The California Energy Commission on Dec. 11 approved the premature decommissioning and demolition of General Electric Co.'s 10-year-old, financially struggling natural gas-fired Inland Empire Energy Center, a more than $500 million generating facility in Riverside County once heralded as the future of the global power sector.

Now a different future is unfolding — one in which a large-scale battery storage system is planned to replace the once roughly 800-MW, combined-cycle plant after GE dismantles it over the next year.

"Obviously, the repurposing of this site as a battery storage facility will provide significant benefits," Commissioner Karen Douglas said at a meeting ahead of the agency's unanimous vote approving GE's closure plan.

The facility will cease power production at the end of 2019 and begin a 12-month decommissioning and demolition process, according to the plan. The company mothballed one of the two units in 2017.

Only a quarter to a third of the way into the typical 30- to 40-year lifespan of such assets, the plant's machinery remains in "pristine condition," according to the Branford Group, an auctioneer that is helping GE sell still-useful equipment at reduced prices.

Inland Empire came online in 2009 amid a gas plant building boom in California that pushed the state's capacity reserves far beyond what is required for grid reliability. Increasingly under pressure from low-cost renewables, the plant's early end reflects the investment risks of a gas-fired glut in many regions of the U.S., as identified in a new S&P Global Market Intelligence investigation.

Wrong design

Designed for baseload operations, GE's gas plant lacked the fast-start capabilities required to meet the needs of California's dynamic peak demand period, occurring as the state's more than 20,000 MW of utility-scale and distributed solar resources power down at sunset. Facing expensive retrofits to boost the plant's flexibility, the company in June instead notified the Energy Commission of its intent to shutter the facility.

As a merchant generator supplying electricity to the California ISO market, Inland Empire had a capacity factor of just 6.12% and total operating expenses of $54.73/MWh in 2018, according to S&P Global Market Intelligence data. Those operating costs alone are well above the cost to build and operate new solar-plus-storage facilities in California and are generally higher than average monthly on-peak power prices at the ISO's SP15 hub this year, according to Market Intelligence data.

Several battery-backed solar projects recently approved in Southern California, for instance, are contracted at or below $40/MWh.

The plant's untimely shutdown comes as California is scrambling to cover an emerging capacity crunch, largely triggered by the state's phaseout of older gas plants that rely on ocean water for cooling, the upcoming closure in the mid-2020s of the state's largest power plant — the 2,240-MW Diablo Canyon nuclear facility, and the eroding ability of variable solar resources not equipped with batteries to serve peak demand.

Battery rebirth

In its next incarnation, the Inland Empire site could be reborn as a large-scale battery system better designed to meet the state's peak power needs. A company called Nova Power LLC agreed to purchase the project site to transform it into a large-scale energy storage facility.

That would make Inland Empire one of numerous gas-fired power plants in California being directly or indirectly replaced by battery storage systems to serve peak power demand.

Nova Power entered into its agreement to purchase the project site Feb. 1, according to GE's closure plan, the same day that Calpine Corp., the original developer of the site, agreed to acquire Inland Empire, according to S&P Global Market Intelligence data on the deal.

Calpine did not respond to several requests seeking comment on the transaction or plans for the site.

The Houston-headquartered company, a major developer of natural gas and renewable power plants, is pursuing energy storage projects. In 2015, the company pitched a 25-MW battery storage system at its proposed gas-fired Mission Rock Energy Center in Ventura County, Calif. But Calpine canceled the battery-backed gas peaker in May after Southern California Edison Co. committed to new transmission and stand-alone energy storage in the area.

Nova Power plans to use existing infrastructure on the site for its battery project, including buildings and electric infrastructure. The system "will require a similar industrial operational footprint as the [Inland Empire] generating station," according to the closure plan, indicating a project potentially in the hundreds of megawatts.

The developer plans to apply for land use and environmental permits to build and operate the battery system after assuming control of the site.