UPDATE:

AB 2514 was just voted out of the Assembly (concurrence with Senate amendments) 44 ayes -25 noes.  Next (and final) step: The Governor’s Office. The last day for the Governor to sign any new legislation into law is September 30, 2010.

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Utility-scale energy storage is a game-changer but it can’t happen without the proper regulatory environment.

A step in that direction was taken today.  California’s AB 2514, a bill mandating utility-scale energy storage, made it through the California Senate (22 ayes to 12 nays).

Next, the bill returns to the Assembly for concurrence in Senate amendments (the Assembly must agree/disagree with amendments made to the bill while it was heard in the Senate).  If successful in concurrence, then the bill goes before the Governor.  The Governor must sign the bill into law by September 30 of this year.

The Senate floor analysis is here.

Here’s a brief excerpt from the bill:

This bill would require the CPUC, by March 1, 2012, to open a proceeding to determine appropriate targets, if any, for each load-serving entity to procure viable and cost-effective energy storage systems and, by October 1, 2013, to adopt an energy storage system procurement target, if determined to be appropriate, to be achieved by each load-serving entity by December 31, 2015, and a 2nd target to be achieved by December 31, 2020.

And here’s a comment, just received by email from Edward G. Cazalet, Ph.D., Vice President and Co-Founder of Megawatt Storage Farms:

The passage of this bill is a major step forward for reliable, clean and lower cost electric power for all Californians. Electricity storage will enable more clean, local renewable wind and solar power supported by clean storage. With storage, Californians will have clean power when and where they need it and with less need for new transmission lines.

I urge the signing of this bill by Governor Schwarzenegger and timely implementation by the California Public Utilities Commission.  More than a year ago I first advocated such legislation. Based on my analysis, California will require about 4,000 megawatts of clean, fast storage mainly from grid scale batteries located close to loads on the distribution grid with the capability to store several hours of energy.

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“Utility-scale energy storage is one of the game changers,”  according to veteran investor and energy thought leader Gunderson.

Maurice Gunderson, senior partner at CMEA Capital, believes that grid-scale storage is a “game changer” in the alternative energy battle.  Gunderson has been working in the energy industry for more than 30 years and co-founded the first greentech investing firm, nth Power.

CMEA Capital’s portfolio companies includeA123 (lithium-ion batteries), Contour Energy (advanced battery technologies), Solaria (solar panels) and Codexis (biofuels).

We spoke to Mr. Gunderson about technology, policy and the investment landscape for energy storage.

Greentech Media is no stranger to this topic; we understand its importance in renewable energy and have covered it extensively.  Here are some recent storage-related articles:

• Energy Storage Medley: Hydrogen, CAES, Li-ion, NaS, NiCad…
• Energy Storage Needs Better Utility Policy, Language, Culture to Succeed
• Gravel-based thermal storage from Isentropic Energy – Thermal Energy Storage Breakthrough?
• Compressed Air Energy Storage (CAES) part 1, part 2, part 3
• Ice-based thermal storage
• Ultracapacitors – Maxwell and the Promise of Ultracapacitors
• Xcel Shows it Can Catch Wind in a Big Battery

“Large-scale energy storage can turn renewables into dispatchables”

Gunderson believes that grid-scale storage is the next frontier in renewable energy investments.  CMEA does not yet have an investment in this sector, but Gunderson says, “we are looking at three of them now.”  Expect to see an announcement in the coming months.

Gunderson continues, “At CMEA, we’re looking at novel chemistries — they won’t be lithium-ion or sodium-sulfur (NaS) and they will be suitable for utility applications.”

“The holy grail is very large-scale batteries, but they have to work at grid lifetimes and duty cycles.”  Unfortunately, at present, “There are no batteries that last decades.”

As for flow batteries, Gunderson said that there are fuzzy distinctions separating fuel cells, flow batteries and batteries.  There is plenty of research on various materials for flow batteries. People get them to work, they look promising, but after a few years they get a show-stopper problem. That issue eventually gets solved, but then new problems arise.  “We’ve never gotten to the point where they’re reliable enough for utility use,”  he said, adding, “There are a lot of people working on this and I think we’re going to get there in the 5-to-10-year time frame.”

“I’ve been looking for this for thirty years”

Gunderson continues, “There are lots of folks working on energy storage ideas, but most of them are half-baked. Most storage on the market is not really market-ready — the economics are unknown. It causes increased costs and uncertainties.”

He adds, “If I were a wind power developer and had a reliable battery that I could install behind the fence, it might double the price, but I can sell the power when people want it and triple my revenue by selling at peak.”

We already have as much wind as we can use in California, yet all of the capital budget is going towards wind and solar and “we can’t use it.”  He adds, “Interestingly, in California, we have a very high quality Public Utility Commission and Energy Commission, but they often are not listened to.”

Other Storage Technologies

Gunderson cited other energy storage schemes: ice storage, for instance.  Ice is cheap, it works, and there are no environmental hazards.  “Imagine a convention center: you make the ice at night and melt it for cooling during the day.”  A convention center that has little activity at night would be a good fit for this type of solution versus a building like a hospital that has energy loads both day and night.

Sodium sulfur (NaS) is “a bit of a headache because of high temperature and could be replaced by new battery concepts.”

