Next wave of battery storage to ease Calif. grid's summer stress – CAISO CEO

➤ CEO views lithium-ion battery performance as "exemplary," despite some hiccups and the emerging need for alternative chemistries.

➤ The grid operator continues learning from energy storage performance during the September 2022 heat wave.

➤ Preparing to harness the potential of electric vehicle batteries and virtual power plants as new grid assets.

The California ISO, the state's primary transmission grid operator, is home to the world's largest fleet of lithium-ion battery storage stations. Those resources, totaling roughly 4,500 MW as of early November, were instrumental in helping the state ride through a 10-day heat wave in September that pushed demand for electricity to new heights. S&P Global Commodity Insights recently spoke with CAISO President and CEO Elliot Mainzer in Sacramento, Calif., about the rise of battery storage to keep the grid stable as it decarbonizes. Batteries have become essential tools after sunset, during "net peak" demand, when solar generation is no longer available. The following conversation has been edited for length and clarity.

S&P Global Commodity Insights: During the September heat wave, did you think about how the system might fare if it had 10,000 MW of four-hour batteries?

Elliot Mainzer: Every single night. We knew that we had about 3,300 MW to 3,600 MW, and we had a number of batteries in testing mode, which we actually got to use. Every evening as we watched ourselves working through the net peak and then trying to imagine what the next night might look like, we would say to ourselves, "You know, if we had another 3,000 MW of storage resources, this net peak would be much more manageable." Certainly, for this stage in the evolution of the California grid, the four-hour lithium-ion batteries have just been almost perfectly matched to the net peak. And I think over the course of the next few years, as we bring another big tranche on, you're going to definitely take some pressure off that summer ramp stress.

Is procurement of new resources going fast enough?

I think it's going as fast as it can. The signal that's been sent by the California regulatory apparatus for procurement is about as strong as it can be. I think everybody is scrambling. Look at the supply-chain challenges, the lithium costs and things like that. But the sense of urgency in the regulatory bodies and with the utilities for procurement is there. We're going to have to keep working on supply chain and also just making sure that the transmission connectivity is as good as possible.

Some marquee projects have stumbled with operational issues. How much confidence do you have in this new resource?

When I took this job, one of the most appealing aspects of it was knowing that I was going to get to participate in the energy storage revolution and be right on the front lines of it. In general, the experience that we've had with the battery storage fleet has been exemplary. There has been good, constructive, transparent dialogue with the industry. The market participants have come to the table recognizing that it's early and the system operators don't have experience yet, and they may have to take extraordinary action under certain circumstances. We've worked hard to make sure that the price signals from the market incentivize the right behavior. They have worked through a couple of cases of technology challenges. We've had the fires and water suppression problems with a couple of key facilities. But when push came to shove during one of the most challenging moments in the history of the California grid, the resource performed really well.

What else did you learn from battery operations in the heat wave?

First of all, we still are learning. We ran into some issues when prices already hit the cap in the afternoon and batteries were incentivized to discharge. So we have some issues to work through on price formation and trying to make sure the constant balance between pricing and reliability operations is harmonized to the maximum extent possible. We found a programming issue around the price constraint that was quickly addressed. The four-hour lithium-ion battery experience has been good, but I think it's also really important to keep pressing for diversification of the storage portfolio, moving into longer-duration batteries and some of the different chemistries.

How soon do you think you're going to need longer-duration storage?

I think four to five years.

What chemistries do you see winning the long-duration game?

I don't know. But, in general, we believe in healthy portfolios and some level of diversification. Some of the new vanadium redox batteries [a type of flow battery technology designed to discharge for several hours longer than today's lithium-ion batteries] are very interesting. And I think we will need even longer durations. We'll need the 100-hour and, at some point, seasonal resources. It's healthy for the state and industry to put as much money into research as possible.

How do you view the potential of mobile batteries, electric vehicles, as future grid resources versus the challenge of charging millions of new EVs?

There will be some challenging aspects of the transition, but we have great leadership in California on this topic. We're very encouraged that the state regulatory entities and utilities are starting to really think about how the price signals and the incentives that they set at the distribution level can really line up with the reliability needs of the grid. We are already thinking about how we can provide good high-fidelity charging information to the vehicle fleet so that it can be a grid asset, not a grid liability.

What about home batteries and other distributed resources aggregated into virtual power plants?

We haven't seen a huge amount of participation yet. But as more aggregators and more entities developing virtual power plants contribute, we're going to try to provide a very clean point of entry into our market.

How do you see the Inflation Reduction Act accelerating California's energy transition?

The amount of investment that's coming is pretty staggering. We need to be ready for that. The cost effectiveness of a lot of these technologies is about to be accelerated. So we're very focused on preparing for that through good transmission planning and infrastructure development.

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