model

  24. Comments due November 15th Formal written comments on the Staff Proposal are filed and submitted to the CPUC Service List “R.10-05-004” Reply comments are due December 1, 2010 Informal comments on the Cost-Effectiveness model are due to Itron (not filed with the CPUC Process Office) Cost-Effectiveness comments should be sent via email to the following: Chuck Hornbrook (Chuck.Hornbrook@itron.com) George Simons (George.Simons@itron.com) Neal Reardon (nmr@cpuc.ca.gov) Melicia Charles (mvc@cpuc.ca.gov) Wrap-up and Next Steps

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