“Stale” Time-of-Use Rates May Undercut Benefits of Energy Storage in California

California’s grid operator is considering a load shift product that could beat “stale” time-of-use rates in its ability to avoid greenhouse gases and generate income for energy storage system owners and operators.

The problem, for storage system owners, is time-of-use rates are getting “stale,” and don’t represent what mix of fuels are producing generation on the grid on a moment-to-moment basis, said Alex Morris, director of policy and regulatory affairs for the California Energy Storage Alliance (CESA). That means it’s unclear what times of day storage owners could benefit both the grid and the environment by storing energy (generally renewable energy) and releasing it later.

For example, time-of-use rates might signal a storage owner to provide stored energy during peak hours, from, say 5 pm to 7 pm, to help a utility avoid using a gas-burning peaker plant.

But the formula is more complicated — and a product that reflects what’s happening on the grid in real-time would be more useful than time-of-use rates, he said. That’s what CAISO is trying to develop in work with CESA, energy storage company Stem, and others.

A recent analysis showed that California’s Self-Generation Incentive Program (SGIP) — which provides incentives for energy storage, with a goal of reducing greenhouse gas emissions — actually led to slight increases in greenhouse gases, Morris said.

“The preliminary analysis is the SGIP caused $11,000 worth of greenhouse gases,” he said. “In order to provide greenhouse gas benefits, you have to know the mix of generation at any time.”

Storage owners need to know when to charge and avoid using natural gas. “Storage devices can charge and discharge but if the timing is wrong, you can get an outcome you didn’t want,” said Morris.

The $11,000 in greenhouse gases is a small effect overall, and the analysis of the SGIP gave CESA important information, Morris said.

“I think it’s good to learn about it early when consequences are small. This is a classic example of California leadership. We are marching down this path, and learned we need more sophistication about the marginal unit,” Morris said.

A draft fact sheet about the load shift product says “a ‘shift-focused’ BTM (behind-the-meter) wholesale product will help with the absorption of excess generation and can use that captured energy for societal benefit later on. This enhancement should also provide market pricing benefits, reduced curtailments, and a more liquid pool of participants in the CAISO’s market.”

The goal is to provide for market access to behind-the-meter resources whose owners want to increase load by participating in the market, the fact sheet says.

Directing state funds to energy storage

Meanwhile in California, two Republican leaders of the state assembly have crafted ACA-21, the so-called “Dare to Build Act,” which would earmark at least two percent of the state’s General Fund revenues to infrastructure, with some of the funds going to storage and microgrids.

Assemblyman Jay Obernolte, R-Hesperia, and Chad Mayes, R-Yucca Valley, have introduced the measure.

Amendment 21 would dedicate new funds for cutting-edge technologies to address infrastructure needs, Assemblyman Obernolte said.

“Energy reliability is a vital component of our state’s infrastructure. Microgrids provide a continuous supply of electricity that protects local residents from grid outages due to natural disasters or cyberattacks,” he said in an email to MicrogridKnowledge.

The public benefits of microgrids include lower electricity costs, increased reliability and local jobs, Obernolte said.

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Way to support microgrids in California

“California should support new technologies like microgrids and advanced energy storage to address our growing energy needs,” he said.

The amendment would create a special fund, from a minimum of two percent of the general fund each year.

Fifty percent of that fund would go to “investments in research and development, project planning, construction and equipment purchases for new and visionary infrastructure projects,” said a fact sheet about the measure provided by Mayes’s office.

The infrastructure projects would include, among other things, investments in planning, research and development, and equipment to speed the integration of microgrids into California’s grid. The goal would be to “strengthen the integrity of the electrical system and protect against outages caused by natural disasters or terrorist attacks, and decrease the cost of electricity to consumers,” said the fact sheet.

Commenting on the legislation, ESA’s Morris said that the proposal appears to direct money from the budget into the fund. “They must be saying they want to keep it in a separate infrastructure fund and cordon off part of the budget. Inherently it’s smart to plan the system to support reliability in the face of natural disasters and other challenges.”

CESA has not yet taken a stance on the measure, he said.

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