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Utility-Scale Battery Storage Systems: Legal Issues and Opportunities

1/9/2017 Articles

Federal and state government mandates and incentives, combined with technological advances, have dramatically increased renewable energy sources during the past decade. Variable renewable energy sources such as solar and wind have demonstrated great potential for meeting electric power demand but remain limited from a grid integration standpoint due to intermittency when the sun is not shining or the wind is not blowing.

As a result, state governments and independent system operators are placing increased emphasis on utility-scale energy storage systems and several states, including California, have adopted mandates and incentives for rapid deployment. While several different storage technologies exist or are in development – including pumped hydropower and thermal storage – increasing focus is on battery storage systems to meet energy storage needs. As with any energy project, however, utility-scale battery storage projects present land use, permitting and environmental and health and safety issues, and developers need to anticipate and address these issues to successfully meet project development timelines and goals.

Emerging Trends in Energy Storage Development

California led with government-mandated renewable energy goals, enacting AB 32 in 2006, which requires 33 percent of the state’s retail energy to be from renewable sources by the end 2020. Other states have followed suit. Hawaii, a state that is “off the grid” and entirely dependent on its own generating capabilities, has adopted the most ambitious goal to date, with 100 percent of its electricity to be supplied by renewable sources by 2045.

Renewable energy sources like solar and wind turbines have the potential to meet the demand for energy in many states and throughout our nation. These are variable energy sources, however, and electricity from fossil fuel combustion and other energy sources must be used to provide base load to balance the grid, as demonstrated by the California Independent System Operator’s well known “duck chart.” Last year’s massive leak at California’s Aliso Canyon natural gas storage facility underscored the need for alternatives to reliance on fossil fuel generation and led to California Public Utility Commission (CPUC) Resolution E-4791, ordering the expedited procurement and development of energy storage resources in the Los Angeles Basin.

As a result of these policy and economic forces, there is increasing emphasis on developing and implementing energy storage systems, both “behind the meter” and on a utility scale. Once again, California has led the way with enactment of AB 2514, which calls for 1.3 gigawatts of energy storage capacity from the state’s three large investor-owned utilities by 2020, and adoption of legislation earlier this year accelerating and expanding deployment of energy storage systems. Oregon and Washington have similarly enacted legislation to promote energy storage capacity and, just four months ago, Massachusetts became the first East Coast state to adopt an energy storage mandate.

Energy storage technologies are not entirely new. Pumped hydroelectric storage facilities have been used for decades to supplement generating capacity during peak energy demand, and a number of evolving mechanical, chemical, and thermal technologies are in use or development. Due to its ready availability, however, the principal focus to meet current energy storage needs is on battery energy storage systems (BESS), and lithium ion-based systems in particular. These systems offer very fast response times and high cycle efficiencies, can be used for utility-scale as well as residential and commercial applications, are relatively easy to deploy, and continue to experience a dramatic drop in costs. There is little doubt that utility-scale BESS are and will in the near-future continue to be the technology of choice to meet energy storage requirements in California and other states.

Utility-scale battery storage projects present great opportunities for developers, investor-owned utilities, and state governments to meet renewable energy goals, make better use of solar and wind resources, and reduce dependence on fossil fuels. However, as with any energy project, consideration should be given to land use, permitting, and environmental and health and safety issues in formulating effective strategies for development of utility-scale battery storage projects.

California Permitting Issues and Strategies

Development-related concerns for utility-scale BESS projects include site consistency with land use and zoning laws, worker safety, security and community safety measures, hazardous waste management and disposal, potential impacts on species and habitat, visual impacts, storm water management, and coordination with generation and transmission facilities. As with any new project-based technology, the myriad of issues relating to BESS projects are still evolving. Nonetheless, below we highlight some of the key emerging considerations.

There are three distinct permitting regimes that may apply in developing BESS projects, depending upon the owner, developer, and location of the project.

For BESS projects developed or owned by the state’s investor-owned utilities, the projects are subject to CPUC jurisdiction under General Order (GO) 131-D. GO 131-D governs permitting for utility-owned infrastructure including the potential need for a Certificate of Public Necessity and Convenience (CPCN) or Permit to Construct (PTC) and related environmental review pursuant to the California Environmental Quality Act (CEQA). For BESS projects approved to date, the utilities have invoked an exemption from GO 131-D qualifying such projects as “distribution” facilities falling below applicable 50 megawatt (MW) and 50 kilovolt (kV) thresholds, thereby avoiding CPCN and PTC compliance and associated CEQA review. While the utilities must still coordinate with local authorities regarding land use matters and obtain non-discretionary construction and operational permits, so long as the project qualifies as utility-owned and meets the applicable GO 131-D exemption thresholds, permitting can be streamlined.

For BESS projects not qualified under GO 131-D, permitting jurisdiction is dependent upon the location of the project, typically either on private, federal or state land, and governed by the applicable governmental agency with jurisdiction over that land. The majority of BESS projects falling outside CPUC jurisdiction to date are located on private land and subject to the applicable county or city zoning and land use ordinances and, if necessary, associated CEQA or National Environmental Policy Act (NEPA) review. The analysis of any required discretionary permits and approvals in each instance is highly fact-specific, depending upon the zoning of the relevant parcel(s) and the permitted and conditional uses under the applicable code for that zoning designation. Co-locating BESS facilities with the solar or wind generating source may streamline the process and provide economic advantages. Additionally, in some instances, BESS projects may fall within permitted uses for electrical substations and transmission and distribution facilities, thereby avoiding discretionary review; in other instances, BESS projects may be allowed as conditional uses requiring a conditional or special use permit and triggering associated CEQA or NEPA review. For those projects located on federal or state land, jurisdiction will fall under the jurisdiction of the applicable agency and its associated permitting regime (e.g., the Federal Land Policy and Management Act for BESS projects falling under Bureau of Land Management jurisdiction).

Where BESS projects trigger discretionary permitting and CEQA or NEPA review, there are a variety of means for proponents to address compliance ranging from a Negative Declaration to an Environmental Impact Report (EIR), Environmental Assessment (EA), or Environmental Impact Statement (EIS). In instances where the project is associated with an existing power generation project, an addendum or supplement may be tiered off existing CEQA or NEPA documentation, as was the case with the Campo Verde Battery Energy Storage System project in Imperial County based on co-location with a previously-approved 140 MW solar project.

Given the relatively small footprint of typical BESS projects and location closer to urban load centers, the environmental and natural resource issues emerging to date tend to focus on technology-specific impacts including fire risk, noise impacts and hazardous materials transportation, use, and disposal. That said, depending on the location and scale of such projects, many of the typical environmental and natural resource impacts encountered in developing other energy projects may come into play, including potential protected species, cultural resource, and hydrological impacts.

Conclusion

Deployment of utility-scale BESS projects can be expected to rapidly increase in California and other states that have adopted renewable energy goals. Such projects present great opportunities for developers, investor-owned utilities, and government to meet these energy goals and make better use of variable solar and wind resources. Developing strategies for addressing land use, permitting, and environmental and health and safety issues early and effectively will facilitate the cost-efficient and successful deployment of utility-scale BESS projects.

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