California Utility Research Council
Annual Technology Conference
November 2-4, 1998
Costa Mesa CA

Background Information —————–

——- Who is CURC? ——-
CURC (California Utility Research Council) was established by the California Legislature (Public Utilities Code, Sections 9201-9203) in 1984 to:

– Promote consistency of utility RD&D programs with state energy policy
– Prevent unnecessary duplication of research efforts
– Encourage the free exchange of information related to utility RD&D projects where appropriate
– Identify opportunities for research coordination between energy utilities and for joint funding of RD&D projects of benefit to California ratepayers

CURC Board includes representatives from the CPUC, CEC, PG&E, SDG&E, SCE, and SoCalGas. [Recently, a new category of “Associate Member” was created, and includes CIEE, CMUA, EPRI, GRI, LADWP and SMUD.]
Website —- http://www.curc.org

——- Restructuring and Public Interest R&D ——-
Restructuring of the electric and natural gas industries is having a dramatic effect on the energy RD&D landscape in California. Previously, most of this work was funded by ratepayers and managed by the four largest investor-owned California utilities: PG&E, SCE, SDG&E, and SoCalGas. Supplemental funding for California RD&D interests was provided by GRI, EPRI, and Federal Agencies.

Restructuring is providing new opportunities for collaboration of energy RD&D efforts. Recent California legislation (AB1890) has made available $62.5 million per year for public interest energy RD&D to be managed by the California Energy Commission (CEC). Utilities will continue to fund ratepayer RD&D activities, although on a lesser scale. It is also expected that there will be an increasing interest in shareholder-funded technologies by energy companies seeking a competitive advantage. Finally, restructuring will have a direct effect on programs offered by EPRI, GRI, and perhaps even Federal Agencies.

——- Purpose ——
– To help attendees better understand how all of the energy RD&D pieces fit together in a restructured environment.
– To provide participants with an overview of technology trends and energy RD&D collaboration activities which benefit California.
– A first hand look at how the California PIER (Public Interest Energy Research), Renewables, and Energy Efficiency programs are being implemented.
– Opportunities to network directly with peers and funding agencies.

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Highlights from the Conference

– Keynote : “California’s Electric Restructuring: a Stunning but Secret Success”
Phil Romero, Chief Economist, Office of the Governor, outlined how rapidly the transformation of California’s electric industry has proceeded and the significant benefits already being realized. He summarized the “deal” struck between all players on stranded assets and rates (recently upheld by the defeat of Proposition 9), and replied to some of the criticisms — there are consumer choice, numerous competitors, and longer term benefits of a renewed generation base, new energy services, and the chance for California to be a winner in world energy service markets.
One surprise was the high price paid in auctions of the fossil power plants. On average, they have sold for 2.5 times more than anticipated. The CEC had expected a “fire” sale. Book value seems to be irrelevant–the underlying issue seems to be the cost to rebuild at a greenfield sight.
California needs to prepare for a population that is expected to double within the next 25 years.

– Keynote: Telecomm RD&D Transition
Peter Magill, Bell Labs reviewed what happened to Bell Labs as AT&T was broken up in the 1980’s, and how the R&D evolved. Under the regulated monopoly, R&D was decoupled from the needs of the business. Interest and dollars dipped and work became much more targeted under the local operating companies and long distance provider. Now Lucent, the new owner of Bell Labs, dedicates 1% of revenues to an agile and strategic research program, and regards it as critical to their success. He noted the complex array of technologies and markets that are converging now in the telecomm industry, and outlined the opportunities for energy utilities to play. In particular, they have no legacy networks to overcome, and have the chance to leapfrog technologically, avoiding a “me-too” approach.

— National R&D Needs and Programs

– EPRI – an overview of EPRI’s continuing process of providing more options, and exploring new ways of providing services.

– GRI – FY 1999 R&D Plan is on their website (www.gri.org). GRI has just done a major reorganization with business units focused on customer segments, and offering staff services on a competitive basis. GRI’s traditional funding mechanisms are disappearing, so they are looking at new business models.

– Livermore and Idaho National Labs – representatives presented overviews of their programs. LLNL sees their advanced computing for weapons modeling as a capability that can make contributions in energy, and expect hydrogen to play a major role in the future. INEEL offers capabilities in environmental management and systems integration, and Lockheed Martin has strong incentives to work with industry and commercialize technology under its management contract.

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— California Utility R&D Perspective

1998 is the last year of ratepayer funded research by electric utilities in California, as the transition proceeds (with the CEC public interest programs–see below). Corporate R&D departments have been disbanded, and the function decentralized completely into separate business units, for each to pursue according to their own priorities. Human and financial resources are declining dramatically, and there is little or no coordination among departments.

