California electric grid operators will be relying on a new technology used in unprecedented ways to avoid blackouts this summer, similar to those that rolled across the state last August. And the time frame for success is short.
That technology is battery energy storage, which currently has a small presence on the California Independent System Operator grid but is due for massive growth over the next few years. Battery storage is mostly used for wholesale market ancillary services, which include regulation service—keeping the grid at the required electrical frequency—and for gaining revenue from arbitrage. California is getting ready to build and rely on thousands of megawatts of storage as a new resource, which is new territory.
"In 40 years in this business I have not seen anything that replicates this. Hopefully, it will work out," Randy Hardy, a former head of the Bonneville Power Administration and Northwest utility executive, told California Energy Markets in a phone interview. Relying on energy storage for raw capacity is an untested strategy, Hardy said, and "we just don't know how they will respond."
Energy storage is the only new resource that will be available in significant quantities this summer. There is currently about 150 MW of storage on the CAISO grid, with thousands of megawatts in the interconnection queue this year and similar amounts due over the next few years. The reliability gap that storage will have to make up is in the thousands-of-megawatts range.
One question is whether batteries will be available for four hours of discharge after being charged and discharged several times a day, and whether there will be enough solar energy on the grid to charge the batteries to meet the evening ramp. Storage is being looked to by grid planners as a way to store excess solar capacity for use in the evenings, after the sun goes down.
"Maybe [batteries] will work as advertised and that will be a real help, but there's a risk there and it's not trivial," Hardy said.
Another possible resource to avoid blackouts is demand response—including CAISO's Flex Alerts for system users to reduce demand—which was named as a key factor in avoiding more blackouts in August 2020. And batteries are not the only type of energy storage, with other technologies such as pumped storage and spinning flywheel storage.
The existing battery fleet uses about 90 percent of its storage for ancillary services and about 10 percent for providing energy, according to consulting firm Energy GPS. About 10 to 25 percent of existing storage is used to back up specific facilities. The mostly short-duration fleet does not primarily dispatch during times of high locational marginal prices but is used to take advantage of attractive ancillary-services prices.
Batteries are excellent for providing ancillary services, with a near-infinite ramp rate, no minimum load requirements or forbidden operations, and none of the startup and idling costs of a traditional power plant. But provision of energy comes at a higher cost because of their limited duration and cycling, which causes rapid degradation. Batteries are a net consumer of energy, not a provider, according to a presentation on the Energy GPS website. About 40 percent of current national battery storage is in California. Most storage is not deployed for the real-time-market, but for regulation service, leaving a majority of overall capacity idle most of the time.
Batteries are primarily being used for regulation service because that is what is most profitable, energy consultant Phil Muller, president of SCD Energy Solutions, told CEM in an interview. Functioning for ancillary services provides a good way for a new resource to begin participating in the markets, but the ancillary-services market is becoming saturated with storage and is a finite need, which will push batteries into energy markets, he said. Much of the new storage will be co-located with new solar plants, helping reduce solar curtailments.
"It's a complicated thing—you have never had anything that takes generation off the grid," Muller said. "It's going to be a challenge." Batteries are easier and quicker to site than conventional power plants, with a smaller footprint and fewer permitting requirements, not requiring air or water permits, for example. And since they are often co-located with current solar projects, the need for new transmission facilities is reduced.
One recommendation in a September 2020 preliminary root-cause analysis issued by CAISO and state agencies is that new generation and storage should be constructed and on line by their target completion dates to ensure reliability.
California's load-serving entities have already begun procuring resources that are due to be on line this summer, including net qualifying capacity of about 2,100 MW of storage and co-located storage and about 300 MW of new wind and solar capacity, according to CAISO data.
There are 25 investor-owned utility energy storage projects due on line by Aug. 1, and 15 more by Aug. 1, 2022. There are five IOU solar-plus-storage projects due on line by Aug. 1. Community choice aggregators have four energy storage projects in the pipeline for this August and four solar-plus-storage projects, according to California Public Utilities Commission data.
In total, there are 42 new IOU energy storage projects due on line by Aug. 1, 2024, and five solar-plus-storage projects, while CCAs have 10 storage projects due by that date and 18 solar-plus-storage projects. CCAs have also signed power-purchase agreements for about 1,000 MW of energy storage in the past couple of years.
There is also behind-the-meter energy storage on the CAISO system. As of August 2020, there were about 30,000 residential and commercial/industrial behind-the-meter energy storage systems interconnected to the California grid totaling around 1,000 MWh, Bernadette Del Chiaro, executive director of the California Solar & Storage Association, told California Energy Markets in an email. About 90 percent are connected to a behind-the-meter solar panel system. The organization anticipates that between August 2020 and August 2021, California will add another 14,000 batteries totaling approximately 360 MWh.
"The pandemic slowed down the residential market for a few months, but the market has picked back up and we are likely to have ended the year stronger than 2019, despite the months of disruption," Del Chiaro said. "Likely driven by the wildfires, blackouts and people being home and investing in home improvement projects of all kinds. On the commercial side, it is likely the pandemic will take its toll on completed projects because the timelines are longer. If you miss a window on a big project due to the pandemic, you can't just fit in other projects waiting in the wings."
There is much more time and energy invested upfront in commercial projects, so if they fall through, which many did due to the pandemic, recovery is not quick, Del Chiaro said.
"All in all, however, there is much interest in energy storage in California despite the pandemic, and the industry is very 'shovel ready' to meet demand," she said. She added that more storage would be in place by this summer if Gov. Gavin Newsom after the August blackouts had issued an executive order for a streamlined permitting and inspection process, as the organization had requested.
One aspect of CAISO's sweeping new resource-adequacy enhancements program is operationalizing energy storage to make sure a minimum level of stored energy is available during the new evening load peak (see CEM No. 1621).
This summer will be a true test of battery storage, which hopefully will step up and fill in the gaps to keep the lights on when things heat up.