Dive Brief:

• California regulators on Thursday approved five energy storage contracts proposed by Southern California Edison for projects totaling 497 MW and expected to come online over the next two years.
• The storage projects will bring the state closer to ensuring it can meet electricity demand during the summer months of 2023 and 2024, California Public Utilities Commission President Alice Reynolds said in a statement. Energy officials have been raising concerns that the state could face electricity shortfalls over the next few years.
• Meanwhile, California policy-makers are also looking to tap into $8 billion in available funding from the federal Infrastructure Investment and Jobs Act to create “an environmentally and economically sustainable and expanding renewable hydrogen hub,” the governor’s Office of Business and Economic Development announced Wednesday.

Dive Insight:

California energy officials have been scrambling to try and shore up the grid against broader threats to its reliability, including decreased energy production caused by the ongoing drought, spikes in demand due to heatwaves, and the impacts of wildfires to the electric system.

The state is also facing challenges in accessing solar materials due to the U.S. Department of Commerce’s anti-dumping circumvention investigation into solar cells from certain countries, as well as supply chain challenges tied to the COVID-19 pandemic. Last week, Gov. Gavin Newsom, D, allocated $8 billion in his revised budget proposal to go toward grid reliability and affordability, $5.2 billion of which would be used to create a 5,000 MW “strategic electricity reliability reserve.”

In the longer term, state officials are preparing for the planned retirement of the 2.2 GW Diablo Canyon nuclear plant, as well as several natural gas-fired plants. Last summer, the CPUC ordered power providers in the state to collectively procure 11.5 GW of capacity between 2023 and 2026, including installments of 2,000 MW by 2023 and another 6,000 MW by 2024.

SCE filed a proposal with the commission in March seeking regulatory approval for 497 MW of energy storage projects to meet its share of the required resources. The contracts – approved by regulators at the commission’s Thursday meeting – include both new projects and expansions to existing lithium-ion battery facilities, including an 82 MW agreement with AES, a 40 MW contract with Calpine and a 75 MW contract with LS Power. 

The approved storage contracts will help California ensure grid reliability during the net peak hours – when electricity demand is still high but solar production is waning – CPUC Commissioner Genevieve Shiroma said in a statement. In addition, “these five energy storage projects are essential for our path to being less reliant on fossil fuels,” she said.

SCE is pleased with the CPUC’s approval of the contracts, spokesperson David Song said.

“Bringing more utility-scale battery storage resources online will improve the reliability of the grid and further the integration of renewable generation resources like wind and solar into the grid,” he said.

Renewable hydrogen hub

Separately, state officials this week announced plans to try and tap federal funding to build a regional hydrogen hub. The bipartisan infrastructure law included multiple funding pots for hydrogen, including the $8 billion for regional clean hydrogen hubs, $1 billion for a clean hydrogen electrolysis program that lawmakers hope will reduce the cost of using clean electricity to create hydrogen, and $500 million for clean hydrogen manufacturing and recycling efforts. 

Newsom administration plans to work with state lawmakers, public and private parties, as well as municipalities like Los Angeles, to submit a state application for the funding, according to the announcement. 

"Near term hub activities will center on deep investments in electrifying port operations, goods movement, transportation, and energy system resilience," it stated.

Hydrogen can play a key role in increasing the resiliency of California’s grid, according to Emanuel Wagner, deputy director of the California Hydrogen Business Council, including as a means of energy storage for surplus renewable electricity.

“California has significant renewable energy production and we see more and more of that production basically go to waste, because we don’t have demand at that time of day for that extra production,” he noted. 

At the same time, California’s hydrogen market is in the very early stages and a lot of technological advancements will need to be made before it can be used as a viable renewable resource, according to Baird Fogel, partner at Eversheds Sutherland. There are also risks associated with it – since hydrogen is very flammable, leaks need to be tended to very quickly. 

“The technology needs to catch up with the idea that hydrogen can be a big contributor to renewable resources in California and the rest of the country,” he said.

The Natural Resources Defense Council supports California’s leadership in creating a renewable hydrogen hub, senior scientist Merrian Borgeson said in an emailed statement.

“California is well-positioned to develop and scale hydrogen produced with renewable electricity, which can be used to fuel hard-to-electrify sectors,” she added.