“The storage battery is, in my opinion, a catch-penny, a sensation, a mechanism for swindling by stocking companies. The storage battery is one of those peculiar things which appeal to the imagination, and no more perfect thing could be desired by stock swindlers than that very self-same thing.”
—Thomas Edison, Interviewed February 17, 1883
Electric storage is touted as a game changer for the electricity energy. However, commercial adoption of battery storage in the United States has been selective and elusive, focused primarily on demonstration projects and state-based incentive programs. Although high levels of renewable integration targeted by state policies may require some form of energy storage and load shifting, a clear solution for utility-scale electric energy storage has yet to appear. In the meantime, the Federal Energy Regulatory Commission (FERC) has been requiring system operators and regional markets under its jurisdiction to level the playing field for storage technologies. Is it enough?
Minding the Store
Since the electricity industry’s genesis, the design of energy production and operations has been built around the assumption that electricity cannot be stored and therefore supply has to equal demand on a constant basis. Load has been the constraining variable, with system capacity built to meet the highest peak demand plus a reserve requirement, and generation dispatched according to whatever load requires.
This reality is changing. High levels of renewable resources motivated by state renewable portfolio standards and clean energy contracting requirements could inject a significant level of intermittent generation onto the grid that has limited flexibility tied to timing of dispatch. Overgeneration problems, illustrated with curtailment and negative prices, already is occurring in multiple markets such as California, Texas, New York, and New England. Goals of 100 percent renewable cannot be achieved without an expensive overbuild of the system unless an energy storage solution is realized. According to the Department of Energy, existing pumped hydro and planned projects dominate the current inventory of energy storage solutions; in 2017, roughly 2 percent of energy production comes from energy storage facilities, of which pumped storage hydro projects represents 95 percent of all energy storage capacity in the U.S.. Yet politicians often shut out pumped storage from policy incentives in order to pursue battery storage as the solution. As Thomas Edison said in 1883, “The storage battery is one of those peculiar things which appeal to the imagination . . .”
Like a Kid in the Candy Store
There are a number of potential chemical and mechanical electric storage technologies that are struggling to work their way down the cost curve to commercialization. Each technology can achieve different size and response times, offering services ranging from frequency response (e.g., flywheels) to bulk system management (e.g., pumped hydro and compressed air energy storage). Electrochemical solutions such as lead, sodium sulphur, lithium-ion, nickel, and flow batteries offer everything between, namely intra-day energy shifting and peak shaving to lower demand charges. Supercapacitors, fuel cells, and cryogenic energy storage round out the bunch. The plethora of technologies are common only in the fact that they provide both generation and load to the system, creating a hybrid of functions, both competitive and regulated, that market rules may not properly reward.
Set No Store By
In light of a potentially unlevel playing field for energy storage in competitive markets, FERC has issued a number of orders to address market participation of storage facilities in ancillary services, energy, and capacity markets. FERC Order 841 issued in February 2018 is the most recent round, mandating that Independent System Operators and Regional Transmission Operators ensure that the market rules for centralized competitive markets allow for storage to participate on an equal basis.
The Energy Storage Association subsequently ranked each market with respect to its compliance with market participation rules and qualification criteria, eligibility of storage to provide all services, ability of storage to participate as both a seller and a buyer, bidding parameters, and pricing. California was found to be compliant in all aspects with the other markets falling short or having unclear conditions. That said, market changes tied to FERC Order 841 are not enough to motivate new energy storage solutions to bid into the markets. The largest entry of new storage into the market has occurred in California and the PJM Interconnect, where state mandates and power purchase agreement requirements support investment. Without these state-based incentives, market prices are not necessarily high enough to support storage.
What’s in Store
Thomas Edison believed that inefficiencies associated with energy storage technology would preclude it from ever being commercially viable. In his mind, energy storage could not compete with large, dispatchable, fossil-fuel generation; carbon was not part of his equation. Edison also believed that internal combustion engines would out-compete electric vehicles, perhaps for similar reasons.
As the transportation sector turns to batteries instead of gasoline, energy storage opportunities at the distribution level may start to offer a new form of distributed yet collective, battery storage solution. Such mobile resources which purchase energy in one state and can sell in another state arguably would be the jurisdiction of FERC oversight. As with demand response in distributed and competitive wholesale markets, energy storage behind the meter requires the right price to buy and sell (i.e., displace) energy efficiently. Given the potential role of aggregated storage solutions in ensuring grid reliability, perhaps the next FERC order should explore where the line between retail and wholesale energy storage resources should be drawn and start setting the wholesale market price for distributed energy storage.
But that’s another story…
About the author: Tanya Bodell is the Executive Director of Energyzt, a global collaboration of energy experts who create value for investors in energy through actionable insights. Visit www.energyzt.com. She can be reached at: [email protected] or 617-416-0651.