Press Release
Lumen Completes the Inaugural CPUC Energy Storage Procurement Study
OAKLAND, California, June 9, 2023 – Lumen Energy Strategy, LLC has completed the inaugural California Public Utilities Commission (CPUC) Energy Storage Procurement Study required by CPUC Decision 13-10-040 and pursuant to California Assembly Bill 2514 (Skinner, 2010). The final study report includes a comprehensive assessment of the CPUC’s stationary energy storage procurement framework, its impact on the evolution of California’s energy storage market, and resulting net benefits. The report concludes with a set of policy recommendations to the CPUC that aim to secure and strengthen future net benefits of the state’s rapidly-growing energy storage portfolio.
At the core of the study is an analysis of the actual operations of energy storage during the period 2017–2021 to determine to what degree CPUC-directed energy storage procurements meet Assembly Bill 2514's stated goals of grid optimization, renewables integration, and greenhouse gas emissions reductions. The study also investigates key policy and market uncertainties raised by stakeholders, including safety-related best practices, other energy storage procurement policies in practice, models for stacking multiple services, the cost-effectiveness of future procurements, the cost-effectiveness of natural gas peaker replacements, and end-of-life options. Findings are detailed in the main report and through a set of report attachments.
Mariko Geronimo Aydin, the report’s co-author, states, "This study is the first I’ve seen that evaluates the benefits of energy storage resources installed at all grid locations—meaning installed at customer sites, on the distribution system, and on the transmission system—with a single consistent approach. We look at actual installed resources, we consider a wide range of potential benefits and services, and we go to a finer spatial and temporal granularity than what you would typically see. We do this to give the CPUC and its stakeholders a really clear view of the benefits and challenges of energy storage so future policies can be as effective as possible." Mariko adds: "We're continuing the CPUC and its stakeholders' tradition of constantly improving benefit-cost analysis to meet modern needs. And we’re able to conduct this rich analysis thanks to their considerable work to explore the feasibility of different services and use cases of energy storage."
The study finds that the early energy storage pilots, demonstration projects, and first-of-its-kind procurements successfully enabled a scalable and cost-effective energy storage portfolio that supports the state’s statutory and policy objectives. In the years 2017 through 2021 California ratepayers invested an average of $75 million per year in exploratory projects and incentive programs to drive market transformation. Newer projects reveal the first fruits of this investment: they were on track to provide net benefits of $22 million per year by the end of 2021. Looking forward, as grid-scale battery installations expand to 13.6 gigawatts to meet the state’s 2021 Preferred System Plan, the study estimates by 2032 energy storage will yield net grid benefits of up to $1.6 billion per year.
"The CPUC and its stakeholders have done something incredible: they transformed this technology from a concept into a viable and scalable resource solution. But much work still needs to be done to fully harvest the fruits of these efforts in the years to come," says Onur Aydin, the co-author of the report, "Energy storage crosses many subject areas, planning, and policy divides. We feel lucky to be part of this meeting of minds to grapple the very complex problem of grid transformation and to drive innovation that will help us build a clean, reliable, and resilient energy future for all Californians. Our recommendations highlight key policy actions needed over the next few years to unlock the full potential of energy storage and to ensure ratepayers’ and customers’ investments in grid transformation are as efficient and beneficial as possible."
Lumen Energy Strategy, LLC advises clients on investment and product strategy to meet business needs in a rapidly changing energy landscape. Lumen’s work is supported by market and policy intelligence, risk assessment, customized analytical tools, and deep industry expertise.
At the core of the study is an analysis of the actual operations of energy storage during the period 2017–2021 to determine to what degree CPUC-directed energy storage procurements meet Assembly Bill 2514's stated goals of grid optimization, renewables integration, and greenhouse gas emissions reductions. The study also investigates key policy and market uncertainties raised by stakeholders, including safety-related best practices, other energy storage procurement policies in practice, models for stacking multiple services, the cost-effectiveness of future procurements, the cost-effectiveness of natural gas peaker replacements, and end-of-life options. Findings are detailed in the main report and through a set of report attachments.
Mariko Geronimo Aydin, the report’s co-author, states, "This study is the first I’ve seen that evaluates the benefits of energy storage resources installed at all grid locations—meaning installed at customer sites, on the distribution system, and on the transmission system—with a single consistent approach. We look at actual installed resources, we consider a wide range of potential benefits and services, and we go to a finer spatial and temporal granularity than what you would typically see. We do this to give the CPUC and its stakeholders a really clear view of the benefits and challenges of energy storage so future policies can be as effective as possible." Mariko adds: "We're continuing the CPUC and its stakeholders' tradition of constantly improving benefit-cost analysis to meet modern needs. And we’re able to conduct this rich analysis thanks to their considerable work to explore the feasibility of different services and use cases of energy storage."
The study finds that the early energy storage pilots, demonstration projects, and first-of-its-kind procurements successfully enabled a scalable and cost-effective energy storage portfolio that supports the state’s statutory and policy objectives. In the years 2017 through 2021 California ratepayers invested an average of $75 million per year in exploratory projects and incentive programs to drive market transformation. Newer projects reveal the first fruits of this investment: they were on track to provide net benefits of $22 million per year by the end of 2021. Looking forward, as grid-scale battery installations expand to 13.6 gigawatts to meet the state’s 2021 Preferred System Plan, the study estimates by 2032 energy storage will yield net grid benefits of up to $1.6 billion per year.
"The CPUC and its stakeholders have done something incredible: they transformed this technology from a concept into a viable and scalable resource solution. But much work still needs to be done to fully harvest the fruits of these efforts in the years to come," says Onur Aydin, the co-author of the report, "Energy storage crosses many subject areas, planning, and policy divides. We feel lucky to be part of this meeting of minds to grapple the very complex problem of grid transformation and to drive innovation that will help us build a clean, reliable, and resilient energy future for all Californians. Our recommendations highlight key policy actions needed over the next few years to unlock the full potential of energy storage and to ensure ratepayers’ and customers’ investments in grid transformation are as efficient and beneficial as possible."
Lumen Energy Strategy, LLC advises clients on investment and product strategy to meet business needs in a rapidly changing energy landscape. Lumen’s work is supported by market and policy intelligence, risk assessment, customized analytical tools, and deep industry expertise.
To access the study report, stakeholder presentations, and other information please visit
www.lumenenergystrategy.com/energystorage.
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www.lumenenergystrategy.com/energystorage.
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