There’s something really big going on in California.

Some of the most aggressive carbon-emissions laws in the world were recently passed. And meeting these ambitious targets will require an unprecedented increase in renewables, as well as the development of new technologies.

These policies could be revolutionary for California’s Big 3 utilities and the sector in general.

In the third and final part of our series, we take a closer look at the technologies that will be necessary to achieve California’s expansive low-carbon vision.

As we’ve noted in previous articles, we believe developments in California could have wide-ranging implications for utilities throughout the U.S. That’s because if the state is successful then its experience could serve as a model for the rest of the country—or, if not, a cautionary tale.

But that’s a more open-ended consideration. In the more immediate future, we’re also trying to determine whether the Golden State’s three big investor-owned utilities, PG&E Corp. (NYSE: PCG), Edison International (NYSE: EIX) and Sempra Energy (NYSE: SRE), which have a collective market cap of nearly $80 billion, will become the most valuable companies in the sector thanks to operating at the vanguard—or whether they’ll share the same disturbing fate as some of their European peers.

In our first article, we established that rather than being disrupted by these new policies, California’s utilities are actually leading the way, which would seem to bode well for their continuing viability as well as shareholder value.

In our second article, we found that similar policies implemented in other countries such as Germany have not been disruptive to system reliability. In fact, Germany’s solar installations manage to generate electricity at an overall cost similar to that of California and Texas, despite the fact that the country receives only half as much annual sunshine as these two U.S. states.

In this final report, we take a look at battery technologies that are still in their infancy, yet whose rapid technological development is crucial for California to achieve its carbon-emissions goals.

During our research, we discovered that an extraordinary expansion in battery technology is underway in the state, but not for the reasons you might expect.

The Pressure to Innovate

While California has long striven to promote battery technology, last year’s gas leak at Sempra’s Aliso Canyon storage field may have done more than anything to advance the expansion of battery technology on a scale and speed never before seen.

If there has ever been an energy utility equivalent to John F. Kennedy’s call to put a man on the moon in 10 years, some are saying the amount of storage being built in response to the biggest natural gas leak in U.S. history could be it.

Here’s the background: The Aliso Canyon field supplies natural gas to power plants that generate nearly 10,000 megawatts of electricity to the Los Angeles area. But regulators say that the gas shortage resulting from the leak means that the region faces the possibility of interruptions to electric service, or even widespread blackouts.

Consequently, the leak has led to plans for the fast-track authorization of two energy-storage projects totaling 37.5 megawatts that are being built by The AES Corp. (NYSE: AES) for Sempra’s subsidiary utility San Diego Gas & Electric. The projects would be built in six months, about a third of the time it would take to build a gas-fired power plant.

Bloomberg also recently reported that Tesla Motors Inc. (NSDQ: TSLA) won a bid to supply grid-scale power in Southern California to help prevent blackouts.

Tesla will supply 20 megawatts of energy storage to Southern California Edison with lithium-ion batteries. The company’s Powerpacks will be operational in record time—by the end of this year.

These technologies may prove to be economic, as they will provide power during peak periods of demand, while supporting grid reliability when demand is low.

A study by investment bank Lazard has predicted significant cost declines over the next five years, based on a survey of industry experts.

For instance, the cost of lithium-ion storage is expected to drop by 47% within five years. The study also found that storage costs are within “striking distance” of conventional alternatives.

This time around, economics may actually align with policymaking, which means California’s utilities could be on the cusp of transforming the sector and reinventing utilities’ value proposition for investors.