INTELLIGENT UTILITY: California law drives definition of grid storage value

Former California Energy Commission chair comments on utility-scale storage.

By Phil Carson

For Joe Desmond, recently appointed chief marketing and business development officer for Windsor, Colo.-based Ice Energy, the California energy storage bill (AB 2514) just signed by Gov. Schwarzenegger is a milestone on a path taken in response to the state's energy crisis a decade ago.

Desmond, who formerly served as Schwarzenegger's choice for chairman of the California Energy Commission, used the bill's passage to make a few general points to me on energy storage.

The California energy crisis of 2000 underscored the need for a "common language" that could help in raising awareness about what reliability or "resource adequacy" means, what it would cost and how technology could help utilities meet California's post-crisis requirements, Desmond told me.

Storage is about system efficiencies, integrating renewables and overall reliability, he said.

"Energy storage has characteristics that can look like energy efficiency," Desmond said. "On the other hand, it provides reliability or capacity value. "Part of the challenge is, how do people arrive at a common language or understanding of storage in order to establish how it's valued?"

Terms like "power density," "discharge duration," "round-trip efficiency," "ramp rates," "modularity"—there are many, diverse ways to characterize storage, Desmond pointed out.

There's "fast storage," or the rapid charge/discharge technologies for markets in ancillary services required to maintain the grid in real time. Then there's "bulk storage," with the emphasis on energy time shifting with potential upstream benefits of capital deferral of transmission or distribution system expansion, he said.

AB 2514 calls on the California Public Utilities Commission (CPUC) to open a proceeding to establish a common framework for valuing the costs and benefits associated with storage. In doing so, it will bring various stakeholders together, in Desmond's view.

"The second part of that bill asked the utilities to establish targets, based on cost-effective storage," Desmond continued. "This elevates storage into the daily discussions about how we serve future energy needs. What role will storage play, at the lowest possible cost and in an environmentally responsible manner? The bill doesn't set mandates but it does begin the process of looking at that.

"People need to understand how to value storage in a regulatory sense," he said. "FERC (Federal Energy Regulatory Commission) is seeking comment on these issues right now. Who can own storage? Should storage be a separate asset class? Is it appropriate for utilities to own it? If so, under what model, what rate of return? Others have suggested that customer-owned storage could participate as a resource in wholesale markets. We need a framework for answering these questions.

"We also need to assess the upstream benefits. How do we value the T&D congestion relief, if we install storage at various points on the grid? Am I looking at short-run avoided costs? At what point on my planning horizon do I consider having to add a generating source? What's the value of the energy time shift provided by storage?"

If Desmond had the "bully pulpit" President Obama used recently to attempt to tell what some referred to as "the battery story," what would be his message to consumers, who are also voters, on the value of storage?

"I'd emphasize a couple things," Desmond replied. "When people think of energy storage they should think of all forms: kinetic, chemical, battery, potential and thermal—all forms have a role to play in the system, because up until recently these solutions were not available on a cost-effective basis.

"You want to ensure that regulated utilities consider storage alongside other options for meeting reliability needs," he continued. "Storage provides a means to increase utilization of your assets—system efficiency at grid scale. Utilities need to be encouraged to look at this and then incorporate storage technologies into their planning process. "We're talking about utility management of storage assets along the entire delivery chain, networked to the advantage of their customers.

"So we're really talking about changing the planning paradigm. We used to talk about 'least-cost planning.' Then we moved to 'integrated resource planning' where efficiency is considered alongside generation. Now we're moving to 'dynamic resource planning,' in which storage adds an entirely new dimension to the planning process, as well as the day-to-day operational aspect of the grid. The legislation the governor just signed calls for cost-effective storage, meaning it's in the utility's and the ratepayers' best interest."

There's a lot to chew on here. I'd say that in a state whose greenhouse gas-related legislation (AB 32) might be suspended by voters in November (by Proposition 23), the use of the concept of "cost effective" in California's energy storage bill is a step forward. How to improve the reliability of the grid without jacking up electricity rates is wise.

We'll be watching to see how the CPUC proceeds to implement AB 2514's provisions.