Almost every week a news story pops up in my inbox about how energy storage is going to revolutionize the energy world. And yet the revolution never comes. Why? Some say the technology is still not there. But more and more companies are working round-the-clock to improve energy storage system technology. Others argue that the hefty retail price of energy storage is the biggest barrier to wide-scale implementation, and yet economic trend lines predict that prices could come down fast, crossing the tipping-point toward wide-scale use in as little as five years.
Nay, the true barrier to energy storage is not much different than the roadblocks currently hampering distributed energy generation, microgrid implementation, or the market growth of any other distribute energy resource (DERs). The real barrier is antiquated energy policy and regulations both nationally and in each of the fifty states.
A new report by the Rocky Mountain Institute (RMI), “The Economics of Energy Storage,” provides an optimistic view of the future of energy storage. RMI suggests that states – acting as the primary regulators of electric utilities – should seize the opportunity to encourage utilities to evolve and allow more behind-the-meter solar, smart controls, and energy storage systems. RMI calls specifically for demonstrating the value of DERs to three different entities: 1) utilities; 2) market agents such as independent system operators and regional transmission operators; and 3) customers. According to RMI, the economics of energy storage is a trifecta of value, with several potential value streams. But market growth for DERs could slow down if states don’t take on the task of promoting their implementation.
The RMI report draws from case studies, an energy research and modeling literature review, and a look at current exploratory trends on energy market reform in key states such as California and New York. The report includes rate assumptions with a simplified dispatch model combined to explore four key questions:
- What services can batteries provide to the grid?
- Where on the grid can batteries deliver each service?
- How much value can batteries generate when they are highly utilized and services are stacked with multiple solutions?
- What regulatory barriers currently prevent single energy storage systems or aggregated fleets of systems providing multiple, stacked services to the grid?
The report, a snappy 41 pages, reads quickly, but it’s in the three sets of appendix (another 41 pages) where the details of the value propositions are fully revealed. The report found 37 services that storage can provide while modeling 13 energy storage values, including:
- energy arbitrage, frequency regulation, spin/non-spin reserves, voltage support, and black start for the independent system operator/regional transmission operator;
- resource adequacy, distribution deferral, transmission congestion relief, and transmission deferral for the electric utility; and
- time-of-use management, increased PV self-consumption, demand charge reduction, and back-up power for the customer.
The locational factor – where energy or another grid service is provided – is very critical to determining value, and further research is needed to demonstrate how much savings could be had here.
Value increases when services are employed concurrently, and the authors note that if energy storage is combined with other DER services such as smart controls, energy efficiency, rooftop solar PV, the value proposition can improve.
The RMI report also provides an important look at the opportunity for widespread energy storage deployment, especially with the growth of other DERs. Most importantly, the authors note that while the economics of energy storage remain promising, energy regulations must evolve. To get the full stack of energy services, more behind-the-meter market development (i.e., generation and storage that occurs outside of the energy provided from power plants to the grid) must occur. The report thus makes the following market development and policy recommendations:
- Regulators enact necessary reform to unlock DERs development and implementation and reduce the cost of the grid;
- Regulators require that DERs be considered as alternative, potentially lower-cost solutions to problems typically addressed by traditional transmission investment and/or centralized peaking generation investment; and
- Prior to considering centralized assets, utilities should consider how energy storage could be leveraged. This would necessarily involve distribution planners, grid operators, and rate-makers to work together in getting multiple uses out of assets.
The authors also recommend that battery and DER developers pursue business models that fully utilize batteries and suggest that they pursue cost reduction efforts for all power-focused elements of energy storage systems in order to open more markets and speed up commerce.
A reader may conclude that change in the energy system is coming, but once again, the speed of change depends on whether policy can unlock the opportunities for a new value proposition.
"Solar+Storage" for Resilient Housing Buildings
Multi-family housing units may also see the benefits of energy storage deployment including greater resilience from power outages, according to a recent study. Three urban areas of Chicago, New York, and Washington D.C. serve as the locations for analysis by The Clean Energy Group in their recent paper, “Resilience for Free – How Solar+Storage Could Protect Multifamily Affordable Housing from Power Outages at Little or No Net Cost.” The report includes modeling of housing project expenses, operations, and maintenance costs, utility bills, grid services, and local and federal tax credits and policies. Modeling three different power/storage systems in each city, the study found varying payback periods. (Of note: authors acknowledged a conflict between whether tenants or landlords should see the economic benefits to energy efficiency, PV, and storage at a multi-family unit. A potential solution included targeted policies for affordable housing.)
Some of the findings:
- Solar+storage can reduce operating costs in multifamily affordable housing in key cities;
- Battery storage can complement energy efficiency and stand-alone solar measures to further reduce facility costs;
- The payback period for investment in solar+storage systems can be as short as a few years;
- Resilient power can be implemented at no net cost over the lifetime of a project;
- There is a need to develop smarter, targeted incentives in some cities;
- These preliminary findings are significant and make a strong case for the installation of more projects.
The authors acknowledge their work is preliminary, but it also demonstrates the need for new thinking about where to deploy solar+storage, especially in urban communities attempting to strengthen their resiliency vis-à-vis energy disruptions.
Lessons from Hawaii on Solar+Storage
As a small, island state with abundant solar resources, Hawaii always bears close watching when forecasting the future of renewable energy; it’s a bellwether state for renewable policy and market development. In fact, Hawaii is already set the policy goal of getting 100 percent of its electricity from renewable sources by 2045. A new valuation methodology for determining the value of solar+storage was commissioned by the Interstate Renewable Energy Council and designed by Clean Power Research for a white paper titled, “Valuation of Solar+Storage in Hawaii: A Methodology.” This work takes a utility customer perspective on the new technology opportunity of solar+storage and builds off prior work both by Purdue University as well as solar industry firms SolarCity and Tesla. Similar to the analysis in the RMI study above, the value of distributed solar+storage can vary significantly because of factors including rate structures and state regulations. Still, the work on designing methodology continues to advance the potential for hard data to drive policy decision-making in each state.