PG&E – In 1999, R&D funding will come from foreign utilities, the CEC PIER program, co-funding, and department operating funds. R&D must compete with maintenance projects for funding, and is expected to be about 1/4 of 1998 levels. Current programs of interest include: Information technology, Environmental impacts and compliance, Real time data for customer decisions, Life extension, Pipeline rehabilitation, Fitness for service–better utilization of assets, and Underground construction activities. Needs include: Reducing the time to bring technologies to the field, Producing products in a shorter timeframe, Looking to others for fundamental research. PG&E expressed concern over loss of in-house expertise. There is a need to collaborate and work with other utilities/research organizations toward reaching common goals.

San Diego Gas & Electric – R&D funding is now focused on technology development and application for core business. A four to five year time horizon for a new product is too long. Programs must focus on the near term – one to two years. SDG&E has interest in programs that increase system reliability, improves performance, and minimizes service.

So Cal Edison – In 1997, SCE spent $30 million in R&D related activities. The 1998 budget was $1.5 million. It has disbanded its research department. Research activities are being conducted by the business units and Edison Technology Solutions, which is a new unregulated unit competing for R&D funding, notably the CEC PIER program. With strong affiliate transaction restrictions in effect, ETS and SCE must keep very separate, and carefully handle any contacts between them.

Sacramento Municipal Utility District – Unlike the IOUs, SMUD’s R&D programs are stable. They are spending 3.7% of their revenues on R&D. SMUD is interested in photovoltaics for parking lots and rooftops and renewable programs. SMUD’s R&D funds are committed, but they welcome collaborations. They will use their funds, others will have to use their funds. Current areas of interest include: landfill gas, fuel cells, microturbines, and wind.

All the utilities represented at this meeting are looking for third party funding—federal, state, partnering arrangements. Utilities can supply test beds for new products and systems, and are interested in collaborative research.

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— Environmental R&D

California EPA – is a family of regulatory bodies, including the Air Resources and Water Resources Boards. The Innovative Clean Air Technology Program (ICAT) has been set up to help new technologies thru the “valley of death” by providing funding, guidance, and certification for new technologies trying to become commercial.

South Coast Air Quality Management District – In So. Calif, 88% of NOx and two-thirds of VOC emissions from mobile sources. The SCAQM spends nearly $5 Million per year to advance new technology solutions to air quality–priorities include fuel cells, electric/hybrid vehicles, and stationery VOC source reduction. They look for cost-sharing, and will accept unsolicited sole-source proposals.

CEC Environmental R&D – The CEC has its own role in supporting energy related environmental R&D focused on improved siting and regulatory decisionmaking. Topics include upper atmosphere NOx transport modeling, avian mortality and wind turbines, and power plant water sources.

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CEC – Public Interest Energy Research (PIER)

(Extensive information is available at http://www.energy.ca.gov/research

Questions regarding PIER should be directed to Mike Batham
of the Commission’s Energy Development Division at:
916-654-4548, MBatham@energy.state.ca.us

PIER is for “public interest” not for regulated utility or competitive research, though it is recognized that the boundary is fuzzy.

Stage I is nearly complete, and Stage II is about to start.

In Stage I, three 1998 solicitations have been completed, with 83 projects approved for funding totaling $53 million through June 1999 (FY).
– One-time Transition Project Funding, for up to one year to continue ongoing (ratepayer-funded) public interest energy RD&D projects
– 1st General Solicitation funding, for projects in Environmental, Advanced Generation and Renewable Research
– 2nd General Solicitation funding, in End Use Efficiency and Strategic Research

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UFTO has an electronic version of the complete listing of these projects that was handed out at the conference. It is available on the UFTO website, or on request. Send an email to pierprojects@ufto.com
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Other accomplishments include establishment of the “Small Grants” program ( $2.5 Million for grants up to $75K each for concept development–announcement due soon, with grants early in ’99). Also, membership in seven EPRI targets has been approved ($1.5 Million).

PIER has a14 member Policy Advisory Council with representation of industry, universities, government and environmental groups.

Stage II Funding is organized around six Program Areas, with a staff team for each area. The team leaders, which in some cases are interim at this time, are listed in the respective program area.

– Industrial/Agricultural/Water — John Sugar, 916-654-4563
– Residential and Commercial Buildings — Nancy Jenkins, 916-654-4739
– Energy-Related Environmental Research — Bob Eller, 916-654-4930
– Environmentally-Preferred Adv. Gen. — Mike Batham, 916-654-4548
– Renewables — George Simons, 916-654-4659
– Strategic — Tom Tanton, 916-654-4930

Each team has compiled a list of high-level issues, based on input from focus groups, the Policy Advisory Council, and the Commissioners. These draft issues are still a work-in-progress as the teams proceed with the next steps: (1) identification of program goals and objectives; (2) prioritization of technical issues corresponding to the high-level issues; and (3) funding options and strategies. (Note: The complete document is available online and as an Acrobat pdf file).

