At a recent conference attended by various participants in the power industry, including regulated utilities and independent energy producers, an astute speaker quipped that “energy storage proponents are quickly becoming the cool kids in the room.” Everyone chuckled knowingly, because policy makers in various jurisdictions, especially California, are driving the power industry to make energy storage happen in a meaningful way.
California’s investor-owned utilities are pumping hundreds of millions of dollars into innovative energy storage projects in an effort to satisfy the state’s energy mandate. Although a handful of storage technologies are getting a big boost from that effort, there is little doubt that roughly 75 percent of the state’s energy storage needs in the coming decades will be met by pumped storage hydro, the traditional—and still the most economical—storage solution.
Demand and Mandate for Energy Storage
California’s RPS benchmarks set the timeline for bringing energy storage online. Without storage, sources of renewable power are susceptible to curtailment because they lack the load-following characteristics required by the grid. Additionally, daily load ramping requires spinning reserves or other forms of stand-by power sources that can be brought online quickly to match customer power use at the beginning and end of the work day. Energy storage added to the renewables portfolio helps solve those problems by making renewable power available when needed to match demand.
California’s energy storage mandate (AB 2514) added a twist to existing demand for energy storage. Adopted in 2010, the bill required California’s three largest power generating utilities to contract for an additional 1.3 GW of energy storage power generation (meeting certain criteria) by 2020, coming online by 2024.
Although California already leads the way in promoting energy storage, lawmakers determined that more efforts were necessary to support the policy and, in September 2016, adopted four new laws (AB 2861, AB 2868, AB 33 and AB 1637) to foster and streamline California’s storage market. These laws (i) improved the conflict resolution procedures for interconnection disputes, (ii) directed utilities to consider the role of energy storage as a distributed energy resource that can provide benefits to the grid, (iii) focused on the role of bulk storage (such as pumped storage hydro, compressed air and batteries) in integrating renewables into the electrical grid, directing the California Public Utilities Commission, in coordination with the California Energy Commission, to evaluate the potential for all types of long duration bulk energy storage resources to help integrate renewable generation into the grid, and (iv) expanded funding incentives for customer-sited storage projects.
Supply Pipeline for Energy Storage
According to records available from the Department of Energy, the following California energy storage projects are announced or underway:
Source: Sandia National Laboratories, via http://www.energystorageexchange.org/, administered by Strategen Consulting LLC. Used under license.
Total power output from the table above is approximately 3.1 GW, of which 2.6 GW, roughly 84 percent of that total, comes from projects outside the gambit of the California storage mandate. AB 2514 expressly excludes pumped storage hydro >50MW, which comprises 2.3 GW. The CAES project uses gas combustion, which is off-pace with the bill’s preference for clean and green storage solutions; and PG&E has not submitted it for qualification under the mandate. Clearly, the investor-owned utilities are contracting to fulfill the state’s gross megawatt requirements for storage, notwithstanding AB 2514. The real impact of AB 2514 is the impact on non-traditional storage solutions.
Disrupting the Grid with Distributed Storage
Gross megawatts does not tell the whole story. Although lesser in power, the remaining 16 percent of pipelined storage illustrates a new mindset in grid management that looks for localized solutions to localized problems. If anything, AB 2514 is pushing the grid to pay more attention to the “where” and “how” of power supply more than “how much.”
A quick pass through the list above shows a breadth of storage technologies in the works. Although the list above is limited to projects greater than 5 MW, the deployments include lithium-ion, zinc-air, thermal, and even flywheel technologies.
Additional solutions not captured in the chart above include over 60 projects with power ratings less than 5 MW. These include a network of batteries by Green Charge Networks for over 30 electric vehicle charging stations.
Also not captured in the list above, at least one utility has inked megawatt-scale energy conservation contracts (provided through smart building management services) awarded to AMS and NextEra.
Southern California Edison has turned its AB 2514 efforts into a public relations campaign, in conjunction with California lawmakers, telling a story about the complexity of valuing storage that ultimately resulted in a decision to purchase more than five times the amount of qualifying storage required by California’s mandate.
Although nearly four years have passed on AB 2514’s procurement schedule (summarized below), only the 2014 benchmarks are complete. Contracting targets for 2016 are approved, but bidding is still in process.
Looking forward, the projects discussed above remain the exception rather than the rule. Utilities and regulators are still trying to wrap their heads around how to value and price energy storage.
At the same time, it is too early to determine whether distributed storage will disrupt grid management or be swept aside to molder on the sidelines. Only the first round of four scheduled procurements under AB 2514 is complete; the second is underway. Already, one of the constituent utilities has determined to integrate distributed energy storage now and is acquiring storage contracts far in excess of the mandate. Time will tell whether that approach is foresight or foolishness.
For the time being, traditional storage continues to dominate the grid’s requirements. However, the first four years of AB 2514 storage projects may ultimately “stick,” i.e., prove their value to the grid notwithstanding the mandate. In that case, the projects currently underway will provide the experience and insight for rethinking power delivery at every level.
With support from policy makers such as those in California, as technology improves and costs become more competitive, the “cool kids” in energy storage could conceivably help to reshape an entire industry.
Randy J. Hill (left) is Of Counsel at Stoel Rives LLP and a member of the firm’s energy initiative. He is serving his third term as one of seven Governor-appointed directors (and is currently Chair) of the Idaho Energy Resources Authority. He is also a member of the Energy Storage Task Force of the Idaho Strategic Energy Alliance.
Elliott J. Williams is an IP litigator and patent attorney at Stoel Rives and a member of the firm’s energy initiative.