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How California’s Landmark Energy Storage Bill Works

Energy storage — if you’re going to have intermittent wind and solar powering even a fraction of the country’s energy needs, you’re going to need it as backup, the experts agree. But right now grid-scale energy storage is a challenge, without clear regulatory and market mechanisms as to how to make it pay for itself.

But a new bill in the California legislature could force the issue. Assembly Bill 2514 (pdf), written by state Rep. Nancy Skinner and backed by state Attorney General Jerry Brown, would require that the state’s utilities match 2.25 percent of their peak loads with energy storage by 2014, and 5 percent by 2020 — a goal that could equate to about 3,400 MW of storage capacity in the next 10 years.

Landmark Bill, Will It Work?

It’s the first such mandate to be introduced at the state level, and “the most exciting piece of energy storage legislation that we’ve seen on this topic to date,” Janice Lin, director of the newly formed California Energy Storage Alliance, said Thursday at the U.C. Berkeley Energy Symposium. The alliance includes battery makers such as EnerVault, A123Systems, Deeya Energy, Prudent Energy, Xtreme Power, ZBB, Powergetics and AltairNano, as well as flywheel maker Beacon Power, air conditioner energy storage maker Ice Energy, solar panel giant Suntech and oil, gas and energy services giant Chevron (s CVX). That list is representative of the range of technologies that could play a role in helping California meet such a challenging goal.

But will a mandate forcing utilities to meet energy storage thresholds help change the current economics of some of the newer energy storage technologies? The problem with some of the technologies like batteries is that they’re just too expensive.

California may be better suited than most states to try it out, Lin said. The state’s Self Generation Incentive Program already offers incentives for energy storage at industrial and commercial sites, she noted. In particular the California ISO — the entity that manages the state’s grid — is considering adding storage to the list of approved sources for ancillary services, or power that’s paid more money to meet peak demand needs, she said.

On the other hand a mandate that’s too aggressive could lead to a couple of negative outcomes, said Hal La Flash, PG&E’s director of emerging clean technology policy. First, it could force utilities to buy systems from out-of-country providers like NKG and fail to assist U.S. storage companies. Or, it could lead to a situation where regulators, seeing that utilities are hurting customers by spending on mandated storage that doesn’t pay for itself, change the regulations, further roiling the storage market.

California’s energy storage quest could be helped along by federal action. DOE has given a total of $165 million in stimulus grants to energy storage projects across the country. That, along with incremental improvements in performance and the price decreases that come with expanded manufacturing capacity, could make 2010 a breakout year for energy storage, according to IDC Energy Insights.

Then there’s the Storage Technology of Renewable and Green Energy Act of 2009 (S. 1091), a bill that would offer tax credits to energy storage that was introduced into Congress last year. While it hasn’t progressed since then, this year could see it re-emerge.

Cali’s Energy Storage Choices

Whether or not AB2514 passes, the state may not have a choice but to build an equivalent amount of storage, according to Ed Cazalet, CEO of erstwhile energy storage developer Megawatt Storage Farms. He believes that California will need about 4 GW of storage by 2020, if the state is to meet its 33 percent renewable goal without crashing the grid with all that on-again, off-again power.

While California has about 1,500 MW of energy storage today, that’s almost entirely made up of pumped hydro — that is, water that’s pumped uphill when power is cheap, then released to spin a turbine to meet peak demands. Examples include Pacific Gas & Electric’s 1,200 MW Helms Pumped Storage Facility near Fresno, Calif. But because sites to build new pumped hydro are hard to find geographically and hard to build politically, the state will need to find other alternatives, Cazelet said.

There are some large-scale energy storage projects being planned in the state. PG&E in November got a $25 million Department of Energy grant to study the potential for a 300 MW compressed air energy storage (CAES) system in California’s Central Valley, for example. But La Flash noted that the utility is now engaged in verifying that the porous rock geology of that CAES site will work for storing energy as compressed air — the only two working CAES plants in the world, in Alabama and Germany, use salt domes instead. Just how fast the PG&E project could be built, “we won’t know until we get to that point” of verifying the geology works, he said.

Then there’s thermal storage, which in the simplest terms involves making ice at night when power’s cheap, then using it to augment air conditioners during the hot summer days when California sees peak power demand. Ice Energy, which makes such an air conditioning unit, just won a 53 MW contract with the Southern California Public Power Authority to install those distributed units across thousands of rooftops.

