By Jason Deign
Independent power producers (IPP) considering the booming California energy storage market will most likely target short-term, power-based applications, Energy Storage Report has learned.
“IPPs will focus on power applications just because of the design of the [storage] target,” said SunEdison’s director of Grid Energy Storage, Faisal El Azzouzi, ahead of his appearance at Energy Storage USA 2015.
SunEdison is evaluating energy storage technologies and applications with a view to possible deployment in California, where a 1.3GW mandate through Assembly Bill 2514 (AB2514) is creating interest in new projects.
However, said El Azzouzi, the structure of the Californian market drives IPPs to focus on short-term storage applications and leave longer-duration tasks, such as energy shifting, to the utilities.
In essence this is because he believes long-duration storage is more costly to implement, which makes it more difficult for IPPs to develop since they are not able to pass costs onto ratepayers.
“Load shifting is expensive”
“Energy applications such as load shifting, with more than an hour duration, are higher-cost assets, which most likely utilities will want to own and rate base,” El Azzouzi explained.
“The rest of the stuff, which is the power applications, is what is really left for IPPs to fight over in these first rounds of California investor-owned utility procurement. We don’t have the luxury to own these assets and rate base them.”
If correct, this assessment means California storage projects from IPPs will be mostly aimed at delivering short-term services such as frequency regulation, super peak shaving and ramp control.
Meanwhile utilities will have to find ways to deal with California’s famous duck curve themselves.
Alongside other industry leaders, El Azzouzi will be discussing the lessons learned from recent Californian requests for offers in more detail this year’s Energy Storage USA 2015 conference in San Diego, on July 7 and 8.
Commercial energy storage in California
SunEdison has yet to build a commercial energy storage project in California.
But it has plenty of experience thanks to its acquisition of Hawaiian wind-plus-storage projects through First Wind in 2014 and its purchase of Solar Grid Storage’s assets, project pipeline and development team earlier this year.
“We have batteries providing power and energy services in Hawaii alongside our wind farms and solar with storage assets participating in frequency regulation on the east coast,” El Azzouzi said, likening the present energy storage market to the early days of solar.
Already, he notes, there is a clear need for storage to stabilise grid supplies on island grids such as that of Hawaii. But few customers are willing to pay a premium for such services in mainland environments.
This means IPPs have to evaluate storage projects according to strictly commercial criteria, and seek out applications that can pay for themselves from the outset.
A major opportunity for IPPs
Nevertheless California represents a major potential market for IPPs because AB2514 specifies that 50% of the 1.3GW mandate should be third-party owned, El Azzouzi said.
When it comes to the kinds of technologies that might be used in this market, however, IPPs such as SunEdison share utilities’ concerns over adopting non-mainstream products that are not backed by a reputable brand.
“In solar, the buzzword was bankability,” El Azzouzi said. “Same thing here.
“The technology could be solid but if there is no solid balance sheet behind it then we are taking on a risk.
“Our preference is the big companies that are willing to offer guarantees.”
A US focus on short-term, power-based applications also favours the use of lithium-ion battery technologies, in contrast to SunEdison’s use of Imergy flow batteries for rural Indian microgrids.
How energy storage developers might be able to overcome the challenges associated with commercialisation is one of the key themes that will be covered in Energy Storage USA 2015.
The commercialisation of storage
The event will feature experts such as Peter Davidson, executive director of the US Department of Energy Loan Programs Office and Rosalie Roth, Energy Contracts, Southern California Edison.
Jack Ahearne, head of renewable strategy for Energy Storage USA 2015 organiser FCBI Energy, said: “This is the only event in the United States focused exclusively on the commercialisation of storage.
“Any company that is serious about the US market should try to attend. We expect some of the intelligence-sharing here to be critical in developing company strategies over the next 12 months.”
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