We’re a couple days into our renewable energy and energy storage road trip, and are already seeing some common threads emerge.
Folks we’ve talked to from the storage industry are exhibiting cautious optimism. Reasons for optimism include declining costs for battery storage- one developer of utility-scale batteries has seen their supplier’s costs for lithium-ion batteries decline by 40% in the past year. In addition to declining costs, policy changes are creating demand that is bringing new storage into market. This includes a 1.3 gigawatt by 2020 storage mandate in California and the fast regulation product in the PJM market that rewards storage’s ability to charge/discharge quickly. Similarly, a fast regulation signal is being developed for the MISO market that would improve the prospects for storage. This is driving investment activity: RES-Americas has developed a utility-scale battery in Ohio, and is constructing two 20 MW batteries in the Chicago area. AES Corporation is moving forward on a 100 MW battery project in Long Beach, CA. Indianapolis Power & Light (a subsidiary of AES) is building a 20 MW battery to participate in the MISO market.
Significant Challenges Remain for Storage
Despite all this activity, significant challenges remain to the deployment of storage. This includes the difficulty battery operators face when trying to find a market for the wide range of services they can provide. A battery can provide many sources of value to the grid, and should be operated in a way that maximizes this. For example, a battery can charge with low-cost wind energy overnight and sell during the day when prices are higher. In addition, it can provide frequency regulation: the moment-to-moment changes in output to help keep the grid balanced. On top of this, it can provide emergency capacity by being available to discharge during peak hours when the grid is constrained, which might defer the need for a more costly transmission upgrade. This “value-stacking” is needed for a battery to offset its costs. The problem is that in most cases there are not markets through which batteries can monetize these benefits. Part of the reason California passed their storage mandate is because they recognized the value of storage’s non-market benefits.
Opportunity to Deploy Smaller-scale Storage
Another opportunity is to deploy smaller-scale storage to help manage distributed solar. Tying batteries to solar generation is an area that Xcel Energy’s emerging technology research group has recently studied at their Solar Technology Acceleration Center in Denver. They see this as an important area to continue research, given the growth of distributed and utility-scale solar on their Minnesota and Colorado systems. The National Renewable Energy Laboratory is also studying this issue at their Energy System Integration Facility in Golden, CO. NREL showed us their new state-of-the-art labs testing the integration of storage, solar, electric vehicles, smart homes, and other distributed energy resources. Optimally deploying these technologies together in this way is needed to fully extract the value of new technologies.
In summary, battery storage is establishing a foothold in California and the Northeast, which is paving the way for deployment in other markets. Innovative research from industry and national labs is helping create the appropriate market rules and bring down costs. Our road trip is off to a good start.