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.