As power market and policy experts quarrel over the reasons for California's first rolling blackouts in 19 years, renewable energy project developers and financiers spy opportunities.
The power problems, which come as parts of the state feel the world's hottest recorded temperatures in 100 years (130 °F), bring the issue of grid reliability to the forefront – whatever the precise causes may be.
Capital Dynamics and Tenaska have used the occasion to make the case for battery storage with the announcement this week of nine new standalone storage projects totaling 2 GW/8 GWh in California's highest load centers.
"Blackouts are a reminder that storage is needed and there is complete consensus around that by the market," says Benoit Allehaut, a managing director in Capital Dynamics' clean energy infrastructure team.
CapDyn will be the long-term owner of the storage projects, which are slated to come online between 2022 and 2023, and Tenaska will have an option to co-invest.
"What we’re trying to do is a real estate play," Allehaut tells PFR. "The interconnection points are right where the load is on the California coast, so we wanted to build storage where coastal thermal power plants are closing. Anybody who owns thermal generation in California understands that, due to renewable portfolio standards, there is a certain shelf life."
However, the retirement of California's existing gas-fired generation is not going to happen overnight, and in some cases is being postponed rather than brought forward.
Among the coastal gas-fired plants that have been slated to retire for some time now are GenOn Energy's 1,516 MW Ormond Beach plant in Oxnard and its 54 MW Ellwood plant in Goleta. But the specter of grid instability means they are being kept online past their retirement date and GenOn is even in the market to refinance them (PFR, 8/14).
"If you own a gas-fired generation plant in California today you’re very happy," says Alex Wernberg, managing director and head of power at MUFG, who is based in California. "Power prices are low during the middle of the day, but if you watch the spike as solar comes off later in the day, you’re getting compensated for that reliability. Ultimately, batteries will intersect some of that, but that’s very expensive to do all with batteries. Gas-fired generation is still going to play a significant role in the country’s transition to renewables."