A clean energy revolution is gathering steam, accelerated by the expanding role of renewable energy in utilities’ power generation and revenue mix. Bolstered by clean energy goals, decreasing costs and strengthening regulatory support, market share for renewable energy continues to grow.
Today, there is little doubt that grid power from solar, wind and other distributed energy technologies will become more prominent contributors to our power portfolio. But technical hurdles remain before the power industry can fully embrace renewable power as a viable alternative to traditional generation. Intermittency remains a major barrier, as renewable power may not be available when it is needed – or too much power may be generated when not needed. Inertia to stabilize the grid, derived from rotating generators, declines as renewables increase.
To help smooth and stabilize this cycle, the power industry needs robust and cost-effective energy storage solutions. These systems can address intermittency and periodicity, capacity constraints, power quality, and reliability and resiliency that allow utilities to effectively increase the amount of renewable electricity generation on the grid while maintaining grid stability.
An Industry Making Strides
The power industry is certainly moving in this direction. According to Black & Veatch’s Strategic Directions: Electric Report survey, an annual survey of the electric utilities industry, 12 percent of respondents have deployed a full-scale energy storage program, while 21 percent are running pilot programs (Figure 1).
Nearly a third (32 percent) have energy storage on their technology roadmap and16 percent are in the process of developing pilot programs. Only 19 percent said that energy storage is not part of their plans at this time.
States such as California and Hawaii are leading the charge in renewable energy and energy storage systems. California’s Public Utilities Commission set energy storage procurement targets that require the state’s three investor-owned utilities to install 1,325MW of energy storage by 2020. Hawaii continues to work towards its goal of attaining 100-percent green energy among its electric companies by 2045.
"Increasing demand for energy storage is being spurred on two fronts: Electric customers who are saving money on their utility bills, and the growing adoption of electric vehicles (EVs), which is causing lithium-ion batteries to decline in cost"
Efforts are spreading to other regions, with New England, the Pacific Northwest, Delaware, New Jersey and New York implementing legislation and tax incentives to promote renewable energy and energy storage solutions. Other states such as Massachusetts, Oregon and Washington are providing policy and/or mandates for considering energy storage, among others.
A Changing Regulatory Outlook
In early 2018, the Federal Energy Regulatory Commission (FERC) implemented an order that has the objective to create major new opportunities for electric storage resources.
Order 841 requires energy storage providers to create market rules that allow for the participation of energy storage resources in wholesale markets. This landmark effort will effectively remove barriers, enhance competition and promote greater efficiency in the nation’s wholesale electricity markets.
This decision is significant, as it enables energy storage providers to buy and sell in wholesale markets at wholesale prices with the equivalent stature of conventional generation assets.
Enthusiasm Grows as Prices Decline
Increasing demand for energy storage is being spurred on two fronts: Electric customers who are saving money on their utility bills, and the growing adoption of electric vehicles (EVs), which is causing lithium-ion batteries to decline in cost.
Because integrating battery storage into electric systems can help offset peak power demand on the grid, energy storage can help lower costs for customers by sparing them the high cost associated with peak demand. In addition, utilities have traditionally levied demand charges on their commercial and industrial (C&I) customers based, typically, on a running 15-minute power draw. If this power draw is reduced, C&I customers stand to see significant gain from reducing the peak demand that the utility would otherwise have to provide.
And when it comes to EVs, the EV industry is driving battery cell production to a much greater extent than stationery energy storage. The increased adoption of EVs has helped drive down the cost of lithium-ion batteries to the point where they are moving into broader, more price-sensitive, stationary energy markets.
Batteries Lead the Charge in Storage
Electrochemical batteries will play the instrumental role in enabling the grid of the future, according to 63 percent of the previously referenced survey respondents. This was followed distantly by pumped hydro (29 percent) and ultra-capacitors (24 percent). Note that in the survey, respondents could choose as many of the options as necessary.
Other novel storage technologies with features and benefits beyond those of lithium-ion batteries, such as long-duration flow batteries and liquid air energy storage (LAES),feature several improvements. Flow batteries do not suffer the cycling degradation attributed to lithium-ion batteries, and because they rely on liquid instead of solid cells, they can storea much longer charge in tanks than lithium-ion batteries can in cells.
Moving Beyond Early Adoption
Today, we see the industry approaching energy storage much like solar several years ago – driven by innovation and new start-ups, but with little standardization, lots of conflicting data, and a lack of information as to what the technology actually represents.
This confusion makes it challenging for developers and utilities to proceed to widespread adoption through bankable projects, and for engineers to appropriately size and specify storage systems.
And while costs are clearly dropping, for many firms and utilities renewable energy is still less economical than the next best alternative – that is, for now. With industry forecasts of price declines of five- to 10-percent per year, more and more applications will become economical, with the swing to most applications being economical with storage by 2025.
But with increased competition, state incentives and increasing regulatory support, expect to see costs come down even further, encouraging new investment in energy storage that in turn unlocks the full potential of renewable energy generation.