Energy storage and the barriers to adoption

California regulators articulate nine major hurdles

Phil Carson | Apr 04, 2012


Why not begin today's column with a prediction, a rare indulgence for me.

Energy storage technology will become a major factor in the ability of individuals, neighborhoods, companies and campuses to break free of centralized power's current near-hegemony over electricity production and delivery.

The near-term alternatives, costs and uncertainties around investments in energy storage at utility scale will prevent swift adoption by centralized power beyond the well-known role of pumped hydro, except in narrow applications. Utilities are exploring those now and I'd welcome good news. 

The disconnect between the two markets—utility applications and non-utility applications—will reflect the general trend towards self-sufficiency and independence now underway across the country for military bases, campuses and individuals, to name a few motivated parties. Distributed generation, energy storage and microgrids of all sizes—in conjunction with radical energy efficiency methods—will become the rage as costs fall and external events such as storms motivate action.

This trend will accelerate in the current climate of mistrust of institutions, for which the investor-owned utility industry has in some well-publicized cases served as a poster boy. Don't take it from me. That's been all over our discussion forums, newspaper forums, blog sites and even the courts, as smart meter opponents and critics of utility practices foment discontent with the status quo. Americans are smart enough to seek out cost-effective alternatives to whatever institutions impose their will upon a strapped and stressed populace. Just my opinion. 

Now that I have your attention, however, let's look at the California Public Utilities Commission's summary of the barriers to adopting energy storage at utility scale and the framework that the CPUC's staff has proposed to explore the topic further.

We received a few comments on yesterday's set up piece, "California's Energy Storage Policies," to which we shall return. And the related proceeding number is R.10-12-007, which can be plugged into the CPUC website search box to reach the basic document titled "Energy Storage Framework Staff Proposal."

Let me list the nine adoption barriers (with a parenthetical note) listed by the CPUC staff, because each could require a separate discussion and, indeed, when the CPUC posts the staff proposal, you'll find concise background for each. They are:

  • Lack of definitive operational needs (a long-term procurement planning proceeding, R.10-05-006, is examining how to meet a renewable portfolio standard of 33 percent)
  • Lack of cohesive regulatory framework (storage's many potential roles cross regulatory jurisdictions, each without a history of treating energy storage)
  • Evolving markets and market product definition (energy storage currently does not fall under market products as defined by various entities)
  • Resource Adequacy accounting (in current RA methodology, no value has been assigned to storage-based services)
  • Lack of cost-effectiveness evaluation methods (the unique operational aspects of energy storage pose a challenge in recognizing all relevant benefits and quantifying them)
  • Lack of cost recovery policy (because storage can provide services in generation, transmission and distribution, cost recovery could occur under both cost-based and market-based rates, thus one difficulty in valuing and paying for storage)
  • Lack of cost transparency and price signals at wholesale and retail levels (improved transparency in energy and ancillary market design at the California ISO, with utility procurement planning and retail rate design could ease adoption)
  • Lack of utility operating experience (but California's three IOUs are evaluating value propositions and applications for storage)
  • Lack of well-defined interconnection processes


Now to the CPUC staff's analysis framework. This is more difficult to convey and I suggest that readers have a look at the proposal, because some visually oriented matrices are employed. However, the proposal cites Southern California Edison's approach and I'll briefly quote it for flavor. We'd already considered it in the column, "Straight Talk on Energy Storage."

"The approach taken by SCE acknowledges that actual energy storage  implementations may have several operational uses and, therefore, groups operational uses into 12 applications to facilitate a better understanding of benefits," the CPUC staff proposal noted. "Leveraging work done by SCE and EPRI [Electric Power Research Institute], among others, CPUC staff has developed a similar framework that decomposes energy storage into 20 'end uses' across the energy value chain. This list (Figure 2) is intended to be used as a foundation for further framework development and subsequent analysis of energy storage related issues."

Here we have the classic conundrum: to "do energy storage right" requires a deliberative process that explores a very complex subject with a lot of ramifications, while vendors are walking a tightrope to survive without market certainties. "Paralysis by analysis" was cited in yesterday's forum here.

The alternative could be haphazard public policy, with undue impacts on utilities and their ratepayers.

Too fast? Too slow? Are the right issues being explored and resolved? Solutions, anyone?

Phil Carson
Intelligent Utility Daily



Related Topics


The cost of storage

One comment about storage: With the exception of pumped hydro storage, currently the cost of building storage must cost more than the cost of building the equivalent natural gas plant. Why? Because if building storage was cheaper than building a natural gas plant, then it would make sense to build the storage and run existing natural gas plants at maximum during the night and other slack periods to charge up the storage. We don't see that in California, with the exception of a few pumped hydro storage facilities which I suspect are used mainly to supplement power during peak demand times.

If natural gas was not so hated by the greens, it would make the perfect backup for renewables. In fact, I live in Boulder, CO, which is currently exploring establishing its own municipal power utility using as much renewable power as possible. It's still the early stages, but the most common model is wind backed up by natural gas, both of which can be purchased on the open market (Boulder will have no power production capability of its own beyond whatever solar people have installed and a tiny amount of hydro).

      Milton Scritsmier

      Boulder, CO

storage application

The profound effects energy storage will have on the energy industry are recognized by the ISO's and the utilities - large and small. There is an undertone of effort to avoid tackling implementation of storage - despite the knowledge that the value and application of storage will improve the industry overall. Maybe California's effort to get this much needed aspect of energy management installed will direct storage, at all levels, in the right direction.

The facts about the mentioned resistence are notable; storage will reduce the need for combustion generation and storage will reduce or defer the need for transmission buildout while providing capacity and regulation much needed on the grid. Both aspects of the resistence make money from their current assets used to provide balance, integration and regulation; the roles of these assets will be be reduced, no business likes their services' or assets' use reduced, thus the bases for the resistence. Storage is coming - from large scale pumped hydro to batteries and the industry will change; this scenario needs to be accepted by the current players.

Utility scale vs. Residential vs. Community

Goldilocks found the porridge either too hot or too cold, before finding Baby Bear's bowl to be "just right," I believe storage technology will follow the same pattern.

Admittedly, the potential of utility-scale storage is tantalizing, from renewable integration to ancillary services. But it remains costly, highly complex and as your article states, highly difficut to integrate for a varity of reasons. Residential-scale? Well just say "Gridpoint" and we have our explanation - the ancillary equipment in a storage system remains too expensive to make residential scale work anytime soon. But as AEP has hypothesized, Community-scale may be just right for energy storage applications.

What is missing is to get utiltiies to start thinking at community-scale, or to get communities to start thinking about energy independence. Either will do, both would be better. Were the utility to focus at the feeder level and cooperate with its communities to embed building-based energy supported by community-scale storage, leading to a microgrid as technology and the market matures, they would find the solution to their DER challenges lies in thinking outside the box with new business models.

To get there, utiliities will have to open up their business models to embrace new ways of providing services, letting outside parties in to share in their problem solving. I called this business model Community Integration when I wrote it up three years ago in the Pecan Street Project down in Austin. Now its the basis of our new company, NextWatt Solutions.

John Cooper, Partner, NextWatt Solutions