Grenades, Swiss Army Knives and Bacon: Storage is a high-impact disruptor, can do everything, and makes everything else better September 13, 2018 | By Tanuj Deora & Nick Esch When Solar Power International (SPI) opens its doors in Anaheim on Sept. 23, thousands of the industry executives and professionals flooding in will be there for a different event — Energy Storage International (ESI). The co-location of the two trade shows signals the extent to which solar and storage are now seen as essential, complementary and vital to the evolution of our industry. Now in its second year, ESI also reflects the accelerating momentum of the U.S. storage market. As noted in the recently released 2018 Utility Energy Storage Market Snapshot, the Smart Electric Power Alliance (SEPA) has seen a small, but steady increase in the deployment of batteries across the U.S. As costs decline, the technology is gaining in economic competitiveness for an increasingly varied list of applications, from fast frequency response to solar smoothing, to following and meeting system peaks. The impact storage is having on the electric power industry is difficult to capture in one metaphor. The perennials — such as “game changer”– no longer seem adequate. Attempting to encompass the technical flexibility, grid value and disruptive nature of storage, we have heard three — Swiss Army knife, bacon and grenade. Always have your Swiss Army knife handy Battery storage is frequently called a Swiss Army knife because, when it comes to grid services, it can do just about everything. Paired with a primary source of power generation, such as photovoltaic solar, storage is capable of providing best-in-class performance across all the established grid services, as illustrated in the chart below. Mmmm … bacon The technical flexibility of storage has led to a variety of economically viable deployments. It can produce individual value streams — such as, PJM Interconnection’s Reg D frequency regulation service or as part of microgrids for individual customer resilience. It can also be used for “value stacking,” that is, leveraging multiple applications from a single storage facility. All of which provides a good segue to our second metaphor. Battery energy storage can be referred to as “grid bacon” because it “just makes everything better.” Like bacon, it can be enjoyed all by itself; or, and often more interestingly, it can be used to enhance the capabilities of other technologies. The range of deployments now emerging across the country can be framed either by duration or by scale. SEPA developed the above framework to help better explain how battery systems are typically deployed. Similar to solar, energy storage capacity is calculated both in terms of power capacity (MW) and energy capacity (MWh.) While costs and overall capabilities of a given energy storage system tend to be correlated more to MWh than MW, both are important when designing, deploying and dispatching storage resources. So what can utilities do with storage? A lot, actually. Mixing metaphors, somewhat clumsily, a Swiss Army knife can slice up bacon in many different and imaginative ways, depending on what you want to use it for or with. The 2018 Utility Energy Storage Snapshot documents a number of typical storage applications that could become increasingly competitive, based on specific grid conditions, market structures, regulations, and system needs. Key examples include: Ancillary services – Energy storage, particularly batteries, are ideal for providing grid support services such as frequency regulation, voltage support, and blackstart. Indianapolis Power & Light Company’s 20 megawatt (MW), 20 megawatt-hour (MWh) battery is providing primary frequency response to the grid, where it’s automatically maintaining frequency at the residential standard of 60 hertz. Imperial Irrigation District’s 20 MW, 30 MWh battery can black-start the utility’s primary natural gas generator. Ramping – Not all generators are capable of rapid (or near instantaneous) output changes; batteries are. Short-duration batteries can be integrated with traditional power plants, taking advantage of storage’s speed and accuracy to respond to signals from a grid operator. Southern California Edison’s has two 50-MW natural gas combustion turbines each coupled with 10 MW, 4.3 MWh batteries. The batteries provide quick-start and fast-ramping capabilities, allowing the plant to ramp to a target output while the battery discharges, avoiding emissions and fuel costs. Smoothing – The variable generation of wind and solar is fast becoming mainstream, and energy storage can be deployed to make both technologies more dispatchable. In this case, storage provides smoothing to minimize or completely eliminate the impact of power fluctuations on the grid. In Hawaii, the Kauai Island Utility Cooperative’s 13 MW solar farm is coupled with a 13 MW, 52 MWh battery that mirrors solar output and acts as a fully dispatchable generator. The systems is also providing frequency support for entire island. Peaking – Energy storage has demonstrated it can compete with natural gas as a peaking resource and, when coupled with solar generation, is now forecast to be the most cost effective peaking resource in the near future. Arizona Public Service (APS) signed a contract with First Solar for a 65 MW solar farm coupled with a 50 MW, 135 MWh battery. APS has control of the battery during its peak demand time — from 3 p.m. to 8 p.m. The rest of the time First Solar can sell energy or services to the market. Behind the meter – Energy storage systems deployed behind a customer’s