Marketwatch: California leading on US storage

By BEN COOK

  • California has lion’s share of US energy storage pipeline
  • Earlier this year, state set 15GW storage target
  • The Golden State’s grid was on brink of collapse this summer

The US state of California is widely recognised as having one of the world’s most vibrant energy storage markets.

It’s a part of the world that is brimming with storage evangelists and, consequently, it was no surprise that a report published by American Clean Power earlier this year highlighted how California was the US state with the most battery storage capacity in development, with a total of 5,773MW.

In summary, the ‘Golden State’ accounts for 41 per cent of the US’ total storage pipeline. These figures put California above second-placed Texas(2,415MW), third-placed Nevada (1,473MW) and fourth-placed Arizona(1,116MW).

But California is by no means satisfied and wants to boost storage deployment even further.

‘Unprecedented’ storage deployment

In February this year, the California Public Utilities Commission (CPUC) decided it was time to ‘go big or go home’ and approved a $49 billion clean energy plan, which not only included provision for 25.5GW of renewables, but also 15GW of storage in the state by 2032.

In other words, the plan aims to develop enough renewables and storage to power no fewer that 11.5 million Californian homes.

Clifford Rechtschaffen, commissioner at CPUC summed it up by saying the renewables and storage procurement plan was “unprecedented”. 

Innovative financial instruments

The reason why California has such a large storage pipeline is that it has a high solar penetration rate and it needs to shift electricity generated by solar to other periods of the day.

The state’s status as a frontrunner in the area of solar and storage was showcased at the end of last month when Intersect Power confirmed the $3.1 billion financial close of one of the US’ largest ever solar-storage portfolios, which includes the Oberon I and II projects in California, which total approximately 685 MWp of solar and 1GWh of battery energy storage.

The solar and storage sector in California has been at the forefront of the development of ground-breaking financing instruments aimed at making projects more appealing to investors. One such example was renewable energy provider Terra-Gen’s completion of the $959 million financing of the second phase of its Edwards Sanborn Solar Storage facility in Kern County, California. The latest phase of the development is composed of 410 MWac of solar capacity and 1,786 MWh of battery storage. 

As Terra-Gen CEO Jim Pagano highlighted, the second phase of the project included an innovative offtake structure that meant the project was “well received in the financing markets and allows us to raise the capital necessary to progress the construction of this transformative project”.

Sophisticated credit facility

Elsewhere, in August this year, Arevon Energy secured a $400 million green loan fund credit facility, it’s first ever such facility, from Canadian Imperial Bank of Commerce (CIBC) and KeyBank N.A. to finance development of a 6GW pipeline of solar and storage projects in the Midwest, Southeast, and California.

Brian Callaway, Arevon’s chief financial officer, indicated that the company’s clout in the financial markets meant that it was able to convince the banks to offer what was a sophisticated two-year facility with an innovative hybrid borrowing base, consisting of uncalled capital with an additional net asset value component. “Complex financial engineering and access to facilities like this are a key part of our competitive advantage,” said Callaway.

Go-ahead for flow batteries and gravity-based storage

Meanwhile, last month, the Sacramento Municipal Utility District (SMUD) placed its faith in long-duration iron flow batteries with the announcement of a deal with ESS for the provision of 200MW / 2GWh of ESS’ systems, which will be integrated into the SMUD electricity grid from 2023. “Long-duration battery technologies move SMUD’s 2030 Zero Carbon Plan forward by expanding our dispatchable renewable energy resources and opening doors to innovation, job training and development opportunities in the green energy sectors,” said Paul Lau, CEO and general manager of SMUD.

Gravity-based storage also appears to be ‘en vogue’ in California. Energy Vault, a gravity-based storage technology company, last month signed an engineering, procurement and construction contract with Wellhead Electric Company, Inc and W Power (described as a “woman-owned business enterprise”) for the deployment of a 275.2 MWh battery storage project at W Power’s Energy Reliability Center in Stanton. Wellhead Electric agreed the deal after being impressed with what they saw as Energy Vault’s ability to fit the “maximum energy storage capacity” on the site. Hal Dittmer, CEO of Wellhead Electric, said the company had “full confidence of meeting our expected system performance and project economic return requirements”.

The Wellhead-W Power deal followed the announcement the previous month that EnCap Investments-backed storage developer Jupiter Power was also teaming up with Energy Vault to develop a 10MW / 20MWh system in Carpinteria, California – in addition to a 100MW / 200MWh battery storage project near Fort Stockon, Texas. Michael Geier, chief technology officer at Jupiter Power, explained that the reasoning behind the deal was the “strong need to continue to execute innovative storage solutions to help relieve grid strain”.

Grid on brink of collapse

And this is the key point – California’s grid is under severe pressure. Indeed, what was described as an “epic heat wave” this summer brought the grid to the brink of collapse.

As long as this situation continues, the desire for increasingly innovative storage systems to ease this pressure means that the state will be a breeding ground for some of the most ground-breaking ideas and developments in the storage sector, from both a technological and financing perspective.

Image (clockwise from bottom left): Hal Dittmer (Wellhead Electric); Clifford Rechtschaffen (California Public Utilities Commission); Paul Lau (SMUD); Michael Geier (Jupiter Power); and Brian Callaway (Arevon);

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