On Aug. 2, the California Public Utilities Commission unanimously voted to adopt a proposed framework for analyzing energy storage needs, which could lead to a precedent-setting mandate for energy storage for utilities.

“We find that the final proposal is a significant step forward in establishing policies for the procurement of viable and cost-effective energy storage,” the president and commissioners stated.

An earlier bill, AB 2514, had suggested that the Commission "determine appropriate targets, if any, for each load-serving entity to procure viable and cost-effective energy storage systems to be achieved by December 31, 2015, and December 31, 2020."

The large California utilities, SCE, PG&E, and SDG&E, all opposed specific procurement figures. According to the CPUC website, "SCE argues that a procurement mandate would not address legal and regulatory barriers, but rather would only serve to increase the return on investment of private storage developers. Procurement mandates and subsidies may have short-term investment impacts, but in the long term are counterproductive by creating a cycle of dependency for storage developers and diverting efforts from technological development to regulatory affairs."

The Division of Ratepayer Advocates (DRA) also warned against setting a procurement target. "Picking arbitrary procurement levels, such as a MW [megawatt] level or a percentage level would most likely result in sub-optimal market solutions and increase costs to ratepayers without yielding commensurate benefits."

The order coincides with predictions for worldwide growth in grid storage. A recent Lux Research study predicts the global market for grid storage of electrical power will rise from $2.8 billion in 2012 to $113.5 billion in 2017. Lux evaluated the cost-effectiveness of eight grid storage technologies in six applications throughout 44 countries, including all 50 U.S. states, of which more than half have renewable energy mandates or goals. The study helped identify the most promising regions of the world—namely the U.S., Japan and China. (See the GTM Research report of grid-scale energy storage in China.)

In the U.S., California has emerged as the leader in renewable energy storage developments. “Everyone is watching California,” says Brian Warshay, research associate at Lux Research, New York. The state’s renewable energy mandate, adopted in April 2011, requires that state utilities must generate 33 percent of their power from renewable energy sources by 2020.

Promising iron-air battery research at the University of Southern California may help achieve that goal. The team, led by Sri Narayan, USC professor of chemistry, has a patent pending design for cheap, rechargeable, and eco-friendly high-energy-density iron-air batteries that use the chemical energy generated by the oxidation of iron plates exposed to oxygen in the air. Both the federal government and California utilities are interested in the project, according to USC. USC claims this is significant because iron-air batteries could provide a more affordable alternative to lithium-ion batteries.

Other states identified in the Lux report that show promise in energy storage technology include New York, Texas and Hawaii, Warshay says.

In Stephentown, N.Y., a 20-megawatt Beacon Power flywheel energy storage farm filed for Chapter 11 bankruptcy last September after two of its units failed, but has since been acquired by Houston-based Rockland Capital. The energy storage application for fly wheel technology, developed by Tyngsboro, Mass.-based Beacon Power, can release power when there is a sudden drop in power on the electrical grid.

Beacon received $43 million in backing from the Department of Energy from the same program that funded failed solar panel maker Solyndra before filing for Chapter 11 bankruptcy last September. A new twist developed when Houston-based Rockland Capital acquired Beacon Power’s Stephentown plant and most other assets of the company in February as part of a DOE loan negotiation. The Rockland purchase agreement included a combination of cash and a promissory note totaling $30.5 million, along with additional guarantees and funding obligations to the DOE of $6.6 million, according to a Rockland statement.

Beacon Power is now operating as a private subsidiary of Rockland. While the company focuses on reorganizing its business, some are cautiously optimistic about its technology. “This is one of the only companies in the U.S. using flywheel technology for this type of application,” Warshay says. “Beacon’s technology is sound and unique enough that I think it will likely persist in niche markets.”

The payment structure for electricity frequency regulation, Beacon’s core revenue stream, is also expected to become more favorable this fall with the implementation of Federal Energy Regulatory Commission (FERC) Order 755, Warshay says. “But the actual quantitative impact of that new order will ultimately be decided by the open market.”

Most of the states in the U.S. have set renewable portfolio standard targets. Should there also be a target for energy storage?