A flow battery system from ESS Inc.
A day before federal regulators voted to remove market barriers to energy storage projects, a Republican utility commissioner from Arizona argued in favor of the emerging technology while voicing concern about building new natural gas infrastructure, underscoring how quickly the country's electricity sector is evolving.
The declining cost of lithium-ion batteries is creating new competition for natural gas-fired peaking plants that usually run intermittently to provide extra power when it is needed on the grid. More broadly, utilities planning to invest in big new natural gas plants have faced resistance from some ratepayer and environmental advocates who say such investments are a bad bet given the rapid advance of cleaner alternatives and the push to move beyond fossil fuels.
For Arizona Corporation Commissioner Andy Tobin, batteries provide a way to reclaim local control of the state's energy system rather than rely on imported energy. He also seems to view the planned closure of the Navajo Generating Station, a coal-fired power plant that was undercut by cheap natural gas, as a bad omen for gas peaker plants.
"Early on I started having some significant issues with the potential for overbuilding and plant costs," Tobin, who joined the Arizona Corporation Commission in 2016, said Feb. 14 at an event hosted by the Energy Storage Association trade group in Washington, D.C. More than anything, he said, customers will remember "what you built when you didn't need it. And they'll remember that they're paying for that in their bill today." Tobin is pushing Arizona to deploy 3,000 MW of energy storage by 2030.
The Federal Energy Regulatory Commission provided momentum to the energy storage industry on Feb. 15 when it voted to direct the country's regional transmission organizations and independent system operators to create rules to allow the resource to fully participate in electricity markets. Ahead of the vote, FERC Commissioner Richard Glick said ensuring market access would help to continue driving down technology costs.
Already, energy storage is cost-competitive in some parts of the country. The California Public Utilities Commission in January ordered Pacific Gas and Electric Co., a subsidiary of PG&E Corp., to solicit bids for energy storage and other "preferred resources" such as energy efficiency and distributed solar power rather than sign contracts with three existing Calpine Corp. natural gas plants. And in Arizona, First Solar Inc. is building a solar-powered battery system to provide electricity to the customers of Arizona Public Service Co. during peak hours. Arizona Public Service is a subsidiary of Pinnacle West Capital Corp.
Even in places where storage may not be the lowest-cost option, "there's a rationale to having some learning by doing by the regulatory body, by the utility, so that when storage is in the money the utility's worked with it, they know how to deploy it, they know how to monetize some of the values for customers," Strategen Consulting Vice President Lon Huber said at the energy storage event in Washington on Feb. 14.
However, some utilities and regulators are not moving as aggressively as ratepayers and advocacy groups would like. In North Carolina, for example, a subsidiary of Duke Energy Corp. was criticized for relying primarily on natural gas to replace coal-fired generation in the western part of the state. Opponents wanted solar power and batteries to play a bigger role, but the North Carolina Utilities Commission said those alternative resources could not be relied on for "critical generation capacity" in the near term. Duke Energy Chairman, President and CEO Lynn Good told analysts in 2017 that while the company is working some with batteries now, "we see it as being a greater contributor" beginning in about 2021.
"[We've] already demonstrated that conventional plants can be replaced with storage," Michael Jacobs, a senior energy analyst at the Union of Concerned Scientists, said at the energy storage event on Feb. 14. However, some utilities "still don't expect it to happen" on a large scale, he said.
California Public Utilities Commissioner Carla Peterman said energy storage "can help address peak capacity." But "as bullish as we are on energy storage, we don't have many projects in operation," she said in Washington on Feb. 14. "And so when we're talking about a resource that's been procured for reliability reasons, we have to make sure that it's going to show up and that it's going to have the ... operating characteristics that we need."