|
|
| Fig. 1: Battery storage resources available to the California Independent System Operator from 2019-2024. [2] This only shows storage capacity on the utilities' side of the meter, as opposed to capacity on the customer's side. (Image source: B. Alexander.) |
Over the past 5 years, California has seen an order of magnitude increase in grid-scale energy storage capacity. Fig. 1 shows how discharge capacity, or the amount of energy batteries can generate per unit time, has grown from less then 0.1 GW in 2019 to 15.7 GW in 2025. [1] That is, battery capacity grew from almost nothing to something quite significant on the scale of the California electric grid. To put 15.7 GW in perspective, 90 GW was the rough nameplate capacity of all generation resources in the California electric grid (technically the California Independent System Operator balancing area, but this is what most people think of when they think of the "California grid"). [2] That is, the investment in storage resources has been both vast and swift.
The vast majority of this expansion has been driven by lithium battery technology. In 2019, over 90 percent of grid-scale energy storage in the state - 3.7 GW to be precise - took the form of pumped hydroelectric power. [3] This is the sensibly straightforward process of pumping water uphill of a hydroelectric generator in order to use gravity store power. Yet it was lithium batteries, which store energy through electrochemical reactions, that formed California recent energy storage expansion. In comparison to the previously dominant pumped hydroelectric storage, lithium batteries store much less energy (typically no more than 4 hours worth) and have much shorter lifetimes (5-20 years compared to 25-100), but have slightly higher efficiency. [4] These batteries can also be built quite quickly and at essentially any scale, as opposed to a pumped hydroelectric facility, which is a major capital investment and building project.
The purpose of a battery as part of an electric grid is to move energy consumption from times when it is easy to generate electricity (or it is in low demand) to times when it is difficult to generate (or power is in high demand). When this doesn't happen and there isn't enough power to go around at the right time, grid operators institute blackouts (or else the grid experiences catastrophic collapse). While traditionally this problem has been solved using fossil fuel plants that can be turned on when needed, California's political goals involve a transition to renewables: this requires energy storage.
 |
| Fig. 2: Role of batteries in powering the California power grid in 2021 and 2024. [9] Note that only battery discharging is shown. (Image source: B. Alexander.) |
Broadly speaking, energy storage is needed to integrate renewables into the grid. This is shown in Fig. 2. We observe two trends. First, solar generation, a major fraction of generation in the state, only produces electricity during the day. Secondly, the total demand (which is exactly equal to generation by energy conservation) is non-constant throughout the day, peaking in the evening hours. In 2021, without major energy storage, the resulting evening shortfall was made up by turning on natural gas generators and importing energy from outside the state. By 2024, batteries have replaced some of that evening imported energy and natural gas generation. That is, in order for solar power to work, it needs batteries to store energy so that energy can get to when it is needed, which is not the same as when it is produced. The 1-4 hour storage timescale of lithium battery technology is notable adequate to meet this acute evening energy storage need, but far less than is needed for a complete transition to a solar powered grid.
This is not simply a theoretical description of how power grids work but a physical reality with real consequences. When power grids have stability issues, people notice. This especially includes political leaders who are aware of the history of Californian governors being recalled when the power stops working. The summer of 2020 may be a particular example, when during August the Independent System Operator (ISO) declared an emergency in response to the system being overwhelmed by a heat wave. This meant rolling blackouts across the state on the 14th and 15th. In a subsequent report by the ISO, they identified insufficient resources during early evening hours as one of multiple causes of the emergency. [5] This crisis and other less severe summer heat wave blackout events likely played a role in political decision-making surrounding California's battery investment. These summer crisis have gotten better since - the state has not issued an emergency request for the public to conserve energy since 2022. [1] We should be cautious in assigning causation around this improvement, but a growth in storage capacity is the most obvious development since then.
Rather than emerging from market forces, the expansion in battery resources had essentially been a result of government regulation. Californian direct regulation of energy storage dates back to 2010 when legislation (AB 2514) was passed ordering the California Public Utilities Commission (CPUC) to set energy storage targets for utilities (Incentives for energy storage date back further, to the 2001 AB 970 and its Self-Generation Incentive Program, responsible for much of the pre-2020 battery storage investments). [6] The CPUC began to scale up these targets in 2019, requiring 3.3 GW of new capacity over four years. [7] While this capacity was not explicitly required to be in the form of energy storage, the requirements were structured so as to make storage projects "fare well in competitive solicitations" for the required capacity. [7] Indeed, over 80 percent of this ordered capacity was filled by battery storage. [7] In 2021, an even larger procurement of 11.5 GW was ordered by the CPUC, to be ready by 2026. [8] Again this order was structured to heavily incentivize battery capacity.
While CPUC orders for the construction of additional battery resources may have been the immediate cause of California's battery boom, they were made possible by improvements in the cost of lithium batteries. To begin with, this investment in battery technology was built on the cost decrease in lithium batteries over the past 15 years. In 2010, the average price of lithium ion battery packs was $1,200/kWh, compared with $132/kWh in 2021. [7] This near ten-fold decrease in price took these batteries from a very small niche on the grid scale to a demand that the CPUC could practically make.
While these lithium batteries may have held the honor of having the lowest cost per MW of power produced, its worth noting that this does not necessarily make them the best energy storage solution. Indeed, the CPUC emphasis on power production, rather than storage capacity, seems to have pushed utilities to the lowest-storage solution they could find that met the production requirements. Relatively short lead time requirements may have also hampered projects like pumped hydroelectric storage. This decision by utilities to essentially do the bare minimum to meet the required metrics is potentially telling when it comes to the economics involved: these units are being built to meet requirements first and foremost - something that may come at the cost of storage capacity and system lifespans. California's battery expansion project may have accomplished important immediate goals including enhancing grid stability while allowing the expansion of renewable generation, but its longer term effects remain to be seen.
© Ben Alexander. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] H. Smith, "California Invests Big in Battery Energy Storage - and Leaves Rolling Blackouts Vehind," Los Angeles Times, 17 Oct25.
[2] "2024 Special Report on Battery Storage," California Independent System Operator, May 2024.
[3] S. Kurtz and J. Sunquistt, "Storage Technology Summary," University of California at Merced, December 2022.
[4] S. Kurtz et al., "Evaluating the Value of Long-Duration Energy Storage in California," California Energy Commission, CEC-500-2024-085, July 2024.
[5] "Root Caus Analysis: Mid-August 2020 Extreme Heat Wave," California Independent System Operator, January 2021.
[6] M. G. Aydin and C. O. Aydin, "Energy Storage Procurement Study," Lumen Energy Strategy, May 2023.
[7] "Final Decision Requiring Electric System Reliability Procurement for 2021-2023," California Public Utilities Commission, November 2019.
[8] "Decision Requiring Procurement to Address Mid-Term Reliability (2023-2026)," California Public Utilities Commission, June 2021.
[9] B. Plumber and N. Popovich, "Giant Batteries Are Transforming the Way the U.S. Uses Electricity," New York Times, 7 May 24.