California’s battery boom is a case study for the energy transition – Atlantic Council

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New Atlanticist

May 13, 2024

California’s battery boom is a case study for the energy transition

Joseph Webster

California is the country’s largest and most mature solar market, but it’s also changing in important ways. On April 25, California marked a major milestone, as it became the first state to deploy 10 gigawatts (GW) of battery storage capacity. This large-scale deployment of lithium-ion storage batteries is leading to lower solar “curtailment,” or when electricity generation is suppressed due to price signals or physical oversupply. Curtailment is a problem because it means solar power stations, for example, are producing less electricity than they could, contributing less to the overall energy mix than they otherwise might.

California’s experience shows that batteries will play an important role in lifting solar power’s share of all electricity generation. The Golden State is showing that it can ramp up solar generation and, thanks to batteries and greater transmission connectivity, that it can do so without a sharp rise in curtailment. On the leading edge of this transition, the state’s success or failure could inform how local and national governments worldwide go about greening their grids. 

Batteries rising

Batteries are helping improve the economics of Californian solar and decarbonize the grid of its California Independent System Operator (CAISO), which covers most of the state (and parts of Nevada). Batteries are succeeding in CAISO because they are helping mitigate its curtailment problems, which surged in the first part of 2023.

Solar curtailment in CAISO and elsewhere is determined by two main factors. In conditions of system oversupply, the grid does not have enough demand for renewable electricity generation. Local transmission constraints also produce curtailment. By shifting electrons into less-congested and higher-priced times of the day, storage batteries avoid saturating system demand or overwhelming local bottlenecks, improving the economics of solar and other clean energy sources and easing duck curve constraints.

California is mitigating curtailment via batteries. US battery storage installations are overwhelmingly concentrated in solar-rich areas of the country: California, Texas, and the “Mountain West battery states” of Arizona, Colorado, New Mexico, and Nevada.

California has traditionally been the United States’ leading solar market. In 2023, solar power’s share of all net generation in the Golden State stood at 19 percent; in Texas and the Mountain West battery states, conversely, its proportion reached only 5 percent and 9 percent, respectively, although solar notably accounted for 23 percent of Nevada’s net generation.

California is also, not coincidentally, the nation’s largest battery market. In addition to deploying nearly 19 GW of cumulative solar capacity, it currently has more than 10 GW of batteries, with its clean energy goals requiring more than 50 GW by 2045.

All these batteries are complementing solar generation and leading to lower curtailment. Battery capacity as a share of solar generation capacity in CAISO surged in the past twelve months, rising from 29 percent in January 2023 to 41 percent by December 2023. As new batteries have entered the grid, curtailment as a percentage of all solar generation has reversed its upward trend and even declined from recent highs, suggesting that more electrons are finding their way to the grid economically. While recent analyses catalogued that CAISO’s solar curtailment rose in early 2023, the newest data shows that batteries—and, crucially, new transmission lines—have reversed this trend, at least in relative terms.

Lower curtailment has lifted solar generation’s share of all electricity output. Solar’s twelve-month average of CAISO’s electricity load, or demand, totaled 18.6 percent in February 2024. That’s an all-time high—even as curtailment as a percentage of all solar generation has dropped.

Importantly, relative curtailment has decreased from recent highs despite the addition of significant new solar generation. While solar generation continues to rise as a percentage of the total load, curtailment’s percentage of all solar production has declined from recent highs. While CAISO’s overall curtailment rose by nearly 135 gigawatt hours (GWh) in the last six months of 2023 from prior year levels, it also generated 3,725 GWh more in solar electricity.

CAISO’s recent relative curtailment downtick could be due to several factors besides batteries, such as weather conditions and new transmission lines. Still, grid storage battery deployment has undeniably been an important element. CAISO’s addition of over 2.4 GW of battery storage capacity from June 2023 through the end of the year coincided with a sharp reduction in curtailment.

CAISO is set to continue deploying even more batteries in 2024. The US Energy Information Administration’s latest estimates suggest it will install nearly 5 GW of incremental battery storage capacity in 2024, along with 3.5 GW of new solar photovoltaic capacity. While not every project in queue will ultimately move forward, CAISO’s absolute increase in battery capacity and its relative rise as a percentage of solar capacity will mitigate curtailment.

More encouragingly, it’s early innings in the rise of batteries. While lithium-ion battery technologies are most prevalent on the grid today, other advances are possible. Most deployed batteries today, such as lithium-ion batteries, have storage of around four hours or less. New technologies, such as iron air batteries, could provide multiday storage solutions. As the quantity and quality of battery deployments improve, the grid will become more resilient and, all else being equal, solar generation’s share of the electricity grid will continue to grow.

Of course, solar and batteries face substantial challenges ahead: namely, geopolitics and economics. China’s massive role across clean energy supply chains raises thorny questions and difficult tradeoffs. China dominates solar supply chains and is deeply enmeshed in battery supply inputs, including for lithium. Political tensions with China could spike prices, especially if Beijing interferes with markets. Even without geopolitical disruptions, however, renewables could face growing costs and disruptions due to supply chain bottlenecks and the boom-bust cycle of commodities and inputs. With a prolonged period of high interest rates posing challenges to capital-intensive renewables, policymakers should alleviate inflation by accepting short-term increases in hydrocarbon output and accelerating housing construction. Meanwhile, managing illiquid commodities and inputs for solar and batteries could require creative policy mechanisms, such as financing hedging instruments or creating new benchmarks.

Increasing solar electricity’s share of generation via batteries would be good news for consumers and the environment. By some metrics, unsubsidized solar is the cheapest generation source, while solar photovoltaic plus storage is economically competitive with other, more polluting resources. Additionally, solar panels and lithium-ion batteries require virtually no water after entering service, unlike coal, for example. The increasing wave of solar and batteries hitting the grid could aid the economic and environmental goals of California and other states.

Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center. This article represents his own opinion.

Further reading

Image: A drone view shows California’s largest battery storage facility, as it nears completion on a 43-acre site in Menifee, California, U.S., March 28, 2024. REUTERS/Mike Blake

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