Q&A: Breaking Down California's Energy Storage Opportunity

Amid some unique challenges on the electric grid, California’s commercial and industrial (C&I) energy users face one of the most compelling business cases for on-site energy storage or combined solar-plus-storage in the US.

However, energy storage is still a relatively new opportunity, and it can be difficult for individual businesses to understand whether the technology is a good fit for their facilities.

To help simplify the market and explain what makes a good candidate for energy storage, I spoke with Terry Holtz, Manager of Technical Sales for Enel X North America, who leads a team responsible for modeling on-site energy storage and solar-plus-storage systems for large energy consumers in California.

Q: What's happening in California that is driving large energy consumers to start embracing energy storage?

The main factor is uncertainty, specifically with regard to electricity costs. California’s electric grid is undergoing a massive transformation, reaching new records for solar production, and faces some unique challenges as a result. In recent years, this has led to changes to utility rates, more volatile energy prices, and higher charges related to their facilities’ peak demand levels.

Today, California businesses are worrying about how the fallout of last year’s wildfire season will affect the state’s electric utilities. Of course, reliability is a big fear, with Pacific Gas & Electric rolling out a new plan to shut off power access voluntarily when wildfire risk is high. However, the state’s large energy consumers also need to prepare for the eventuality that the legal implications for the state’s electric utilities could result in higher electricity costs.

Given all of these concerns, California businesses are exploring their options to manage exposure to these risks, and energy storage provides the flexibility to accomplish that without affecting operations in their facilities. You can now store low-cost electricity to use at times when consuming from the grid is expensive, and California businesses understand the value of that opportunity as well as those in any other part of the country. 

Q: What kinds of attributes tend to make for a strong business case for on-site energy storage?

Every facility is unique, so it’s going to come down to the priorities of the organization involved. But, generally, we tend to see a particularly strong business case for facilities with peak electric demand levels that exceed 500 kW, high electricity usage in the evening hours, and those that either currently have an on-site solar system or are considering installing a solar system.

In terms of industry types, we’ve seen successful energy storage projects at metals, plastics, aggregates, and wood manufacturing facilities, as well as food processing facilities. However, as I said earlier, every site is unique, and we’ve seen a lucrative business case at facilities of all kinds.

Q: Can you expand on the relationship between energy storage and on-site solar? How does energy storage factor into the business case for on-site solar in California?

Energy storage effectively makes solar power more flexible. Standalone solar is extremely valuable as a low-cost power source, but is only useful during the hours when the sun is shining and the system is generating power. Integrating energy storage enables a facility to store some of that low-cost power and use it at any time.

This is particularly valuable in light of recent changes to California’s utilities’ compensation rules for solar power, which reduce the value of power exported to the grid during the daytime hours. Adding energy storage to these sites will allow the system to export energy in the evening when it is the most expensive, re-capturing most of the value lost as a result of these changes.

Q: What are some of the common concerns that may be preventing California businesses from moving ahead with an energy storage project?

Cost is still a concern. Even though lithium-ion batteries have become more affordable in recent years, we still see businesses that face a strong business case for energy storage struggle to find the capital to cover the project's costs.

What many businesses aren’t aware of is that the market conditions that create the business case also create opportunities for project financing. We have the technology and the energy market expertise to generate a return on an investment in energy storage, and that enables us to create flexible financing agreements to cover project costs and integrate the system within the facility, while still delivering substantial savings to the energy consumer.

Q: Since these projects are typically financed under long-term agreements, what do you see as the long-term value of on-site energy storage? Why should a business trust that an energy storage or solar-plus-storage system installed today will still be valuable in 10, 15, or 20 years?

We are at the beginning of an energy revolution that is making distributed energy resources (DERs) more valuable at the site-level. The factors causing so much uncertainty about California’s electric grid today will only become more complex as the energy industry continues to evolve. Energy storage is the flexible link that will tie all these DERs together and ensure large energy users are able to manage the impact of new market changes over time.

DER Optimization Software is the other piece of the equation. Energy storage hardware provides the flexibility to manage consumption from the grid, but the software is key for ensuring the hardware accounts for the biggest energy cost drivers and adapts as new challenges arise. As new value streams become available or new cost drivers emerge, the software will ensure the storage assets can adapt accordingly. Energy storage not only enables a facility to take control of today’s cost drivers, but prepares the facility for tomorrow’s energy challenges.

See why solar-plus-storage is becoming more valuable in California with this in-depth whitepaper
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Authored By Colin Neagle

Colin is a marketing manager for Enel X North America and editor-in-chief of the EnergySMART blog.

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