This entry is part of an ongoing series on the biggest front-of-the-meter battery owners in the U.S. The first installment covered Duke Energy.
San Diego Gas & Electric, the smallest of California’s investor-owned utilities, took an early lead in energy storage asset ownership in response to a crisis.
In 2016, after the massive gas leak from the Aliso Canyon storage facility, state authorities determined that Southern California needed new sources of capacity by the following summer to avoid a shortfall. The timeline was tight for grid infrastructure development and further complicated by the fact that the gas constraints ruled out the go-to resource for peak power. Instead, SDG&E chose lithium-ion batteries.
“SDG&E really early on identified that storage could be built quickly, located in places that would be advantageous to their system,” said John Zahurancik, COO of Fluence, which supplied storage to the utility. “It was quite amazing to watch storage go from people talking about it as a potential future solution, to ‘We need to put it in the ground now as part of an emergency procurement.’”
The utility powered up the world’s largest lithium-ion battery within six months of contracting it. Later overtaken by the Tesla-supplied Hornsdale plant in South Australia, the Fluence-supplied Escondido battery near San Diego still leads the U.S. in megawatt-hour storage capacity, with 30 megawatts/120 megawatt-hours.
The results of the emergency procurement not only proved that this up-and-coming grid resource could excel in ways that fossil fuel plants couldn’t; it also showcased the benefits that regulated utilities enjoy for storage development and ownership.
SDG&E continues to make use of those benefits today, as a new wave of storage projects move toward completion. In fact, the utility sees storage technology as vital to its strategic interests.
“Our mission is to build the cleanest, safest, most reliable energy infrastructure company in America,” said Estela de Llanos, SDG&E's vice president of clean transportation, sustainability and chief environmental officer. “Our early projects confirm that, in order to fulfill that mission, utility-scale energy storage is…definitely part of that future.”
Utility ownership unlocks speedy development
The speed of delivery for Escondido and a smaller system called El Cajón (7.5 megawatts/30 megawatt-hours) left an impression, especially compared to conventional power plant development.
“These systems can be successfully deployed to meet reliability and capacity needs very quickly,” said de Llanos, who oversees the utility’s storage development efforts and previously practiced land-use law at Latham & Watkins.
SDG&E’s knowledge of suitable project sites that already had adequate permitting proved crucial to delivering in that timeframe, Zahurancik said.
The utility chose locations it already owned: equipment storage yards at substations in the suburbs of San Diego. Since the spots were permitted for power operations, and batteries need no water and emit no exhaust, storage plants could go in without extensive new permitting efforts. “As long as we didn't disturb too much new land, we could do it,” Zahurancik recalled.
Since SDG&E had permitting and interconnection taken care of, Fluence could work quickly to drop in an array of battery enclosures and lay the necessary cables.
Fluence built the Escondido battery plant with minimal disturbance to the site to avoid triggering new permitting requirements. (Photo credit: Julian Spector)
Given the nascent state of the U.S. storage market, it would have been hard to imagine the scenario succeeding without a utility spearheading it.
“At that time, nobody was doing site development for storage and just holding those sites, waiting for a need,” Zahurancik said. “In earlier days, it was more difficult for non-utilities to monetize the benefits of storage.”
There are still uses for storage that are not easily captured by the contracting structures available now, or are otherwise unavailable to non-utility developers, Zahurancik added.
As for the actual uses of the battery plants, SDG&E expected them to charge on the midday overabundance of solar and discharge for the evening ramp, de Llanos said. But they often end up being called to deliver shorter bursts of ancillary services throughout the day, based on grid operator CAISO’s dispatch signal.
SDG&E's next wave of storage projects
SDG&E’s ongoing storage activities fall into four categories, listed here in rough order of arrival.
SDG&E is running a procurement for another 300 megawatts of capacity by 2023 to meet the needs determined by regulators, de Llanos said. About half of that needs to come online in 2021.
Though the utility’s history emphasized owning the assets, it’s not wedded to that approach. An independent group within the company handles procurement, evaluating utility proposals alongside third-party bids.
“There's such a big market here, we think there's a lot of room for all kinds of projects, locations, and contract and ownership options,” de Llanos said.
The company won regulatory approval for a batch of storage projects in June 2018. The biggest is a follow-up from Fluence at Fallbrook, California that will add 40 megawatts/160 megawatt-hours to its arsenal. RES America is building a 30-megawatt/120-megawatt-hour system in San Diego. Both of those are currently under construction.
A smaller system from Powin Energy is still in development. Additional smaller batteries contracted with AMS and Enel Green Power are no longer happening, because those developers terminated their contracts, the utility confirmed. That move parallels AMS’ pivot away from storage development toward a software product; the company handed operational duties for a battery fleet in Southern California Edison territory to former rival Stem last week.
SDG&E plans to build a series of battery-powered microgrids to protect communities from wildfire-prevention outages. This builds on earlier experience backing up the remote desert town of Borrego Springs, fed by a single power line that often went down in heavy storms.
“Turning off the power is counter to our DNA when it comes to reliability, but when we have to for public safety, we shut off the power,” de Llanos said.
To counteract that painful solution, SDG&E will build and own batteries in front of the meter that supply power to critical facilities, so they can act as community gathering spots and air-conditioned shelters.
A 2018 plan envisioned 166 megawatts of energy storage across the territory. More immediately, the company is looking at sites called Cameron Corners, Ramona Air Attack Base and Desert Circuit 221, which could be ready by the end of the year — in time for next year’s fire season, at least.
The California Public Utilities Commission approved an initial microgrid proceeding on June 11, which included the PxISE microgrid controller SDG&E chose to coordinate batteries, generators and switchgear at those three sites.
Electrification of transportation microgrids
San Diego is gearing up for increased electric vehicle charging investment. As fast-charging proliferates and demand for it increases, the costs for associated distribution grid upgrades could get out of hand.
That creates a tension between the goal to facilitate vehicle electrification and the need to maintain affordability.
“I always think about the fact that as a public utility, we are not a luxury brand,” de Llanos said. “We have a duty to serve all customers, and we are very cognizant of the need to transition to a clean grid and a clean energy economy in a way that doesn't leave anybody behind.”
Microgrids could help with that, by sectionalizing power generation and storage at the sites of high-intensity charging. The goal is to deliver fast-charging for customers without exacerbating local or system peaks, which would complicate the long-term decarbonization goals.
The advanced clean technologies group that de Llanos oversees is looking out for long-duration technologies to complement batteries in the portfolio. Hydrogen could be one of them, de Llanos said.
Several California utilities have started talking about converting surplus renewable power into clean hydrogen and then burning it in turbines for peak power. SDG&E runs a gas distribution network, so it has infrastructure and expertise for delivering gas — and an institutional interest in the long-term usefulness of those investments.
The Sumitomo flow battery sits on an isolated plot of utility land southeast of San Diego. (Photo credit: Julian Spector)
The utility also has been testing a vanadium redox flow battery from Sumitomo since June 2017, in a demo that was half paid for by the Japanese government. SDG&E has an option to buy it after four years if it wants to.
That ongoing demonstration verified that the technology can operate at high states of charge without degrading, and can discharge multiple times a day without degrading as well. Asked whether the company plans to build more of this technology, a spokesperson declined to endorse it: “SDG&E is technology-neutral as it relates to the type of energy storage and lets the use case and costs determine the appropriate energy storage technology for the need.”
Though flow batteries are vying for the still-largely-hypothetical long-duration market, the Sumitomo system only has 4 hours of duration (2 megawatts/8 megawatt-hours).