The global movement toward a cleaner, more sustainable grid continues to gain momentum. In the U.S., we have seen tremendous growth in the clean energy sector, supporting millions of jobs and driving billions of dollars in economic activity. Policymakers are prioritizing clean energy, financial mechanisms are aligning with technology acceleration, and utilities and grid operators are embracing new strategies as they plan for the future.
The decades-long effort to transform how we generate energy is bearing ample fruit, and along with it, we are fundamentally changing how the electric grid operates. The era of the hub-and-spoke grid with fossil-fuel power plants lumbering on the horizon is in a state of flux, giving way to distributed resources, two-way power flows, and a much more complex, integrated network.
Matt Roberts
Operating the electric grid has never been simple, but new complexities are putting novel strains on our aging infrastructure. Utilities are in a constant state of repairing and upgrading our infrastructure to meet the needs of the modern economy and bulwark against severe storms.
The goal of these efforts is to reliably and affordably maintain a near-perfect balance of supply and demand. Downtime, variability, peaks, and congestion are some of the most costly and inefficient elements of grid operation.
Solar and wind power are the fastest-growing sources of new generation and now provide enough power for more than 25 million homes – nearly one-fifth of U.S. households. Solar production alone is projected to double in 2017, and wind is on pace to deploy more than 9 GW of new capacity. But increasing amounts of intermittent generation is only half of the equation.
Continued electrification of the economy is introducing new variability on the demand side, as well. More than 500,000 electric and hybrid vehicles are on the road in the U.S., adding new loads spread throughout the system that will vary depending on the weather, holidays, traffic and consumer whims. The innovation economy is also creating new commercial and industrial demands, such as massive data centers and high-tech manufacturing with exacting power requirements.
This rapid acceleration in renewables deployment is often cited as the driving force for energy storage deployment – critics argue that intermittency is insurmountable or that a few cloudy days could cause system-wide shortages. This shortcoming is grossly overstated, though, and the fundamental reason that the energy storage industry is growing by leaps and bounds is much more expansive, impacting every element of our energy supply chain.
Renewable generation intermittency is not a challenge for the grid; it is indicative of the problem with our aging grid infrastructure – system-wide inflexibility. Widespread deployment of energy storage combats inflexibility, enables new economic efficiency and markets, and is inherently valuable regardless of how you generate electricity.
Grid peaks: such great costs
Before discussing the broader implications of system peaks and inefficiency, let me first quickly summarize why intermittency, itself, is not a significant challenge to the grid.
While an individual solar or wind farm could create rapid changes in supply at the localized level due to clouds or shifts in the breeze, when analysts look at the macro impacts of thousands of these systems spread out over large geographies, these variations all merge together into a relatively stable output that is easily addressed.
One must recognize that, yes, at the individual substation level, these variations can result in operational challenges. But in regard to the system as a whole, intermittency is a widely overstated obstacle for the continued deployment of renewables.
The future of energy storage is not dependent on renewables, and the future of renewables is not reliant on storage. But these advanced energy technologies can work in concert to enable a modern, more cost-effective and resilient electric system.
The entire electric system is scaled to satisfy the “peaks” on the electric grid – a few hundred hours of the year when demand markedly outstrips supply. These dramatic departures from average demand happen infrequently but require generation, transmission and distribution to be sized to meet these needs.
Billions of dollars of infrastructure sits underutilized and idling every day, with some “peaker plants” providing less than 7% of their potential in any given year. This represents millions of dollars in inefficient capacity and unproductive capital that, until recently, was largely unavoidable.
Given the limited role that energy storage has played on the grid historically, most of the traditional utility forecasting and planning models were not designed to assess energy storage alternatives. Within utility resource and integrated planning, energy storage is markedly undervalued by current methodologies and modeling and, therefore, often not even considered alongside other options.
Aside from just inefficient deployment of capital, peak energy prices are substantially higher, and ramping traditional fossil-fuel power plants creates unnecessary emissions and has long-term negative impacts on plant operations and maintenance costs. Although the newest combined-cycle natural gas plants are significantly faster and more capable than previous generations, their performance is still significantly limited when compared with advanced energy storage systems.
