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.