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The Power of Energy Storage

How to Increase Deployment in California to Reduce Greenhouse Gas Emissions

Energy storage includes a panoply of major technologies. At one end of the spectrum is “bulk” or “centralized” energy storage technologies, which contain hundreds of megawatts of capacity and can provide many hours of energy storage each day. At the other end of the spectrum are smaller “distributed” energy storage systems that can be located on-site with electricity consumers and along key distribution and transmission points. As California moves towards the goal of generating 33 percent of the state’s power from renewable sources by 2020, it will need significantly greater deployment of energy storage technologies to address the challenges posed by integration of large amounts of renewables into the grid.

Energy storage is critical to limiting California’s greenhouse gas emissions. Greater deployment of intermittent renewable energy technologies from wind and solar power will require grid operators to deploy energy storage technologies.

Energy storage will reduce reliance on fossil fuel-based power to meet peak energy demand. Capturing renewable energy generated during periods of low demand for later dispatch will help  flatten the generation profile of electricity and may obviate the need for “peaker” plants.

Energy storage can save consumers money and protect the electricity supply. Energy storage enhances opportunities for distributed generation, which involves small- to medium-scale generation close to demand, and also can provide security to the grid by hastening recovery from blackouts.

Policy Needs

Policy Solutions

Reforming Regulations & Utility Processes that Disfavor Energy Storage.

Develop Means to Fully Calculate and Capture the Value of Energy Storage and Encourage Utilities and Developers to Invest in Storage Facilities.

Federal Energy Regulatory Commission (FERC)

Establish rules for energy storage.

To help states develop a separate asset class for energy storage that will allow utilities, transmission operators, and independent energy storage owners and service providers to include the capital costs of energy storage in the ratebases, FERC should develop a method for analyzing how much value an energy storage project will bring to the grid and to ratepayers.

FERC & California Independent System Operator (CAISO)

Create cost and performance requirements for long-term, must-take contracts with utilities.

The federal government and CAISO could develop performance standards under which a utility would have to enter into an appropriate medium- or long-term agreement with the energy storage provider for the various services offered by the energy storage facility. These standards should be designed to protect the utilities from losses and give them the right to void the contract if the energy storage component fails to meet reliability requirements.


“Unbundle” the procurement of ancillary services.

Ancillary services provide key support for the stability and power quality of electricity. Currently, the CAISO purchases these services for the grid. Unbundling the process to allow outside parties to bid to provide specific ancillary services would help energy storage technologies compete to provide these specific services at lower costs.

California Energy Commision’s (CEC) Public Interest Energy Research (PIER) Program

Sponsor the analysis of performance and cost features of energy storage.

Utilities and the CAISO may be reluctant to approve new energy storage projects because they lack data on the likely cost savings of these projects. Studies can be performed to develop more solid data to help utilities decide when to invest in energy storage. The data could include a methodology for evaluating the cost effectiveness of energy storage and capturing the multiple value streams offered by storage.

CEC & California Public Utility Commission (CPUC)

Add energy storage to the energy loading order.

The energy resource loading order was established to guide energy decisions. Adding energy storage to this list of priorities would help ensure that agency leaders and utilities analyze storage technologies as an alternative to building new transmission lines and power plants and as a complement to renewable energy facilities.


Require utilities to procure storage systems equivalent to a percentage of their overall energy capacity.

Under terms of state law embodied in AB 2514 (Skinner), the CPUC was to adopt an energy storage procurement target, if determined to be appropriate, to be achieved by each LSE by December 15, 2015, and a 2nd target to be achieved by December 31, 2020.


Institute a rulemaking to develop a cost-effectiveness methodology to determine rates for energy storage.

An “Order Instituting Rulemaking” (OIR) to develop a cost-effectiveness methodology to determine the appropriate rates for energy storage.  This process would help rate-making authorities and energy storage investors calculate the value of storage and provide certainty for investment.


Establish a resource adequacy rating for energy storage.

The Resource Adequacy (RA) program at the CPUC requires all load-serving entities (LSE) that provide base load power to demonstrate that they have sufficient resources and reserves to meet the aggregate load on a monthly basis. The goal of the program is to ensure the safe and reliable operation of the grid at all times.

Minimizing Costs.

Develop Tax Incentives, Federal Support for Funding, Energy Pricing Mechanisms, and Streamlined Regulatory Approvals to Make Energy Storage More Attractive to Investors.

Federal Leaders

Offer tax credits and other incentives for storage projects.

Tax credits would spur more investors to finance these projects and could potentially offset the high upfront costs of deploying and developing cutting edge technologies. Congress could expand the Modified Accelerated Cost Recovery System (MACRS), which allows investors to deduct annually the capitalized cost of depreciable property, to cover energy storage investments.

Federal Leaders

Offer loan guarantees for energy storage developers.

DOE should extend its Loan Guarantee Program to energy storage technologies. The program offers federal support for clean energy projects using innovative technologies to spur investment.

Federal Government & California Air Resources Board

Set an appropriate price on carbon.

Putting a price on carbon that reflects the true cost of fossil fuel generation will make carbon-free renewable energy more competitive in comparison to fossil fuel-based energy. This action will stimulate more investment in energy storage and renewable energy, which can then provide potentially cheaper alternatives and more certainty for investors.


Develop standardized contracts for energy storage.

CPUC-approved rate for energy storage facilities as part of a standard offer contract, where terms and requirements are uniform for all parties without the need for negotiation each time, would reduce transaction costs for energy storage and provide more certainty for investors.

Raising Awareness of Energy Storage Benefits.

Expand Data on Energy Storage Technologies, Perform Studies, and Promote the Findings to Key Decision-Makers.


Conduct a “2020 vision study” for energy storage with a supporting model.

The CEC can use an analysis of how energy storage could be integrated into the grid by 2020 to elevate awareness of the key barriers and policy needs to accomplish this goal. A CEC-led convening of stakeholders to provide input on this vision could present policy-makers with the key solutions and raise the profile of this issue.


Restart its in-house energy storage stakeholder group.

A revitalized Energy Storage Stakeholder Group could help make energy storage projects a priority at the CAISO and coordinate further energy storage research. CAISO should assign a project manager to oversee this effort, using CEC PIER funding or other available resources.

Energy Storage Experts & CEC

Compile and publicize data on current projects.

Energy storage experts could identify a sampling of existing commercial storage projects around the country, compile performance data and lessons learned, and disseminate the information to decision-makers. The CEC should dedicate funds, such as from Advanced Research Projects Agency-Energy (ARPA-E), to compile some of this information and to finance further demonstration projects.

Energy Storage Advocates

Provide leadership to elevate energy storage issues among key decision-makers at FERC, CPUC, CEC, Governor’s office, and Legislature.

Advocates will probably want to create a national organization to promote energy storage, perhaps by building on CESA in California or utilizing or altering the existing Electricity Storage Association. This national organization could start by publishing an accessible and interesting report that describes energy storage in a practical way for policymakers and average citizens and provides policy proposals to advance cost-effective storage.

"We know the ISO is dumping excess energy at night. So if you had storage facilities to contract with, we could get it back."

Joseph Desmond, California Energy Commission