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Energy Storage Is Ready To Earn a Scalable Role in Utility and Commercial Portfolios

Game Changers Column

The absence of a viable means to store a significant amount of electricity generated from renewable resources is one of the tallest hurdles limiting their growth.  After a series of financial setbacks and exhaustive regulatory deliberations, energy storage fed by renewables is set to earn a scalable role due largely to a new mandate in California and market rules and incentives in the PJM Interconnection.

But will it? Can it?

Whether it’s electricity stored for transmission and distribution by utilities or by end-users with their own equipment,  opportunities are emerging that position energy storage as a viable option in the portfolios of utilities and power-hungry commercial entities and municipalities. Energy storage could show significant gains within two years.

This comes after a rough couple of years for energy storage generally. According to Steve Minnihan of Lux Research in Boston, a mix of technology failures including fires, bankruptcies and withdrawals pushed the industry back on its heels. Of the 10 battery storage manufacturers which once accounted for 93 percent of the global market, seven of them were tripped up by a technological shortfall or some other setback, according to Minnihan.

Now all eyes in the U.S., as well as in Canada, China, Germany, India, Italy and Japan (to name a few) are on details emerging from a mandate by California for development of 1.325 gigawatts by 2020. The mandate, in Minnihan’s words, is expected to drive growth at a “torrid pace.”

Early this month, the California Public Utility Commission (CPUC) released details of the long-awaited proposal to support the state’s power grid with a variety of energy storage options.  Here are public comments about how the Commission’s final rule which was finalized at its October 17 meeting.

As often is the case in California, which has set a very ambitious renewable energy target of 33 percent by 2020, the mandate is daring attempt to make emerging storage technologies work together with an experimental regulatory regime to help transform the market.  If it succeeds, the nation, and the world, will have a virtual blueprint for scaling up this energy option with a host of technologies to choose from.

This California mandate is “paving the way forward for energy storage to participate on a level playing field as a mainstream resource,” said Janice Lin, Co-Founder and Executive Director of the California Energy Storage Alliance.

“Energy storage was always out there in the ether. It wasn’t a focus — until now,” Lin added. 

The move to enable energy storage in California began in 2010 when California Assembly Bill (AB) 2514 became law. It was the first state law of its kind. The CPUC has since decided that a goal of about 2.8 percent of the state’s 2010 peak load of 47,350 megawatts (1.325 gigawatts) is a reasonable target.

To reach that threshold, the CPUC has identified 21 storage applications working with different components of the power grid. They range from backup power for end-users, outage mitigation, “ancillary services” for the California Independent System Operator  (CAISO) and “black start” support.  (Black start is the process of restoring a power plant’s operations without relying on the surrounding transmission network. Black starts were required during the August 2003 Canada / Northeast U.S. power outage.)

This chart by the California Public Utilities Commission illustrates the types of  applications for energy storage divided for each of the three parts of the grid.


Most of the burden for achieving the California target rests with the states three investor-owned utilities (IOUs) and:  Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison.  Each utility has one or more notable energy storage projects under development which would count toward their respective quotes. But collectively they barely scratch the surface.

To gauge the breadth and depth of energy storage applications and the various projects capable of meeting the mandate, let’s look at a few examples.

Southern California Edison is building an 8-megawatt wind energy storage system in Tehachapi, California to improve grid performance and help integrate large-scale variable energy-resourced generation.  Most of these operations are designed to either shift other generation sources to meet peak loads and other grid system needs with stored electricity. The operations also could help maintain grid stability and meet demand challenges that occur due to the intermittancy of renewable sources.

Pacific Gas & Electric has a power purchase agreement with SolarReserve for a solar-thermal power project that integrates molten salt energy storage. San Diego Gas & Electric is working with S&C Electric to develop an energy storage system to support a community microgrid in Borrego Springs, California. Each of these utility projects is backed by a U.S. Department of Energy smart grid stimulus grants.

