Grid-scale and distributed energy storage is moving from its demonstration and pilot program phase to its early commercialization phase -- with California setting the pace.

But there's a challenge in being a pioneer. California's energy storage entrepreneurs, innovators and financiers are confronted by a market that is still forming -- with a shifting regulatory landscape and an unsure value proposition and supply chain.

A workshop presented by Infocast during its Energy Storage Week in Santa Clara California drove that point home.

As background, last June, the PUC asked California's big three investor-owned utilities to procure 1.3 gigawatts of energy storage by 2020, along with setting market mechanisms to launch the procurement process. Customer-located storage can also be used to meet the mandate.

The recent 50-megawatt Southern California Edison Los Angeles Basin Energy Storage RFQ reveals a California utility industry that is just starting to understand the deployment of big energy storage. Imperial Irrigation District (IID), a municipal utility in the southeastern part of California's desert, just issued QR 123, the start of a solicitation for 20 megawatts to 40 megawatts of battery storage. There were 500 responses to the SCE RFQ, according to sources at Energy Storage Week.  

Despite these very encouraging signals, courtesy of the CPUC, utilities have never had to place a value on substation-based or distributed energy storage. The utilities are learning as they go and have admitted as much. But this makes for an ill-defined business case and fuzzy line of sight for a business trajectory.

Against these headwinds, three vendors in the energy storage industry elucidated their business case and the challenges ahead.

GELI's operating system for energy storage

Dr. Ryan Wartena is Chief Strategy Officer of Growing Energy Labs Inc. (GELI), a four-year-old provider of energy storage and microgrid management software. In Wartena's words, "We are introducing the energy storage operating system," adding, "We have software for a variety of hardware sets."

Wartena wants to partner and provide the software glue for developers and "anyone who wants to get into energy storage." He called the energy storage medium itself "the hard drive of energy," while the software creates an "adaptive energy storage system for multiple economic services."
Wartena adds, "We built a little dynamic tariff database" that includes utility demand structures, tiers, nuclear decommissioning taxes, and other rate structures to run optimizations in the GELI EOS (Energy Operating System).

"It's all about demand charge management" in California, New York and other states, said Wartena. "This is what we're going to do over the next two years. Not just GELI, but all of us [in the energy storage industry]." He said that demand charge management can result in a 10 percent to 20 percent bill savings and a three-year to six-year ROI.

GELI is involved in a number of energy storage projects, including the integration of the first commercial Aquion battery system (integrated with a generator), the GridStar microgrid, and a net-zero-energy microgrid condo. GELI has also done work with Coda batteries.

Stem sells energy storage behind the meter for "an inefficient grid with changing needs"

Tad Glauthier, Vice President of Customer Development at Stem, brought in the initial customers for the behind-the-meter energy storage startup. He spoke of Stem's business case for California.

The company made its initial exploration in this market by measuring loads at 30 commercial verticals such as cellular towers and hotels in order to figure out the opportunities for energy storage behind the meter. "It boils down to [being] faster and cheaper," said Glauthier. "That's the business case we're making."

An 18-kilowatt energy storage tower from Stem:

  • Can operate with no change to customer operations
  • Works with a multitude of rate tariffs
  • Complements efficiency measures
  • Adds value by providing energy usage insights

The Stem storage device levels peaks in combination with a predictive component to search for the best peaks to level. The device serves only to reduce loads, reducing the necessity of upgrading the transmission or distribution infrastructure.

Glauthier contrasted the installation of a 1-megawatt storage unit next to a substation with 1 megawatt of distributed energy storage. He cited a 1-megawatt Hawaiian energy storage system that cost $4 million all-in and claimed that Stem could install a megawatt of batteries for well under $2 million.
He noted that the Stem product is made to be installed in the built environment along with a ten-year warranty, as required by California's SGIP initiative. Stem is "battery-technology-agnostic," but Glauthier said the firm "likes lithium-iron-phosphate." The VP cited Ambri and Aquion as new battery vendors with potential price-competitiveness. He noted that improvements in lithium-ion technology are small and incremental, while changes in battery technology's price point have the potential to change the size of the market. Glauthier sees near-term battery price reductions reaching one-half to one-third of lithium-ion, falling to sub-$100 per kilowatt-hour levels before 2020.   

Glauthier said that payback for energy storage is three to five years. He added that five-year payback is for green-minded early adopters. That's a tough sell -- but added, "three years, you can sell."
Stem has closed a $5 million project financing fund, so customers can install energy storage systems with no upfront costs. The funding is backed by Clean Fleet Investors. 


Jim McDowall, the business development manager at 95-year-old battery company Saft, has been in the energy storage business since 1998. And although Saft is at the forefront of battery technology and commercialization, it too is looking for market cues and a hint as to the value of batteries for grid applications.

McDowall pointed out that storage can be viewed and valued as generation (resource adequacy, ancillary services, flexible resources) or as distribution.

"We really don't know how energy storage is going to be used.  We don't know what the value is going to be," said McDowall. "How do you go about building a business case? How do you stack benefits?"

Although utilities and regulators are bullish on energy storage, that sentiment on the part of an industry stalwart is indicative of the low visibility and uncertainty that today characterizes the storage market in the U.S.