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Duke Energy and the Outlook for Energy Storage

The 2011 NAATBatt Annual Meeting and Conference concluded last Thursday in Louisville.  The program was a great success.  A wide range of speakers and panels touched on issues of importance for the industry, including secondary use of EV batteries, distributed energy storage, battery recycling, new technologies in traction batteries and distributed energy storage systems, and export incentives for U.S. battery manufactures.  The Industry-Academic Advanced Battery Summit portion of the program was also extremely successful, with many new contacts being made and important information exchanged.

The most memorable part of the conference for me, however, was the keynote address by David Mohler, Chief Technology Officer of Duke Energy.  David’s credentials as an expert in the electric power business and technology are unequaled and his remarks were superb.  Among other aspects of his presentation, David made three points that struck me as particularly insightful and important for those interested in understanding the future of electricity storage on the grid.

David’s first point was made in the form of an amusing story about Thomas Edison.  Apparently, early on in his career, Edison was trying to raise money for his light bulb project from late Nineteenth Century versions of what we now call venture capitalists. After one dog-and-pony show, a VC came over to Edison, put his arm around him and said something like: “Tom, that light bulb is an amazing piece of technology.  But for it to be successful, wires would have to be run to every house in the country, and that is clearly never going to happen.”

The point of the story, of course, is that when you have a potentially transformative technology, such as a light bulb or a way to store electricity on the grid, it is a mistake to lose sight of the forest through the trees.  If the forest is real, the barriers to adoption may be far less daunting than they seem.  As we think about grid-connected energy storage and other smart grid technologies, and worry about the large costs and complicated regulatory schemes that seem to constrain their adoption, David’s story is important to remember.

David’s second memorable point was his stated expectation that grid-connected energy storage technology will become economically viable by 2015.  That was quite a prediction, given that three white papers published in the last year by Sandia National Laboratory, Southern California Edison and EPRI all seem to show that storage technology is today nowhere near economic for utilities to deploy.  The basis for David’s prediction was a little unclear and one could dismiss it.  But given that David is the chief technology officer for what will soon be the largest electric utility in the country, his prediction must be taken seriously.

Third and finally, David made an interesting remark about the ownership of energy storage systems on the grid.  David said that many questions about energy storage technology still need to be resolved, including who will own the assets.   In posing the question about ownership, David answered his own question, saying “I hope I (i.e., Duke Energy) will.”  He said this at least twice.  I was counting.

That statement really caught my attention.  I have talked for some time about my view that utilities will invest in storage as much as a defensive strategy as for immediate return.  The long term value of most electric utility companies lies less in the value of their assets than in their close relationship with electricity customers.  That relationship is the legacy of a historic monopoly market structure.  Energy storage is potentially transformational to the utility industry because of storage’s ability to change, or, at a minimum, significantly to affect, that relationship.  Distributed energy storage is a technology that is coming to the grid; the only question is when.  Electric utilities that fail to be first movers in deploying this technology and instead let it be deployed and developed on the customer side of the meter or under the control of third parties will forfeit a significant market advantage and seriously impair their long-term equity value.

So it was interesting for me to hear David Mohler, one of the most respected thinkers in the electric utility business, hint at the importance of electric utilities owning energy storage assets.  If Duke believes that its ownership of the energy storage assets that serve its customer is important, the rest of the industry cannot be far behind.  Perhaps this is what accounts for David’s prediction that energy storage will become economically viable by 2015?

James Greenberger's picture

Thank James for the Post!

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Gunnar Rundgren's picture
Gunnar Rundgren on September 11, 2011

Interesting thoughts. “Cloud” energy storage. It might work, but perhaps it will not. Coincidentally I just posted something about how we (“people”) have problems to accept creative new ideas, and your story about Edison is a very good example of that – which I will take into my post now. Time will tell if Energy Storage on the Grid will be another example of something that was seen as impossible – or if it indeed will remain impossible, on a large scale that is. I do feel that the energy sector is awash in supposedly brilliant solutution, and the real trick is to separate the chaff from the grain, without mistakenly throwing the good things away. I would spread my bets over many options rather than banking on any one option.

Rick Engebretson's picture
Rick Engebretson on September 11, 2011

Thanks for this good news.

James Greenberger's picture
James Greenberger on September 17, 2011

Willem:

My organization, NAATBatt, focuses on energy storage technologies that have application both in electric vehicles and grid-connected energy storage.  As a consequence, the storage technology we talk about at our conferences and meetings tends to be systems that will be installed in electricity distribution systems, rather than bulk storage systems that might be operated by or in connection with a generator or used to support transmission systems.

Distributed energy storage (DES) systems will be located in buildings or communities, close to the customer, in or adjacent to substations, or on the customer side of the meter.  While third party ownership and financing of DES systems is possible, non-customer owned DES systems will probably be owned by utilities as regulated assets.  Accordingly, deploying DES systems will require utilities to be able to make the case to their PUC’s that expenditures on DES systems are “just and reasonable”.

Today that is a difficult case to make.  As one senior utility executive observed, it is cheaper to generate an electron than to store one.   Recent white papers by EPRI, SCE and Sandia (all of which you can read on our Web site) purport to calculate the current cost of storage relative to peak generation.  Until that equation changes, DES systems will be an interesting technology relegated to government-funded demonstration projects.

There are two ways to change the equation.  The first is by improving the technology of DES systems in order to lower their cost.  Zinc-air, sodium-ion, advanced lead acid and secondary use of EV batteries all offer the prospect of reducing significantly DES system cost.  But they need further work.

The second way to alter the equation is to recognize (and better to design DES systems so that PUC’s will recognize) that an electron generated by a DES system may be more valuable than an electron generated by a gas peaker plant or other spinning generation reserve asset.  The reasons why this is the case are numerous and beyond the scope of this response.

As to why David Mohler thinks that, in essence, it will be cheaper to store an electron rather than to generate an electron by 2015, as I said in my post, I am a little unclear.  But my assumption is that David thinks we will be make sufficient progress on both solutions to the aforementioned storage vs. generation equation by 2015 for this to be the case.

Jim

 

 

James Greenberger's picture
James Greenberger on September 18, 2011

Thanks, Willem.  FYI, Guenter Conzelmann at Argonne National Laboratory is currently conducting a study about the impact of wind energy on CO2 emissions, which I suspect will be pretty comprehensive.  I am not sure when it will be published, but my guess is that it will be fairly soon.  I served on a panel with Guenter in July and, although the study was still in process, he seemed to indicate that though the issue of peaker plant cycling is real, his sense was that the ultimate impact was likely to be small and that wind energy was going to come out looking pretty good from a CO2 emissions perspective.  -Jim

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