California’s pioneering energy storage mandate moves forward

California is moving ahead with what could be a precedent-setting mandate to require its utilities to invest in energy storage systems and services, which are meant to complement the growing amount of wind and solar electricity flowing into the grid.

California lawmakers passed a bill in late 2010 that fell short of requiring utilities to invest in energy storage but did  give the California Public Utilities Commission the task of looking into whether a mandate is a good idea and what that mandate should be. The commission on Thursday approved a proposal that identified 20 ways that electricity storage could benefit the grid and consumers. That decision then kicked off a new round of discussion that could eventually lead to an energy storage mandate and turn California into a prime market for many types of battery and other storage technologies.

Similar to the existing state mandate that requires investor-owned utilities to buy or produce more and more renewable energy over time, an energy storage mandate could very well require the same utilities to put money into technologies that could store electricity for short and long-term use. For example, utilities could build their own energy storage systems or buy services from owners of energy storage farms. Ultimately, the costs of investing and using energy storage will be passed on to consumers.

The idea is to use energy storage to complement the growing amount of solar and wind electricity that is flowing into the grid. Solar and wind energy production can be intermittent because it depends heavily on weather conditions. That intermittency worries utilities and grid operators because an electric grid runs smoothly only when there is a balance of supply and demand — it’s something that is easily achieved with fossil fuel power plants because they can produce electricity around the clock. The grid now is not well equipped to handle big surges or quick declines of solar and wind energy.

Electricity from an energy storage system can help to maintain that supply-demand balance in minutes at a time, become a go-to power source when demand is particularly high (such a hot summer day), or serve as a backup power supply during blackouts (see the 20 uses identified by the commission).

The energy storage bill signed by then Govt. Arnold Schwarzenegger in 2010 was apparently the first legislation in the country to look at how energy storage might be necessary for meeting a state’s goals to increase its use of renewable electricity. The new law (PDF) was a watered-down version of an initial effort to require the state’s investor-owned utilities to use energy storage. Instead, the law requires the commission to start the process of determining whether energy storage is necessary for the investor-owned utilities by March 1, 2012. The commission has until Oct. 1, 2013 to adopt an energy storage procurement target if it deems storage necessary. If that happens, utilities will have until the end of Dec. 2015 to meet the first target, and the end of 2020 for the second target. Municipal utilities and public utility districts, which aren’t regulated by the commission, also have to follow similar deadlines.

Understandably, the state’s three biggest utilities – Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric – oppose setting energy storage targets. And so does the Division of Ratepayer Advocates within the commission.

The utilities argue that public subsidies can actually slow down the development of better and cheaper technologies. The Division of Ratepayer Advocates noted that “Picking arbitrary procurement levels, such as a MW [megawatt] level or a percentage level would most likely result in sub-optimal market solutions and increase costs to ratepayers without yielding commensurate benefits.”

You can be sure to hear a lot more debates about whether a mandate will help or hurt storage technology development and deployment. A lot of federal and private money has gone into energy storage technologies, particularly in the field of rechargeable batteries, because they are betting that electric cars and renewable energy storage will become big business. Just earlier this week, the U.S. Department of Energy announced a new round of battery technology funding.

The commission plans to hold a workshop on energy storage on Aug. 20, and another meeting is scheduled for Sept. 4.