How Will the California House Storage Mandate Impact the Energy Storage Market?

Published: July 14, 2010    Category: Smart Grids

The California House recently passed bill 2514 which would require that California utilities develop energy storage capacity equal to 2.5 percent of their peak capacity by 2014 and 5 percent of their peak capacity by 2020.   

The passage of this bill highlights the increased awareness of the need to implement electrical grid storage in order to fully realize the smart grid goals of increased efficiency and incorporation of high levels renewable resources.  The need for grid storage is especially acute as wind and solar begin to account for more generating capacity in California and other states which have high renewable energy mandates. 

California has a renewable energy generation goal of 33 percent renewable energy by 2020.  While around 18 percent of this would come from reliable hydroelectric and geothermal sources, the other 15 percent will be from wind and solar which are variable and uncontrollable in their generating output; and therefore in need of storage facilities to optimize their use.

Depending on grid configuration, sudden drops in wind generation from changes in wind velocity can cause grid instability when the percent wind capacity is over 10-15 percent.   In fact, Ireland capped wind power at 7 percent of overall generating capacity due to grid instabilities from the variability of wind power. 

Likewise, in 2007, Texas experienced rolling blackouts when an unpredicted drop in wind speeds drastically cut the wind generating capacity in western Texas to the point that the other generating assets could not keep up with total demand and rolling blackouts resulted.

In our recent report on energy storage in the Smart Grid, NanoMarkets/Smart Grid Analysis also concluded that this the need for grid storage is real, and that the market for this kind of storage will grow rapidly in the near future,

Let’s take a look at how the new California law might work

EIA data from 2008, tells us that for California, the total summer capacity of all electrical generating resources over 30 MW is 56.8 GW.  Now, the law as written mandates 2.5 percent of this amount; i.e., 1.42 GW in storage capacity.  

Unfortunately, implicitly the law has confused power (Watts) used to rate generating capacity with energy (Watts-h) used to define storage capacity.  But let us assume for the sake of argument that what is really required is 1.42 GW-h of storage capacity which would allow frequency regulation, ancillary services and some load shifting of peak demand which are all intended goals of the law. 

This goal seems achievable based on NanoMarkets/Smart Grid Analysis recent forecasts of the grid storage market, but the price tag of such storage will vary widely depending on which technology is used. 

Lead acid is the lowest cost solution at approximately 150 dollar/KW-h, is well known, but needs close monitoring for acceptable service life.  The NaS batteries widely used in Japan for grid storage are around 400 dollars/KW-h.  Lithium-ion solutions are the most expensive at somewhere between 1,000-1,200 dollar/KW-h. 

Since the light weight of li-ion compared to lead is less important for stationary applications, it is highly likely that lead-acid and NaS will dominate the grid storage market.  The price tag for the California 2.5 percent mandate would be approximately 213 million for a lead acid solution, 568 million for NaS and around 1.4 Billion for li-ion. 

Clearly, at some level the new California law will be good for grid storage sales.  Unfortunately, it is far from clear that the law is good for California consumers.  Legal/regulatory mandates as a means to solve technical issues typically misallocate resources.  Perhaps, the optimal deployment of storage facilities from an engineering/energy efficiency standpoint should have been some number quite different from 2.5 percent. 

We will never know, for sure.  And while the new law highlights the need for grid storage, it smacks of micromanagement in the extreme.  It might have been better to let the electrical providers define the amount of storage necessary to maximize reliability and efficiency, meet renewable mandates and emissions targets all at the lowest cost to the consumer and with a much better chance of building a Smart Grid infrastructure that offers the public long term sustainability.

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