San Diego Gas & Electric (SDG&E) late last month signed its largest power purchase agreement to date for an electro-chemical energy storage facility. The deal also serves as a marker of where the utility is on its trajectory toward a grid system that will derive at least half its electric output from renewable resources.

SDG&E is ahead of schedule in meeting the state’s original renewable portfolio standard target of 33% renewables by 2020 set in 2011. The utility hit 36.4% as of first-quarter 2016, according to a PUC report.

SDG&E is also well on the way to meeting the state’s new RPS target of 50% renewable by 2030, set in 2015, with 43.1% under contract for 2020, said Stephanie Donovan, senior communications manager at SDG&E. “We are ahead of the curve, so we have the opportunity to take a longer look ahead” at ways to manage the system and change customer behavior," she said.

In looking into that renewable future, SDG&E has been working on deals and policies that will give it a wider array of tools to manage its grid. 

Under the 20-year storage PPA, SDG&E will buy capacity from a 20-MW lithium-ion battery facility that Hecate Energy will build, own and operate close to a substation in Spring Valley, a small community in the eastern part of San Diego County. The facility is due to be completed late in 2018 and be in service by the beginning of 2019.

SDG&E will handle the charging of the battery and will offer it into the California Independent System Operator (CAISO), which will handle dispatch.

Hecate will receive capacity payments from SDG&E, and SDG&E will receive the energy payments from the ISO when the batteries discharge, which could possibly be multiple times per day.

Charging and discharging of the batteries will be determined by energy pricing. When the price of energy is low, when there is over supply or congestion on the power grid, for instance, the battery will be charged. When the price is high, it will be discharged.

The agreement moves SDG&E closer to meeting the target set by the California Public Utilities Commission (CPUC), which calls for the utility to procure 165 MW of storage by 2020. The Hecate deal gives SDG&E 79 MW of completed or progressing energy storage projects.

SDG&E sees other benefits to the deal, as well. “If we charge the battery when there’s a glut of power and electricity is cheaper, we not only help to ease congestion on the power grid, we also save a lot of money for our customers,” Donovan said.

In SDG&E’s view, storage is a unique resource because when it charges it takes excess power off the grid and when it discharges, it acts as a generator, but it is just one of the resources that can help integrate renewables on the power grid, Donovan said.

From that perspective, SDG&E sees storage and gas turbines serving essentially the same purpose, the smooth integration of renewable resources, according to James Avery, the utility’s chief development officer.

“At some point in the future, as technology advances and battery costs come down, batteries will play a larger role in serving our customers’ needs; until that time, gas turbines will play a crucial role in meeting our customers’ peak demands and facilitating our ability to integrate renewable energy into our overall energy portfolio,” Avery said.

The cheapest resource

At the same time it announced the storage deal with Hecate, SDG&E also announced an 18.5-MW energy efficiency program it will run with Willdan Energy Solutions. The program has a six-year term, running to 2024, and will help control usage in local buildings related to heating and air conditioning, refrigeration, lighting and other commercial features.

Donovan notes that energy efficiency is the state’s No. 1 preferred resource. It is ahead of renewables and traditional sources. It is essentially cheaper to reduce load than it is to add new resources, regardless of the source, she said.

An adjunct of SDG&E’s grid management approach to integrating renewable resources on its grid can be seen in the utility’s Power Your Drive program that was recently approved by the PUC.

SDG&E estimates that by 2050 electric vehicles will add about 9,000 MW of load to its system. To deal with that demand, the Power Your Drive program envisions the addition of 3,500 EV charging stations at 350 sites that SDG&E will put into ratebase. The program targets workplace settings and multi-family residential communities and allows participating customers hourly, day-ahead rate that reflects circuit and system grid conditions, as well as hourly energy costs.

SDG&E said that pricing structure will encourage customers to charge their electric vehicles when hourly prices are low. That benefits customers, but it also benefits the utility because low prices often coincide with times of maximum solar output. So the program could use EVs as forms of mobile storage devices to take up excess solar power off the grid. That, in turn, will help SDG&E accommodate an increasing amount of renewable energy into its system, Donovan said.