VACAVILLE, CALIFORNIA — Outside of this Northern California town, under a tangle of power lines, sit two metal boxes, each the size of a moving truck. Inside are a collection of powerful battery packs capable of delivering power to more than 1,500 homes.
The two batteries, along with the accompanying transformers and generators, have a price tag of $10 million. But that’s just a fraction of the bet that California is making on the future of industrial-size batteries, still an unproven technology.
From Sacramento to San Diego, the state is pushing utilities to invest in dozens of costly and, in some cases, highly experimental projects designed to store massive amounts of electricity. Utilities might have to make investments in the ballpark of $5 billion dollars collectively to meet the mandated standards, says Haresh Kamath, an expert on electricity storage at Electric Power Research Institute, an electricity research organization based in Palo Alto, California. The hope is that trial and error will lead to breakthroughs that will help electricity grids around the world operate more cleanly and efficiently.
If that happens, the world will have California ratepayers to thank for picking up the tab. If it doesn't, ratepayers will still be footing the bill, but with little to show in exchange.
“That money has to come from somewhere,” Kamath says—and it comes from taxpayers' and utility users' pockets.
In 2014, each Californian paid 15.23 cents per kilowatt-hour on average—twice as much as someone from Idaho (7.95 cents/kwh) or Arkansas (7.85 cents/kwh), and one and a half times the national average (10.45 cents/kwh).
This bold investment of ratepayers' money comes out of California's mad dash into renewable energy. In 2008, it was one of the first states to mandate that utilities get a set amount of electricity (33 percent by 2020) from sources such as solar and wind power.
Solar production surged as homeowners and businesses took advantage of generous subsidies by adding panels to their rooftops. The amount of solar power produced in California rose from 769 gigawatt hours in 2010 to 9,891 gigawatt hours in 2014, which was more than the total electricity produced by the Netherlands that year.
It’s a considerable accomplishment. But now, the power on the state’s electricity grid rises and falls with the sun. On a cloudy day, it can disappear nearly completely. When that happens, it can send California’s electricity grid into tilt. Power companies have to quickly ramp up energy from other sources. So the state is scrambling to find a way to store power when it doesn’t need it and deliver it when it does.
But existing energy storage solutions don’t cut it. To spur innovation and growth in the energy storage industry, the California Public Utilities Commission is requiring large investor-owned utilities in California to collectively procure 1.3 gigawatts of energy storage by 2020, enough to power almost a million homes at any given instant. That’s about 100 times the amount of storage that utilities currently have.
“PUC is pushing the [storage] market ahead of where the market would be had they not put out the procurement target,” says David Fribush, project manager for battery energy storage at Pacific Gas and Electric Company. But at the same time, the need for storage is increasing as more renewable energy is added to the grid each month. “The utility commission looked down the road and saw it coming,” he says.
There’s just one problem: No one is certain it’s going to work. Many of the energy-storage technologies, including battery storage, are largely untested or astronomically expensive, or both. And the California ratepayers will bear the burden for this innovation.
“The thing about setting these aggressive procurement targets is that they are going to cost a lot of money,” Fribush says. “Eventually, things that are costs will get distributed to ratepayers.”
Frank Wolak, a Stanford economist who studies renewable energy, adds: “That’s what politicians like to do—impose mandates that people don’t realize that they actually pay for. That’s the oldest political story around; that is, hide the costs and publicize the benefits.”
Californians already pay, on average, one of the highest rates in the continental United States. In 2014, each Californian paid 15.23 cents per kilowatt-hour on average—twice as much as someone from Idaho (7.95 cents/kwh) or Arkansas (7.85 cents/kwh), and one and a half times the national average (10.45 cents/kwh), according to the U.S Energy Information Administration. Some of that difference is because California now uses less coal power, the cheapest source of electricity, than most other states. The rest is because experimental alternative energy sources cost so much. And as the state's appetite for renewable energy increases, those rates are likely to rise even higher, experts say.
“It’s not a question of whether the prices will go up, but by how much,” says Travis Fisher, from the Institute of Energy Research, a energy research think-tank based in Washington, D.C. He is currently working on a report that will try to forecast how much prices may rise.
"I have seen so many companies say that they can do it and they get help from the government and they go under and the cost actually goes to the taxpayers."
Utilities are under time pressure to come up with storage solutions if they want to meet the utility commission’s aggressive renewable energy mandates. And they are investing in just about any technology out there—trains, carrying water up and down a hill, wheels rotating at a high speed, even underground caverns storing compressed air that could be converted into electricity.
Some of these technologies are more established than the megabatteries. For years, utilities have been pumping water up a hill when they have excess power, then letting it drain back down to generate hydro-electricity when needed. They are also experimenting with storing power by pushing compressed air into underground caverns and releasing it to turn turbines.
But both of these methods have their limits. Hydro uses precious water and requires steep hills to be effective, while underground caverns to store compressed air are hard to find.
Batteries, however, have a particular allure: They can be placed just about anywhere and can be turned on and off in a flash. The problem is the price. Southern California Edison received a grant for $24.9 million from the Department of Energy to evaluate a lithium-ion battery storage project to store wind energy in Tehachapi. SCE put in the additional $29.9 million required for the project.
PG&E has invested in two sodium-sulfur battery storage pilot projects in the San Jose Bay area and Vacaville, partly using a $3.3 million grant from the California Energy commission. The batteries in Vacaville, only a couple of miles away from the PG&E’s solar power plant, will be used to balance the unreliable output from the sun. Sodium-sulfur battery technology can store power longer than lithium-ion batteries (up to six hours at a time). It’s highly efficient, but expensive.
Several companies that have promised energy storage solutions in the past, such as A1234 Technologies and Beacon Power, have gone bankrupt.
“I am just jaded at this point because I have seen so many companies say that they can do it and they get help from the government and they go under and the cost actually goes to the taxpayers,” Fisher says. “It’s kind of annoying to watch it happen over and over again.”
Still, if California can get it right, the benefits would be substantial. Texas, New York, Arizona, and several other states are working toward adding more renewables to their grids. California’s aggressive policies, while expensive for taxpayers, could be groundbreaking for the world at large.
That’s the “price of leadership,” Kamath says.
This story is part of our week-long special report on energy issues in California produced in collaboration with the University of Southern California's Annenberg School for Communication and Journalism. For more, visit the project's landing page.