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FEATURE: Battery storage capacity rapidly rising across California, thermal remains strong

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Platts M2MS-Power

FEATURE: Battery storage capacity rapidly rising across California, thermal remains strong

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California battery storage capacity to double by end of year

June-Aug. thermal generation up 27% over 5-year average

Battery storage is taking off in California with nearly 1.2 GW of capacity added in the last year and expected to double before the end of the year, despite COVID-19-related supply chain delays that have helped boost natural gas demand, along with lower hydro and imported generation.

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California leads the nation in battery energy storage at 1.391 GW by the end of second quarter 2021, an increase of 50% from Q1, according to the American Clean Power Association's Q2 Market Report.

"The virus and supply chain issues delayed some equipment shipments, but it appears that most of the backlog has been resolved," said Gary Ackerman, Foothill Services Nevada president and Western Power Trading Forum former executive director. "There will be a steady growth of the battery fleet throughout the year."

Despite some supply chain delays, the California Independent System Operator is on target for 2.5 GW operating by the end of the year, spokesperson Anne Gonzales said. She noted the additional 100 MW that came online at the Moss Landing Energy Storage Facility started operating several months ahead of schedule.

The addition brings Vistra's Moss Landing Energy Storage Facility to a total capacity of 400 MW, making it the largest of its kind in the world, according to Vistra.

"What's great about this particular site is that it has the space to support even further expansion – up to 1,500 MW/6,000 MWh – while responsibly utilizing our existing site infrastructure, including existing transmission lines and grid interconnection," Vistra CEO Curt Morgan said in an Aug. 19 statement.

California has a goal of 100% carbon-free electricity by 2045 which will mean a growing need to increase long-duration energy storage, S&P Global Platts Analytics noted in a recent report.

Battery storage additions

Cal-ISO added about 1 GW of battery storage since last summer, after a push to add capacity to the grid following rotating outages in August 2020, the first since 2001. There is currently about 1.5 GW of battery storage on the ISO grid with another 500 MW expected before the end of the year, Gonzales said.

The share of batteries in the overall ISO supply stack has increased to about 4% of total supply this month, according to Platts Analytics. In comparison, in August 2020 peak discharged was around 60 MW, which was less than 0.5% on most days.

"The increase in battery usage comes as California pushes to decarbonize its power sector and increases its renewables capacity, especially in the form of solar," according to Platts Analytics. Battery storage co-located with solar can take advantage of the investment tax credit.

California Gov. Gavin Newsom issued an emergency proclamation in July to reduce strain on the energy infrastructure and to ensure increased clean energy capacity due to projected shortfalls of 3.5 GW in 2021 and 5 GW in summer 2022. It created an expedited permitting process to drive large-scale battery storage additions by Oct. 31, 2022, according to Platts Analytics.

"Therefore, some of the nearly 5 GW of capacity with interconnection agreement status for 2022 start in the CAISO queue may come online sooner rather than later, helping California address the growing problem of resource adequacy, especially in the warmer summer months," according to Platts Analytics.

Gas guzzle

Despite the progress made on the battery front, worsening hydropower conditions and uncertain power imports have accentuated the need for more reliable generation this summer than the new build batteries can currently provide.

Gas-fired generation has largely been the chosen method of filling that need, with ISO data showing thermal generation averaged 280 GWh/d for June-August. This is 60 GWh, or 27%, higher than the five-year average, or 24%, higher than last year's average.

In addition to utilizing the current gas-fired generation fleet, California officials have set about bringing additional gas capacity online and postponing the retirement of aging plants.

The California Energy Commission and Department of Water Resources are in the process of procuring five additional 30 MW gas-fired generation sites while working to identify other generation possibilities in response to Newsom's proclamation.

Gas-fired plants previously slated for retirement but now designated as reliability must-run include the 34.5-MW Kingsburg Cogeneration plant and 28.56-MW Agnews combined-cycle plant.

California's strong demand for gas-fired power, combined with ongoing pipeline restrictions and increased competition for Permian flows, have boosted spot gas prices to sustained heights rarely seen in the last several years. Cash SoCal city-gate has averaged $5.70/MMBtu June 1–Aug. 25.

More battery storage generation could eventually have a bearish impact on regional gas demand and spot prices.

Curtailment impact

Renewable generation curtailments continue to increase in California, especially in spring when solar production exceeds demand. Curtailments reached an all-time record of 341.959 GWh in March. In March, the ISO curtailed an average of 15% of its utility-scale solar output, according to Platts Analytics.

A main pillar the ISO is utilizing to reduce renewable curtailments is energy storage, but most of that energy storage is coming in the form or four-hour lithium-ion batteries, according to Platts Analytics.

"Co-located storage will charge with solar generation that would otherwise have been curtailed due to system or local oversupply," said Morris Greenberg, senior manager of North American Power for S&P Global Platts Analytics. "It will be full as solar output falls in late afternoon and will be able to fulfill its resource adequacy obligation by offering energy into the market as net load peaks. It can use the interconnection/transmission capability that was congested by peak solar output earlier in the day."

Battery performance

Market experts agree the battery fleet is performing as expected.

"On most days it is charging during the mid-day hours and discharging in the evening," Ackerman said. "About 1,000 MW are being injected into the system when most needed."

However, batteries have discharged over 1.2 GW in the evening hours on several days, according to S&P Global Platts Analytics. Peak discharge occurs around 7 pm.

There is more room for storage to fill in the time period that is of most concern, Ackerman said. In its 2021 Summer Loads and Resources Assessment released in May, the ISO noted early evening hours as periods of stress. Battery storage is expected to help ease that stress as batteries absorb excess renewable energy in the middle of the day and inject it back into the grid after sunset when solar generation goes offline, according to the report.

"The problems will start to occur when the battery fleet becomes sufficiently large that on a hot weekday when demand is high there will be competition for mid-day energy between native load and stored energy [charging]," Ackerman said. "It will be interesting, but the CAISO grid isn't there yet."