California's Energy Storage Mandate-Will Others Follow?

California created a market overnight by issuing an energy storage mandate. It hopes to safeguard its renewables mission and provide better energy security.
Published: Wed 19 Feb 2014

To help meet California’s ambitious renewable energy targets, regulators have approved an ambitious plan to install a significant amount of energy storage projects by 2020.

The mandate requires all investor-owned utilities in the state including Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric, to jointly purchase 1325 megawatts of energy storage by 2020.

The proposed targets increase between 30% and 55% every two years. This will create economic incentives for a number of market players with various technologies to enter the space.

The mandate has virtually created a market overnight and is a further indicator that the energy storage market is set to accelerate rapidly as we recently reported in Energy Storage Solutions Continue to Boom.

California sets the stage for New York to follow

California's Public Utilities Commission is setting the stage for other states to follow - New York seems to be gearing up as the next hot market for energy storage.

Bill Acker, Executive Director of the New York Battery and Energy Storage Technology Consortium, is positioning New York State as a world leader in energy storage technology, including applications in grid storage, transportation and power electronics.

Governor Andrew M. Cuomo has recently announced a US$23 million public-private investment to build a battery storage test and commercialization center. This is in partnership with NY-BEST which moved state-of-the-art energy storage testing capabilities from Pennsylvania to a facility at the Eastman Business Park in Rochester, New York.

A few months later, the Governor's office announced that the nano-particle organic hybrid materials Technologies is locating its pilot nano-scale battery materials manufacturing facility in Rochester and received $1.5 million in funding from the Governor's Regional Economic Development Councils initiative.

Texas is also adopting energy storage solutions in order to cope with its large wind power supplies. Over 10,000MW of intermittent wind generation has been installed thus far, and US $6.7 billion of investment in new transmission infrastructure is expected to allow that to nearly double by 2020.

Unlike most parts of the United States, Texas is severely low on reserve capacity. The Electric Reliability Council of Texas forecasts that Texas will fall below its target reserve capacity margin in 2014 or 2015. This reserve capacity shortage, in combination with positive market rules and legislative changes, should drive many attractive opportunities for both thermal and electricity storage to help shift loads from on-peak to off-peak in order to reduce summer air conditioning loads.

Hawaii and Puerto Rico will probably also follow suit. From an economic standpoint, islands are a very beneficial place to apply energy storage, as they are generally short of indigenous natural gas or oil resources and must therefore import these at a high cost.

These areas generate most of their power using diesel-based generators. This results in high electricity costs at both the wholesale and retail levels. Many islands are installing wind and solar to reduce their reliance on diesel fuel. The intermittency of renewable assets causes energy balancing problems within small systems, especially since most of these resources are interconnected at lower distribution voltages where rapid changes in generation output can create major issues for customers who share the same line.

US government supports storage development

The US government is also realizing the growing importance of energy storage. In December 2013, the US Department of Energy released a Grid Energy Storage report which examines the obstacles and solutions for energy storage technology development and widespread installation.

Ensuring safety and cost-sensitive pricing are key issues in this report. We view this report as evidence that the US government wants to create a substantial energy storage marketplace and is laying the groundwork to make this a reality.