Sunday, May 3, 2009

Energy Storage: Key to Renewables

What are the legal aspects and implications of grid-scale energy storage systems (ESS)? And, are there other legal issues for smaller-scale systems? This post will address those points.

The key legal issues involve pricing power from a renewable power plant such as wind, or solar, although there are many other types of systems. Without grid-scale energy storage, intermittent renewable power plants receive very low prices for their power, whereas with an effective ESS, the renewable plant’s power can receive a much higher price. Hence, there is much interest, activity, research, and investment in ESS.

With a smaller-scale ESS, legal issues include, but are not limited to, warranties for the equipment, liquidated damages for equipment failure, contract and tort damages for any harm caused by the equipment or failure to perform, and contractual issues with the utility for time-of-service power and reduction in demand charges.  

These are some of the legal issues presented by ESS. Next, a brief introduction to ESS and their interface with renewable power plants is presented.

Background on Energy Storage Systems

An upcoming 4-day symposium in San Diego will focus on Energy Storage; both on systems for storing electric power, and on the issues surrounding effective deployment of such systems.
The systems are generally divided into two categories: large and small, although that size division usually places the devices into two other categories, upstream or downstream of the customer’s electricity meter. Large devices are upstream, and small ones are downstream.
Within each category, there are a number of technologies offered for sale or currently in development. These technologies include advanced batteries, ultra-capacitors, superconducting systems, high-speed flywheels, compressed air energy storage, pumped hydroelectric, pressurized hydraulic storage, among others.

Large energy storage is the Holy Grail of renewable energy. Without energy storage, some renewable power systems are not economic, or barely economic, due to the lack of reliability. In a power grid sense, reliability signifies the power is available when needed, within the range of power production for that generating plant. There are many different technologies for generating power, and each has a different reliability factor. Those systems with high reliability include large hydroelectric, nuclear, coal, natural gas, geothermal, bio-gas, bio-mass, and landfill gas. Some include solar thermal with storage in the high reliability category, although that depends on the amount of storage and the usual days of sunshine.

Those systems with low reliability, and thus in great need of effective, economic storage, include wind, solar photo-voltaic, solar thermal, and wave. Each of these energy sources is very intermittent, with sudden shifts in energy production. Tidal energy is a slightly different case, as the tides at any location are predictable both in height and timing. However, energy storage is required because the energy demand on the grid seldom coincides with the generation provided by tidal systems.

The disparity between energy demand and energy supply from renewables creates the need for ESS. As an example, solar power plants typically are most effective from approximately 10:00 a.m. until 4:00 p.m., yet peak power demand may occur later than 4:00 p.m. Using California as an example, the projected peak demand for Sunday, May 3, 2009, is at 9:00 p.m., 5 hours after the 4:00 p.m. solar production cutoff time. For another example, wind power in California typically peaks at night due to the winds that blow from the ocean onto the land. There is little demand for power at night, however, as the minimum demand for the same date occurred at 3:00 a.m. From this, it may be seen that great advantages exist for an ESS that can store power when it is generated, and released to the grid when needed.

Legal Issues

Product pricing is a key issue for power plant owners, and the issue is more acute for renewable power plant owners. Utilities that purchase power from renewable power plants pay a low price for intermittent, unreliable power, and a higher price for stable, reliable power. Thus, a large hydroelectric plant with ample water in the reservoir will receive a higher price for its power because it is available when needed by the utility. A wind power plant will receive a low price for its power due to the inability of the wind plant owner to provide power when and as needed by the utility.

Another legal issue is receiving a permit to construct a renewable power plant. State-wide power generation planning and permitting also depends to some extent on the availability of power from the various plants. As an example, a Public Utility Commission may find that 2,000 MW of new power is required to meet the state’s growing demand. Most states have a renewable energy goal or law, such as California’s Renewable Portfolio Standard that requires 20 percent renewables by 12/31/2010, and 33 percent by 2020. If a wind power plant is to supply 50 MW of that total new power, the state agencies must apply some factor to wind to account for the intermittent character. If wind power is assigned a factor of 25 percent, then 200 MW of wind power plants will be allowed and permitted. When and if an ESS is available for wind power, that factor would be reassessed.

Small-scale ESS have legal issues also. Back-up power supplies have been used for many years, especially for computer installations and emergency lighting. An economic incentive also exists for some consumers to reduce their peak usage, and thereby reduce their utility bills. An ESS may only be required for a few minutes of no power, until a backup generator is started and online. Yet, that few minutes may be critical to the consumer. Legal issues include contractual issues between the consumer and ESS provider, and between the consumer and the utility.

Still another legal issue arises with ESS that applies to permit issues with the local air quality district. If a sufficiently long-lasting ESS is available, running a diesel-powered backup generator during a power interruption is not required, thus providing additional benefits to the consumer. As an example, the consumer may create air pollution credits by not running the diesel engine, which can be banked for later internal use, or sold into the emission credit market. Negotiating with the air pollution district for proper emission credits requires legal expertise.

Also, in some utility markets such as Southern California, an incentive is offered to power consumers to allow the utility to curtail or shut off power during crisis peak demand periods. These usually occur on very hot days in Southern California. The incentive to the consumer is a lower power price in return for the utility shutting off power when needed to preserve the grid. An ESS can allow a consumer to take advantage of the incentive program, without losing productivity. An ESS will increase the number of consumers who are willing and able to take advantage of the incentive program.

Finally, under state global warming laws, such as California’s AB 32, the Global Warming Solutions Act of 2006, ESS play a key role. As one example, the Renewable Portfolio Standard for California will be much easier to achieve when a renewable power plant owner can achieve higher power prices with an ESS. Higher power prices will attract more parties to invest in the renewable power plants.


Energy storage is a very timely topic, with many important ramifications for electric power consumers, power producers, utilities, state regulatory agencies, ESS manufacturers, and others. Each of the affected entities should obtain legal advice to assess their needs and opportunities in this growing, exciting, and important field.  

Roger E. Sowell, Esq. 

Contact Mr. Sowell at his legal website


johnio78 said...

Energy storage is important but; there also needs to be a way of pricing the product, i.e. in the commodity markets. Without a pricing structure no one knows the true price of the commodity.

Roger Sowell said...

Mr. johnio78, power pricing is a fairly complex matter, as you may be aware. As I alluded to above, the power price that can be negotiated is, at least in part, due to the nature of that power. If it is not there when the utility calls for it, the power cannot command a high price. Conversely, if the power is there, and reliably so, upon demand, then the utility is willing to pay much more for that power.

There are also pricing structures published by utilities in their rate tables, such that off-peak power in winter is very low price, and on-peak power during summer is very high price. Other periods have intermediate prices. One can use those as a guide to set the maximum prices.

johnio78 said...

You are correct in the established power producers, i.e. coal, nuclear, oil, Natural gas. But The new forms of power are not taken into accout. That is Geothermal, Ocean energy, Wind energy. Once a form of measuring the new energy harvest,is found, then an adiquate price structure can be put in place.

M. Simon said...

Some wind farms are paying utilities $40 a KWh to take wind power off their hands. Why? The wind subsidy makes such things possible. Not only possible. Profitable.

Jobbed By Greens.

Charles R. Toca said...

Great to see a blog post on this topic. I hope you do more, I'd like to get more from the legal side of energy storage.

Regarding pricing, a small ESS in California just got much less expensive. The CPUC has approved a $2 Watt ($2 million MW) incentive for some types of energy storage under the SGIP program. More information at