California Takes the Lead With Energy Storage Procurement Targets


In a first-of-its-kind move in the United States, a California Public Utilities Commission (CPUC) order made effective today sets specific energy storage procurement targets for 2020 covering enough power to serve approximately 1 million homes. Please view PDF here.   The state’s 3 investor-owned utilities (PG&E, SCE and SDG&E) must target obtaining 1,325 MW of energy storage contracts by 2020 with a final installations by 2024.  The order requires the utilities to forward move quickly on this – the proposed procurement process must be submitted to the CPUC by March 1, 2014 along with a structure for steady but orderly contracting and implementation.  The requirements specify broad integration of storage across the grid with transmission-connected, distribution-connected and customer-side applications that have to be contracted on a graduated basis in 2014, 2016, 2018 and 2020.  The order also requires the state’s community choice aggregators and electric service providers to procure energy storage to cover 1% of their 2020 peak load.

This order follows the state’s requirement announced earlier this year that SCE must include 50 MW of energy storage in its western Los Angeles area resource procurement plan.  Please view PDF here. This, along with some other existing storage projects will count towards the utilities’ procurement targets under today’s order.

The energy storage procurement processes are required to be competitive but due to stringent resistance from the commentators, the reverse auction format used in the renewable energy auction mechanism (also known as “RAM”) was rejected by the CPUC.  Instead the utilities will collect requests for offers (“RFOs”) and then negotiate specific bilateral contracts with winning bidders.  Since energy storage technologies vary considerably in terms of size and the types of grid services they can provide (from grid balancing to renewables integration to back up capacity), the prevailing viewpoint is that RFOs provide a better mechanism for evaluating and valuing energy storage by the service offered.

Akin Gump will be releasing a Client Alert with further details on this order shortly.


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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