CAISO Batteries (Try to) Pick Up the Slack

PhDs will no doubt spend years dissecting what exactly happened in California to cause its system operator, CAISO, the need to enact rolling blackouts this past week. Maybe a perfect storm of capacity outages and a geographically broad heat wave, restricting imports? Maybe the blame will land on CAISO policies? Regardless of the outcome of those studies, today I wanted to focus on one small sliver of the saga: utility-scale battery storage. Batteries provide the ability to dispatch to the grid when it is needed the most; in California that usually means when the sun is setting. So, how have batteries reacted as blackouts rolled through the state?

To set the stage, let’s first look at battery capacity throughout the US. This, and other analysis throughout this piece, was put together using BTU’s new Power View platform. The graphic below shows utility-scale installations by ISO, which recently crossed the 1 GW mark.

Leading the way in energy storage installations, and especially new installations, has been CAISO, where generation curtailments provide prime opportunities for storage. In theory, batteries should charge during the day, during peak solar generation and dispatch in the evening when load hits its daily peak, as shown in the graphic below. Below I’ve chosen a selection of high load days in August and the range of load we have seen over the past few years. Notice August 14th, 2020, the first day of rolling blackouts.

While we have occasionally seen storage act as we might expect (charge in the day, dispatch at night), more often than not, due to their design and duration they serve other functions through the ancillary services market, such as frequency regulation. However, with new, longer-duration installations we have seen a shift, especially through the recent heatwave. The graphic below shows battery dispatch in CAISO on August 14, compared to average dispatch from last year. Positive values on the left axis represent dispatch to the grid, while negative represents charging.

Also overlaid on the graphic above is pricing. In the evening as the situation became more dire, prices rose to nearly $1,000/MW. Energy storage operators were able to capitalize on that price spike by aggressively dispatching during the two-hour price run, and then re-charging when prices dropped. With about 4 GW of, mostly longer-duration, energy storage projects in the Lower 48 under construction or close to construction, expect batteries to grow their influence over power markets.

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Matthew is a Manager of Energy Analysis for BTU Analytics. He oversees product development and the publication of BTU Analytics’ product offerings which cover the oil, gas, and NGL markets for the US and Canada. He also leads research on the downstream markets for natural gas, natural gas midstream, and natural gas pricing dynamics across the US. He holds a M.S. in Finance from the Simon Graduate School of Business at the University of Rochester and B.S. in Physics from Florida State University.

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