California has been a leader in renewable energy adoption and environmental sustainability. It has ambitious goals to reduce greenhouse gas emissions and combat climate change. It faces challenges related to its electrical grid, including the integration of intermittent renewable energy sources like solar and wind. Energy storage plays a crucial role in addressing these challenges. California has been actively expanding its grid-scale battery installations. From 2017 to 2021, the state transitioned from pilot projects to commercial deployment of lithium-ion batteries. During this time, the cost of energy storage decreased, and its use to ensure grid reliability increased. By the end of 2021, 2,200 MW/8,900 MWh of storage resources were contributing to resource adequacy services.
California Public Utilities Commission (CPUC) decision D.13-10-040 requires CPUC staff to conduct a comprehensive programme evaluation of the energy storage procurement policies and energy storage projects built under the law [Assembly Bill 2514 (AB 2514) which promotes the use of energy-storage devices across the state’s transmission network]. The final study conducted by CPUC and Lumen Energy Strategy (Lumen) was released on May 31, 2023. It reports that California’s energy storage portfolio has the potential to generate significant net grid benefits of up to USD1.6 billion annually by 2032. This means that the state’s investments in energy storage technology could result in substantial cost savings and improved reliability for the electrical grid.
California plans to continue its investment in energy storage. A preferred system plan adopted in early 2022 suggests that an average annual build-out of 1.3 GW of storage will be necessary for reliability over the next decade. The state aims to expand its grid-scale battery installations to 13.6 GW by 2032. The study also analysed both the costs and benefits of California’s energy storage resources. State ratepayers invested an average of USD75 million per year from 2017 to 2021 in exploratory storage projects and incentive programs.
Looking ahead to 2032, the study projects that net grid benefits of storage in California could range from USD 835 million to USD1.34 billion annually, assuming the expansion of battery installations as per the state’s preferred system plan. The goal is to achieve a total net grid benefit of USD1-1.6 billion per year by 2032.
The study also highlights advancements in California’s energy storage market, especially in the commercial scaling of lithium-ion battery technology for short-duration energy storage. It also suggests that various types of energy storage, including transmission-connected and customer-sited installations, can contribute to grid benefits if properly incentivised.
The report recommends building upon the research’s framework, considering emerging technologies, longer durations, market price impacts, and future data and analytical innovations. These insights will inform CPUC’s energy storage procurement analysis, which will become more complex as storage penetration increases.
For more details, the report can be accessed here.