The CPUC provides the utilities with significant leeway in meeting their quotas. For instance, it asks Southern California Edison to either procure 50 megawatts of storage-based capacity for the Los Angeles basin by 2020 or acquire 35 megawatts of energy storage under the state’s existing self-generation incentive program. That program pays customers for on-site generation or storage.

In case you’re wondering whether pumped hydro storage – the only storage technology considered a cost-effective hedge against “peaker” plants fueled by natural gas — such projects of 50 megawatts and up are expressly prohibited from the storage mix going forward. Which means batteries, fuel cells, thermal energy storage and compressed-air are the technologies in play.

A key player in California’s push for energy storage is Carla Peterman, a member of the CPUC. In a June ruling, she articulated the big picture: “When the energy storage market becomes sustainable, procurement targets for storage will no longer be needed and it will compete to provide services alongside other types of resources.”

California Public Utility Commissioner Carla Peterman is a driving force in California’s planned procurement of energy storage by and for electricity providers and large consumers. CREDIT: California Energy Commission


Peterman outlined a plan whereby project owners will be able to bid in their costs and be paid over the life of a contract. Meanwhile, future winning bid prices can, in her words, “adjust over time as IOUs learn more about the projects, the storage market develops and the (Energy) Commission and the CAISO continue to assess the storage needs for the state.”

Minihan of Lux Research asserted that by mid-2014 or soon thereafter, the industry, policymakers and large energy users will be to see who’s winning contracts. By the end of 2015, we’ll be able to see which projects are making economic sense.

One of the more intriguing models for owning energy storage systems in California is a provision permitting utilities to own up to 50% of a storage asset on the customer’s premise, e.g. “behind the meter.” Because utilities traditionally don’t share actual ownership of any asset, such an arrangement may never be realized; or they might blaze a new trail.

Still another provision in the California rules subject to a final ruling allows utilities, if they cannot procure enough “viable projects to meet the targets,” to defer up to 80 percent (that’s right, 80 percent) of their required procurement targets to later periods.   The final rule due out as early as early October is expected to pin down how much extra time they’ll be allowed. At present, procurements could be delayed until the next solicitation or perhaps until a project, or projects, are considered “viable.”

So how will California determine which projects are viable?

First of all, the Electric Power Research Institute and utility consultancy DNV Kema have developed energy storage evaluation tools. Those tools are to be used in creating a “consistent evaluation protocol” that enables developers to calculate myriad benefits, including the market services that storage systems will provide and costs they will avoid or reduce.

Because storage needs can vary so widely and depend heavily on the specific application and its location, the CPUC calls on utilities to issue “request for offers”, or RFOs, to enable providers to focus on each of their specific transmission or distribution needs.

California may be the emerging epicenter for energy storage but a other developers and utilities are making notable progress in their own right. Much of that activity is occurring in the PJM Interconnection power grid serving utilities from the Mid-Atlantic through the upper Midwest. That’s because PJM, backed by Order 755 by the Federal Energy Regulatory Commission, makes it possible to earn money for helping balance power flows on its grid.

This month AES Energy Storage, a unit of AES Corp. in Arlington, VA., increased the reach and capacity of its battery array and supporting software to provide frequency regulation service to PJM located at the Dayton Power & Light’s Tait power plant. The increase boosts AES’ storage resources throughout PJM to more than 100 megawatts, all of it developed within the past five years and all without any government support.

In coal-dependent Ohio, AES’ system can displace power generation from inefficient and retiring coal-fired power plants. Like similar battery operations, AES’ system produces no direct emissions and requires no water to operate. And that is drawing support from environmental activists, many of whom are starting to rally behind storage as yet another way to back out fossil fuels and fill gaps left by nuclear plants whose licenses aren’t being extended.

Going forward, AES Energy Storage President Chris Shelton asserts three pre-requisites for the storage market to grow quickly: 1) procurements that specify the capabilities / services needed; 2) pay is for performance; and 3) decision-makers are agnostic about technology – this to spur innovation.

