by Julian Spector
May 05, 2020

When it comes to buying big batteries, California cannot be stopped.

Utility Southern California Edison dropped some late-breaking news Friday afternoon: It’s contracting for 770 megawatts of new storage across seven projects and four counties, slated to be online by August 2021. If you’re wondering just how big that is, try all the battery capacity installed in the U.S. last year, plus 200 megawatts.

But that’s just the latest and most dramatic addition to California’s battery buying spree. Over the last year, a drumbeat of new storage megaprojects has made it very clear that California has moved past the trial period and into full-scale grid deployment mode. 

Coronavirus response may delay some battery projects around the globe, but it’s not stopping new deals in the biggest state storage market, nor is it significantly slowing construction. The beaches may be closed on the governor’s orders, but the storage industry is catching some sun right now.

Learning from history

The key to understanding SCE’s move here is looking back at recent history. 

When the 2015 Aliso Canyon gas leak debilitated Southern California’s access to natural-gas supplies, SCE was one of the utilities facing a capacity crunch for future summer peak season. In the fall of 2016, the utility sprinted to obtain battery capacity in key load centers in a matter of months, something that never would have been possible with conventional gas plant construction (new gas capacity wouldn’t have helped with the gas constraint, in any case).

The young storage industry got more than 100 megawatts up and running in that time frame, thanks to fast-tracked regulatory approval and the work of AES, Tesla, Greensmith and others. Based on the geography of the Southern California grid, SCE held the lion’s share of the Aliso Canyon projects and saw firsthand how the industry responded to the call.

“It isn’t a pilot project,” SCE CEO Kevin Payne said at a January 2017 celebration for Tesla’s Mira Loma project. “It validates that energy storage can be part of the energy mix now.”

Fast-forward to today. Southern California is trying to shut down a crop of old gas plants located right on its beloved beaches. Aside from marring the littoral vistas and releasing pollution, they run afoul of an environmental rule against using ocean water for cooling. While that effort proceeds, the California Public Utilities Commission upped the stakes by deciding the state needs 3.3 gigawatts of extra capacity to avoid a grid crisis.

With Friday’s announcement, SCE makes clear it intends to make storage the centerpiece of its compliance with the emergency order. Having seen how quickly the industry could deliver four years ago, when supply chains and business practices were not nearly as mature as they are now, the utility felt confident with a 15-month turnaround for a much bigger fleet of battery plants.

How can they go so fast?

A key feature of the portfolio is that most projects are adjoined to existing solar plants. NextEra Energy Resources, for instance, is adding batteries to its McCoy, Blythe 2 and Blythe 3 solar farms in Riverside County. 

The implication here is that the developers already have land rights and interconnection from the solar project. The battery projects have smaller power capacities than the existing solar plants. That should let them piggyback on the existing transmission infrastructure by charging on solar power in the day and using the wires to export during the evening peak hours when the plants otherwise wouldn’t be shipping electrons. 

The one project that isn’t solar-paired is a 100-megawatt/400-megawatt-hour beast from LS Power. That was one of the very large battery projects previously listed on the company’s website as under development. It’s the largest storage contract known to be awarded to the company, which is also working on the 316-megawatt battery peaker project for the Ravenswood plant in New York City. 

All the contracts require approval by the CPUC, which will need to happen hastily in order for financing and construction to move forward. It’s hard to imagine objections, since the regulators are the ones demanding this new capacity, and the choice of batteries rather than gas capacity clearly tracks with California’s climate goals. 

The state ratepayer advocate did protest PG&E’s battery mega-procurement for Moss Landing, the most similar in scale to this new round. But the raison d’être for Moss Landing was harder to pin down: It was to replace a gas peaker that the utility wasn’t actually going to shut down. For SCE, there is a clear and present capacity need that these batteries are fulfilling. Unlike Moss Landing, if these projects don’t happen, there will definitely be a problem.

California’s first 100-megawatt project still trucking along

It’s getting hard to keep track of all the 100-megawatt or larger batteries headed for California’s grid — SCE just added four more to the list. But the first of that scale hasn’t even arrived yet. It’s been under construction since last June at the AES Alamitos plant south of Long Beach, with the battery supplied by Fluence. The beach is closed, but power plant construction proceeds under California’s policy for critical work.

Since the battery is so enormous, Fluence is putting it inside a purpose-built enclosure, rather than rolling out an army of the metal containers used in earlier projects. The steel structure for the building is just about finished and transformers are installed, Fluence COO John Zahurancik told me last week. The walls are going up soon.

Fluence is working on 73 projects worldwide, and all but three continue to move forward, Zahurancik said (in those three cases, the customer opted to shut things down while waiting out the pandemic). 

The company instituted safety measures like checking employees' temperatures at the gates, moving meetings outside and spacing out the work. Alamitos benefits from being a massive building, in the neighborhood of two acres, so workers don’t have to squeeze into the tight containers used to house grid batteries in the past. 

“It takes some thinking and it takes some planning to be able to do that, but it’s fortunate that in most places you can schedule that work to have people do it six feet apart,” Zahurancik said.

Fluence has also booked new business since the onset of the coronavirus, though it hasn’t revealed specifics. The broader storage industry’s ability to move forward with new contracts reflects its status as a mainstream part of the power sector, serving real needs for the grid, Zahurancik said.

“Not only are projects continuing to move [but] we’re also seeing some of the largest projects ever conceived getting signed and approved and advancing during this time,” he said. That assessment only became more accurate following SCE’s announcement a few hours later.

Meanwhile, on the East Coast …

I dove into Virginia’s storage outlook a few weeks back as a key growth market to watch, though not much was happening there yet. Just so you know I'm not totally winging it here, I wanted to flag that opportunities are cropping up already.

Utility Dominion Energy just filed its first integrated resource plan since the state's Clean Economy Act passed into law. This marks its first milestone on the clean energy journey since the state committed to phasing out all fossil fuel plants in the coming decades.

The biggest storage news in Virginia had been a pilot of four batteries testing some standard grid battery operations. Now the utility’s 15-year forecast has jumped more than eightfold from 326 megawatts of energy storage to 2,700 megawatts.

More immediately, Dominion is seeking bids for 250 megawatts of storage slated to be up and running by 2023, with or without a renewable pairing. This is easily one of the largest East Coast utility storage solicitations, up there with Florida Power & Light’s 409-megawatt megabattery and Con Ed’s 300-megawatt bulk storage procurement.

Virginia represents yet another case study of how quickly storage projections rise when political pressure and utility willingness align.