Utilities across the country are currently issuing a number of requests for proposals (“RFPs”) to procure energy storage resources. The reason for the strong demand in energy storage is driven by the dramatic growth of intermittent wind and solar generation, which often time generate power off-peak. Energy storage can smooth out this fluctuation by absorbing surplus base-load generation during off-peak hours for injection back into the grid during peak hours. In addition, energy storage is economical in that it can reduce the amount of expensive network upgrades otherwise needed to handle congestion during periods of peak power flow. These benefits, along with state renewable portfolio standards (“RPS”) and increased customer-sited generation, have increased energy storage demand which has in turn lead to technological advancements as well as reductions in manufacturing costs as the industry scales up. Now that the industry has matured, investors and developers are seeing enormous potential.
Currently, the greatest opportunities for those looking to develop and invest in energy storage projects is in California. This is due to a California Public Utilities Commission (“CPUC”) decision last October, mandating that California’s three large investor-owned utilities, Pacific Gas & Electric (“PG&E”), Southern California Edison (“SCE”) and San Diego Gas & Electric (“SDG&E”) collectively procure 1,325 MW of energy storage by 2020, which coincides with the statewide 33% RPS target date. In order to meet this target, the CPUC set out the following schedule:
Storage Grid Domain (Point of Interconnection) | 2014 | 2016 | 2018 | 2020 | Total |
SCE Transmission Distribution Customer |
50 30 10 |
65 40 15 |
85 50 25 |
110 65 35 |
310 85 55 |
Subtotal SCE | 90 | 120 | 160 | 210 | 580 |
PG&E Transmission Distribution Customer |
50 30 10 |
65 40 15 |
85 50 25 |
110 65 35 |
310 85 55 |
Subtotal PG&E | 90 | 120 | 160 | 210 | 580 |
SDG&E Transmission Distribution Customer |
10 7 3 |
15 10 5 |
22 15 8 |
33 23 14 |
80 55 30 |
Subtotal SDG&E | 20 | 30 | 45 | 70 | 165 |
Total - all 3 utilities | 200 | 270 | 365 | 490 | 1,325 |
The first RFPs takes place at the end of this year, and then each utility will issue an RFP biennially thereafter. To that end, PG&E, SCE, and SDG&E recently submitted applications to the CPUC detailing their 2014 RFPs, which are available here, here, and here. The size of each successive RFP will grow substantially as the 2020 target date approaches. This is due not only to the fact that the scheduled targets increase but also because utilities are allowed to defer a portion of their targeted amount if the bids are not cost-effective to the next solicitation as well as apply certain energy storage projects that were already planned prior to the RFP towards the requirements.
There are important restrictions built-in to the procurement process. Utilities must solicit energy storage technologies within three different domains: (1) transmission, (2) distribution, and (3) customer-sited. The domains are based on where the storage is connected to the grid, and utilities are required to meet energy storage technologies within each specific domain, with some flexibility given between the transmission and distribution domains. Furthermore, the utilities may not own more than 50% of the storage projects that are counted towards their energy storage mandate.
In addition to the energy storage mandate described above, on March 13, 2014, the CPUC required SCE and SDG&E to procure additional energy storage in the Los Angeles area when it approved the utilities’ biennial Long-Term Procurement Plan (“LTPP”). The LTPP cumulatively authorizes SCE and SDG&E to procure up to 3600 MW of generation to replace the moth-balled San Onofre Nuclear Generation Station as well as other generation in the region. The CPUC order authorizing the latest LTPP is available here. As set out in the charts below, there are specific carve-outs for energy storage.
SCE
Resource Type |
Track 1 LCR Resources (D.13-02-015) |
Additional Track 4 Authorization |
Total Authorization |
Preferred Resources Minimum Requirement |
150 MW |
400 MW (which may include energy storage) |
550 MW |
Energy Storage Minimum Requirement |
50 MW |
– |
50 MW |
Gas-fired Generation Minimum Requirement |
1000 MW |
– |
1000 MW |
Optional Additional From Preferred Resources/Energy Only |
Up to 400 MW |
– |
Up to 400 MW |
Additional from any Resource |
200 MW |
100 to 300 MW |
300 to 500 MW |
Total Procurement Authorization |
1400 to 1800 MW |
500 to 700 MW |
1900 to 2500 MW |
SDG&E
Resource Type |
D.13-03-029/D.14-02-016 |
Additional Track 4 Authorization |
Total Authorization |
Preferred Resources(including energy storage) Minimum Requirement |
– |
175 MW |
175 MW |
Energy Storage Minimum Requirement |
– |
25 MW |
25 MW |
Additional from any resource |
300 (Pio Pico) |
300 to 600 MW |
600 to 900 MW |
Total Procurement Authorization |
300 MW |
500 to 800 MW |
800 to 1100 MW |
Although the PG&E, SCE, and SDG&E service territories offer the greatest opportunities for energy storage in terms of the total MWs of development available, there are plenty of other opportunities throughout the U.S. and Canada for investors and developers, as detailed below: