No More Storing Dirty Energy: California Works to Cut Emissions Due to Energy Storage

Photo by Lisa Cohn of energy storage at University of California, Riverside

But the California Public Utilities Commission (CPUC), through its Self-Generation Incentive Program (SGIP), has discovered that SGIP energy storage projects actually increase greenhouse gas emissions.

Once again, the state is leading the way with its environmental policies, this time with a proposal to cut greenhouse gas emissions (GHG) due to energy storage. The CPUC staff has issued a proposal that’s expected to address the problem and possibly create a program replicable elsewhere, as California did with its emissions trading efforts.

“In a similar, data-forward, hands-off approach the CPUC took to introducing ’emissions trading’, the GHG signal proposal would arm the industry with accurate up-to-date data and then get out of the way. That approach scaled to become an essential pollution control across the globe, and I see the GHG signal doing the same,” said Gavin McCormick, executive director, WattTime, who participated in the working group that created the proposal.

The energy storage emissions problem was uncovered by the 2017 and 2016 SGIP Advanced Energy Storage Impact Evaluation reports. They showed that under the current system, SGIP energy storage projects increase GHG emissions — for both residential and non-residential projects, McCormick said.

Bad timing creates emissions

Energy storage’s ability to reduce GHG emissions is all about when batteries are charged using grid power — and what incentives are available to ensure they’re stored at the right time. SGIP storage has led to a net increase in greenhouse gas emissions, in part because most time-of-use (TOU) rates aren’t designed to reduce charging energy storage when grid power is creating high greenhouse gas emissions, said the CPUC staff in its proposal.

In addition, existing retail rates provide incentives for customers to prioritize demand charge management over TOU rate arbitrage, it said.

“Each time batteries charge, they’re increasing the total amount of demand on the grid,” explained McCormick. “That increases output at the marginal power plant. If that plant is a wind farm or a solar farm, the battery is functionally charging on surplus renewable energy. Then when the battery discharges, it’s reversed. If the battery is discharged when the marginal plant is a dirty peaker plant during times of high demand, it reduces output at that peaker plant, reducing emissions.”

However, batteries aren’t always charged when the marginal power plant is renewable energy. And they don’t always discharge when a dirty peaker plant is operating, he said.

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But new CPUC proposal attempts to correct the problem — ensuring the batteries charge when there’s renewable energy on the grid, and discharge when there’s dirty power on the grid so that they displace that dirty energy.

Instead of charging at times of surplus clean energy — and discharging to replace dirty peaker plants — the storage operators too often were doing the exact opposite. “The net result? Storing dirty energy,” explained McCormick.

The challenge: Until recently, there was no way to identify when and which power plants were operating as marginal plants. That meant that there was no way to know when it was best to charge and dispatch energy storage, he explained.

To solve the problem, the CPUC created the GHG Signal Working Group to look into how real-time data could identity the best times to charge and discharge batteries.

“The group analyzed thousands of different scenarios and worked with real customer data, real emissions data, and real dispatch algorithms to assess energy system performance,” said McCormick.

How to make energy storage a GHG reducer

The working group concluded that creating a real-time greenhouse gas signal, along with updated TOU rates, could reduce or eliminate emissions from energy storage. At the same time, these moves could ensure storage customers’ utility bills wouldn’t increase, he said.

The CPUC proposal is still open for comment and won’t be implemented before the CPUC issues a final ruling, expected in the first quarter of 2019. “But bottom line: The proposal can swing energy storage into the category of a GHG reducer, rather than net producer,” said McCormick.

In its proposal (R1211005), the staff suggested new greenhouse gas rules, for both existing and new projects. It also proposed separate rules for residential and commercial projects.

The CPUC staff has developed a performance-based incentive structure for all new commercial projects in which 40 percent of the incentive is paid upfront and the remaining 60 percent is paid over five years. Program administrators will verify each project’s greenhouse gas reductions annually. If the project reduces the emissions less than 25 kg of carbon dioxide per rated energy capacity, or increases the emissions, the program administrator will reduce the project’s annual incentive payment in proportion to the emissions.

For new residential projects, the staff proposed eliminating an annual round-trip efficiency requirement and instead calls for all new residential projects to enroll in rate programs with peak rates starting at or after 4 pm. In addition, the projects must charge energy storage with at least 75 percent on-site solar, and have a single-cycle round-trip efficiency of at least 85 percent.

And for legacy projects — those that are submitted before the new rules take effect — staff proposed two options. Projects could meet existing rules, or commit to operating in a way that achieves annual emissions decreases.

The staff proposal noted that “time-varying residential rates with peak periods starting at 4 pm or later” are already available in the service territories of Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.

“Staff believes these new TOU rates, with peak periods better aligned with grid emissions, will provide residential projects with some additional information and incentive to dispatch in a way that reduces GHGs,” said the CPUC proposal.

The staff noted that it identified several residential rates either available now or proposed in recent or pending rate cases that provide “super off peak periods for much of the year.” The rates might provide more granular signals about greenhouse gas emissions.

However, the staff said that more modeling needs to be done to conclude the new TOU rates will reduce greenhouse gases enough. That’s why the staff also called for pairing the storage with solar.

The staff’s modeling found that for residential projects, the requirement to pair with and charge at least 75 percent from solar increases the likelihood projects will reduce the emissions.

Said McCormick, “No one wants to hear that battery storage is a climate contributor vs. savior but that’s where this technology sits globally today.”

Microgrid Knowledge will host “Microgrid 2019: Shaping the New Electric Grid” May 14-16 in San Diego, Calif.