By Janice Lin, California Energy Storage Alliance
Adoption of energy storage has evolved greatly in the last five years. Though its benefits have never been disputed, the viability of energy storage as a meaningful grid resource was repeatedly called into question in the early years of storage deployments. But all this changed last November when Southern California Edison (SCE) selected more than 250 megawatts (MW) of energy storage in its competitive solicitation for capacity, thus cementing the merits of energy storage as a smart and viable alternative to traditional peaking generation. SCE worked to identify the true value that energy storage holds for the power industry, beyond ancillary services in their procurement process. The selection marked a significant milestone, not only for the industry, but also for how companies will develop, procure, and implement innovative energy resources in the future.
The SCE selection marked the first time energy storage had been selected to supply generation alongside other peaking and capacity alternatives. The selection process has shown that energy storage can be competitively compared to traditional generation across many metrics, including cost. Through its evaluation, SCE identified the unique benefits of energy storage, including its above average reliability and its ability to scale over time, proving the viability of the technology and forcing regulators, utilities, and policymakers at all levels to recognize its potential for the grid. With the added capability to perform multiple grid-level jobs at a competitive price point, it seems the industry is just scratching the surface of opportunities the technology can provide, as well as the many benefits it can add to the power system, like assisting with renewable energy integration. While SCE’s storage requirement was just 50 MW (as established by the California Public Utilities Commission), the utility procured more than five times this amount, ultimately selecting 260 MW of storage from more than 1,800 offers of all types of resources. This clearly demonstrates that energy storage resources are commercially available and can be procured cost-effectively, even when compared against traditional alternatives.
The SCE procurement was put in place to choose an efficient resource that would ensure critical power system reliability in the Western Los Angeles Basin, as Calif. seeks a variety of new generating resources and advanced energy solutions to replace the San Onofre Nuclear Generating Station (SONG) and other aging and less efficient generation assets. During the procurement process, SCE reported that more than 1,800 offers were submitted between energy storage, thermal generation, demand response, and other preferred resources. Never before had energy storage competed head to head with such capacity alternatives.
It is not surprising that Calif. is leading in this area. Strong legislation, coupled with overwhelming support from local stakeholders and clear direction from Governor Brown and the Public Utilities Commission, has made Calif. a leader in progressive decisions about its energy mix. More recently, Governor Brown established in his inaugural address a bold new set of clean energy goals for 2030:
- Increase renewable electricity use from 33 to 50 percent
- Reduce petroleum use in cars and trucks by up to 50 percent
- Double the efficiency of existing buildings and make fuels cleaner
A couple of months later, Governor Brown issued a new executive order requiring Calif. to also reduce its emissions to 40 percent below 1990 levels by 2030.
Energy storage offers a solution which is both innovative and proven, and can directly assist with each of these bold new goals. Energy storage is ideally suited to manage the variability in our electric power system, allowing existing transmission, distribution, and generation assets to be utilized to their fullest potential, and with fewer emissions. Furthermore, while the emissions profiles of power plants are well documented, power plants are also significant users of water, which they rely on for cooling or other uses. Energy storage can become a game changer for similar markets facing unique climate challenges and goals, with zero added emissions or water usage, as well as significant other benefits like faster siting, permitting, and overall increased grid flexibility and reliability.
With solutions like energy storage available today, the industry has the ability to shift toward new technologies that allow it to do more with the power capacity at hand and save existing natural resources. Thankfully, the SCE selection process has produced a number of key learnings that will be helpful to other power markets in the U.S. which seek ways to bring the benefits of energy storage to their regions.
The Same Procurement Criteria Yield Better Outcomes
The SCE selection was progressive in that the utility took the necessary first step to vet energy storage technologies against the same factors it historically used to evaluate traditional power plants. This process allowed SCE to understand how storage stacked up against traditional resources and where it could provide unforeseen benefits and increase value.
The end result allowed SCE to implement technologies that will help it achieve a more modern grid. A grid that utilizes energy storage can maximize the most beneficial forms of power generation available, minimize fuel costs and emissions, and maintain reliability. Energy storage provides needed flexibility in the grid, whether the grid is predominantly powered by relatively inflexible resources like nuclear or coal, or it is powered by large amounts of highly intermittent renewables like wind or solar. As more states adopt aggressive clean energy goals with high renewable energy penetrations, energy storage will become an even more essential resource. It can be utilized at any time and has no minimum start time or load requirement. Storage is flexible and more easily scalable, and it can be in commercial operation in a matter of months. In addition to the benefits available today, energy storage has established itself as a future-proof solution that can adapt to the newest grid problems by adding new capabilities in a modular way. Essentially, storage is a simple solution for managing today’s most complex grid challenges.
Innovation is not synonymous with risk
During the selection process, SCE found that energy storage technologies are mature, and that the applications for the technology are proven. Though the technology itself is innovative, it can be delivered in a standard contract form, meaning it can be paid for based on performance similar to what has been used for traditional generation. This contract structure helps to guarantee the performance of storage to mitigate concerns over utilizing newer technologies for critical grid services.
Additionally, leading energy storage companies have been operating storage at grid-scale for close to a decade. Tapping into the mature and robust supply chains for the transportation and consumer electronics industries and millions of megawatt-hours of service and experience to date, energy storage providers have taken the risk out of its operation.
Energy storage provides twice the resources for the same cost
When compared to a peaking power plant, energy storage costs less and effectively does more. Battery-based storage serves as both a generation and load resource, providing twice the flexibility on the same interconnection. This gives customers twice the value at the same cost.
Additionally, battery-based storage is unique in its flexibility to grow over time in order to meet future demand in lock step. The technology is modular and thus easily scalable, providing the ability to simply add on additional capacity to meet specific needs in a variety of footprints. This eliminates the need for expensive and time consuming procurements to achieve incremental growth.
The momentum experienced as a result of the SCE selection has led other power markets and individual states across the United States to consider energy storage for their energy mix. For example, Texas and New York have begun to introduce state legislation to invest in energy storage projects that will help with reliability and renewable integration needs. This recent momentum in the industry has underscored many of storage’s benefits, including its cost-effectiveness, scalability, and flexibility. This sets the industry up for explosive growth in 2015 and beyond. While the nation is still a long way from consistently adopting storage across all regions, it’s clear it is on a path toward a safer and more resilient grid with the proliferation of energy storage.
The industry can be encouraged by the changing perceptions about energy storage technologies and the continued recognition of storage as a critical grid resource. It has become widely accepted that the country needs a more sustainable, more flexible, and smarter grid. Industry has only just begun to recognize that energy storage can provide this smarter and more sustainable solution. As utilities, planners, and operators in Calif. prepare for the retirement of older and less efficient generation resources, the storage industry looks forward to seeing continued leadership in the implementation of this smart solution, including from other forward-thinking, load-serving entities in the state. Many years from now, it will be clear that innovative leaders like SCE opened the door to a more modern grid in Calif. and set a course for many others to do the same, all by utilizing energy storage as part of their power mix.
Janice Lin is the co-founder and executive director of the California Energy Storage Alliance, the co-founder and chair of the Global Energy Storage Alliance, and the chair of Energy Storage North America.