Similarly, the transmission and distribution (T&D) systems have to be equally oversized. Installing new transmission lines can cost upwards of $300,000 per mile, with a similar cost or more for distribution lines. To make them resilient – burying them underground to resist storms – it can cost five to 10 times more.
As we have seen in multiple markets, storage enables more efficient use of existing utility resources – enabling all types of generation to run at peak efficiency and allowing us time to shift energy to avoid T&D system congestion. Energy storage also increases system reliability and resiliency to severe weather, physical threats and cyber attacks.
Using energy storage to address system peaks and provide fast-responding grid services enables us to avoid peak system costs that are typically passed on to households and businesses. This amounts to significant system savings, as well as increased flexibility and performance. A recent analysis, for example, found that using resources like energy storage to “flatten” the top 100 hours of load during peak hours could avoid up to $600 million annually for Massachusetts ratepayers.
The rise of energy storage
To understand what is really driving the meteoric rise of the energy storage industry, we have to look at the grid itself and the needs of the modern energy economy.
According to the latest U.S. Energy Storage Monitor report, from 2014 to 2015, the U.S. energy storage industry grew by more than 256%, deploying nearly 230 MW. The Energy Storage Association and GTM Research project this growth to continue, with more than 260 MW anticipated for 2016 and growing to over 2 GW a year by 2021.
This growth is being driven by plummeting installed system costs and enhanced manufacturing capacity, as well as rapidly rising system value and increased demand as regulatory environments improve and markets create steady price signals that spur further investment.
According to the same report, total U.S. corporate investments in energy storage during the third quarter of 2016 (Q3’16), including venture funding and project finance, totaled $659.8 million, five times the corporate investments in Q3’15. Notably, Q3’16 saw the largest amount of project financing for U.S. energy storage in any single quarter since we started tracking in 2010.
The U.S.’ grid is one of the longest supply chains in the world, with very little storage capacity built in. We can stockpile fossil fuel, and some of our advanced hydroelectric facilities even run water uphill and back down again – but once energy is generated, our ability to do anything other than consume it is very limited.
Energy storage defines a suite of technologies: batteries, flywheels, compressed air, thermal, flow batteries and more. Although each of these systems may operate differently on the inside, their fundamental value is the ability to store energy when it is plentiful and utilize it when it is needed or most valuable to the grid.
Storage systems make a more reliable electric grid possible, creating flexible, decentralized reserves of energy that can be tapped into on demand. Faster-responding storage allows us to operate the grid more efficiently, instantly balancing fluctuating supply and dynamic demand. These systems are also used to defer and avoid costly investments in excess capacity and infrastructure that is currently needed to serve our nation’s growing peak loads.
Customer-sited energy storage enables homeowners and businesses to drastically lower their consumption, while avoiding more expensive demand charges and time-of-use rates. Storage provides backup power and enables solar customers to generate on-site and consume their own energy even when the grid is down. High-tech industries with exacting power specifications can use storage for reliable, unvarying supplies of energy.
Through these various applications, energy storage enables end users to be partners in creating a more reliable and affordable electric grid, and it means that utilities can deliver more sustainable energy from a more resilient system while adapting to the changing needs of businesses and homeowners.
The era of value is ahead
Energy storage presents us with a different shade of green. The electricity we produce is only as good as the system that transports and delivers it to the end user.
A reduction in emissions and smog is a direct result of burning less fuel and more efficiently operating fossil-fuel assets. Inefficient assets also mean that we inefficiently deployed capital and wasted money. Reducing emissions is an economic imperative and is a result of creating a more intelligent and modernized electric grid.
In order to catalyze this transformation, though, we need to ensure that we are properly understanding both the cost and value of our grid investments. Energy storage systems are inherently valuable to the system, but our current markets and planning models do not have mechanisms to competitively compensate the value delivered to the grid.
To move forward, we have to listen to the grid, understand its demands, better adapt to the changing needs of consumers and prepare for the sustainable energy future. Energy storage is critical to this grid transformation, and that is what is driving the industry’s rapid expansion.
Energy storage systems have a universal and absolute value, regardless of the generation mix, and ensuring our policies and regulations support a transition to a flexible, reliable and sustainable electric grid is of paramount importance to continuing the meteoric rise of storage on the grid.
Matt Roberts is executive director of the Energy Storage Association, a national trade organization representing an array of private companies, nonprofits and individual experts.
