Dive Brief:

• The California Public Utilities Commission on Thursday approved four energy storage projects for Pacific Gas & Electric (PG&E) to replace retiring gas generators, including two batteries that would be the largest in the world. 
• The CPUC granted approval for a total of 567.5 MW / 2,270 MWh of storage, including a 300 MW / 1,200 MWh project from Vistra Energy and a 182.5 MW / 730 MWh project from Tesla that the utility would own. Those batteries, once completed, would be the two largest in service. 
• The CPUC directed PG&E to purchase the storage in January instead of approving new ratepayer-funded contracts for three gas plants in PG&E's service area. Analysts told Utility Dive the cost of the batteries is likely cheaper than continuing to operate the plants. 

Dive Insight:

Approval of PG&E's landmark energy storage solicitation is the most significant example to date of batteries taking the place of fossil fuel generation on the power grid. 

Energy storage has helped decrease the California's reliance on gas for years, particularly since 2016, when regulators ordered accelerated battery procurements to counteract the closure of a natural gas storage facility outside Los Angeles. 

The PG&E projects, however, are the first time a utility and its regulators have sought to directly replace multiple major power plants with battery storage. 

The projects would take the place of three plants owned by generator Calpine — the 580 MW Metcalf plant and the Feather River and Yuba City generators, both 48 MW. 

​Calpine and the California ISO last year asked the Federal Energy Regulatory Commission to approve reliability-must-run (RMR) contracts for the plants, arguing they are essential to maintain power reliability. The one-year contracts would see California ratepayers finance the continued operation of the generators, which are losing money in the ISO's wholesale market. 

FERC approved the request in April, but California regulators were already planning for when the plants retire. In January, they ordered PG&E to seek alternatives to the generators, writing that the lack of competition in RMR contracts could mean higher prices for customers. 

Without a replacement plan, "it is likely that the Calpine plants could need to be RMR'd year after year," CPUC spokesman Christopher Chow told Utility Dive at the time. "The new procurement would eliminate the shortfalls in the local areas that would result in future RMRs, if not addressed."

Approval of the storage plan gives PG&E the green light to proceed with the projects — all lithium-ion battery facilities.

Once completed, the Vistra and Tesla projects will be the largest in the world, according to the Department of Energy's global database of energy storage projects. The largest lithium-ion battery currently in service is Tesla's 100 MW / 127 MWh facility in South Australia, while Japan's Kyushu Electric Power Co​. has a 50 MW / 300 MWh sodium-sulfur battery facility that it installed in 2016. 

In addition to those projects, the PG&E solicitation includes a 75 MW / 300 MWh facility from Hummingbird Energy Solutions and a 10 MW / 40 MWh facility from battery provider mNOC. PG&E will own the Tesla facility, while the developers will own the other projects. 

The two largest facilities will be sited in Moss Landing, a transmission-constrained region south of San Francisco, while the Hummingbird facility will be placed in the city of Morgan Hill, and the mNOC capacity will come from multiple behind-the-meter projects in PG&E's service area. 

PG&E will be allowed to recover all the costs for the facilities from ratepayers, but analysts say that's likely less expensive than the gas plants they will replace. 

"Storage at this scale is likely now cheaper than the total cost to run the gas plants," Alex Eller, senior energy research analyst at Navigant, told Utility Dive when the solicitation was announced. 

PG&E's analysis appears to bear that out, with the CPUC decision noting that the utility found the projects "result in a net positive value over the Metcalf RMR."

PG&E aims to have all the projects online by the end of 2020. The mNOC project will be the first, slated for completion by October 2019, while the Vistra project, built by subsidiary Dynegy, and the Hummingbird facility will be finished by December 2020. The final Tesla facility will come online by the end of that month.