The “smart grid” is not a thing. It represents a concept… the massive upgrade and evolution of our current energy infrastructure. The long-term journey will require innovation and risks. Yesterday the California Public Utility Commission (“CPUC”) issued an order adopting an Energy Storage Procurement Framework and Design Program. The CPUC states that inclusion of energy storage in California’s energy resource portfolio will assist in grid reliability and potentially reduce the need to construct some generation facilities. The Energy Storage Procurement Framework and Design Program is guided by three purposes:

  1. The optimization of the grid, including peak reduction, contribution to reliability needs, or deferment of transmission and distribution upgrade investments;
  2. The integration of renewable energy; and
  3. The reduction of greenhouse gas emissions to 80 percent below 1990 levels by 2050, per California’s goals.

California law defines energy storage system as commercially available technology that is capable of absorbing energy, storing it for a period of time, and thereafter dispatching the energy.

“Energy storage has the potential to be a game changer for our electric grid, and I fully support the goals of grid optimization, integration of renewable energy, and reduction of greenhouse gas emissions,” said Commissioner Mark J. Ferron, in a press release issued by the CPUC.  

Pacific Gas and Electric Company, Southern California Edison Company and San Diego Gas & Electric Company must each file procurement applications containing a proposal for their first energy storage procurement period by March 1, 2014. The targets for the companies are shown on the chart below. This is huge. Utilities in regulated and unregulated states will observe the implementation with great interest. The regulatory framework seems to be changing like the departure board at Union Station, creating strategy challenges for utilities looking to create or at least maintain shareholder value.

*Click the chart above to view it at a larger size.