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California's energy storage policies

Energy storage is the holy grail of the power industry. No one has escaped hearing that mantra.

But it turns out that a holy grail is a complicated matter. You may find it, but that doesn't mean you can use it. Just as the mythological chalice is elusive, so is energy storage—at least on a utility scale.

In some cases, energy storage technology works—it can receive, store and release energy. But that technology's role on the grid, the output's place in the electricity market and the regulatory framework around valuing its services and allocating costs is fraught with complications.

Should energy storage technology be used to capture intermittent, renewable resources so that that energy can be used at another time? That might make cheap, off-peak power more expensive by time-shifting it away from a period of abundance and low demand to a period of scarcity and high demand. If storage is used for ancillary services, how would that compete with less expensive, existing sources of ancillary services? Who owns the storage technology itself, how is it valued, who pays and how much? Is energy storage an application-specific role that leaves the foregoing questions difficult if not impossible to answer? 

Who knew that a holy grail could be found, only to confound?

Confused? That's the status of energy storage, in an admittedly imperfect summary, at least as it's been considered by the California Public Utilities Commission (CPUC), which has a mandate to resolve the issues around this nascent technology.

Let's move from general ruminations to specifics. Briefly, the background:

California's Assembly Bill 2514 was signed into law Sept. 29, 2010, by Gov. Schwarzenegger. AB 2514 required the CPUC to "determine appropriate targets, if any, for [utilities] to procure viable and cost-effective energy storage systems" by March 1, 2012. The CPUC has until Oct. 1, 2013, to adopt procurement targets and once that's done, utilities would have deadlines on Dec. 31, 2015 and Dec. 31, 2020 to achieve them.

Like the notion of seeking a holy grail, AB 2514's mandates sounded simple enough. And progress toward fulfilling these mandates has not lacked for honest, hard work. But, to cite another cliché, "the devil's in the details."

The CPUC opened a proceeding in December 2010 and in May 2011 it identified the issues to be addressed and a schedule for considering them. An initial workshop was held in June 2011 and another workshop in July 2011 focused on barriers to implementation. Comments were solicited, the CPUC staff issued a draft proposal in December 2011 and parties to the proceeding offered comments and replies to other comments, a process that ended in February this year.

There is, of course, at least one other crucial aspect to this narrative: what do stakeholders say? A brief generalization is fraught with peril, but that's where the man behind the curtain can help. (That's me.) Utilities are already engaged in pilots to discover what roles storage technologies might serve and how they might be valued by the market. Vendors suggest that procurement targets would provide a degree of certainty to their investments and provide real-world scenarios that would be preferable to more modeling and analysis. Critics suggest that forcing procurement targets merely lays more costs at consumers' feet, prior to proven business cases, and, in the market, the services (and value) that storage might provide tend to fluctuate, making storage investments at scale rather perilous. Meanwhile, researchers (see "Energy Storage: Drivers and Goals") have noted that "storage" per se isn't a monolithic concept, that specific applications must be identified and the value of storage to deliver those applications must be established. Cost-effective storage likely means, for instance, using one type of storage for multiple applications. 

In some sense, that's a very short version of how we've arrived at the CPUC staff's final framework proposal, issued yesterday. As the arc of this column reflects, just setting up the background leaves little room for considering the issues. Now to the final CPUC staff proposal, which you simply have to read yourself. I can only cite aspects of the executive summary or we'll be out of space and into the devil's details - which, unfortunately for brevity, it's all about. (As I published, the final staff proposal had not been posted online. Go to the CPUC proceeding R.10-12-007 and check for the latest documents; the one in question may be labeled April 3, 2012. Or go to the CPUC homepage and enter the proceeding number with no punctuation (R1012007) into the search box in the upper right corner.)

The CPUC staff has proposed the adoption of an energy storage "end use" framework" to assist in defining evaluation methods and resource adequacy values.

"CPUC staff believes that this analysis framework, along with a plan for addressing identified barriers, will set a foundation for expanding the ability of energy storage to gain wider adoption," the final staff proposal said. "Specifically, CPUC staff believes that the creation of a resource adequacy value and development of other rules allowing storage providers to participate more effectively in the utilities' procurement programs will mitigate many of the identified barriers. This effort will need to be coordinated with the California Independent System Operator (CAISO) to encourage policies and define products to enable electric energy storage systems to participate in its markets similar to other generation facilities. In parallel, the CPUC will continue to evaluate electric energy storage to make a determination whether or when an energy storage portfolio standard could be adequate."

That quote hardly suffices as a capper here, but it's clear that procurement targets are not being imposed on utilities right now in California. So tomorrow I'll look at the CPUC staff's "energy storage analysis framework," barriers to energy storage implementation and the next steps in this appropriately tortuous issue.

Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757

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