Arevon Energy has commissioned the 300MW/1,200MWh Nighthawk Energy Storage Project in Poway, California, delivering a four-hour duration battery system directly into the San Diego Gas & Electric service territory where local capacity shortfalls have persisted since the San Onofre nuclear plant retirement. The project enters service as California’s grid operator reports storage routinely supplying 15-20% of evening peak demand, marking a structural shift from pilot-scale to baseload-reliant asset class.
California’s storage buildout reaches San Diego’s local capacity zone
The Nighthawk project sits in Poway, roughly 20 miles northeast of downtown San Diego, placing it squarely within the San Diego-IV local capacity area (LCA) that CAISO has identified as chronically deficient. Since the 2013 retirement of the 2,200MW San Onofre Nuclear Generating Station (SONGS), the region has relied on a combination of gas-fired peakers, cross-border imports from Baja California, and increasingly, battery storage to meet local resource adequacy (RA) requirements. CAISO’s 2024 Local Capacity Technical Study flagged a need for approximately 1,100MW of additional local capacity in the San Diego-IV area by 2027, even after accounting for projects already in development. Nighthawk’s 300MW represents roughly 27% of that identified gap in a single project.
Arevon, formed from the rebranding of Capital Dynamics’ clean energy platform in 2021, has assembled a portfolio exceeding 2.5GW of solar and storage across the U.S. The company secured a 20-year RA contract with San Diego Gas & Electric (SDG&E) for Nighthawk’s capacity through the utility’s 2021 Local Capacity Request for Offers (RFO), a procurement mechanism specifically designed to address the SONGS-induced shortfall. That contract structure – fixed capacity payments indexed to inflation – provides revenue certainty that underpins project finance, distinct from merchant energy arbitrage plays that dominate ERCOT deployments.
The project’s four-hour duration (1,200MWh ÷ 300MW) aligns with the duration threshold that CAISO’s resource adequacy rules currently treat as “full capacity” for planning purposes. Systems shorter than four hours receive derated capacity credit; longer durations earn no additional RA value under current tariff rules, though that framework is under active review at FERC and CAISO as evening net-load ramps extend beyond four hours on high-renewable days. Nighthawk therefore hits the current economic sweet spot: maximum RA revenue per MWh of installed battery.
Four-hour lithium-ion hits diminishing returns as net-load ramps lengthen
Analysis: Nighthawk’s commissioning coincides with a pivotal inflection in California storage economics. CAISO data shows the net-load ramp – the difference between midday solar minimum and evening peak – now regularly exceeds five hours on spring weekends and is approaching six hours in early autumn. A four-hour battery dispatched at maximum output from 4 PM to 8 PM still leaves the grid exposed to the 8-10 PM shoulder period when solar has vanished but demand remains elevated. That points to a coming bifurcation: four-hour assets like Nighthawk will continue earning full RA payments, but their energy arbitrage margins will compress as the “shoulder” price spikes shift later and widen. Developers already in the interconnection queue – particularly those with 2026+ commercial operation dates – are specifying six- and eight-hour configurations despite the higher $/kWh capital cost, betting that CAISO will eventually extend full capacity credit to longer durations or that energy market revenues will justify the incremental investment. By comparison, the levelized cost of storage (LCOS) for a six-hour system today runs roughly 1.3-1.4x a four-hour system on a $/kWh basis, but delivers 50% more energy throughput per MW of interconnection capacity – a critical metric when interconnection upgrade costs can exceed $200/kW in constrained zones like San Diego.
Analysis: The project also illustrates how local capacity procurement is reshaping siting decisions. In an unconstrained market, a 300MW battery would likely locate near major load centers (downtown San Diego) or at retired gas plant sites with existing interconnection (e.g., the former Encina or South Bay plants). Poway’s substation topology and available land offered a faster path to commercial operation – Arevon broke ground in Q1 2023 and achieved commercial operation roughly 18 months later, a timeline that would be impossible in dense urban substations where upgrade studies alone take 24-36 months. That speed-to-market advantage compounds value: every month of earlier operation captures an additional month of RA capacity payments, which for a 300MW resource at current local capacity prices (~$8-10/kW-month) translates to $2.4-3.0M/month in contracted revenue.
