On May 16, 2019, the California Public Utilities Commission (CPUC) issued a decision establishing a cost-benefit framework comprised of four cost-effectiveness tests. This framework will be used to evaluate distributed energy resources (DER) in regulatory proceedings. The most notable impacts of the decision are the revised greenhouse gas (GHG) adder value to existing cost-benefit tests, the creation of a new test to measure societal impacts and environmental externalities, and the universal application of the tests across multiple proceedings. The framework will be applied as the state pursues its aggressive climate goals, including 60% of retail load served by renewable generation by 2030 and 100% served by zero-carbon generation by 2045.
The immediate impact of the cost-benefit framework order will be felt in the revisions to the GHG adder values and the consistent application of the tests across proceedings.
The GHG adder will, as intended, favor resources that produce less, or zero, GHG emissions. Should the CPUC adopt the SCT with its more expansive definition of the social cost of carbon than the GHG adder, non-emitting resources may become even more attractive.
The universal application of the framework is an ambitious step to link planning functions that traditionally have been conducted separately. For California, generation and transmission planning in IRPs must now be coordinated with distribution planning in the IDER/DRP and the utility-run DER programs. Establishing this consistency across planning functions has been challenging for the industry, as, historically, these have been addressed in different regulatory proceedings, performed with different frequencies and time horizons, and coordinated with different utility planners and stakeholders. Looking ahead, the long-term forecasts and procurement for the bulk system will need to account for the uncertainty inherent in distribution planning, requiring tighter coordination and common assumptions between energy supply, transmission, and delivery analysts. Lessons learned through this effort will inform DER integration planning and IRPs elsewhere.
This report is part of the Grid Edge Minute series. To view all featured Minutes, please click here.
Additional Contributing Author: Todd Bates
Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.