What about batteries? Grid storage batteries are increasingly coming online, though mostly in pilot projects, at least in the U.S. PG&E, for example, is testing out 4 MW of high-temperature sodium-sulfur batteries in San Jose for grid balancing purposes, and American Electric Power has installed about 7 MW. Some grid storage applications for everyone’s favorite electric vehicle battery technology, lithium ion, are being pursued — Southern California Edison won $4 million in DOE stimulus grants to deploy an 8 MW lithium ion battery to help integrate wind power into its energy supply. Other utilities are likely looking at lithium-ion for projects to bring small batteries into neighborhoods to back up the distribution grid, like the project AEP is planning with $75 million in DOE smart grid grants.

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6 Responses to “How California’s Landmark Energy Storage Bill Works”

  1. I believe that this statement is misleading:
    “But because sites to build new pumped hydro are hard to find geographically and hard to build politically, the state will need to find other alternatives, Cazelet said”

    Pumped storage hydro sites are abundant in many areas throughout the US. There are over 40 pumped storage projects with preliminary permits with FERC and there are 3 in California in the later stages of licensing review with up to 2 GW of capacity.

    The main requirement for a pumped storage site is a change in elevation. This can be accomplished in a variety of ways including using underground resources for a lower reservoir.

    As with any large project there is significant due diligence to be performed to ensure that the project will not be harmful to the chosen site, but I would not consider that a political road block.

    Like other energy storage technologies pumped storage hydro suffers from lack of market pull. Unlike other energy storage technologies, pumped storage hydro is a mature technology that is internationally accepted. Pumped storage hydro is the only mature large scale energy storage technology available in the world today.

  2. Rover1401

    Renewables are NEGATIVE load.
    Understanding this simple equation will highlight that CA & the author of this bill have no grasp on economics, the power industry, or the integration of renewables. Depicting energy storage as the panacea to renewable integration and forcing utilities to have a % of storage per load is pure lunacy. Let me break it down into 3 main points.

    1) Renewables are used to replace load. The remaining generators & storage will be used to fill in the gaps when renewables are not available or the penetration level causes base-load plants to reg down. However, market mechanisms should be used to signal that storage (or demand response) are needed. Storage is different than solar or wind and a mandatory level of energy storage is ludicrous.

    2) Energy Storage is a new, unproven technology. As you mentioned, pumped hydro, CAES, and a number of technologies have been running for decades but these latest technologies are new & unproven. There is absolutely NO WAY that these should be a rate based asset that gets pushed onto the end customer. Anyone remember what happened w/ the Chino, Puerto Rico, or Vernon installations? If storage is to be owned in the power industry, it needs to be in the hands of private companies who succeed or fail on the success of these technologies. Remember, private capital should be used for risky ventures. I know this isn’t very American anymore, but this drives innovation and places risk with the correct people.

    3) Storage can provide a number of services ALL of which are already being provided in some form or another. (though the response time of storage is faster & more accurate). A new technology does not change the fact that regulation, spinning reserves, voltage support, arbitrage etc. should be market based activities and not utility rate-based activities.

    So the real question is, how do we increase renewable penetration levels? Energy storage will definitely help and should be encouraged but not by incentivizing projects that are risky to the rate payer and providing services that should be market based.

    Instead, create the market incentives to bring storage into the balancing areas. A refundable tax credit on CapEx, a capacity market for storage, or a market based service that pays for performance(speed of response) would all encourage energy storage to enter the market, but at a lower cost and less risk to the tax-payer.


    • Stored energy backs up renewables but also reduces the peak load so that we can avoid the more costly option of adding new power plants or the more polluting option of using peaker plants. Fact is that we need to really reduce peak demand and storage is best suited for that. Since peak load can be calculated a mandatory level can likewise be mandated.

      There are many kinds of storage and lumping them all together doesn’t tell the true story. Thermal energy storage has been used effectively for decades and is manufactured here in the United States. Its not risky. Many of America’s top banks, corporations, schools, etc use thermal storage now. But is everyone using storage? No. There are some financial incentives for customers to use storage (Most utilities have a 50% sale on off-peak power every night) but the largest benefit is to society not to individuals which is what makes this Bill so critical. The more storage, the more peak goes down for everyone, the less peaker plants are used and replaced by storage, the better air-quality for everyone and less money spent on new plants means more money in everyone’s pocket. We can use what we have and affordably phase in renewables or not.

      Market incentives can work but they are not the only way. Markets as we saw with the housing boom do not always work in favor of consumers. Market incentives have their risks as well. Incentivizing projects and thermal energy storage is proven to work and can be instrumental in providing a solution to energy shortages, pollution and the phasing in of green power.