Enabling the Next Generation Grid: The Potential of Energy Storage

Enabling the Next Generation Grid: The Potential of Energy Storage

All of us experience what amounts to “magic” in our daily lives: Every time we flip a switch to turn our lights on they do so instantly. The electric grid is one of humankind’s greatest engineering marvels, balancing electrical supply and demand within a close tolerance at every point along the network to keep our economy and modern way of life running at full speed.

Traditionally, increasing customer electrical demand was met by building additional capital intensive generation capacity and related transmission and distribution infrastructure. With the increasing penetration of renewable energy generation, such as wind and solar, the grid requires more flexibility to manage the variability of such distributed generation while maintaining the reliability we count on. In areas with high penetration, renewable energy production is often curtailed or reduced from what is physically possible to ensure baseload generation assets continue to operate and respond quickly to supply and demand imbalances and voltage variations maintaining reliability.

To support grid resiliency and stability, grid-scale energy storage can be a potential game-changer. However, this is not a new concept. According to U.S. DOE’s Global Energy Storage Database, as of last August, over 170 GW of operational energy storage exists globally. However, over 96% of that is capital intensive pumped hydro storage that has been around for decades – literally pumping water! We are at the beginning of a revolution where distributed thermal and battery storage technologies can benefit the grid while lowering both the cost of electricity and carbon emissions.

Here are some key enablers and trends we identified while leading a workshop on battery storage technologies and the potential of distributed energy storage earlier this month:

Bankability is Key

Reducing revenue uncertainty for providers of energy storage offering grid related services is key to reducing financing costs and allowing for cost-effective deployment of storage and novel business cases. Tax incentives such as the investment tax credit (ITC) and the ability for arbitrage (charging energy storage when prices are low and releasing energy back to the grid at higher priced times) also form part of the picture. However, it is important to balance the value such assets provide versus the cost of incorporating them into the grid, which impacts all customers.

Interconnection Approvals Need to Be Streamlined 

One of the biggest uncertainties of energy storage deployment revolves around the interconnection process. These processes vary across electric utilities, Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs). The duration of this interconnection request depends on the size and cost of the energy storage system and whether it will be located along transmission or distribution systems. These processes are rarely completed in less than a year — even for distribution level requests. If the interconnection studies reveal a requirement for new transmission infrastructure, these types of projects could take a decade and completely derail an energy storage project.

Flexibility to Adapt 

While the opportunity for energy storage to participate in the grid related services market changes over the life of an installed system as the industry matures, the controls systems must be able to intelligently adapt while managing asset degradation. In fact, some trials are in place for mobile energy storage systems that can be re-deployed as stress points on the grid change. Also, storage systems must be managed appropriately for safe operation, and as competition increases, to lower costs, such safety must not be compromised. Safety regulations are expected to evolve as the industry learns from field operations – and existing installations may have to be retrofitted accordingly.

Deferring Traditional Investments – Non-Wire Alternatives

Various utilities nationwide are considering, or are outright mandated to explore whether distributed energy resources can help defer, mitigate, or potentially eliminate traditional utility transmission and distribution (T&D) investments. A key advantage of energy storage, when compared to traditional T&D infrastructure and other non-wire solutions is its versatility to provide a range of additional services that deliver value to the utility and its customers. These adaptable NWS can participate in wholesale markets when not needed to manage peak demand, or even to keep electricity on in case of an outage. It is imperative that these storage resource capabilities are fully captured in order to have a fair economic comparison to traditional solutions. Energy storage cannot be viewed as a T&D asset alone.

Having been involved with several projects where energy storage technology has been evaluated, West Monroe has developed deep technical and regulatory understanding of the market. We’re just at the beginning of a new era for the potential of energy storage – let us partner with your teams to ensure you make the most of this transition.

Phone: 312-602-4000
Email: marketing@westmonroepartners.com
222 W. Adams
Chicago, IL 60606
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