California’s energy storage mandate – requiring utilities to acquire 1.3 GW of energy storage by 2020 – was precedent-setting, and now comes the big job of implementing the mandate.
It’s complicated and difficult, to say the least.
In a recent interview, however, Elliot Hinds, a partner with Akin Gump, shed light on some of the issues regulators are grappling with. For example, how to set pricing on the energy storage, when each storage unit and developer offer different benefits? How to pay for the cost of energy users defecting from their utilities in favor of energy storage plus solar? (That’s a topic we covered in this story: Will Energy Storage Plus Solar Inspire Customers to Abandon Their Utilities?)
“Anyone interested in investing in energy storage should be paying close attention to this proceeding,” says Hinds. “There’s the opportunity to comment on the RFPs that the utilities have filed. Those responses will be due in early April. Participants can shape the process for developing the contracts for energy storage.”
Pricing an energy storage project is, like the California mandate, totally new, he says. And it’s important. Why? Because energy storage can provide huge benefits.
“This is on the heels of the renewables integration that has happened throughout the country. Storage is a way to smooth out renewables integration. The technology has improved. It’s more cost competitive. It’s becoming a necessary component to grid management,” says Hinds.
It’s difficult to price energy storage because it can provide up to 20 different services to the grid. This includes a variety of ancillary services, Hinds says. And it can reduce or delay capital investments in transmission. “All these are benefits that give it powerful potential but also make it a difficult thing to actually price,” he says. “You should see the formulas in the contracts. They will make your head spin.”
As they price their projects, developers must factor in what kind of the 20 services or so their energy storage project will provide. “It’s up to the developer to decide which services the project will offer.”
What’s more, developers must figure out how quickly the energy storage units will degrade. The more the storage unit is used, the faster it will degrade.
And then there’s the impact of customers defecting from their utilities.
“We’re still working through how to manage the consumer and retail rates in an environment where significant segments of customers are moving off the utility model and pulling all their power off their grid,” says Hinds.
Meanwhile, some utilities are offering programs that allow homeowners to acquire storage systems for their own use and go off-grid, Hinds adds. This all adds to the complexity – and excitement.
Times are changing for utilities and their customers – and energy storage is helping drive that change. Stay tuned to our energy storage news by following our LinkedIn Group here: Energy Efficiency Markets on LinkedIn