Energy Storage: A Critical Player in a Cleaner Grid

When it comes to truly transformative energy technologies, energy storage should be on the short list. While it feels like there is never any good news these days, energy storage is shattering records, meeting milestones, and writing its own good-news story. 

Because of its many benefits, states, utilities, and even big corporations are increasingly interested in investing in energy storage. Lawmakers are also interested in the opportunities energy storage presents. The U.S. House of Representatives Energy and Commerce committee has announced the latest installment in their “Powering America” hearing series: the Role of Energy Storage in the Nation’s Electricity System for Wednesday July 18. Members of Congress will examine the growth of large-scale energy storage in the United States, the unique reliability attributes energy storage provides for the electric grid, and the use and impacts of energy storage within wholesale electricity markets.

Storage offers us a terrific opportunity to partner with renewable energy resources to build a cleaner and more effective electric grid. It can provide flexibility to meet shifting patterns of electricity usage; complement renewable energy sources to facilitate greater growth and more rapid reductions in carbon emissions; and provide emergency power in the face of disaster.

It’s exciting to see federal representatives taking up the topic of energy storage. From funding targeted research and development programs to providing deployment incentives, it's in their best interest (and ours) to consider the various actions they can take to leverage the tremendous energy storage growth toward a decarbonized electric grid.

Many Shapes and Sizes

There are countless ways to store energy, from the obvious electrochemical technologies—like lithium-ion batteries—to the less well-known, like pumped-storage hydroelectricity and compressed air storage. The different technologies each carry their own advantages—which allow them to fit distinctly into our grid—and we have many ways of describing them, including duration of charge, energy density, specific energy, power capacity, energy capacity, and the list goes on.

The quantity of energy storage is measured in two major ways: 1) the power capacity, which is the electric power that the resource can provide in a given moment, measured in watts (W), kilowatts (kW), etc., and 2) the energy capacity, which reflects the length of time for which a fully charged storage resource could provide its maximum power before being fully drained, measured in watt-hours (Wh), kilowatt-hours (kWh), etc. These two metrics highlight two of the different services that storage can provide: from high power capacity but low duration which can offset short-lasting peak demand, to a long-duration storage resource with lower power capacity which might be better suited for more seasonal differences in electricity needs.

Deployment Skyrockets and Costs Plummet

The global market for energy storage has been booming and is expected to grow exponentially in the coming years. In the first quarter of 2017, the U.S. energy storage market set a new record, with 234 megawatt-hours (MWh) of new storage capacity. And the U.S. market is projected to expand over 80-fold between 2016 and 2024—from 1 to 81 gigawatt-hours (GWh). That is equivalent to roughly 2 million typical electric vehicle batteries being connected to the grid in 2024.

As more storage continues to be built, costs are plummeting. Large-scale lithium-ion batteries dropped in price 50 percent between 2015 and 2017, enabling rapid growth in grid-scale storage projects—with astonishingly low prices.

For example, last year, Tuscon Electric Power in Tuscon, AZ, signed a power purchase agreement (PPA) for 100 MW of solar coupled with 30 MW (120 MWh) of storage, at less than $45 per MWh. In terms of average cost of electricity delivered, that’s cheaper than a new natural gas plant.

The Role of State and Federal Policy

Energy storage provides flexibility and other key services to the electricity grid, and federal policy should ensure that those services are properly compensated. A recent order from the Federal Energy Regulatory Commission (FERC) moves toward opening U.S. wholesale energy markets to storage on an equal footing with generators and other grid resources. FERC’s Order 841 could result in the deployment of an additional 7 GW of storage across the country, and if states go beyond the order and also compensate storage resources for their transmission, distribution, and customer benefits, Brattle estimates that storage capacity could increase to up to 50 GW—together demonstrating the tremendous role federal policy plays in unlocking this transformative resource.

States and utilities are pushing the market forward for energy storage in similar ways. Five states now have energy storage mandates:

  • NJ target of 2,000 MW by 2030,
  • NY of 1,500 MW by 2025 (and possibly 3,000 MW by 2030),
  • MA target of 200 MWh by 2020,
  • Oregon target of 5 MWh by 2020, and
  • CA target of 1,325 MW utility-scale and 500 MW behind-the-meter (in homes and businesses) by 2020.

Utilities across the U.S. are increasingly favoring energy storage in their resource plans and procurements as well:

  • PG&E in CA just requested approval to replace 3 gas plants with the world’s biggest battery projects, as, at this scale, it is likely cheaper to build storage than operate the gas plants. A Navigant research analyst noted that this is likely “the largest utility-owned, non-hydro, storage project in the world by far.”
  • Xcel Energy Colorado has asked the Public Utilities Commission to add 275 MW of battery storage capacity that would allow it to store power from solar sources and use it when the sun isn’t shining.
  • In Nevada, NV Energy has issued a request for proposals to add 330 MW of new renewable energy projects, which will potentially include battery storage for the first time.

Looking Ahead

Appropriate state and federal policy, including federal R&D investment, will continue to bring down the costs, improve the performance of proven technologies and develop other types of storage that have the potential to more effectively meet the needs of an evolving electric grid.

However, the policy and market structures need to be carefully designed to meet our goals. Recent analyses have demonstrated that cost-optimized storage operations can lead to emissions increases, particularly in coal-heavy regions. This is true only in the near-term, as, in the long run, storage will enable greater growth in renewable energy, which will, in turn, cause storage operations to reduce emissions. Moreover, the near-term emissions problem is not a problem intrinsic to energy storage but rather one with the market design. If markets considered the cost of emissions, storage operators would be incentivized to avoid operating in a way that increases emissions—and this could have a significant impact on storage-related emissions.

Further, we need significant investment in the full spectrum of energy storage to allow a diversity of technologies to overcome market barriers and meet our needs more effectively and affordably. Federal investment in R&D are critically important, as it will continue to drive down costs and improve performance of Li-ion, lead-acid, and flow batteries. Moreover, research in long-duration storage solutions has the potential to be transformative on an even bigger scale. The ability to meet daily, monthly, and even seasonal variations in demand poses a massive challenge and will require significant, targeted investment in R&D.

It’s great to see recent announcements attempting to tackle that very challenge. ARPA-E (Advanced Research Projects Agency-Energy) recently announced a funding opportunity “the Duration Addition to electricitY Storage (DAYS)” program to pursue new long-duration energy storage technologies. Private investors are stepping up as well. It makes sense with the significant untapped potential that the $1 billion energy fund led by Microsoft Corp. co-founder Bill Gates and other billionaires is targeting energy storage technologies as its first investments. One investment is looking at new approaches to pumped-hydro and the second is seeking to develop new battery chemistries--two entirely different approaches to energy storage. These and other initiatives are positive steps for energy storage but much more can and should be done to fully tap into this important technology.

About the Authors

Arjun Krishnaswami

Climate Policy Lead, Innovation, Climate & Clean Energy Program

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