In response to California's 2022 forecasted 4.4 GW electric capacity shortfall and Governor Gavin Newsom’s Emergency Proclamation, the California Public Utilities Commission (CPUC) has passed a decision (latest version here) creating a new Market Access program to deliver peak or net peak demand savings to improve summer grid reliability.
The initial funding for the program allocates $150 million over the next two years, with the potential to expand depending on successful deployment. Several parties, including Recurve, supported this market model as a means to quickly scale the behind-the-meter resources in a short time frame and leverage the capabilities of a wide range of vendors in the state that are currently boxed out of the current procurement models. The Market Access program is largely modeled after the Demand FLEXmarket currently operating in California.
New Energy Efficiency Programs - A new energy efficiency program for the Summers of 2022 and 2023 for rapid deployment of energy savings at peak or net peak times, with payments to consumers made on a performance basis and energy savings measured at the meter; and augmentation of several existing energy efficiency programs that have proven to deliver savings rapidly and reliably.
~ CPUC Press Release
The CPUC’s decision also suspends the cost-effectiveness requirements for this program model and instead caps payments at the total system benefits delivered to address the emergency. While this change dramatically increases the value of delivering demand flexibility in the FLEXmarket, fundamentally it creates a much clearer delineation of the value proposition for the grid investment versus customer investment. Aggregators are incentivized to deliver targeted impacts for the grid, customers will have a wider range of options to save money, and ratepayers only have to pay for reductions actually delivered.
"In addition, this type of program is very low risk to ratepayers regardless of cost-effectiveness score, because actual energy savings are measures based on NMEC methods, payments to aggregators are made based on performance, and spending is limited by the TSB actually achieved." ~ CPUC Proposed Decision at p. 26
The Market Access Program is based on MCE/Recurve’s Peak FLEXmarket and opens the opportunity for any program administrator to stand up a similar market in their service territory. Recurve’s Demand FLEXmarket model is standing ready to address peak challenges and accelerate the implementation of energy efficiency and demand response as a demand-side resource. Recurve’s Demand FLEXmarket fulfills all CPUC requirements for the Market Access Model.
We are ready to support Program Administrators with filing a Tier 2 advice letter addressing program requirements and encourage implementers and aggregators in California and beyond to talk to us about how to join a FLEXmarket today.
We are excited to take a leading role in helping to transform demand flexibility into a true resource in California and beyond.
The proposed rule addresses Governor Gavin Newsom’s July 30, 2021, Emergency Proclamation urging all state energy agencies to ensure there is adequate electricity to meet demand.
The governor’s proclamation comes in response to the rolling blackouts that occurred during the August 2020 heat storm. In response to that catastrophe, the CPUC took up the issue in the Emergency Reliability Rulemaking (R.20-11-003) and also considered action in the long-standing energy efficiency proceeding (R.13-11-005) to quickly make more resources available to prevent a recurrence in the summer of 2021 and beyond.
As part of these proceedings, the CPUC sought proposals from parties to help augment and accelerate efficiency projects before the summers of 2022 and 2023, reduce electricity load overall, add efficiency programs or measures that target peak hours, integrate efficiency with demand response and other clean energy investments (such as solar and storage), remove rules that may create barriers, and add financing options that would accelerate energy efficiency or demand-side investments among other goals.
In their responses, many parties agreed on the critical need to de-silo resources and reevaluate the total resource cost test and modify the Avoided Cost Calculator (ACC) to reflect the true value of load reduction during peak hours.
Summary of the Decision’s Key Points
- Creating “Market Access” programs
- Creation of “Market Access” program based on FLEXmarket.
- An additional $11 million for MCE Demand FLEXmarket for 2022 and 2023.
- $150M in new funding allocated to “market access” (FLEXmarket) programs for 2022 and 2023
CPUC determines that a $300M budget is warranted after demonstrating success:
“In assessing the appropriate budget cap for this program, we evaluated the proposal of Recurve that was based on MCE’s current program and territory size (in terms of customers and energy usage on their system). On that basis, a statewide budget of approximately $300 million per year would be warranted, but given that we have not yet authorized such a program on this scale, we will be more conservative.“
- $150M in new funding focused on rapid deployment of peak-focused flexibility for 2022 and 2023.
- Suspension of cost-effectiveness requirements, the inclusion of a peak kicker to drive additional reliability-focused impacts.
- FLEXmarkets are not part of the overall portfolio cost-effectiveness calculation, which removes the downside risk for utilities.
- An addition of a summer peak weighting of the avoided cost values signal further increases the value of flexibility in the FLEXmarket for summer reliability.
- Utilization of Population NMEC Rulebook.
- Beneficial Administrative Rules
“In addition, all summer reliability efforts will be required to provide weekly or monthly savings reporting to the Commission, including up-to-date forecasts of peak or net peak savings, based on completed installations and enrolled customers.”
- Recurve is the only firm that has the technology to deliver on these reporting requirements.
The requirement to use Population NMEC requires open-transparent pre-approved tools and at least 50% paid on performance.
Watch these videos to learn more about how FLEXmarket "Market Access" programs can help grow your efficiency business.
Check out the FLEXmarket website to learn more about how CCAs are already successfully deploying this model.