Who this affects
- Utility planners (SDG&E/CAISO): Nighthawk closes roughly one-quarter of the San Diego-IV local capacity gap identified for 2027, reducing reliance on the Otay Mesa and Palomar gas peakers that currently provide must-run voltage support. Planners should model the interaction between Nighthawk’s four-hour dispatch and the 8-10 PM net-load shoulder to assess whether remaining RA procurements need longer-duration resources.
- Storage developers with queue positions in SDG&E territory: The project validates that substation-adjacent sites in Poway/Escondido corridors can achieve COD within 18 months of groundbreak. Developers with later queue dates should factor in rising interconnection cost allocations – CAISO’s 2024 cluster study shows network upgrade costs in the San Diego area averaging $280/kW, up 40% from the 2022 cluster.
- Resource adequacy compliance buyers (CCAs, ESPs, IOUs): Nighthawk’s RA capacity is contracted to SDG&E, but the project’s commercial operation increases the pool of local RA supply available for bilateral trades. Current San Diego local RA prices trade at a $1.50-2.00/kW-month premium to system RA; that spread may narrow if 2-3 more projects of similar scale come online by 2026.
- Gas peaker operators (Calpine, NRG, LS Power): Each 300MW/4hr battery that clears local RA reduces the capacity value of existing peakers by an equivalent amount. The three largest San Diego-area peakers (Otay Mesa 600MW, Palomar 560MW, Carlsbad 500MW) now face a combined 1,200MW+ of battery capacity either online or in late-stage development within their LCA – roughly 40% of their aggregate nameplate.
What to watch next
- CAISO’s 2025 Local Capacity Technical Study (due March 2025): Will the study reduce the San Diego-IV local capacity need by 300MW reflecting Nighthawk’s commercial operation, or will load growth (data centers, electrification) offset the gain? The 2024 study already incorporated 1,200MW of “planned” storage; Nighthawk moves from planned to operational.
- FERC Order 841/2222 implementation at CAISO for multi-hour storage participation: Nighthawk’s four-hour duration qualifies for full RA today, but CAISO’s upcoming “Extended Day-Ahead Market” (EDAM) and “Resource Adequacy Enhancements” track may create distinct capacity products for 6+ hour resources. Watch for a capacity accreditation methodology change that could revalue Nighthawk’s duration relative to newer, longer assets.
- Arevon’s next-phase development at the Nighthawk site: The project occupies roughly 20 acres; the substation interconnection (Poway 69kV/138kV) has headroom for expansion. Arevon has filed a separate queue position (Queue Cluster 14) for a 150MW/600MWh “Nighthawk II” co-located expansion targeting 2027 COD – a test case for whether developers will overbuild duration at existing interconnection points rather than seek new queue positions.
- SDG&E’s 2024 Local Capacity RFO results (expected Q4 2024): The utility seeks an additional 400MW of local capacity for 2026-2028 delivery. Bid pricing and duration mix will signal whether the market has fully internalized the four-hour duration ceiling or is pricing in anticipated RA rule changes.
Bottom line: Nighthawk is not merely another battery project – it is the single largest increment of local capacity to come online in the San Diego-IV zone since SONGS retired, and its contracted RA structure makes it a bellwether for whether California’s procurement framework can deliver reliability at scale without new gas. The next 18 months will reveal whether the market responds with longer-duration bids at the same interconnection points, or whether four-hour lithium-ion remains the default until policy forces a change.
Read the full report at Energy Storage News
Note: facts and figures attributed above to Energy Storage News reflect that outlet's original reporting. Broader context, cross-sector connections, and forward-looking scenarios reflect independent analysis by our editorial team.
About this article: Drafted by Energy Ai with AI-assisted research and writing based on public reporting, then reviewed under our editorial process before publication.
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