4 reasons why utility leadership is essential for realizing the full value of energy storage

Take a quick look at the schedule for next week’s Energy Storage North America (ESNA), and you may begin to understand just how critical this highly flexible technology is becoming to the transformation of the U.S. electric power system. The theme of the conference may be “Where the Future of Power and Transportation Meet,” but the impact of storage on the evolution of markets, the grid and industry business models is also on the agenda.

Another quick take-away from the agenda — utilities are playing a critical role in realizing the full potential of the diverse capabilities of storage and the growth of the industry overall. Historically, discussions about storage have tended to prioritize a short list of applications — such as providing emergency backup power, frequency regulation or reducing demand charges. However, far more value could be derived from a fuller range of grid services and utilities will play a key role in imagining and valuing those applications.

As Director of Research for the Smart Electric Power Alliance (SEPA), I am in regular contact with utilities developing a range of innovative storage projects, often in partnership with storage developers. I am also Chair of the Utility Leadership track at ESNA, where some of these projects — including those discussed below — will be profiled, and industry executives will speak about the opportunities and challenges they see as storage technologies and markets grow.

When developing the track with ESNA staff, I drew from many of the trends highlighted in SEPA’s 2018 Utility Energy Storage Market Snapshot. While existing capacity is still modest — in 2017, U.S. utilities interconnected 216.7 megawatts (MW), 523.9 megawatt-hours (MWh) of storage to the grid — levels of interest and activity continue to rise as new applications and programs are tested and rolled out. As I thought about how we can accelerate the adoption and market expansion of storage and encourage further innovation, utilities’ role as key industry leaders came into clearer view.

1. Utilities can leverage broader deployment of storage, not only to harden the grid, but also to save their customers money.

Utilities are uniquely positioned to explore the full value of storage to the distribution grid because they are often responsible for ensuring the second-by-second balance and operation of these systems.

A prime example is Punkin Center, Arizona — a somewhat remote, unincorporated town, with a tiny population, but growing energy demand. For Arizona Public Service (APS), the traditional answer to getting more power to that community — without causing other problems on the system — would have meant rebuilding 17 miles of distribution lines over rough terrain.

After considering other options, including diesel generation and combined solar plus storage, APS determined that battery storage — in this case, a form of non-wires alternative — provided the least-cost, best-fit solution. The utility installed a 2 megawatt (MW), 8 megawatt-hour (MWh) battery system that has been in daily operation since March 2018.

A key feature of the system is the high level of reliability it provides Punkin Center and APS — with several layers of redundancy and flexibility for future expansion. For example, APS keeps critical spare parts, such as transformers, on-site, as such equipment often has long procurement lead times. APS also configured the site to allow for temporary generators to connect to the spare transformer in the event of an extended battery outage.

While APS has encountered a number of challenges with operating the system in Arizona’s triple-digit summer weather, the battery storage has successfully provided feeder peak shaving with high reliability and minimal disruptions.

2. Utility energy storage will be essential to achieving local and state-level policies and corporate customers’ goals requiring 100 percent renewable energy.

As we are already seeing in Hawaii and California, going 100-percent renewable cannot be easily achieved without storage — to provide backup power when the sun is not shining or wind blowing, as well as vital grid support services. For the Los Angeles Department of Water and Power (LADWP), meeting state and city mandates for 100 percent clean energy has meant aggressive plans to decarbonize its system, in part through battery storage projects.

The utility already has 1,300 MW of pumped storage at its Castaic Hydroelectric Power Plant, and as part of a state regulatory mandate, is fast-tracking 178 MW of battery storage, which will be online by 2021. Most recently, it commissioned a 20 MW, 10 MWh lithium-ion system at the Beacon Solar Plant in the Mojave Desert, where the storage provides grid support and optimization of solar power from the plant. The project was originally scheduled to go online in 2020, but was completed earlier this year due to the Aliso Canyon natural gas disruption. In Phase 2, storage at the site will be expanded to 50 MW.

3. Utilities can also help optimize customer-sited storage by providing behind-the-meter programs.

Aggregation of customer-sited solar plus storage — whether behind or in front of the meter — is another area where utilities’ knowledge and operation of local distribution systems can drive deployment and innovation. The Sacramento Municipal Utility District (SMUD) is still in the early stages of planning for residential, behind-the-meter storage, but the utility is known for its industry-leading forecasting system. The forecasts allows block-by-block analysis of customers’ use of power and their adoption of distributed energy resources, such as solar, storage, energy efficiency, and electric vehicles.

Using data and analysis from these forecasts, SMUD has been exploring behind-the-meter storage as a key solution for substation and transformer constraints associated with residential rooftop solar.

Still, another intriguing option utilities might consider is a behind-the-meter program that offers storage as a service.

4. Utilities can design innovative rates to help drive and optimize the electrification of transportation, as well as other beneficial electrification.

Utilities see electric vehicles (EVs) as a valuable source of new load, but also as potential grid assets — batteries on wheels. Further, they see the electrification of transportation as a first step toward “beneficial electrification,” that is, replacing fossil fuels (such as propane, heating oil and gasoline) with electricity to reduce emissions and energy costs. The catch here is that such electrification can only be beneficial if it doesn’t lead to increased reliance on fossil fuels or the buildout of expensive new infrastructure.

Innovative rate design for EV charging could provide a model for other areas of electrification. For example, EV time-of-use rates could reward charging during times of high solar and wind production and discourage charging during the hours when electricity is most expensive. With such rates, EVs could provide many of the same value streams as stationary storage. Xcel Energy in Minnesota has had EV time-of-use rates in place since 2015, providing a model and lessons learned for utilities around the country. Managing these loads initially through rate design is a critical first step as EV adoption grows.

I was recently on SEPA’s fact finding mission to the United Kingdom, where one of the utility executives on the trip said that a true utility battery doesn’t yet exist. Electric utilities need a higher level of durability, reliability, and redundancy than is available today, he said.

Utility leadership will be essential to direct and guide the nascent utility-scale storage industry as it develops that next generation of batteries, and other products and services that can fully realize the value of this technology for customers, utilities and the grid.