California’s New Energy Storage Mandate Under the Microscope

Ken Silverstein | Oct 19, 2013


California is once again on the cutting edge -- and this time with regard to its just-enacted energy storage mandate: Investor-owned utilities there must collectively buy 1,325 megawatts of such capacity by 2020, including 200 megawatts in the next year.

Energy storage systems not only harness power but also inject that energy into the grid so that providers can efficiently meet their demands. The focus in California is on reducing harmful air emissions and on increasing the use of greener energy that is sometimes unavailable. And while some suppliers are now using the technology, they readily acknowledge that prices must come down if the tools are to become commercially available on a national level.

“This decision represents an important first step in encouraging the storage market and supporting grid reliability,” says California Commissioner Carla J. Peterman, who has led this effort there.

The commission has three basic goals: To optimize the grid so that it can shave peak energy usage while also delivering electricity when it is most needed -- something that will help to defer investments in transmission infrastructure. And, such adequacies not only make room for more green electrons but they are also allowing storage devices to inject renewable power onto the network. Finally, storing energy and sending it when needed will help the state reduce its greenhouse gas emissions by 80 percent before 2050, from 1990 levels.

The affected utilities are PG&E Corp, San Diego Gas & Electric and Southern California Edison, which can adopt the kinds of energy storage that best suit their needs. The energy storage sector estimates that 670 megawatts those devices are operating. An application could be anything from shaving peak load to storing and injecting wind and solar electrons onto the grid.

"It will be a combination of utilities identifing areas where the technology can be utilized on their grids and then releasing request for proposals to third party developers," says Richard Fioravanti, vice president of energy storage for DNV KEMA. “What it means is that utilities must procure the amount of storage by the required times. It is not a 'suggestion' but there is flexibility in how to do it. The commission has confidence that the technology is ready today for deployment." 

Potential but Potholes

At least 40 different technologies exist. Many of today’s storage devices can inject about 15-45 minutes of power into the grid. An ultimate battery may go for 3 to 5 hours, and run at 90 percent efficiency whereby little energy is lost during the production process. Batteries can go for 6-10 hours, such as NGK Sodium Sulfur Battery, Fiorvanti says. That duration is able to cover 98 percent of all outages, making it ideal for back-up power.

According to Pike Research, the total U.S. energy storage market could surpass 14,000 megawatts by 2022. To get there, the price of such systems installed must fall to about $700-$750 kilowatts per hour, other experts say. Depending on the required duration of storage, the costs can be three times that amount today.

Eventually, the demand for electrical power is expected to escalate, necessitating greater reliability and cleaner fuels. As such, storage is a method by which to firm up both traditional as well as renewables plants if they should falter. 

Consider AES Energy Storage: It has 174 megawatts of energy storage in operation and another 1,000 megawatts in development. In Chile, for example, it has 12 megawatts of battery storage that backup the grid.
"I have a lot of confidence in the ability of the storage industry to produce," says KEMA's Fioravanti. "It will definitely need to step up, but companies are diverse and are trying to learn how to produce at scale. The current players are very capable of achieving the numbers."

The technologies are improving but the prices must fall. California’s mandate is designed, in part, to facilitate more energy storage development and greater economies of scale that will help reduce barriers. It’s another green venture in which the state hopes to become a national leader but in which the ultimate outcome is still unknown. 

Twitter: @Ken_Silverstein

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California's Storage Mangate

Hi Ken,

It is important to note that although there was talk about economics and benefits to ratepayers, the Commission's Order explicitly excludes the most efficient form of storage:  pumped storage > 50 MW.  Although the State law supporting the Commission's vault into mandating storage included pumped storage, the Commission here chose to focus on "market transforming goals" rather than strictly assuring economic dispatch of storage.


David Kates

CA's new storage mandate

Hi Ken, a comment on your article on CA's new storage mandate: prices will surely fall for storage in the coming years as the market develops. However, it's important to note that the law behind the CPUC decision requires that every MW of installed storage be cost-effective from day one.

The CPUC commissioned two major reports looking at this issue, and while the CPUC punted a bit on finalizing the cost-effectiveness methodology, the commissioned reports found that in almost all scenarios storage was expected to be cost-effective. This is the case because even though costs are relatively high still, the benefits to the grid are considerable. So the full cost/benefit analysis found that most storage applications are likely to be cost-effective either now or relatively soon.

Tam Hunt, J.D.
Community Renewable Solutions, LLC