20 Jul 2015
California has been a leader in the adoption of renewable energy. Jurisdictions aggressively adopting renewables are all becoming increasingly aware of three problems.
First, is the intermittent nature of both wind and solar generation. The second, is the timing problem which occurs when energy is generated and available, but not needed. For example, the majority of wind generation occurs at night when overall demand is greatly reduced. Third, is generation sources not visible to the utility; customer-owned solar generation has seen significant growth but these sources are not controlled or managed by the utility. These three problems jeopardize the reliability of grid, keep the grid dependent on fossil fuel generation, and ultimately limit the degree to which renewables can replace fossil fuel generation.
California policymakers recognized that energy storage was the missing piece required to maximize the adoption of renewables. For this reason, in 2013, the state stepped out ahead of everyone with its energy storage mandate. Storage being the key to unlocking the potential of renewables was obvious enough; if energy that is intermittently produced, and oftentimes generated when it’s not needed, can’t be reliably stored, then that energy can’t be properly used, and the grid remains dependent on fossil fuel generation.
Mandating storage in 2013 was a bold move. It was not clear that energy storage was ready for prime time in terms of cost and reliability. Critics made the case that the mandate would force the procurement of expensive and unreliable storage, drive up the cost of electricity to consumers, drive businesses out of California, kill jobs, and so on.
California policy makers took the opposite view, just as they had done with the Renewable Portfolio Standard (RPS). They made a bold move, reasoning that in the same way that the RPS created a market for renewable energy, drew in competition, attracted capital, and drove down costs, the storage mandate would similarly, draw in competition, attract capital, and drive down costs. It is still early days for the storage mandate but indications from the first mandated procurement make the bold move look smart and well-timed.
Southern California Edison’s 2013 LCR RFO, which included a 50 MW mandate for storage, was, by anyone’s standards, an exhaustive evaluation of resources capable of meeting their local capacity requirements. To most people’s surprise, SCE awarded contracts for five times the amount of storage they were ordered to procure, with three of the four companies that won, receiving large, grid-scale projects.
In this first, mandated procurement by SCE, a definitive message was sent that energy storage had graduated from the world of pilot programs and was, in fact, ready for prime time, both in terms of cost-effectiveness, and reliability. It remains to be seen how the other California utility procurements will play out but it is already apparent to those in the industry that energy storage is clearly on its way to becoming a major part of the grid in California. This means renewables can take another leap forward, with the possibility of a complete displacement of fossil fuels. This should be not just good, but great for California, both environmentally and economically.
It will be interesting to see which other states will move to facilitate the adoption of energy storage, how they will do it, and when. A bold mandate like California’s is not the only way of getting storage onto the grid. But think where solar and wind would be today in the absence of mandates. Without a doubt, it would be far more expensive, and far less prevalent.
Mandates have done the job quickly and effectively, making renewables a low-cost, clean alternative to fossil fuel generation. At the minimum, other states interested in moving away from fossil fuel dependence need to address regulatory regimes that didn’t contemplate a resource like storage, and which often, simply aren’t recognizing energy storage to be the cost-effective and reliable grid resource that it is today.
Mike Hopkins is CEO of Ice Energy which provides cost-effective and reliable distributed energy storage solutions for the grid.