Summary:

California is set to become a large energy storage market, and that has prompted bankers to figure out whether they could make money from it. Wells Fargo plans to get answers from its own pilot project.

AES Laurel Mountain wind and storage 1
photo: AES Energy Storage

As California plans to require its big utilities to pay for energy storage, banks are trying to figure out how they could get in on this new and potentially lucrative market. And one bank, Wells Fargo, has an interesting idea: install energy storage at one of its buildings, examine the data over time, and figure out if there is a business case for it.

The bank plans to install a battery system — likely lithium ion batteries — with a set of solar panels (or fuel cells) at one of its administrative buildings in Los Angeles or Orange County in the first quarter of 2014, said Chad Cochran, client relationship manager in Wells Fargo’s cleantech group. The bank plans to spend up to $100,000 on the project, which would include 30 kW of storage.

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The idea is for the bank to find out how an energy storage system will perform over time, whether it will deliver the promised revenues, whether it could create other benefits, and also to see the bank can build an investment portfolio around the technology, said Cochran, whom I caught up with after he spoke on a panel at the Energy Storage North America conference in San Jose last week.

“We want to help push the market forward,” Cochran said.

The emergence of renewable energy in the nation’s electricity supply has driven discussions about energy storage in recent years. Using batteries, compressed air or other technologies enables wind and solar to become power sources that can be delivered at a needed quantity at any time. Utilities want this flexibility to serve their customers well. Renewable energy proponents want it so that wind and solar could gradually replace power from fossil fuels.

Now that California is moving ahead with a plan to mandate energy storage, everyone from technology companies to project developers to utilities to investors are trying to figure out how they could shape and profit from this new, subsidized market. The California Public Utilities Commission is set to discuss as early as Oct. 3 a proposal that outlines how the big three investor-owned utilities will go about buying energy storage services. The target is to require Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric to collectively buy 1,325 MW of storage by 2020.

The proposal will undergo public debate before being adopted. After that, each utility will have to submit to the commission its proposal for carrying out the mandate. The first request from a utility to buy storage service won’t likely happen until December 2014, said Carla Peterman, the commissioner who penned the proposal and spoke at the energy storage conference last week.

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Given the market is new, many banks aren’t ready to pony up big money, if any, to finance energy storage projects. Two of the big questions they have are whether the technology will perform as promised over time and how much money can be made. While some energy storage systems have been installed next to wind and solar generation plants in the last few years, bankers say there aren’t enough of them around to generate the amount of data that provide the assurances major banks want.

“I’ve been following energy storage for years now, and it’s in its infancy,” said Chris Moscardelli, director of energy project finance at Société Générale, on the same energy storage panel with Cochran. “It’s been on the cusp for a while. I think it is the next big thing.”

Energy storage promises to not just deliver electricity to meet household and business demand, it also could send bursts of power into the grid to help utilities maintain a balance of supply and demand. That balance is necessary to keep the grid running smoothly. Grid operators around the country have only recently started to put regulations in place that will allow energy storage project owners to make money. Beacon Power and AES Energy Storage are among the developers and owners who are selling their energy storage services to grid operators.

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