Energy storage enjoys a breakthrough day

While most Americans were paying attention to election results, news emerged out of California on Wednesday that truly heralds a new era for the energy storage industry. Utility Southern California Edison announced that it will acquire 2200 megawatts (MW) of new power generation assets, of which 250 MW will be energy storage systems. This is the end result of the “Lowest Cost Resource” request for proposals that is designed to eventually replace the generation provided by the shuttered San Onofre nuclear power plant.

While the sheer scale of the announcement is staggering (no utility has ever purchased 250 MW of non-pumped-hydro energy storage before), the details of the announcement are even more impactful. Although SCE was expected to use some of this bid for energy storage (it listed energy storage as a “preferred resource” on the RFP), Navigant Research assumed the energy storage part of the purchase would be about 50 MW. By ordering five times that amount of energy storage, SCE is making a very loud statement about how highly it values energy storage as a grid management tool.

AES Energy Storage battery farm in Barbados. Image courtesy of AES Energy Storage.

AES Energy Storage battery farm in Barbados. Image courtesy of AES Energy Storage.

 The Land Rush Begins

 Another important aspect of this move is that it was done on a completely level playing field. SCE decided to purchase 250 MW of energy storage because it felt it had a higher value than any other generation asset (including natural gas, wind and solar). That in itself is an extremely important positive note for the energy storage industry.

Even more important for the industry is that SCE’s big vote of confidence for energy storage happened just before the launch of three big RFPs that were designed as part of the energy storage mandate that California is forcing on the big utilities. By December 1st, all three of the large investor-owned utilities in the state will introduce a total of more than 200 MW of energy storage purchases. It’s the energy storage industry’s equivalent of the Oklahoma land rush.

A large battery farm next to a solar system.

A large battery farm next to a solar system.

 Other Big Deals

 There are a couple of other important nuggets regarding the SCE announcement. First off, AES Energy Storage will be building a 100 MW battery plant that will dwarf all existing battery power plants out there.

Over the last few years AES Energy Storage has discussed how such a plant might work, but now it will have a chance to actually implement a battery peaking plant. If this project is successful, it will open up a completely new business model for the energy storage industry that could, in the long-run, be the largest segment of the stationary storage market.

In addition, San Francisco-based startup Stem won an 85 MW contract that will comprise of hundreds (if not thousands) of distributed battery packs working on the customer side of the meter. Like many other behind-the-meter energy storage system integrators, Stem has preached the concept of distributed battery packs that, in aggregation, work like a virtual power plant (see Navigant Research’s report, Virtual Power Plants). Stem will be the first company to implement such an idea at scale in the real world. If it succeeds, then other players like Coda Energy and GreenCharge Networks will also benefit.

Whatever your politics, for the energy storage sector it is Morning in America.

This article also appears on the blog of Navigant Research, a market research and consulting team that provides in-depth analysis of global clean technology markets. Navigant Research is also a partner of GigaOM Pro, GigaOM’s premium research service.