In a decision unprecedented in the United States, on October 17, 2013 the California Public Utilities Commission (CPUC) voted unanimously to adopt an energy storage requirement for the state’s investor-owned utilities.  The decision in Rulemaking 10-12-007 implements the goals of California Assembly Bill 2514 which required the CPUC to determine appropriate targets and deadlines for California load serving entities to procure viable and cost effective energy storage systems.  Since passage of this legislation in 2010, the CPUC has worked to develop a framework for policies and guidelines pertaining to energy storage including consideration of various energy storage technologies and their applicability to various end uses along the "value chain" of generation, transmission, distribution, and behind-the-meter.  The decision requires regulated entities to acquire 200 MW of energy storage capability by 2014 and a total of 1.325 GW of energy storage by 2020.  The CPUC identified the objectives of this requirement as promoting grid optimization, integration of renewable energy, and reduction of greenhouse gas emissions.

For years, energy storage has been discussed as a possible solution to the challenges presented by the variability of renewable resources such as wind and solar power.  For example, energy storage would allow wind energy generated at night during low load periods to be stored and "time-shifted" to higher load periods during the day.  This capability essentially makes such variable, intermittent resources dispatchable and more amenable to incorporation into utilities' resource plans.  However, while some energy storage technologies such as pumped hydro are mature and well known, other technologies, including various thermal, chemical, and mechanical systems, are still developing and generally remain more expensive as compared to other energy options.  This latter challenge has been compounded recently by the low cost of natural gas and the ability to regulate or supplement variable resources with cost-effective natural gas-fired generation.

Industry stakeholders have been monitoring developments in California since passage of AB 2514.  Now, with the adoption of this first-in-the-nation energy storage requirement paired with what are arguably aggressive targets and procurement deadlines, the question is: Will other states follow suit?  The National Association of Regulatory Utility Commissioners has been considering this issue and various state regulatory commissions around the country have undertaken their own investigations into energy storage technologies.  While the CPUC's decision does not immediately solve the challenges associated with the state of energy storage technology or its costs, the California experience in the coming years may be instructive as to what is feasible from both a regulatory standpoint and from the perspective of effective integration of energy storage resources into the grid.  Utilities, regulators, and energy storage technology vendors will likely be watching with great interest as this unprecedented experiment unfolds.

Read the CPUC's press release here.