Energy Storage

Meeting California's Climate and Energy Goals Through a Balanced Low-Carbon Grid

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The Bay Area Council Economic Institute’s 2016 report, 21st Century Infrastructure: Keeping California Connected, Powered, and Competitive, underscored the need for a smart grid that improves reliability and resilience, supports the increased generation and use of renewable power, integrates energy storage, and with that enables the reduction of greenhouse gas emissions.

As California pursues ever more ambitious greenhouse gas and renewable energy targets, new challenges are emerging for the electric grid. In particular, the variable nature of renewable energy sources, which in large part depend on when the sun shines and the wind blows, requires increased attention as regulators and policy makers attempt to balance the grid and match power needs with available supply. This balance is critical to avoiding the situation where renewable power is increasingly not used (“curtailed”) because of power being generated in excess of immediate demand.

Acknowledgments

This report was written by Bushra Bataineh, a PhD candidate in Civil and Environmental Engineering at Stanford University who focuses on Sustainable Design and Construction. Its development was managed by Sean Randolph, Senior Director at the Bay Area Council Economic Institute. Table Rock Infrastructure Partners, a member of the Economic Institute’s Board of Advisors, sponsored its production. The Institute wishes to thank the many individuals identified in Appendix A who contributed valuable information and perspective.

California’s commitment to renewable power is growing: in October 2015, Governor Jerry Brown signed into law State Bill (SB) 350, which increased the Renewable Portfolio Standards from the previous target of 33 percent to 50 percent by 2030.
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Even as California continues to rely on traditional electricity generation sources such as nuclear and fossil fuels, the use of variable wind and solar sources is increasing, as is the potential for overgeneration to affect the grid.
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To meet ambitious climate and energy targets, measures must be taken to integrate a higher level of renewable generation, while at the same time maintaining grid stability and reliability and ensuring overall resiliency in the system.
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Two main recommendations for improving energy storage investibility are to (1) strengthen cost recovery for ancillary services that help stabilize the grid and (2) make behind-the-meter storage capacity more dispatchable.
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Energy storage holds the key to managing a balanced, reliable, and sustainable grid in the face of these challenges.

This report aims to contribute to the discussion around bulk or grid-scale storage. There is broad agreement that bulk storage will play a key role in California’s energy storage portfolio and overall grid management strategy. But there is a lack of clarity about the amount of bulk storage needed and how best to support the range of options to meet those needs.

The need for energy storage and the energy storage market are growing rapidly as renewable generation, energy policies, and greenhouse gas reduction goals impact how the grid needs to be managed. Storage offers a clear solution, allowing excess renewable energy to be stored, not curtailed, during times of overgeneration, and then released to meet demand and ramping needs. It also provides important ancillary services that help to stabilize the grid. While uncertainty remains around contract structures and mechanisms to recognize the full value offered by advanced energy storage technologies, promising market opportunities are emerging that are financeable.

Policy shifts towards longer-term procurement, longer contracts, and bulk storage procurement mandates make technologies like advanced pumped storage and compressed air energy storage attractive. While no advanced pumped storage projects have been built in the US, many have been proposed, particularly in California. The recent Request for Proposals for the 500 MW San Vicente closed-loop pumped storage project in San Diego is a positive indication. Pumped storage remains the most installed storage solution globally at the largest demonstrated scale among existing energy storage solutions, and it can grow in California if cost recovery mechanisms and regulatory uncertainty are resolved.

Cost reductions and technological advancements are bringing electrochemical storage, such as lithium-ion batteries and flow batteries, more prominently into the mix of technologies available for bulk applications. With speed to deployment an advantage, battery storage can significantly increase its contribution as well, particularly if ways can be found to aggregate and dispatch production from behind-the-the meter renewable sources.

With a suite of technologies available, the issue now is how to accelerate deployment by making storage of all kinds more attractive for investment.

With slow and complex permitting for pumped storage, and an assumption that battery costs will continue to fall, utilities are primarily investing in small-scale projects. While this approach is understandable, policy should focus on strategies with the long-term potential to deliver bulk storage capacity. This is essential if California is to secure the full benefit of the renewable resources it has invested in, and to meet its climate and energy goals, without excessively burdening ratepayers.