California-Will Energy Storage Offer Solutions Where Demand Response Fails?

The demand response program in California has not done enough to engage consumers, nor has it solved the complex relationship with renewable generation. This has led California to bank on energy storage as a solution.
Published: Mon 24 Feb 2014

California faces an unprecedented challenge in balancing its growing share of intermittent solar and wind power supply on the grid. It has become necessary for the State to implement new goals and solutions that will help the state's grid cope with the sometimes erratic energy supplied by wind and solar sources.

In its attempt to reach its renewable energy goals, reduce carbon emissions and keep the lights on, the State is implementing demand response and energy efficiency solutions.

The California Independent System Operator has just released its Demand Response and Energy Efficiency Roadmap (PDF) which aims at transforming energy efficiency and demand response into “integral, dependable and predictable resources” for a grid that’s both green and stable.

However, California is faced with a number of demand response regulatory challenges which doesn’t offer as much opportunity for demand response as do other grid regimes, like that run by mid-Atlantic grid operator PJM, which allows demand response assets to bid into capacity markets and get paid immediately for pledging resources to be made available in future years. The California Energy Commission’s 2013 Integrated Energy Policy Report lists the challenges that the State is up against as far as demand response goes

Therefore, energy storage may well be what California’s power grid is looking for. The California Public Utilities Commission (CPUC) is looking more seriously into storage as a solution-it has recently established a 1,325MW storage target for utilities and several private power companies in the state.

The need for storage targets

Storage targets have to be established, explains Carla Peterman, Commissioner, California Public Utilities. Because of the country’s interest in clean energy generation and its aggressive plan to promote renewable energy, storage solutions will become essential to the success of renewable energy integration.

California’s aggressive renewable energy goals and greenhouse gas reduction mandates will be hard to meet without a lot more energy storage to help balance intermittent wind and solar resources while keeping the grid stable.

To support this renewables development, California has a 33% Renewable Portfolio Standard (RPS) to be achieved by 2020. The State is currently at 20%. Ms Peterman says that there is a huge growth in solar and that they are anticipating an oversupply in renewables in the near future. Storage is being viewed as a tool to assist with the various challenges that the adoption of renewable energy poses. Another driver of storage targets is the State’s commitment to reducing carbon emissions.

Targets vary from place to place within the system to which storage connects. There is a target for transmission connective storage, distribution system connective storage and customer side storage. Acknowledging that this is a new space, targets have been put into place but need to be flexible in terms of compliance, explains Ms Peterman.

Since the storage system has to be cost effective and viable, if utilities see bids that don’t meet those standards, they are allowed to defer up to 80% of the target to the next period. They can also shift between target categories because the State wants to see storage develop quickly on the grid.

There are different ownership models for storage but no more than 50% can be utility-owned. The idea is to encourage third party participation and aggressive competition.

Storage mandate is necessary

Although there has been storage development, California is after market transformation.

This is the reason for the mandate, released late last year, which requires the state’s big three investor-owned utilities to add 1.3GW of energy storage to their grids by 2020.

The mandate will create a bigger take-off in the market, explains Ms Peterman. She says, “We have to start working on storage solutions now so that we can achieve our 2020 storage goal.”

Large-scale energy storage doesn’t really exist today beyond massive pumped hydro projects. But California’s ambitious renewable energy goals and greenhouse gas reduction mandates will be hard to attain without a lot more energy storage to help balance intermittent wind and solar resources, while keeping the grid stable.

Ms Peterman is confident that storage methodologies will improve over time and as a result, the benefits and cost improvements will improve. Since the market is “open and fair and all bids are welcome”, it is expected that storage costs will decrease as new solutions and competitors enter the storage space.

Within 3 years, there will be a review to monitor development. “That will be our opportunity to alter the program or make policy changes. We may even consider expanding the target if it is appropriate,” says Ms Peterman.