As for compressed air energy storage (CAES) and pumped hydro, Gunderson had this to say: “If nature gives you a canyon, you should use it [for pumped hydro]. If you happen to have that, you’re lucky: you can put in as much wind as you can finance.  When the wind blows, you pump the water uphill.”  Unfortunately, the ability to do that varies widely, and in California, “we’re taking down dams not putting them up.”

Energy storage is a “baby industry” according to Gunderson, and there are a number of potential business models, such as Megawatt Storage Farms’ Independent Storage Provider concept, as well as “inside the fence” applications.

Gunderson is an optimist, a necessary quality for a venture investor.  He concluded, “We can go to Mars, we can go the the Moon, we can do this.  All we have to do is focus.”

Energy Storage Policy

In late July, the U.S. Senate introduced new legislation, known as the Storage 2010 Act, that will provide up to $1.5 billion in tax credits to storage energy projects connected to the U.S. electric grid. The initiative is intended to support intermittent energy sources, including wind and solar power, which can moderate demands during peak hours and facilitate a “smart grid,” using the power when it’s actually needed.  This might provide a boost for the energy storage industry, broadening the potential for better returns and increased investments in this area.

AB 2514 is a bill currently in the California legislative process that has been, in part, suggested by Ed Cazalet of Megawatt Storage Farms and recently championed by California gubernatorial candidate Jerry Brown. It has gone through some changes as it has made its way through the legislative sausage maker but nevertheless, the measure remains a mandate for energy storage.  If you are a Californian and believe that storage needs to be part of our renewable energy future, you might want to look into the bill and call your state senator.

Differing Viewpoints on Storage

Amory Lovins of the Rocky Mountain Institute challenges the concept of baseload power and the roles that renewables can play.

We have a commenter on Greentech Media’s comment boards who, when I write about storage and dispatchability, seldom fails to to inform me of the following: “Large-scale energy storage co-located with VERs [Variable Energy Resources] is unlikely ever to be commonplace.  It is irrational and based on a fundamental misunderstanding of variability and grid integration.  For a good summary, I recommend this recent report out of NREL (this means you, Eric Wesoff):

Here’s the URL for the NREL PDF:  http://www.nrel.gov/docs/fy10osti/47187.pdf

Here are a few excerpts from the cited report’s conclusions that the commenter might have in mind.  The report’s conclusions don’t seem to match the commenter’s vehemence:

• The increasing role of variable renewable sources (such as wind and solar) in the grid has prompted concerns about grid reliability and raised the question of how much these resources can contribute before enabling technologies such as energy storage are needed.

• Fundamentally, this question is overly simplistic. In reality, the question is an economic issue: It involves the integration costs of variable generation and the amount of various storage or other enabling technologies that are economically viable in a future with high penetrations of VG. To date, integration studies of wind to about 20% on an energy basis have found that the grid can accommodate a substantial increase in VG [variable generation] without the need for energy storage, but it will require changes in operational practices, such as sharing of generation resources and loads over larger areas [emphasis is mine].

• Beyond this level, the impacts and costs are less clear, but 30% or more appears feasible with the introduction of “low-cost” flexibility options such as greater use of demand response. However, these studies have not necessarily focused on storage and generally do not attempt to determine the optimal system (including the amount of storage) that provides the lowest cost of energy.  There are technical and economic limits to how much of a system’s energy can be provided by VG without enabling technologies based on at least two factors: coincidence of VG supply and demand and the ability to reduce output from conventional generators.

• At extremely high penetration of VG, these factors may cause excessive (and costly) curtailment, which will require methods to increase the useful contribution of VG However, the concern regarding how much VG can be used before storage is the most economic option for further integration currently has no simple answer, primarily because the availability and cost of grid flexibility options are not well understood and vary by region.

• It is clear that high penetration of variable generation increases the need for all flexibility options including storage [emphasis mine], and it also creates market opportunities for these technologies.

• Historically, storage has been difficult to sell into the market, not only due to high costs, but also because of the array of services it provides and the challenges it has in quantifying the value of these services – particularly the operational benefits such as ancillary services. The challenge of simulating energy storage in the grid, estimating its total value, and actually recovering those value streams continues to be a major barrier.

• VG complicates this issue because variability adds additional analysis challenges. The ability to simulate the cost impacts of VG and benefits of storage is still limited by the methods and data sets available. It is understood that VG increases the need for flexible generation and operating reserves, which can be met by energy storage. However, the value of energy storage is best captured when selling to the entire grid, instead of any single source.  Evaluating the role of storage with VG sources requires continued analysis, improved data, and new techniques to evaluate the operation of a more dynamic and intelligent grid of the future [again, emphasis mine].
  

The report doesn’t say that storage is unlikely; rather, it is complicated and has to be carefully assessed, economically, technologically and from a regulatory standpoint.  On that we agree.

Despite objections from our commenter, utilities and power providers are incorporating storage into the grid.  Note that Tres Amigas chose Xtreme Power to furnish energy storage and power management at the Tres Amigas SuperStation, a PE-backed transmission facility linking the Eastern, Western and Texas Interconnections.  The storage is being implemented, in part, to integrate variable generation.

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