Renewable standards boosted 'green' energy. Are storage standards next?

In the cleantech sector, pretty much everyone knows the acronym RPS, for Renewable Portfolio Standards. Since the first RPS policy in the U.S., implemented in Iowa in the late 1990s, 30 states have passed similar policies to promote the installation of renewable energy projects and expedite penetration (overcoming the ambivalence or outright opposition of utilities) of renewable energy in electric power supply.

Now, as reported in this article, California is considering the adoption of what looks to be the first Storage Portfolio Standard: requirements for utilities to install grid-scale energy storage.  Specifically, in early August, the California Public Utilities Commission (CPUC) voted unanimously to adopt a framework for analyzing the energy storage needs of each utility. This builds upon a previous bill, AB 2514, which included a mandate for the CPUC to “determine appropriate targets, if any, for each load-serving entity to procure viable and cost-effective energy storage systems to be achieved by” the end of 2015 and 2020.

Not surprisingly, the three major electric ”load-serving entities” (i.e., electric utilities) in California —PG&E, SCE and SDG&E — all opposed this movement.  As did the Division of Ratepayer Advocates (DRA), the consumer watchdog organization, which argued that “picking arbitrary procurement levels…would most likely result in sub-optimal market solutions and increase costs to ratepayers without yielding commensurate benefits”.

As one of my former McKinsey colleagues noted on a number of occasions, quoting an executive who worked his entire career at a large electric utility, “No technology has ever been widely adopted by the electric utility industry without having it mandated by the regulators.”

The storage analogue of RPS policy — let’s call it SPS — faces some hurdles, no doubt.  But so did RPS policies.

Given that GE (NYSE: GE) is now working on a grid-scale battery technology, given how much GE’s wind business has benefited from the expansion of RPS policies over the last decade, and given how active GE tends to be in energy policy circles, it’s not a stretch to think that there will be a push for SPS-like policies across the U.S.

It will take time to fully implement, but perhaps grid-scale energy storage will soon be following the path blazed by renewables over the past 15 years, with a domino-effect of SPS requirements spreading across the country.