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CERAWEEK: Changing US power grid conditions driving energy storage growth

Highlights

Storage market value varies regionally

Ancillary service needs to drive growth

New York — Energy storage flexibility allows the technology to participate in multiple US power markets, with regional electricity costs, incentives, geography, and state-level mandates currently acting as growth drivers, market participants said during a CERAWeek by IHS Markit panel discussion about valuing energy storage.

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Energy storage customers have very specific requirements, with some needing capacity during peak demand periods, others valuing intra-day arbitrage, and others requiring fast response capabilities, Leo Moreno, president at storage developer AES Clean Energy, said during a March 4 panel discussion.

Being able to manage the flexibility of energy storage to generate different value streams allows storage solutions to be highly customized and the growth of energy storage deployment is an "irreversible and accelerating" trend, Moreno said.

S&P Global Platts Analytics estimates there will be 42.6 GW of installed battery storage capacity by 2030 for the continental US, Kieran Kemmerer, power market analyst with Platts Analytics, said in a March 5 email. The US currently has a little under 3 GW of battery energy storage capacity.

France-based global energy company Engie also expects considerable energy storage growth given the technology's flexible nature.

"Storage is a great way to hedge differences in price or hedge differences in availability," Michael Webber, Engie's chief science and technology officer, said.

"We store commodities like corn in silos and water in reservoirs, so why not store energy?" he asked, noting that new battery chemistries that decrease price and weight make it easier to grow energy storage faster.

Valuing energy storage can also be viewed through three vectors: the cost of electricity, how a customer values sustainability and the importance of resilience to various end-users, Mark Feasel, president of North American smart grid operations at Schneider Electric, said.

Increasingly abundant data helps companies quantify the impacts of losing power, like whether that means losing a shift of employees or losing a quantity of goods on an assembly line, he said.

The most valuable US energy storage markets are driven by the levelized cost of electricity in a given area and variability of tariffs across geographies, Feasel said. And because there is no single federal electricity regulatory structure in the US, incentives can vary and state-by-state carbon dioxide emissions reduction policy or energy storage mandates can also play a role, he said.

Changing grid conditions

The US power grid already had a lot of demand-side variability, but with the increase in wind and solar power output there is an increasing amount of supply-side variability as well, and storage is a good way to smooth that variability out, Webber said.

Batteries have a lot of value in smoothing out intra-day variability now and as the power markets change with greater volumes of variable resources there will be more opportunities for energy storage, he said.

For example, ancillary service markets could grow as the need for ramping power up and down grows, along with needs for fast frequency response. As ancillary service market value increases and there are more reliability concerns due to extreme weather, there will be more opportunities to monetize energy storage, Webber said.

Asked why US energy storage markets have grown faster than in Europe, AES' Moreno said one factor has been early adoption of concepts like pay for performance in PJM Interconnection's market where it was determined there should be more value for an asset that can respond in 200 milliseconds than a thermal plant that takes half an hour to respond.

However, over time energy storage should be attractive in any market where decarbonization is important, he said.

Additionally, competitive power markets tend to have more price variability than regulated markets and that invites energy storage, Webber said.