On a much smaller scale, energy startup Solar Grid Storage in Silver Spring, MD, co-founded by former SunEdison executives, recently finished building a grid-connected battery system that stores electricity from a 402- kilowatt solar array developed by Standard Solar and funded by a Maryland Energy Administration “Game Changer” grant. The integrated system provides backup power to a commercial office complex and its microgrid in Laurel, MD. At the same time, the storage system can provide local voltage control and demand response services in conjunction with Potomac Electric Power Co. (PEPCO) and generate revenue by providing load control services to PJM.

From these and numerous other energy storage projects surfacing throughout parts of the U.S. alone, it will take a lot of enlightened collaboration to ensure storage meets specific needs. But as more of collaboration takes root, the upside potential for energy storage looks to expand quickly. The sky may indeed by the limit.

Jim Pierobon's picture

Thank Jim for the Post!

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Discussions

Bob Meinetz's picture
Bob Meinetz on Oct 1, 2013 7:45 pm GMT

Jim, in what sense is energy storage “ready to earn a scalable role in utility and commercial portfolios”? I suppose nuclear fusion is ready in the same passive interpretation, i.e., society is ready for something that’s nowhere near ready.

But it’s very difficult to have an intelligent discussion on energy when there is a complete misunderstanding of the terms and units involved. Throughout your article as well as the CPUC’s own proposal energy storage is expressed in terms of power. “1.325 gigawatts” of energy storage is meaningless, as is an “8-megawatt wind energy storage system in Tehachapi, California”. At the risk of being a pest I will again make this clarification, because it’s critical:

Watts are units of power – the rate of energy transfer.

As it turns out, the Tehachapi facility will be able to store 32MWh (megawatthours) of energy, at a cost of $54 million. 32MWh may be very useful for helping to balance wind energy’s variable output, and thus making its contribution more reliable. But that’s never been the real problem with renewable energy – it’s been coming up with a solution with thousands of times that capacity which can sustain the grid for hours, or even days, during periods of little sun or wind.

I’m looking at the California Independent System Operator current usage, and during this not-particularly-high-demand period 32MWh would be enough to power the State of California for just over 4 seconds. The cost to construct a modest 3-day supply would be $3.5 trillion, or about 15x California’s entire annual budget.

Janice Lin remarks that “energy storage was always out there in the ether. It wasn’t a focus — until now.” It’s still out there in the ether Janice, but now we’re throwing hundreds of millions of dollars at it with no promising technology on the horizon to justify it. Whether this focus is an intentional swindle, an intentional obfuscation, or simple misunderstanding of energy principles hardly matters.

Nathan Wilson's picture
Nathan Wilson on Oct 2, 2013 5:32 am GMT

Bob, it’s really important to know the Watts and the hours (at max power) for an energy storage system.  As you’ve said, the Watts tells us the power, but just as important, the hours tells us the application.  

  • A 1-hour system is enough to let fossil fuel power plants ramp up and down to complement PV with its rapid output variations (i.e. “frequency regulation”, since frequency dip is a symptom of not enough power going into the grid).
  • with 5 hours, desert PV becomes a useful source of peaking power (otherwise, the sun sets during the evening peak in demand, and the fossil fuel peaking system must be able to supply the entire peaking, as though the PV system did not exist!), and works well with a nuclear or geothermal rich grid.
  • with 15 hours of storage, desert PV systems can supply power all night.
  • with 20-60 hours of storage, PV systems can supply power during cloudy days, and wind system output becomes much smoother.

The $1.68/(Watt*hour) price you found for the Tehachapi facility suggests that 15-hour systems are way beyond reach with current technology, but 1 hour may be achievable soon (the new liquid metal batteries promise higher power than older sodium sulphur batteries, and longer life than lead-acids).  It looks like the German coal industry will be the big winner, once PV is paired with small batteries (assuming that environmentally friendly methods can be found to produce the unprecedented huge quantities of batteries which will be required).

Bob Meinetz's picture
Bob Meinetz on Oct 2, 2013 4:01 pm GMT

Nathan, knowing either watts or hours alone is pretty useless, which was kind of my point. Even statements like yours:

with 15 hours of storage, desert PV systems can supply power all night

are ripe for misunderstanding (if the energy capacity of these systems is small, the amount of power they supply will be negligible).

