The California Public Utilities Commission is scheduled to vote on a proposed decision at its Aug. 2 business meeting aimed at pushing forward with the integration of energy storage into the state's power generation mix.

The proposed decision, if approved, would adopt an April 3 staff proposal for an energy storage framework. "We find that the final proposal is a significant step forward in establishing policies for the procurement of viable and cost-effective energy storage," the proposed decision said. But the multifunctional capabilities of energy storage mean that it cannot be evaluated and considered on a "one-size-fits-all" basis, it said.

"We believe that there is a need to divide energy storage applications into separate, discrete functions," said the proposed decision, published July 2. "At the same time, however, we agree with staff and parties that energy storage attributes must be considered in a comprehensive manner to identify opportunities where storage could provide value to the electric system. Consequently, it is imperative that we develop a process that will allow this to occur. We believe that the final proposal does just that."

The proposed decision is part of a two-phase proceeding at the CPUC. The first phase addresses questions about how to integrate energy storage into utility portfolios and encourage policies that support cost-effective technology. The CPUC is using the second phase to delve into cost-benefit analysis and allocation such as how to value energy storage attributes and how different customer classes should pay for these technologies.

The CPUC's energy storage proceeding is mandated under a 2010-enrolled bill, A.B. 2514, which requires the regulators to determine "appropriate targets, if any, for each load-serving entity to procure viable and cost-effective energy storage systems." By Oct. 1, 2013, the CPUC must adopt an energy storage system procurement target, "if determined to be appropriate," to be achieved by Dec. 31, 2015, and a second target to be achieved by Dec. 31, 2020, according to the bill.

Any CPUC-set target would apply to the state's investor-owned electric utilities, including PG&E Corp. subsidiary Pacific Gas and Electric Co., Edison International subsidiary Southern California Edison Co. and Sempra Energy subsidiary San Diego Gas & Electric Co.

Without setting any specific energy storage targets, the CPUC in the proposed decision took the step of defining what energy storage is as "a common starting point" for all parties, opting to focus on a "technology-neutral" approach that covers applications throughout the energy system. "Energy storage system means commercially available technology that is capable of absorbing energy, storing it for a period of time, and thereafter dispatching the energy," it said, further defining a storage system as centralized or distributed and one that uses mechanical, chemical or thermal processes to store energy.

Also in the proposed decision, the CPUC said it would create an analytical framework of energy storage focused on end-use value. "We realize that several parties are concerned that the proposed framework and iterative nature of the analysis approach could delay the implementation of energy storage systems. However, we believe that this concern has been addressed [through] the prioritization of end-uses. This prioritization would allow us to evaluate energy storage opportunities in a manageable manner," it said.

"We believe that focusing on the end uses and applying them to specific scenarios will reduce the risk that this potential resource will be undervalued," the proposed decision said. "More importantly, this approach will allow us to determine the need for storage in relevant situations and set targets, if necessary, to meet this need. Therefore, the proposed framework should not prevent progress in policies for individual end-uses or applications, as analyses and results become available, while the larger evaluation continues."

In its proposal, CPUC staff recommended that "a resource adequacy value be identified for energy storage systems and that long-term procurement plans [by the state's IOUs] develop a process for energy storage to participate in utility procurement practices." Doing so would mitigate many of the identified barriers to widespread use of this technology, staff said.

"This effort will need to be coordinated with the California ISO to encourage policies and define products to enable electric energy storage systems to participate in its markets similar to other generation facilities," the staff proposal said. "In parallel, the CPUC will continue to evaluate electric energy storage to make a determination whether or when an energy storage portfolio standard could be adequate."

Copyright 2012 SNL Financial LC. All Rights Reserved.

(Originally published July 25, 2012, in SNL Power Daily with Market Report.)