by John Jung, Greensmith Energy Management Systems Inc.
Our aged, worn electric grid has seen more changes and been confronted with more challenges during the past 10 years than at any other time since its inception.
We’ve gone from an environment of one-way power flows from centrally located generation in remote areas, over long transmission and distribution lines, then finally to homes and businesses to the new world of bidirectional power flows where customers also can be merchants who sell their excess power back to grid operators.
We’ve gone from a world where generators can be tightly managed to maintain synchronous power output to an evolving framework of must-take renewables that add significant intermittency and stress throughout the network.
In addition, load curves continue to change with the proliferation of electronics in our daily lives-cell phone penetration exceeds 100 percent, PCs are commonplace and the average household has 2.93 TVs.
It’s outpacing a grid that was designed post-WWII for a different load profile and that is reaching its capacity and reliability constraints.
Into this second coming of an electron gold rush of sorts, entrepreneurs rushed in with technology solutions to modernize the electric grid.
Some of these innovations, such as smart meters, provide the necessary underpinnings for more innovation in areas such as rates and usage patterns.
Some of these innovations address single points of failure along distribution or transmission lines.
And some of these innovations have increased grid strain and made grid operators’ jobs more challenging.
None of these innovations address the fundamental shortcoming of the grid: that it must be operated at scale and increasingly on a just-in-time basis.
Utilities have understood the value of being able to store energy to time shift its use to when it is most needed or economical to use.
Combined gas and electric utilities practice this duality every day, storing natural gas until demanded by customers.
In addition, large-scale electric storage through legacy pumped hydro has existed many years.
The challenge has been to provide the same functionality cost-effectively to customers.
In the name of American recovery, utilities have experimented with all forms of energy storage.
They knew prices would make energy storage a competitive grid asset. San Diego Gas and Electric, for example, has deployed multiple containerized systems, each demonstrating the value of different applications, including:
“- Site load management through a behind-the-meter site integrating photovoltaics, (PV), electric vehicles (EVs) and storage; and
“- T&D deferral through a 1-MW system deployed behind a known congestion point that will provide the utility more time to alleviate the need for new transmission upgrades and remote backup power for critical infrastructure.
These pilots have led to exciting conclusions for the industry. Energy storage is a completely new type of asset. It can function as a load and a resource. It can solve the challenges of the duck curve. It can provide much faster and accurate response to frequency regulation, avoiding the overshooting so common using conventional resources. It will allow much greater levels of renewables integration. It is the silver bullet for the smart grid.
Which brings us to today. With California’s landmark AB2514, it appears the market is lining up behind a big push in the deployment of energy storage systems (ESS).
But is the technology ready? Can it be delivered on a cost-effective basis?
Many years from now, we will look back to 2014 and conclude this was the end of the beginning.
Like a well-conducted orchestra, we see positive movement on all major fronts to make energy storage a cost-effective reality.
Utilities see the value in energy storage as a reliable generation asset.
Regulators from Hawaii to New York are making policy changes to explicitly include energy storage in the utilities’ integrated resource planning, as well as their demand response portfolios.
Wholesale markets including PJM, the New York Independent System Operator (NYISO) and the California ISO (CAISO) are creating products specifically tailored for energy storage to reflect the increased value from rapidly responding assets.
Further, New York is providing incentives for customers to deploy distributed storage systems and will allow them to participate in wholesale markets.
The market is evolving quickly in the time scale of utilities. One of the most encouraging signs is the current construction of multiple multi-MW ESS systems by several renewables developers that intend to use the systems for large-scale frequency regulation in the PJM market.
These units are being built with an ROI target, and it has advanced the dialogue to the bankability of these systems.
Another key factor to watch is the cost of the storage medium.
There is no Moore’s law for materials science, but there is the good old Henderson Experience Curve: Every time production doubles, costs can drop 20 to 30 percent. In this case, utility ratepayers are not being expected to shoulder the burden of R&D through high initial costs. In this case, utilities are benefiting from the investment and focus that battery original equipment manufacturers (OEMs) have placed on developing large-format cells for the EV industry. Nearly every major auto company has a growing line of hybrids or full EVs. Many major battery OEMs have spent the better part of the past 10 years developing cells to meet this rigorous environment.
This is great news for the electric sector because large-format cells are ideal for energy applications and can be packaged easily in racks and placed adjacent to the grid. The grid environment is less rigorous than the EV environment, so many of these solutions are in some ways over-engineered. With anticipated volumes set to grow for EVs and ESS, we will soon see pricing drop below $500 per kilowatt-hour, and that will change everything.
As more systems are commissioned, we will move beyond what energy storage can do for the grid to how to maximize the return of energy storage-whether we consider that in terms of increasing the asset life or prolonging the hours of operation. It is relatively simple to follow an AGC signal and charge or discharge to meet the power or energy requirements.
The challenge is to add intelligence to this asset through software and analytics to maximize revenue potential from a given application against the twin challenges of extending asset life and minimizing the impact of round trip efficiency. Intelligent software also will be necessary as we evolve from single-application systems to multiple applications that are running to improve grid function. Software will play a key role to manage storage resources, shift capacity during peak periods, provide ancillary services in the off-peak hours and provide standby power for emergencies.
Meanwhile, our first glimpse into this brave new world of energy storage is happening on an island near you. Tropical island nations have been quick to add solar on a central station and distributed basis.
This has been driven by fantastic solar yields and a high ceiling in terms of the price to beat. Making solar competitive against 50 cents per kilowatt-hour diesel-based generation is a lot easier than the average 12 cents per kilowatt-hour in the continental U.S.
But all this renewable generation extracts a hidden cost on these fragile microgrids. As solar penetration increases, it will cause many islands to rely on a handful of generators, or, in some cases, just one. This fragility leaves little room for error.
Couple that with intermittency, and you quickly come face-to-face with a significant ramping challenge. Energy storage is ideal to mitigate this problem. Placed next to a solar site and coupled with intelligent software, energy storage can fill the gap to create a smooth ramp rate that other resources can match though increased generation.
Energy storage systems are also ideal to solve frequency regulation challenges, as well as reactive power issues.
The smart grid is already here, able to provide: two-way power flows, support generation both in remote areas connected by transmission and distribution among homes and businesses, integrate intermittent renewables, and support massive ramp rates from solar, wind and EV charging.
Energy storage might be the silver bullet after a decade of industry research. Never before has the industry had a tool so powerful be a load and a resource with the ability to transform the grid to a flexible, two-way power system to support modern lifestyles.
John Jung is the CEO of Greensmith Energy Management Systems Inc. More information is available at www.greensmithenergy.com.