CEC claims it has “streamlined” the contracting process. The Commissioner admitted that the contracts offered previously were difficult to accept. A team has recently reviewed and modified the terms and conditions (T&C’s). The T&C’s now used are in the best interests of the program—not the State’s. Modifications will be very difficult to get in the next solicitation. It was strongly recommended that the T&Cs be reviewed before preparing a bid, and be ready to accept them if selected for an award.

The next solicitation opportunity is tentatively scheduled to be released late winter (likely in February). A series of solicitations will address clearly defined target areas. There is no policy in place for reviewing, approving, or handling unsolicited proposals, and they are distinctly not encouraged. Would-be applicants probably would do well to contact CEC program staff informally to explore their ideas.

Criteria include: eligible organizations, public interest benefits in California, technical merit, credible team and schedule, policy fit — scores by independent evaluators are weighted, added and ranked. Matching funds can be zero if benefits are 100% public–must increase in proportion to non-public benefits.

NOTE: A proposal does not have to be submitted by a California company, nor does it have to be performed in California. There is no “favorable weighting” for California companies in the PIER program. The program, however, must clearly benefit California rate payers. The program requires matching funds. There will be a PIER workshop in January or February.

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The Other Public Benefit Programs

There are two other major “public benefit” programs that were established under AB1890 restructuring that represent a much larger $ resource than PIER — Renewable Technology, and Energy Efficiency. Presentations and discussions explored how these programs bridge to or overlap with PIER.

— Renewable Technology Program (www.energy.ca.gov/renewables)

AB1890 provided for $540 Million ( of the “Public Good Charge” to be collected from the IOUs) to support existing, new and emerging technologies, and SB90 codified recommended allocation and distribution mechanisms. Basically, there are four separate “accounts” (existing, emerging and new technologies, and consumer-side), all of which provide some form of “buy-down” for renewable generation, with no participation in any form of RD&D. The purpose is to encourage the renewables industry to accept and promote new renewable technology.

— Energy Efficiency (www.cbee.org)

The Calif. Board for Energy Efficiency (CBEE) is a Board established by the CPUC to administer these funds–roughly 10 times the budget for PIER. Under “standard performance contracts, payments are made for measurable energy savings achieved by installation of specific energy-efficiency projects. Savings must be measured and installations verified under standardized program rules. There are also “market transformation” programs providing commercial downstream incentives, LED traffic signal standards, commercial surveys, and a demonstration programs for a premium efficiency relocatable classroom. Nearly 1/3 of the funds will go towards residential programs, e.g. contractor training and labeling programs. Contact Mark Thayer, 619-594-5510

— Bridging PIER (R&D) and the Renewables/Efficiency Programs
California Institute for Energy Efficiency http://eetd.lbl.gov/CIEE/
(CIEE plans, funds and manages a statewide energy R&D program)

CIEE outlined some their own programs, and offered ideas to bridge the gaps between R&D and these two programs. PIER can’t support demonstrations unless they “add to the knowledge”, and the CBEE needs more latitude for emerging technology. PIER needs to awareness of market needs. There is a need to prove cost effectiveness to market participants, etc.

An important element for bridging the gap is the multi-year program strategy that enables orderly transitions from R&D to demos to commercial use. Multi year projects should have advisory committees, direct involvement by market representatives, and deliberate plans for disseminating results in appropriate venues. CIEE also recommends that research be done directly on market processes themselves–barriers, incentives and decisionmaking.
Contact: Jim Cole, CIEE Director, 510-486-5380, jwcole@lbl.gov

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Calif. Trade and Commerce Agency, Office of Strategic Technology (OST)
Pasadena CA http://goldstrike.net

Steve Jarvis, 626-568-9437, sjarvis@goldstrike.com
Richard Keeler, ” ”

This agency provides resources, support, funding and access to various state and federal programs to help California companies to be successful and compete globally. OST partners with other organizations that seek to help the formation of partnerships and enable industry to move forward. A total investment 5 year investment approaching $1 Billion has been realized, leveraging funds from federal, state and private sources.

Companies seeking help must meet strict criteria as businesses (i.e. not just technology), much as venture capital investors require.

OST programs include the Calif Technology Investment Partnership, Regional Technology Alliances, Calif. Manufacturing Technology Program, Calif. Information Infrastructure, and NSF Research Centers.

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Other agenda items included:

A series of presentations of a sample of PIER funded research projects:
– Waste water and agricultural technology demonstrations
– Monitoring and Diagnostic system for Commercial Buildings
– Global Climate Change–scenarios and analysis
– Low emission Gas Turbine Combustor for Distributed Gen.
– Photovoltaic system implementation

Customer view of RD&D Needs
– Calif. Manufacturers Assoc.
(want certain end in 2002 of ratepayer funded R&D)
(suggest a number of energy conservation items for work til then)
– Applicant Design of Gas and Electric Distribution systems
(evolving to include private ownership and O&M, with many
resulting legal, regulatory and technical issues)

Panel Discussion on Improving Collaborative RD&D Processes

Past Successes of CEC and IOU research (under the old framework)
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