As energy markets switch from fossil fuels to intermittent renewable resources, the market has added a growing fleet of battery storage resources to maintain the flexibility and resilience of the power grid.This is especially true in the Western U.S., where states like California, Washington, and Oregon have ambitious decarbonization goals. California is projected to need 79 GW of new renewable generation and around 50 GW of battery storage to meet its 2045 greenhouse gas reduction goals.

According to the latest report from the California Independent System Operator (CAISO), battery storage capacity grew from about 500 MW in 2020 to 5,000 MW in May 2023 in the CAISO balancing area. Over half of this capacity is physically paired with other generation technologies,especially renewables, either sharing a point of interconnection under the co-located model or as a single hybrid resource.

Source: CAISO

Battery storage is the fastest growing type of resource in the CAISO market. As of May 1, 2023, NGR batteries make up 7.6 percent of CAISO’s nameplate capacity. Figure 2.2.3 shows the steady growth in CAISO’s battery capacity compared with other resource types.

Source: CAISO

In addition, the majority of projects waiting to connect to the grid contain a battery component. The CAISO requires projects to undergo a series of impact studies before they can be connected to the grid.The list of projects in this process is known as the “interconnection queue.” On May 1, 2023, the interconnection queue included nearly 127 GW of planned capacity, 46 percent of which comes from batteries. 55 percent of planned new capacity comes from mixed-fuel projects, which collectively include nearly 11 GW of batteries.

Net market revenue for batteries increased from about $73/kW-yr in 2021 to $103/kW-yr in 2022. This increase was driven largely by higher peak energy prices. In addition, in 2022 the average charging (buying) price was 96 $/MWh lower than the average node price, while the average discharging (selling) price was 155 $/MWh higher than the node price, thus batteries achieved an average margin of 251 $/MWh.

Batteries now provide over half of CAISO’s regulation up and regulation down requirements. However, the percentage of total battery storage capacity being scheduled for ancillary services has decreased as batteries have transitioned to providing more energy during the net peak hours.

Batteries now account for a significant portion of load during peak solar hours. From hours-ending 10 to 13 in 2022, battery charging represented nearly 5 percent of load. During these hours, batteries help reduce the need to curtail or export surplus solar energy at very low prices.