The California Public Utilities Commission ("CPUC") has thrown down the gauntlet, creating a 1325-MW market for energy storage in California, but requiring California's regulated utilities purchase storage only if cost-effective options are available. The CPUC's novel approach upends the usual after-the-fact prudency review of utilty purchase decisions, forcing energy storage sellers to leap the cost-effectiveness barrier in order to access the new CPUC-mandated market.
The CPUC's order, adopted in response to legislation enacted in 2010 (AB 2514), is a new approach to an old idea -- technology forcing. Environmental legislation dating back to the 1960s aimed to force manufacturers to develop new pollution control technology by imposing health-based standards even if those standards could not be achieved with known technology. Rather than following this command-and-control regulatory approach, the CPUC order imposes only general requirements for energy storage: storage must (1) optimize the grid, contribute to reliability needs, or defer upgrades on the T&D system; (2) help integrate renewable resources; and, (3) help achieve greenhouse gas reduction goals. The order requires California's regulated utilities to purchase 1325 MW of storage meeting these requirements by 2024, but allows them to defer these obligations if no cost-effective options can be found. The CPUC order, then, uses the incentive of a huge, mandated market to try to force rapid development and deployment of new energy storage technologies.