Large Battery Projects Soar in CA, Small Ones Struggle

15 Jun 2017

Someone’s loss is another’s gain extends to the emerging energy storage market in California.

The closure of the massive Aliso Canyon natural gas storage field caused the energy storage market in the state to take off.

Despite California’s mandate that private utilities procure a total of 1,325 MW of energy storage by 2020, the state’s market for large-scale storage projects, excluding pumped hydro, was “insignificant until six months ago,” Cody Hill, LS Power energy storage manager, told a Power Association of Northern California gathering on June 14. The shutdown of Aliso Canyon after a massive, months-long methane leak led to energy storage deals to fill in power demand in Southern California.

The most successful new technology in energy storage is the lithium ion battery because of a significant price drop in the last several years. In 2010, the cost of battery storage was about $1,000 per MW/hour. Battery projects were dependent on Department of Energy subsidies.  The price of batteries has fallen dramatically since then, reaching $300 per MWh for recent large-scale lithium ion projects in California this year.

“It is a very scalable technology in the wholesale market,” Hill said.

The last few months, nearly 60 MW of large battery projects have come on line in the state.

They include the 20 MW/80 MWh deal Southern California Edison signed with Tesla for a project at the utility’s Mira Loma substation in Ontario. It came online in January. It also includes San Diego Gas & Electric’s contract with AES Energy Storage for 37.5 MW of storage. Under that contract, a 30 MW system at the Escondido substation capable of storing 120 MWh came online in late February. In March, the 7.5 MW project at the utility’s El Cajon substation powered up.

Earlier large installations, which were demonstration projects dependent on Department of Energy funds, include an 8 MW/32MWh lithium ion battery project at Edison’s Tehachapi wind facility. Installed in mid-2014, it was largely financed by DOE money. A 2 MW lithium iron phosphate project at the Santa Rita jail was installed in 2012. It was funded with DOE, Energy Commission and other state funds, and money from Alameda County.

Predictions are that within nine years, the cost of lithium ion batteries could drop to $100  per MWh, said Megda Lakhchaura, Sunrun director of public policy.

However, the price of key elements in the batteries has risen, with access to cobalt the most threatened. Cobalt comes from the Congo which is in the midst of a civil war.

Unlike the large-scale new energy storage market to date, the private residential battery storage market depends on public subsidies because they are not yet cost-effective. The key source of funding is the California Public Utilities Commission’s Self Generation Incentive Program.

Pending legislation, SB 700 by Scott Wiener (D- San Francisco) would bolster the residential storage market because instead of insecure SGIP funding that varies by year, the legislation would provide continual funding totaling up to $1.4 billion over nine years.

“Now, the economics don’t make sense,” said Lakhchaura.

The behind-the-meter storage market would improve if the difference between the high and low prices of time-of-use rates was significantly larger, she said. For example, if utility off peak rates were far lower than peak rates, storage projects could power up during off peak times then feed juice back into the grid at peak times.

Another economic opportunity for small-scale battery storage may be the demand response market and bidding aggregated projects into the California Independent System Operator’s market. Small-scale storage project participation in the CAISO market is currently restricted to load reduction.

Issues that may arise if and when the large-scale and small-scale new energy storage markets meet remain to be seen. But at this point, both sectors hope the price of storage technologies continues to drop, allowing significant advances in California’s energy market.

Elizabeth McCarthy

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