Energy Storage Law Would Attract Manufacturers and Jobs to California

State could become a hub for the energy storage industry

Sep 2, 2010

California lawmakers passed a bill late last month that its backers say offers the triple benefit of job creation, electrical grid stability and greenhouse gas reduction.

The bill, AB 2514, is designed to kick start a statewide process of grappling with energy storage, emerging technologies crucial to the expansion of renewable energy generation required by California law.  Though the bill was watered down as it moved through the legislative process, energy storage developers are still expecting it to deliver the incentives and certainty they need to grow and flourish. 

In its original version, the bill set specific energy storage procurement targets for utilities, as well as timelines. The amended version approved by state lawmakers did not say how much, if any, storage capacity utilities would be required to have. Instead, it would require the California Public Utilities Commission (CPUC) to assess whether to require the state's utilities to adopt energy storage systems.

If the agency determines that such storage systems are viable and cost-effective, it would then be tasked with setting targets and timelines for utilities to procure them.

Still, David Nemtzow, chief policy officer for Colorado-based energy storage company Ice Energy told SolveClimate News that the bill is "the most far reaching storage legislation so far in the U.S. It will change the way utilities think about storage."

For Ice Energy the new legislation could determine where it chooses to locate its manufacturing facilities. The company makes energy storage systems that are incorporated into buildings' air conditioning systems, making ice at night when power demand is low and using it in the daytime to provide cooling for the air conditioning, in place of the AC unit's
compressor.

If the CPUC mandates energy storage for California utilities, "Ice Energy would fully consider opening an manufacturing facility in California," Nemtzow said. The company, which has about 70 employees, currently manufactures its units in New York.

If the bill is signed by Gov. Arnold Schwarzenegger, CPUC would be required to begin proceedings to determine whether to establish energy storage targets by March 2012. If the commission determines that such storage systems are viable, it must then set energy storage targets by October 2013, to be implemented by utilities in two stages by the end of 2015 and 2020.

While the bill's opponents, including the California Manufacturers and Technology Association, said the legislation would hike up the state's already high electricity rates, its supporters expressed confidence that the CPUC would find storage to be an economically viable solution for meeting the state's increasingly complex power demands.

"We're happy with amendment," said Janice Lin, director of the California Energy Storage Alliance (CESA). "We believe once [the CPUC] has a focus on energy storage, [it] will find that it's cost effective."

Power Grid Management

Energy storage refers to a suite of technologies—including batteries, thermal storage, flywheels, compressed air and pumped hydro—that allow surplus energy to be kept in reserve to be dispatched during times of peak demand. As more intermittent resources, such as wind and solar, are added to the energy mix, energy storage will be increasingly vital to a smoothly functioning power grid, according to a 2010 report from the CPUC.

If state regulators decide to require energy storage, that could mean an infusion of "green collar" jobs—such as in manufacturing and installation—into a state where unemployment rates have hovered around 12 percent for the past year, according to the CPUC report.

The original version of the bill, if fully implemented, would have created between 5,000 and 10,000 jobs, according to CESA. Actual job creation will depend on the targets the CPUC comes up with, Lin said, as well as the type of storage technologies used. CESA based its estimate on thermal energy storage technologies, while real implementation would likely include a range of storage solutions, including batteries, compressed air and pumped hydro.

For the energy storage sector as a whole, the bill could positively affect project financing and how the marketplace looks at energy storage, Nemtzow said, by both increasing the size of the market and making the market more predictable for an industry that has suffered from a lack of clear policy support.

Beyond California, federal lawmakers are also mulling over legislation that would support the fledgling energy storage industry. Introduced in 2009, the Storage Act would allocate up to $1.5 billion in tax credits to grid-connected storage projects. Utility-scale projects would be eligible for a 20 percent investment tax credit, while commercial and residential installations could receive a 30 percent tax credit.

In the meantime, some utilities are already developing energy storage projects. Ice Energy in early 2010 announced a 53-megawatt distributed storage project with the Southern California Public Power Authority, a group of 11 municipal utilities serving about 2 million customers.
And in late August, Pacific Gas and Electric filed an application with state regulators to launch a feasibility study for a pumped hydro facility of between 400 MW and 1,200 MW in size.

The utility said it is also investigating batteries and compressed air storage. In 2009, PG&E was awarded $25 million from the U.S. Department of Energy to go towards a $356 million compressed air energy storage project in Kern County, Calif.

Energy storage is critical to supporting California's renewable energy mandates, which require utilities to receive one-third of their power from renewables by 2020, PG&E spokesman Jonathan Marshall wrote on the company's blog. "An electrical grid without energy storage will forever be just a bunch of dumb wires."

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