meter have the same capabilities as grid-scale storage. These systems can be aggregated by a third party or a grid operator; or customers can be incentivized to operate their systems in a way that provides value to both the customer and grid. Green Mountain Power is leasing utility-controlled Tesla Powerwalls to residential customers for $15 dollars a month. The customers get backup power when the grid goes down, but Green Mountain Power can also call on the systems to shave their system peak to save money both for itself and its customers. Non-wires alternatives – With its range of capabilities, energy storage can be used as an alternative to traditional infrastructure deployments, such as upgrade for substations, power lines, and generators. Distribution-level: APS’s Punkin Center is using two 1 MW, 4 MWh batteries in place of upgrading 20 miles of distribution lines, a 50 percent saving for the utility. The battery will meet the local distribution system’s peaks that occur 20 to 30 days a year which stress the distribution system. Transmission-level: National Grid has plans to build a 6 MW, 48 MWh battery to back up a diesel generator on Nantucket and defer the building of an additional submerged transmission line. This project will have an industry-first duration of eight hours. Lobbing grenades At the most basic level, energy storage has the makings of a high-impact disruptor — or put more simply, a grenade. For the past 100-plus years, the power system has been engineered to maintain a real-time balance of supply and demand at all but the smallest of scales and niche applications. In general, that system has worked very well, providing consumers with high degrees of reliability and value that are orders of magnitude greater than the cost of service. But if the criticality of real-time balancing diminishes, unintended consequences may result because storage may not be able to cost-effectively provide the implicit benefits of traditional generation. Battery storage has the potential for broad implications for wholesale price formation and retail rate design. Paired with increasingly cost effective solar and wind energy, it could disrupt the business case not only for natural gas peakers, but for other forms of generation as well. These resources may represent real value, but do not have established market mechanisms to compensate for attributes such as seasonal benefits, or system inertia. Further, the very versatile — Swiss Army knife — nature of storage allows it to participate in multiple revenue streams and at scale — value stacking. Generally, generating multiple revenue streams is understood to be a good thing, but may also result in problems with double counting the value in multiple markets. More fundamentally, at high levels of deployment, energy storage could break current market designs — whether at the retail or wholesale level. This is not to suggest by any means that the technology is inherently problematic; we believe that it is hugely valuable and exciting technology. Under our current market structures, however, it does raise many issues — not only ensuring that energy storage is rewarded for all the value it provides, but also that it is not overcompensated. We must also not lose sight of factors, like inertia, that are taken for granted in current market structures. So which is it? We think all three metaphors can be useful, each in its own way, and when taken together, provide a fairly robust view of the complexities, opportunities and challenges energy storage represents for the energy sector. The Swiss Army knife reflects the fundamental value of the technology; bacon represents the range of are very scalable applications; and the grenade stands for real and growing concerns. Fortunately, stakeholders across the industry are gaining an increasing understanding about both the opportunities and challenges of integrating storage into markets. FERC Order 841 is a big step forward, and has triggered more research on grid operation and integration, as well as new interconnection procedures being put in place by utilities across the country, and discussions among grid operators on market rule changes. More bacon and fewer grenades will be achievable as we work together to develop deeper and broader understanding of energy storage and its integration in power markets, and constructively offer market and rate reforms. SEPA is working with interested members to help figure out the issues and share insights. If you’d like to be involved, send us an email at [email protected]. Share Share on TwitterShare on FacebookShare on LinkedIn About the Authors Tanuj Deora Vice President, Regulatory Affairs and Market Development, Simple Energy Tanuj Deora is Vice President of Market Development at Simple Energy. He was previously Chief Strategy Officer at SEPA. He can be reached at [email protected] Nick Esch Manager, Research, SEPA Nick Esch joined SEPA as a Research Associate in August 2015 after interning with the research team since January 2015. Nick is the lead on SEPA’s annual utility data collection effort, leads SEPA’s Energy Storage Working Group and is SEPA’s subject matter expert on all things energy storage. Nick was a Fall 2016 Fellow in the Clean Energy Leadership Institute (CELI) in Washington D.C., a leadership development organization dedicated to building a diverse community of professionals to advance innovative clean energy solutions. Nick holds a bachelor’s degree in climate science from the University at Albany and master’s degree in solar energy engineering and commercialization from Arizona State University.