Southern California Edison (SCE) has awarded 235MW of battery energy storage projects as part of its local capacity requirement (LCR) request for offer (RFO). SCE is required by the regulator, California Public Utilities Commission (CPUC), to procure nearly 2,200MW of generation resources, due to the forced retirements of nuclear and other generation capacity in SCE's operating region of Southern California. Of the 2,200MW of new capacity, CPUC requires 50MW to be energy storage – so SCE's decision to procure 235MW of battery energy storage technologies is significantly higher than the bare minimum. The chosen companies must install the energy storage by 2021, but can deploy them as early as the start of 2015. The awarded battery energy storage projects are:
- Stem will deploy 85MW across two contracts for behind-the-meter energy storage.
- AES will deploy a 100MW / 400MWh in-front of the meter (transmission) for a single contract.
- Advanced Microgrid Solutions will deploy 50MW across four contracts for behind-the-meter energy storage.
- NRG Energy will deploy a 0.5MW in-front-of-the-meter energy storage project.
SCE also included 25.6MW of thermal energy storage to be provided by Ice Energy across 16 contracts. As part of California's energy storage mandate (AB 2514), SCE must procure 580MW of energy storage across the three grid domains. However, the separate LCR mandate may count towards the broader energy storage mandate. Furthermore, the mandate requires that more than half of all projects be owned by someone other than the coordinating utility, which was a requirement put in place by CPUC to support energy storage developers. SCE likely expanded its energy storage LCR procurement process to meet the energy storage mandate under AB 2514, but it remains to be seen whether all projects will count towards its utility-owned procurement target. For example, Stem has traditionally deployed behind-the-meter, third-party owned systems through no money down leases, which would normally account for non-utility owned assets. The 85MW procurement dwarfs the current deployed base for Stem, and would make it the largest distributed energy storage player in the world. Additionally, developers like AES are project operators as opposed to project or technology developers and would likely need to own and operate a project to earn a return. Ultimately, there is still uncertainty about who will own these projects, the hours of storage, what applications they will meet, and in turn, how these projects will earn revenue on the grid.
AES Energy Storage will be deploying a four hour energy storage system with 100MW of power and 400MWh of energy storage capacity. Previous drafts of SCE’s LCR proposal included both a two and four hour only energy storage project, but the rest of the selected energy storage developers have not commented on which storage project they intend to pursue.
It remains to be seen when the exact timeline for deployment will be, as the construction and interconnection of such projects should take significantly less than the allotted six years. This is not the only RFO for SCE or in California, SDG&E, SCE and PG&E have already released their AB 2514 compliant RFOs. All three investor-owned utilities are expected to complete procurement of the first mandate by the end of 2015 while offers are required to be submitted between January and April of 2015 depending on the utility. For SCE the latter procurement will focus on16.3MW under two distinct application structures. PG&E is seeking 74MW of energy storage split between distribution level projects (24 MW) and transmission level projects (50MW). PG&E’s high deployments of behind-the-meter storage allow the utility to overlook the behind-the-meter grid domain in this procurement and still comply with AB 2514. SDG&E was the first utility to issue its AB 2514 compliant RFO, and is scheduled to procure 25MW, but is not capping its procurement at that level and is open to bids as large as 800MW, far surpassing its required amount. Like SCE, PG&E is required to procure 580MW of storage, while SDG&E is require to procure 165MW. The power to energy ratio or hours of storage for these procurements still remains to be seen.
While, SCE's LCR procurement is an unexpected near term boost that validates energy storage's role as part of the utility grid planning process, the three investor-owned California utility RFOs represent the largest policy-driven opportunity for energy storage in the foreseeable future. However, as countries and utilities gain operational experience with various energy storage applications, they will be able to incorporate energy storage as a grid planning asset, and the stationary storage market may find sustainable growth opportunities beyond policy-driven deployments.