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Washington State Utilities and Transportation Commission Proposes Changes to Planning Paradigms and IRP Models for Energy Storage Technologies

The Washington State Utilities and Transportation Commission (the “WUTC”) has issued a Draft Report and Policy Statement on Treatment of Energy Storage Technologies in Integrated Resource Planning and Resource Acquisition (the “Draft Report”) in connection with two consolidated dockets, UE-151069 and U-161024 (the “Dockets”).  The Draft Report is intended to provide useful guidance regarding energy storage technologies to investor-owned utilities (“IOUs”), vendors seeking to promote energy storage for use by IOUs, and anyone interested in the use of energy storage on electric distribution systems.  The WUTC is seeking comments to the Draft Report by 5:00 pm on Monday, April 3, 2017 for the WUTC’s consideration in preparing its final policy statement on the Dockets.

Before issuing the Draft Report, the WUTC held two formal workshops and solicited two rounds of comments.  Commenters generally agreed that current integrated resource planning (“IRP”) models are inadequate for purposes of capturing the benefits of energy storage technologies.  The following is a summary of the WUTC’s conclusions and guidance with respect to investments in energy storage technologies.

Cohesive Resource Planning To Replace Current Siloed Approach

The WUTC concludes in the Draft Report that current IRP models are inadequate in large part because the planning regime provides for separate evaluations of energy storage technologies within the independent silos of generation, transmission, and distribution. The WUTC notes that energy storage technologies will most likely be required to perform more than one function and that a more comprehensive framework must be used to properly evaluate the “stacked” costs and benefits of energy storage across these functions

Mandatory Evaluation of Energy Storage Technologies

To that end, the Draft Report requires that any IOU seeking a prudence determination from the Commission for any investments in generation, transmission, or distribution projects must demonstrate that the IOU’s analysis of alternative resource options has included a storage alternative and has considered all of the associated costs and benefits of each option.  Consistent with previously established principles of prudence with respect to resource acquisitions[1],the IOU must also demonstrate that it has adequately evaluated a range of energy storage technologies against other options in its IRP.  Analyzing only one or two types of storage technologies will not be sufficient. Finally, the Draft Report finds that given the trend of rapid cost declines for various energy storage technologies, IOUs should apply a reasonable learning curve to account for forecasted cost declines, particularly with respect to modeling such resources at a size sufficient to be captured within the IRP model.

Shift From Traditional Hourly to Sub-Hourly IRP Models

The WUTC further concludes that traditional hourly IRP models do not adequately recognize the benefits of energy storage technologies.  The WUTC intends to set a reasonable timeline for requiring the use of sub-hourly models in its ongoing IRP rulemaking.  In the meantime, the Draft Report directs IOUs to use an external model capable of measuring sub-hourly benefits, including transmission and distribution benefits, to model energy storage over the resource’s useful life, and then calculate the net present value of those benefits and deduct that value from the resource’s modeled capital cost in the IRP.  The WUTC recommends that cost data in modeling assumptions be procured from reliable, independent third parties.

Competitive Procurement and Funding

The WUTC notes that energy storage resources should be competitively procured through requests for proposals. However, the WUTC also notes that it is willing to accept some degree of uncertainty with respect to the benefits of energy storage acquisitions.  The Draft Report indicates that the WUTC will even consider and give weight to energy storage acquisitions that are not the least-cost option, provided that they are reasonably competitive.  The Draft Report also provides that IOUs will be expected to demonstrate that they have been actively pursuing funding opportunities to effectuate cost sharing between government agency grants and ratepayers to minimize risks inherent in evaluating new products and services.

Looking Ahead

The WUTC concludes the Draft Report by noting that the WUTC is open to considering an IOU’s procurement of energy storage resources as a component of the IOU’s rate base, but that such procurement must follow the guidance in the Draft Report.  Because Washington is not part of an organized energy market, it would not be subject to the recently proposed rules of the Federal Energy Regulatory Commission (“FERC”) to remove barriers to entry and improve market access for energy storage resources.  However, it is clear from the Draft Report that the WUTC intends to follow FERC’s leadership in requiring IOUs to quantify and monetize the value of energy storage in their IRPs and ensure that IOUs will identify and pursue energy storage projects that will improve system operations and reduce costs for ratepayers. The Draft Report provides tremendous opportunities for investors, vendors, and other stakeholders in the energy storage sector.  The Draft Report may also be a model for other states in evaluating how to better incorporate energy storage into their resource planning programs.


[1] See WUTC v. Puget Sound Energy, Inc., Docket UE-031725, Order 12, ¶19 (April 7, 2004).

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Copyright 2020 K & L GatesNational Law Review, Volume VII, Number 87
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Vanessa Pronovost, KL Gates Law Firm, Banking and Finance Attorney
Associate

Vanessa Pronovost is an associate in the firm’s Portland office, focusing her practice on sophisticated finance transactions, including domestic and international acquisition finance, mezzanine finance, project finance and asset-backed finance. Vanessa’s clients include private equity funds; investment, commercial and development banks; project sponsors and borrowers. Her energy industry experience includes representation of lenders and borrowers, private companies and other project participants in connection with the financing and private acquisition of renewable and...

503-226-5789
Eric Jay, KL Gates Law Firm, Corporate Law Attorney
Associate

Eric Jay is an associate in the firm’s Seattle office. His practice focuses on corporate transactions, including mergers and acquisitions, venture capital financings, emerging growth companies, and project finance. He also dedicates part of his practice to assisting clients with energy transactions and electric utilities law issues. Mr. Jay joined K&L Gates in 2014

206-370-8032
Molly Suda, KL Gates, electricity markets lawyer, FERC compliance attorney
Associate

Molly Suda focuses her practice on regulatory compliance, enforcement, and transactional matters involving electric utilities, electric transmission owners, independent power producers, power marketers, and public utility holding companies that are active in the electricity, capacity, and ancillary services markets in the United States. Ms. Suda regularly represents clients before the Federal Energy Regulatory Commission (FERC), federal courts, and the Department of Justice and advises on issues before state public utility commissions. Ms. Suda has represented clients in...

202-778-9452
William H. Holmes, KL Gates, Hydroelectric infrastructure projects lawyer, energy transactions attorney
Partner

William Holmes is a partner in the firm’s Portland office. He focuses his practice in the area of energy and infrastructure projects and transactions with an emphasis on wind energy, solar energy, hydroelectric power, geothermal, biomass, natural gas, carbon offsets, and energy storage. His experience extends into corporate transactions, water law, and real estate law. Bill also advises clients in negotiating major power purchase agreements, acquisition and sale of energy projects, EPC agreements, O&M agreements, fuel supply, and energy project development agreements...

503-226-5767
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