California's Energy Storage Policies Enable a Greener, Cleaner Future

By Buck Endemann

The term "energy storage" includes a wide array of technologies that capture energy at one point in time, store it, and release that energy later when it is needed or when it is profitable to do so. While some energy storage technologies, like dams, have been around for millenia, recent advances in solid-state and flow battery technologies have made storing energy cheaper, more efficient, and more scalable. While the most visible examples of better batteries are the improved performance of cell phones and electric vehicles, energy storage is also quietly playing a role in how California's homes and businesses receive and use electricity.

How did we get here?

Since 2002, California has required its utilities to purchase or generate an increasing percentage of electricity from "green" resources like wind and solar--laws collectively known as the Renewable Portfolio Standard, or RPS. But because the wind does not always blow and the sun does not always shine when people need electricity, energy storage systems are seen as necessary to smooth the peaks and valleys of an increasingly intermittent power supply and to preserve the reliability of California's electrical system.

Starting in 2010 California became the first state to require its utilities to install energy storage systems along various points of the electricity grid, including at the bulk power transmission level, the street service distribution level, and the customer (or "behind the meter") level. Taken together, Assembly Bill (AB) 2514 and AB 2868 require California's utilities to procure and install over 1,800 megawatts (MW) of energy storage resources by 2024. See Cal. Pub. Util. Code §§ 2835-2839, 9620. Like the policies that nurtured the wind and solar industries a decade earlier, California's storage mandates have helped spread the acceptance and reduce the price of storage systems, and states like Massachusetts and New York have followed California's lead in setting storage targets for their utility providers.

Energy storage isn't just for integrating intermittent power resources, however. Utilities are also using batteries to replace or defer investment in traditional electrical infrastructure, such as power lines or "peaker" plants that run in bursts to provide electricity during periods of maximum demand.

In 2016, when the Aliso Canyon gas leak threatened the fuel supply for Los Angeles-area gas-fired power plants, Southern California Edison worked with developers to install 70 MW of battery storage to mitigate the risk of blackouts. Designing and deploying these systems within six months gave all stakeholders confidence that significant amounts of energy storage could be added to the grid quickly and efficiently.

Senate Bill 338, approved by Governor Brown in September 2017, recognizes that energy storage can serve multiple uses and requires all California utilities to consider how storage can help meet peak demand electricity needs while reducing the need for new electricity generation and transmission projects. See Cal. Pub. Util. Code §§ 454.52, 9621. Meanwhile, the California Public Utilities Commission continues to analyze how the multiple uses of energy storage can be valued, and how associated revenue streams can be created within current market structures. Non-utility players have reason to pay attention to energy storage, too. California's Self Generation Incentive Program (SGIP) offers energy consumers financial incentives to install new technologies to meet the electric energy needs of their facilities. SGIP funding has recently doubled to $166 million, and 85 percent of those funds must be allocated to energy storage technologies. While SGIP funding has been secured traditionally by large commercial and industrial projects, AB 546 (approved in September 2017) aims to ease the administrative burdens for residential customers by requiring local governments to make available and accept online all permitting applications for behind-the-meter energy storage systems. See Cal. Gov't Code § 65950.8.

Driven by technological advancements and progressive state policies, energy storage systems have the potential to fundamentally change the way that Californians generate, deliver, and use electricity. Storage systems are already being paired with solar panels and configured into microgrids to provide large energy consumers like hospitals and universities with additional energy security. Homeowners and businesses with behind-the-meter systems use stored energy during high demand hours to trim their "demand charge," or the cost associated with delivering reliable electricity during a discrete period of peak demand.

To be sure, energy storage resources do not fit perfectly into the existing regulatory environment that has evolved to accommodate 20th century technologies. But as storage technology becomes cheaper and more widespread, expect to see additional legal developments to accommodate this flexible energy resource.

Buck Endemann is a partner in the San Francisco office of K&L Gates, where he helps clients build, buy, and sell projects that comply with California's environmental and energy laws.