I agree that coal does come out the big winner. No matter how much storage we have, we’ll never have enough to remove all dispatchable sources from the grid – letting power die is not an option. Without nuclear, this guarantees fossil fuels and the carbon they create a healthy (or unhealthy) place in our energy future.

Jim Pierobon's picture
Jim Pierobon on Oct 2, 2013 5:02 pm GMT

Bob and Nathan,

Many thanks for shedding helpful light on how we measure stored energy. Just about where ever I hang out online or at seminars or hearings, the discussions focus on both mega- or gigawatts and mega- and gigawatt hours.

I take issue with your remark Bob that there is “no promising technology on the horizon to justify” energy storage investments is missing the point. Let us know with another comment here which of the projects I spotlighted do not hold some promise.

With a growing focus on microgrids, enabling wholesale market rules such as those in PJM, commerical and government entities wanting better reliability AND the California mandate, THIS sector is ready to grow quickly, especially compared to what it’s been through since 2010.

 

Bob Meinetz's picture
Bob Meinetz on Oct 4, 2013 1:33 am GMT

Jim, I believe that energy storage can be helpful in the roles CPUC has identified, i.e. backup power, outage mitigation and other ancillary purposes. Research in all of these areas is warranted, but in my opinion their significance to the adoption of renewables is minor.

None of these represents the significant amount of electricity you identify as hurdles limiting renewables’ growth. We’re still about three orders of magnitude shy of a storage solution which will put renewables in the realm of coal’s cost effectiveness, one which is able to store days or weeks of grid-scale power and allow us to consider retiring coal or gas plants.

Technologies under consideration might knock it down by 10x, but there really isn’t any game changer here. Until we have one we’re at the mercy of the wind and the weather.

Nathan Wilson's picture
Nathan Wilson on Oct 4, 2013 4:16 am GMT

Ross, I’m slightly more optimistic about storage.  Not in general, but for the specific application of peaking power from utility-scale desert PV.  Solar PV in the deserts is special in that just 5 hours of storage are enough to make a fairly reliable peaking power source (in comparison, adding 5 or even 10 hours of storage to a wind farm would not produce much benefit).  Deserts are special in that they have few cloudy days in the summer, and the electrical demand and available sunlight are both greater in summer than the rest of the year.

A lot of people in non-deserts (e.g. the entire eastern US, Canada, northern Europe, etc) believe they’ll be getting lots of PV installations too.  Well, what are they going to do on cloudy days or the winter after we have stopped using fossil fuel?

The other special thing linking PV and storage is that utility-scale PV always has DC-AC inverters anyway.  These inverters normally connect directly to the PV output.  But adding a battery charger to the system will only add 25% or so the cost of the inverter, since that is a simpler function.

For those of us who do not live near a desert, and don’t want our energy dollars leaving our regional economy (i.e. most of the world), nuclear power is our best hope to move beyond fossil fuel.

It is a common perception that nuclear fission has problems that can only be solved by switching to nuclear fusion.  Most of this is just gross distortion of the facts.  I hope that you will put aside your preconceptions about nuclear fission and consider it anew.  I suggest watching the movie “Pandora’s Promise” if you’ve not done so already (it’s coming on cable TV in the US on Nov 7).

Also, I recommend the consideration of Energy from Thorium‘s LFTR and Brave New Climate‘s IFR, which describe versions of nuclear fission that are basically “everything that fusion wants to be” (safe, clean, affordable, and in-exhaustible).  Robert Hargraves has a great book about LFTR too.  But today’s light water reactors are the bridge technology that will get us there.

Nathan Wilson's picture
Nathan Wilson on Oct 4, 2013 5:08 am GMT

Yes, hydro is the low price leader in areas that have the appropriate geology/topography.  It is also very old technology that never really achieved much market share.  

I find it interesting that much of the pumped-hydro that exists today was built during the first nuclear boom  .. yet another reminder that the (nuclear + hydro) strategy has historically been more effective at displacing fossil fuel than the currently popular (renewables + fossil gas). 

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