California PUC Considers 1st in Nation Battery Storage Mandate

According to an article in the San Jose Mercury-News, the California Public Utilities Commission (PUC) is close to approving a requirement for the state's largest utilities to buy 1.3 megawatts of energy storage by 2020 to help improve upon the intermittent nature of renewable energy resources like solar and wind. The directive would be the first of its kind in the country and would provide enough storage capacity to power nearly 1 million homes.

Supporters of the provision, including Commissioner Carla Peterman, believe the policy will spur development of technology that can store larger amounts of power that can be used when the sun doesn't shine or wind doesn't blow - in addition to dealing with managing loads of renewables on the grid during peak and off peak hours. Limitations in storage for renewables is often seen as the biggest strategic hurdle preventing alternative energy from becoming baseload power. Advancements in battery storage have been complex, slow and expensive thus far. As a cost-effectiveness report issued by the Electric Power Research Institute at the direction of the California PUC aptly noted: 

"Energy storage has unique advantages and limitations, and it does not fit neatly into the existing electric system asset categories. Conventional assets for the electric grid generally can be classified as generation, transmission, or distribution, and existing policy, regulation, and even technical tools have evolved around these distinctions. Fossil power plants are distinctly generation, and wires and transformers are distinctly transmission or distribution, depending on voltage class. In contrast, energy storage systems may be located on either the transmission or distribution network (or even on the customer side of the meter), and they have characteristics that sometimes bring value to generation and other times to transmission or distribution. As a result, it is often not possible to benchmark storage clearly with identical size, usage, and location against a conventional grid asset. Furthermore, there are business cases and regulatory complexities. Generation is deregulated, and generation companies make their business cases in the California Independent System Operator (CAISO) market, where transmission and distribution assets are allowed a regulated return on investment."

The report went on to find that break even capital costs for building projects ranged from $1,000 to $4,000 per kW of installed storage under the plan before the PUC. However, there is no known exact cost impact the proposal may have on ratepayers. The order being considered requires the utilities to examine cost-effectiveness of the storage technologies they use, but the full costs will not be known until actual procurement begins because the market is still new and developing.

Regardless, energy storage industry consultants and companies believed the presumptive action that will be taken by the PUC will be transformative and likely considered at some degree at other utility commissions across the country.

To read the proposal before the California PUC, please click here.