Duke Energy and the Outlook for Energy Storage
- September 11, 2011
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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?