trending Market Intelligence /marketintelligence/en/news-insights/trending/UvFrqvJApyn2e9qTmLAT4w2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us
In This List

Battery storage yet to 'turn a corner' in energy industry

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


Battery storage yet to 'turn a corner' in energy industry

Battery storage technology has seen exponential growth in ashort amount of time as both utilities and merchant power producers haveinstalled batteries for a variety of purposes, from replacing peaking powerplants to providing ancillary services for the grid.

But a different set of regulatory incentives could speed upbattery storage's graduation from niche technology to formidable player in theenergy industry, according to a number of different industry leaders at theEnergy Storage Association's annual conference held April 25-27 in Charlotte,N.C.

A theme that came up again and again at the conference wasthat due to its relative newness, battery storage does not fit into the usualboxes that regulators tick off when approving an energy project. In addition,battery storage developers have to navigate very different incentives—orobstacles—for the technology across the country.

"We need to turn a corner in the industry,"AES Corp. VicePresident and Chief Technology Officer Chris Shelton said in a panel at theconference. AES is one of the leading developers of battery storage systems.Shelton was talking specifically about competitive bids for power, and howstorage in his view is often not included with traditional energyinfrastructure.

"All that has to happen is for regulators, legislators,governors… to clear the field and say, 'Let's make sure storage is on theshopping list,'" he said. Shelton pointed to California, where regulatorshave required investor-owned utilities in the state to procure energy storage,as a state that has made the changes he advocates.

In just three years battery storage capacity has grown from about300 MW in the U.S. to nearly 900 MW, according to data from the Electric PowerResearch Institute. Revenue from energy storage has grown from $58 million inrevenue in 2014 to $734 million in 2015, according to the advocacy groupAdvanced Energy Economy.

Despite these impressive numbers, however, battery storage'sfull potential is hindered by complex regulatory factors. Director of Project Development Richard Benedict said in a panel that batteriescould be used to store and thus better harness renewable energy that todayoften goes to waste because there is too much of it being pumped onto the gridat certain times. In turn, that benefit of storage could make it easier forutilities like Indianapolis Power and Light to comply with federal limits onCO2 such as the Clean Power Plan.

"We curtail a lot of the renewable energy in thiscountry that could be used to help meet the Clean Power Plan. With storage wecould eliminate a lot of that curtailment," Benedict said.

But rules in the MidcontinentIndependent System Operator Inc., the grid operator of whose regionIP&L is a part, are not that friendly to battery storage, according toBenedict. The "MISO generation interconnection process is not necessarilyideally suited for batteries," he said. IP&L is also asubsidiary of AES.

Developers at the conference said policymakers have stillnot fully recognized the services that batteries can provide to the grid, whichgo well beyond dispatching energy to smooth out renewable energy.

In states where electricity markets have not beenderegulated, the pursuit of battery storage projects is often at the whim ofstate regulatory commissions. Avista Utilities Fellow Electrical Engineer forTechnology Strategy Curt Kirkeby said utilities need to do a better jobproviding regulators with the research and data that can prove the benefits ofbatteries. "We owe regulators that methodology," he said.

Storage "could be astronomical if we can unlock thevalue," Kirkeby said. Avista, which provides electricity to parts ofWashington, Idaho and Oregon, has installed a battery system in order tocounterbalance the abundance of hydropower and wind power that can lead tonegative electricity prices in the spring, but Avista got funding from theWashington State Department of Commerce and the Department of Energy to put inthat system. Avista Corp.owns Avista Utilities.

California utilities, including Edison International subsidiary recently launched thefirst pure-play solicitation for storage. SoCalEd's action remains one of someexamples of utilities investigating the full suite of services from batterystorage, according to AES Energy Storage President John Zahurancik.

"In California they're not just looking at capacityvalue. [SoCalEd] did an all-in cost benefit analysis," he said.California's mandate for utilities to procure storage is not limited to justbatteries. State utilities have also receivedproposals for other types of storage technology like flywheels.

But in some of the competitive markets like in theMid-Atlantic, many developers feel like the full value of storage is notreflected in the rules. In PJM, "I don't have a lot of certainty" asa battery storage developer, according to Zahurancik, and there are questionsabout, for example, the duration a battery has to function in order to becounted as power capacity under PJM's rules, he said.

PJM has tried to take some steps to make the rules clearerand last year FERC approvedPJM's capacity performance proposal that allows storage to aggregate with otherresources like energy efficiency.

In competitive markets battery projects tend to rely onthese kinds of regulatory changes to make money. "Market opportunities aredriven top-down by regulatory initiatives, whether it's the Clean Power Plan"or actions from FERC like Order 755, according to Michael Huerta, programmanager for energy storage at Generate Capital, a San Francisco-based energyfinance firm. Order 755 creatednew compensation for batteries for their ability to help regulate the grid.