Market Insight

AES, AMS and Stem largest contract winners of SCE's energy storage procurement plans in 2016

September 16, 2016

Marianne Boust Marianne Boust Principal Analyst, IHS Technology
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On 13 September 2016, investor owned utility Southern California Edison (SCE) announced contracts awarded to six developers for a total of 125 MW of multi-hour behind-the-meter energy storage and demand response projects to be built by 2020, as part of its Preferred Resources Pilot. Winning candidates include Advanced Microgrid Solutions (AMS), Convergent Energy & Power, Hecate, NextEra, NRG and Swell.
The same week SCE awarded two additional contracts for utility-side-of-meter projects for a combined 22 MW/88 MWh to Powin Energy and Tesla as part of its efforts to replace gas peakers using natural gas from the Aliso Canyon gas storage facility. The two latter projects are expected to be commissioned during the winter of 2016/17.

Key insights:

  • SCE accelerates energy storage deployment, targeting specific areas of the distribution network with several hours of storage
  • Batteries are increasingly attractive compared to thermal plants, not only for grid services but also for peaking capacity.
  • AES energy storage, AMS and Stem have captured half of SCE’s contracts
  • Tesla receives its largest contract for utility-side-of-meter projects, shifting towards becoming a system vendor

With a pipeline of over 500 MW of contracted energy storage (ES) projects, SCE is playing a major role to boost the United States ES market. According to IHS Markit’s projections, SCE’s projects represent over 10% of future ES installations in the United States between 2016 and 2020.

SCE’s ES procurement program reveals a preference towards behind-the-meter ES assets used to provide peaking capacity, thus competing directly with thermal power generators and centralised ES systems. This demonstrates the appeal of energy storage not only to provide frequency regulation but also longer duration storage owing to the small footprint, the ease and speed of installation in highly dense urban areas and reduced dependence on fossil fuels imports.

AES energy storage, AMS and Stem have captured half of SCE’s contracts award on the back of a combination of utility-side-of-meter and behind-the-meter assets. AES Energy Storage leads the way, leveraging its track record in California and ability to commission large-scale projects. AES energy storage is expected to commission the 30 MW/120 MWh Escondido battery project and the 7.5 MW/30 MWh El Cajon battery project under San Diego Gas & Electric’s procurement plan by end of 2016. In contrast, AMS and Stem are focused on the aggregation of multiple behind-the-meter assets providing demand charge management. With the SCE announcement AMS and Stem now boast 97 MW and 87 MW of projects awarded all in California based on IHS Markit energy storage project database.

Furthermore, the SCE’s Aliso Canyon tender award marks the largest utility-side-of-meter contract to date for the Tesla Powerpack. While leading the way amongst residential and commercial customers, Tesla has struggled to compete for utility-side of meter projects against Asian manufacturers BYD, LG Chem and Samsung SDI owing to aggressive pricing strategy. However the proximity to its Gigafactory enables Tesla to deliver and commission the project within three months. The deal signals Tesla's strategic shift towards energy storage system integration as opposed to battery vendor. The outcome of this first grid-scale project may position Tesla as a new contender in the utility-side-of-meter segment and give required credentials to tap other markets like PJM and Europe. 

Research by Market
Power & Energy Technology
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