California forces utilities to invest in storage

Many of the world’s most important energy storage companies are about to gather at the Energy Storage USA 2015 conference in San Diego. Photo credit: Pacific Gas and Electric Company
Many of the world’s most important energy storage companies are about to gather at the Energy Storage USA 2015 conference in San Diego. Photo credit: Pacific Gas and Electric Company
In advance of the new California energy storage legislation, PG&E (one of the state's three energy utilities, along with San Diego Gas & Electric and Southern California Edison) has been testing battery storage systems. Photo credit: Pacific Gas and Electric  Company

In advance of the California energy storage legislation, PG&E (one of the three utilities, with San Diego Gas & Electric and Southern California Edison) has been testing battery storage systems. Photo credit: Pacific Gas and Electric Company

After two and a half years wrangling, we finally got an agreement… and it was unanimous. On October 17, the California Public Utilities Commission (CPUC) issued a press release confirming that the state’s three utilities would be forced to adopt 1,325MW of energy storage, which must be up and running by the end of 2024.

This is being lauded as a first for the US, an unprecedented step forward in the integration of renewable energy into a major grid system, plus a huge boost for the energy storage industry.

Indeed, Carla J. Peterman, a rising star in Governor Jerry Brown’s administration and the bill’s champion, commented: “This decision represents an important first step in encouraging the storage market and supporting grid reliability.”

Added state assemblywoman Nancy Skinner: “(It) makes our state the global leader in energy storage, spurring innovation and creating jobs across California.”

Many in the administration and beyond have pointed out that California’s renewable energy goals and mandates for carbon reduction, along with the San Onofre nuclear and various conventional plant closures, have created a great environment for energy storage. And now, Assembly Bill 2514 guarantees that market.

Learning to love energy storage

The environmental, renewable energy and energy storage lobbies are, of course, ecstatic. But what about the Pacific Gas and Electric Company, Southern California Edison and San Diego Gas & Electric, the three utilities that have to implement the changes? Again, no surprises here.

According to many reports, utilities have grumbled about what they describe as the ‘arbitrariness’ of both the timescale and the size of the target. San Diego Gas & Electric effectively said the commission had not gone into enough detail as to how exactly energy storage would benefit utilities. There are also gripes that newer technologies are still too speculative to cost adequately.

Well, they would complain, wouldn’t they? But joking apart, utilities have already experimented with energy storage projects of their own, and, as Janice Lin and Alex Ghenis of the California Energy Storage Alliance point out in EV Wind,utilities have much to gain from energy storage.

With the technology, they can ramp up power supply to cover peak demand much more quickly than they can with a gas peaker plant. And energy storage installations are far cheaper to build and maintain, as well as providing the flexibility to cope with the variable supply of intermittent renewable energy.

Mark MacCracken, CEO of thermal energy storage company Calmac, makes the same points in a podcast for Energy Efficiency Markets, adding that storage allows utilities to explore the possibilities of energy arbitrage, as well as improve power quality.

Competitive bids for the energy storage sector

Whatever the utilities think about the new legislative reality, they have until March 1 next year to present their own plans for meeting the mandate. Presuming the plans are accepted, they will form the basis for energy storage developers to draw up projects and submit their bids. The first bidding will start in June 2014 and auctions for ever-larger projects will take place every two years.

In reply to the charge from utilities that many up-and-coming technologies are speculative, the commission says judging commercial viability of bids will play a big part of the selection process.

In fact, the CPUC has bent over backwards to make this legislation as flexible as possible, without sacrificing concrete figures and timelines. For example, there is a near lack of any stipulation as to which technologies should be employed.

With the solitary exclusion of pumped hydro projects above 50MW capacity, the commission has, in theory, opened the door to all and any technologies on offer. This is particularly to be welcomed as a spur to innovation in the sector. Additionally, the utilities have carte blanche to use energy storage as they wish, including capacity, ancillary services and peak shaving.

They can use the data they glean to provide real-world data for further market expansion, another reason for utilities to learn to love energy storage.

Lack of ambition?

The bill may represent a breakthrough by forcing shareholder-owned corporations to adopt a substantial amount of energy storage in a large, economically significant part of the world. But looking at the figures again, you can’t help feeling a little disappointed: 1,325MW is a lot of storage, but only equates to a little over 5.5% of the US’s current installed base.

And the utilities have over a decade to reach that level. There are significant additional mandates in the bill, such as ‘Community Choice Aggregators and electric service providers to procure energy storage equal to 1% of their annual 2020 peak load by 2020 with installation no later than 2024.’ Again, it seems far less ambitious than all the media hoopla would have you believe.

But to see this legislation in isolation would be an error. The CPUC explicitly states that the bill has been engineered to reduce “greenhouse gas emissions to 80% below 1990 levels by 2050, per California’s goals.”

The state has also legislated to increase the amount of renewable energy generated to 33% of total by the end of 2020. These are ambitious targets and to meet them the utilities may have to go way beyond the relatively timid energy storage targets set last week by CPUC. In summary, then, although the target figures are on the low side, the California mandate is significant because it:

  • Sets a precedent for hard-and-fast, binding targets for energy storage.
  • Creates an environment that introduces utilities to the benefits of energy storage.
  • Guarantees a market for energy storage providers.
  • Is not partial to one type of energy storage over another.
  • Is part of a legislative landscape that will necessitate more energy storage in the future.

And as some are pointing out, the looming anniversary of super-storm Sandy is an apposite time to invest in a technology that can make the grid more robust, flexible and better serve communities.

Written by Mike Stone

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