The rise of big storage batteries could create serious problems for natural gas power plants across the United States, as utility regulators begin mandating new ways of meeting peaks in consumer demand for electricity.
In an order published last week, the California Public Utilities Commission instructed the state’s biggest utility, PG&E Corporation, “to change the way it supplies power when demand peaks,” Bloomberg reports. “Instead of relying on electricity from three gas-fired plants run by Calpine Corporation, PG&E will have to use batteries or other non-fossil fuel resources to keep the lights on in the most-populated U.S. state.”
The decision makes sense in a state that has doubled its renewable energy capacity in the last decade, creating a surplus that can be captured during off-peak periods and released by increasingly affordable battery systems when the grid needs a boost. “With improved technology and lower costs, storage systems are becoming more viable for utilities, especially in a state hoping to get half its power from wind and solar by 2030 and targeting major cuts in greenhouse gas emissions,” Bloomberg notes.
But now, “there is a big push” for cleaner fuels, “especially on the West Coast,” said U.S. Sierra Club spokesperson Marta Stoepker. “If we are getting off of coal, let’s also skip over gas.” And what begins in California sometimes has a way of spreading across the country.
“California is going to create a blueprint for the coming years,” said Michael Ferguson of S&P Global Ratings in New York. “Renewables proliferated where there was supportive regulation, and that caused the costs to decline. I would expect to see the same thing happen with battery storage.”
The push from the climate and energy community is driven largely by concern about methane emissions from natural gas fracking. But for utilities, it’s all about renewables bringing so much power online that wholesale electricity prices are falling.
“That’s a problem for companies whose plants only generate power during periods of peak demand, like some of those run by Calpine,” Bloomberg notes. “Last year, the Houston-based firm told California’s grid operator that it would have to retire plants because of low prices. The operator determined the market needed the plants for reliability and allowed Calpine to sign profitable, must-run contracts for 2018.”
But now, the Utilities Commission is looking at other options. “These gas plants typically sit idle for much of the year, whereas a battery could be used for a range of other services, such as helping integrate renewables,” said energy storage analyst Logan Goldie-Scot of Bloomberg New Energy Finance.
Calpine opposed the latest order in a December 29 letter to the commission, maintaining that it would impose “unreasonable costs and risks on customers” and depart from a “considered, thoughtful approach to grid reliability”.