Friday, May 13, 2011

CESA v. Itron, How Hard is it to Put Energy Storage in a Box?

The California Public Utilities Commission hired Itron, Inc. to prepare a report on the “Cost-Effectiveness of Distributed Generation Technologies” as part of their on-going project to revise the Self Generation Incentive Program, which has provided rebates for energy storage installations. According to the California Energy Storage Alliance (CESA), they got it completely wrong when it comes to energy storage.

Legislation funding and defining the SGIP was changed by California Senate Bill 412 (SB412), and that has thrown a monkey-wrench into the program. (History of the SGIP program here...) US&R worked with VRB Power Systems, Inc. to open the SGIP for energy storage in 2008. Challenges to the energy storage provisions, the demise of VRB Power and subsequent purchase by Prudent Energy, and the ARRA stimulus program confused implementation, but things finally started to role in 2010 as the Gills Onions project was announced, and at least 5 energy storage projects were approved for the SGIP. However, the new legislation required the CPUC to revise and open the program to additional technologies, and all new applications were suspended to prevent the existing funds from being depleted before the CPUC finished their work.

The Itron report was supposed to provide a basis for evaluation. However, an analysis is only as good as it's assumptions, and Itron created a false energy storage straw man for evaluation, leading to cost effectiveness conclusions that severely reduced the apparent value of energy storage for SGIP incentives.

Some of the points made by CESA in their filing to the CPUC:
  • "...the Itron Report incorrectly assumes that Li-ion technology, one specific type of electrochemical battery storage technology, is representative of all energy storage technologies. This is done even though the Itron Report itself says that advanced lead acid, Zn/Br flow batteries and emerging Zn/air and Fe/Cr were generally found to have potential for low capital expenditure and the smallest gaps to support the energy storage business case. The Itron Report also arbitrarily and inexplicably assumes that Li-ion is a good match for an application that requires a four-hour duration for load shifting purposes."
  • "Generally speaking, however, Li-ion is not the most cost-effective solution for long duration, multi-hour peak shifting, nor are Li-ion’s relatively minor volumetric advantages particularly needed for grid storage applications."
  • Also, "The discussion of energy storage in the Itron Report makes it painfully clear that the report’s authors failed to understand the sources of value that would truly compensate system owners for their investment in grid connected energy storage. The Itron model does not simulate the way a storage system owner would operate the system in real-world scenarios. Such projects would rely entirely on electric bill savings results from shifting consumption of electricity from peak to off-peak periods, customer demand charge savings, and the SGIP incentive itself."
Essentially, CESA points out that the SGIP is used to incentivize customer installations. However, Itron used an energy storage technology currently being deployed, with good success, at utility scale, and for applications (frequency regulation) that are irrelevant for the end-user.

The SGIP revision process, which began in January 2010, now appears to be stuck in a quagmire of expensive consultant reports that are trying to compare apples to bananas, and not just energy storage bananas. In the meantime, projects that could be addressing the peak load management objectives of the program are stalled while the consultants fight over the GHG emission reduction benefits of various technologies.

CESA points out that energy storage has already been evaluated for the SGIP. Systems like the VRB® meet those requirements and have already been approved for funding. Unfortunately, until the current process is brought to a close, the opportunity to install and evaluate new storage technologies has been severely reduced.

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