The power industry is seeing a heightened need for peaking-capacity resources as capacity from retiring power plants is lost and higher levels of renewable generation is integrated.
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This potentially sets up a battle for market share between natural gas-fired generators that are currently the dominant source of peaking capacity and battery energy storage systems that have seen significant cost declines in recent years, an industry panel said Tuesday.
There must be a policy shift at the federal and state levels that recognizes that storage is here, it's cost-effective, mature and scalable, Praveen Kathpal, vice president of AES Energy Storage, said Tuesday at the National Association of Regulatory Utility Commissioners' annual meeting in Baltimore.
"And this isn't about just mandates in California," he said. "It's about storage being a real solution to real problems across the utility value chain."
But for that to happen, battery storage must have better access to compete, he said, contending that utilities' integrated resource plans and requests for proposals must start including storage as a capacity solution. "Recognizing that it's on the menu not just in a conceptual way, but in a transactional way, is really critical."
Kathpal pointed to a policy in Washington state that mandated the consideration of storage as an alternative before an investment could be considered prudent. He said storage would not prove cost-effective in every application, but has proven to be in many cases.
FLEXIBILITY TO BE KEY
Key to the debate over whether battery storage can compete with gas peakers will be how much flexibility these technologies can offer utilities and grid operators, agreed panelists participating in the discussion.
Although power markets are still evolving, much change has already come, noted Mikael Backman, Wartsila's North American regional director of energy solutions. "The game now is flexibility and renewables. If you're looking at something else, you need to wake up."
Being able to provide flexibility, he said, is "clearly the place to be if you are in gas generation today." He added that Wartsila's "customers are utilizing the flexibility of gas plants to lower their costs based on renewables."
For instance, some of Wartsila's customers use highly flexible assets to procure power in the real-time market instead of in the day-ahead market. "You have a discount in the real-time market, thereby you are saving the ratepayers if you can buy energy for your system in real time," Backman said.
But the competition between battery storage and gas peakers may not shape up to be "much of a battle" at all, Backman said, contending the two resources can provide specific and separate value propositions to meet different needs and thus do not necessarily have to butt heads.
Wartsila is a leader in the development of gas generation but recently added an energy storage unit to its company.
"The big thing we are seeing is more value in flexibility in markets," Backman said. "Today it's no longer about baseload or peak. If you're providing only peak today, you're not going to have a bright future. You have to provide a much greater value proposition than that."
GAS PEAKERS 'MIMIC' BATTERIES' ATTRIBUTES
Kathpal took a stronger position that ultimately would see battery storage come out on top. In his view, the transition of gas generators from relatively inflexible turbines to combustion turbines to reciprocating engines is part of a broader trend that's "encouraging for storage."
Gas generators are adding flexibility attributes so they can start faster and more often, he said. "Essentially they're trying to mimic all the attributes that make storage the ultimate peaking technology, so it's part of a very natural transition of our enlightenment toward storage becoming the dominant peaking technology in the US," Kathpal said.
He added that "beyond the peaking theme of this panel, is [a need to look] at storage as a planning tool within transmission and distribution." While that often "lands outside of the scope" of traditional generation and capacity planning, "recognizing that there are really specific ways that storage can be a lower-cost alternative to traditional [transmission and distribution] solutions is going to be an increasingly important area," Kathpal said.
Chris Villarreal, president of electricity market consultancy Plugged-In Strategies, said it was also important to recognize that "the characteristics that the system is requiring are now being provided by multiple resources."
"Where appropriate, one resource may be better than the other and that's a determination we would make," he said. "But again the markets are moving this along in such a way that flexibility is becoming an important component of any service, whether you want the more certain peaker plant or a little more flexibility with something like storage. Which ones come where is still to be determined based on the economics of the market solution at that place."
POLICIES MUST OPEN ACCESS TO MARKETS
This reality is creating a need for policy change, particularly geared toward market access, because market rules have "historically focused on particular types of resources, i.e. coal, gas, big giant power plants," Villarreal said.
The US Federal Energy Regulatory Commission has taken the first steps to addressing the issue of access in the wholesale markets, issuing a policy statement clarifying that electric storage resources are free to concurrently pursue two revenue streams and initiating proceedings that would aid the participation of storage in the markets.
"One of the things that is important for FERC rules going forward is recognizing that a variety of ... resources [not categorized as power plants] can meet the same needs and provide the same services," Villarreal said.
--Jasmin Melvin, email@example.com
--Edited by Valarie Jackson, firstname.lastname@example.org