California Releases its Proposal for 1.3 GW of Energy Storage by 2020

The California Public Utilities Commission (CPUC) released its proposal to mandate 1.3 GW of energy storage by 2020 (read the full proposal here). It includes three dedicated domains of procurement across transmission, distribution, and customer assets. The percentage of energy storage assets utilities can own is limited to 50%. This upper limit provides an opportunity for third-party developers to gain valuable projects and influence the use cases for energy storage.

The CPUC proposal outlines example use-cases across the three grid domains, including behind-the-meter storage. It states that utilities can own assets across all three domains, meaning that utility-owned residential energy storage systems are allowed.

For the procurement process, CPUC proposed a recommended reverse auction, which was almost universally rejected. The comments include a suggested request for offer (RFO), which the commenting parties believe better reflects the wide variety of storage projects that can bid into the storage solicitation. The solicitation process will occur once every two years beginning in 2014. The three California investor-owned utilities (IOUs) will be allowed to count the existing storage projects like the Tehachapi Wind Energy Storage Project against the procurement targets. The IOUs will have the ability to defer up to 80% of the investment if they can show that the responses do not meet identified needs set out by solicitation protocols or are cost prohibitive. Should the procurement and solicitation process not meet the identified needs, the procured energy storage could fall as low as 265 MW; the likelihood of deferring investment assets will depend on the RFO implementation.

The CPUC proposed plan recommends cost-benefit analysis tools developed by DNV-KEMA and the Electric Power Research Institute (ERPI) for evaluating energy storage applications and technologies. The IOUs will additionally come up with a cost-benefit tool that utilizes a common dispatch model co-optimizing benefits across utilities.

While still not finalized, the proposed rules allow for an unprecedented opportunity for third parties to guide the development of California’s energy storage market. All technology developers, system integrators, or financiers should be actively engaging with CPUC and the three IOUs to guide the implementation process of procurement and cost-effective project evaluation.