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Aggregation: The real reason storage is the energy industry game changer

I like facts and figures as much as the next person — as a former newspaper reporter, possibly even more. The problem is they don’t always tell a coherent or compelling story.

The 2017 Sustainable Energy in America Factbook recently released by the Business Council for Sustainable Energy (BCSE), is a case in point. Compiled by Bloomberg New Energy Finance (BNEF), the facts and figures in the book’s more than 100 charts and graphs are authoritative and admirable. But the very vibrant story of energy transition in the U.S. gets a bit lost among the tiny symbols and small type that seem endemic to these kinds of documents.

Which is to say, I may be getting jaded, but charts comparing the levelized costs of various forms of energy (pages 37-38) — showing yet again that solar and wind are competitive with coal and even natural gas — just don’t get me excited any more.

I was looking for something a bit more visceral when I got to the map on page 112 showing announced and commissioned energy storage projects across the United States. It stopped me cold with a clear, immediate visual of the 2.2 gigawatts (GW) of storage now online or being planned in 41 states across the U.S. Only small, somewhat predictable pockets in the Plains states and Southeast are not yet planning projects, at least not as of December 2016.

US announced and commissioned energy storage projects, as of December 2016. (Source: Bloomberg New Energy Finance)

What is significant and exciting here is not only the geographic spread of projects, but the patterns of concentration and what they tell us about how storage is already changing our energy system. Yes, California’s 1.2 GW — more than half of total storage in the U.S. — is mandate-driven, with the state’s three investor-owned utilities required to have 1.3 GW of storage online by 2020.

But, the other major concentration of storage, more than 265 megawatts (MW) across PJM Interconnection’s mid-Atlantic and Midwest service territory, is all about economics, the grid and well-functioning market rules and structures. The projects here — for example, the 7 MW of storage brought online last year in the tiny Village of Minster, Ohio — are bidding into PJM’s frequency regulation market, providing critical, real-time support services that keep the grid safe and reliable. Similarly, a 20-MW project that came online in Indiana last year is also providing grid support services for the Midcontinent Independent System Operator (MISO).

Both PJM and MISO operate the transmission grid and wholesale power markets in their respective service territories.

The trend toward storage providing flexible grid support services — traditionally one of the main uses of natural gas plants — becomes even more obvious in charts showing the applications of announced and already commissioned storage projects (pages 113 and 114). The predominance of blue in both charts reflects projects planned or being used for frequency regulation.

From 2012 on, frequency regulation accounted for more than half of all storage applications coming online — 50-77 percent according to BNEF — save for a dip to 45 percent in 2016.

Mix of applications for commissioned projects (% by MW). (Source: Bloomberg New Energy Finance)

Meanwhile, the blocks of light green — for system capacity — showing up in projects announced between 2014 and 2016 could, again, be at least partially due to the fast expansion of storage deployment in California. The pressing need there is to fill gaps in power supply and grid support left by the closure of the San Onofre nuclear plant and, more recently, the Aliso Canyon gas storage facility.

Future projects providing system capacity could also be bolstered by the Federal Energy Regulatory Commission’s proposed rule allowing storage to compete in wholesale electricity markets.

Cut the cord or aggregate?

Still another development worth watching has to do with a possible shift in the applications that announced projects will offer. Among the projects already online, particularly between 2014 and 2016, a small, but still significant number were intended either to support the integration of renewables on the grid or for specific end users. Going forward, such applications look to be tapering off among projects announced during the same time frame.

Mix of applications for announced projects (% by MW). (Source: Bloomberg New Energy Finance)

Couple these trends with the growing acceptance of renewables as mainstream energy — well documented in the BCSE factbook — and the nature of the transition underway in the U.S. energy sector starts to shift. Yes, we are moving from a centralized toward a distributed system, but one in which aggregation of resources and the technologies that support aggregation, such as storage, will be critical.

As noted in the Smart Electric Power Alliance’s recent report on distributed energy resource (DER) capabilities, storage is emerging as the industry’s jack of all trades, able to deliver multiple services and revenue streams from a single installation. We are only beginning to glimpse the innovative synergies that may be possible when storage is aggregated with the capabilities of other distributed energy resources, such as solar and demand response.

The popular narrative about storage as an electric industry game changer has, thus far, focused primarily on the residential markets. Specifically, when paired with solar, storage will allow customers to become increasingly independent of utilities and even cut the cord to the grid.

But the more likely scenario, reflected in the BCSE factbook, is that storage in the U.S. — both residential and utility-scale — will be driven by the technology’s potential to help aggregate resources. In the process, it will make power more flexible, more efficient and more valuable, to customers and the grid.

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