Much like all markets, utilities operate on a supply and demand model. However, utilities are designed to easily shift their output capacities. Fossil fuel plants perform well in continuous operation and renewable utilities depend on the availability of natural sources to maintain their power production. This creates a need for energy storage, an increasing focus of utilities’ investment.
Accordingly, energy storage solutions bridge the inevitable gaps between power demand and supply. This phenomenon is embodied by the two-way grid. It works by storing energy in off-peak hours – when there is oversupply – and then utilizing it in peak hours – when there is higher demand.
Why do utilities need to store energy?
There is a long list of advantages that energy storage provides to the electricity grid. We shall explore a few of them here.
Almost every developed country’s power grid is up to 99.9% reliable. Customers expect this high standard of reliability to be maintained in the future when renewables are increasingly being integrated into the energy generation equation.
In a highly renewable-energy-integrated future, grid capacity and reliability become extremely important. This is largely because energy generation via renewable sources, such as wind and solar, is inherently intermittent. If this power generation is considered and transmitted as is, there are large irregularities that will follow. Take solar power, for example. The peak electric power generation hours are expected during the day. But if this power generation during the day is not monitored and the energy not stored, the nighttime will also expectedly be power poor.
Thus, energy storage systems provide a smart solution to this problem by storing energy when there is peak generation and releasing it at times of peak demand. This results in increased grid reliability, as expected, since brownouts become less probable.
Another solution to improving grid reliability, especially for traditional fossil-fuel power plants, would be to burn through more fuel when there is higher demand and vice versa. However, such power plants operate more efficiently when they are run at full capacity which renders this method of stabilizing supply with demand sub-optimal. Additionally, this contributes to extra greenhouse gas emissions which exacerbates the already serious climate change crisis.
However, if we introduce energy storage to this problem on the back of advanced battery technologies, we can reduce the need for fossil-fuel power plants to continue to run on their most efficient model that requires maximum use of their fuel. The lesser the amount of time these plants spend shifting from high capacity to low capacity, the lesser the operating costs. Energy storage for fossil fuel power utilities can also give rise to opportunities for potential cost savings in the form of fuel purchases when prices are low.
What energy storage trends to look out for?
Let us now look at the major trends in energy storage for utilities to look out for in 2022.
Competing Energy Storage Technologies
The disparity within grid-scale energy storage technologies and their economic and reliability impacts, especially in the context of renewable energy integration, has been widely studied and evaluated.
It has been concluded that in regions with variable renewable energy generation or where energy storage systems have already been installed, installing new gas-fired peaking power plants might be at the risk of becoming stranded assets. Moreover, it has been revealed that energy storage technologies that operated around the 8-hour mark provided the highest net savings to the grid at instances and regions of higher renewable energy penetration.
Furthermore, the geographical region where such storage technologies are installed seem to have a large impact on the magnitude of savings in the form of cost reductions. For instance, when energy storage solutions are installed in more renewable resource-rich regions, the resultant system cost reductions are over 60% higher than for installations elsewhere. This difference is the most pronounced for compressed-air and lithium-ion energy storage systems.
Another major difference between CAES and lithium-ion battery systems is that since the latter are not synchronously connected with the electric grid, they are unable to effectively generate grid inertia. Grid inertia here refers to the tackling of demand/ supply imbalances in very short time durations, typically seconds. CAES, however, prove triumphant in this area and make for the lowest-costs grid inertia alternative. Contrastingly, flywheels not only provide very low grid inertia contribution but also do so more expensively.
These conclusions strongly focus on the fact that low-cost, high-duration energy storage technologies, such as CAES, generate the most system value when they relieve power transmission congestion. This might also point to the fact that such energy storage solutions might also be a better investment alternative than transmission network expansion.
Rapidly Dropping Costs of Lithium-Ion Batteries
Corporations are having to do more with less in times of increasing competition and regulatory pressures and utilities are not immune to this predicament. Where rising fuel costs and taxes on non-renewable generation are on the rise, there is the favorable wind blowing in the direction of cheaper storage options, specifically Li-ion batteries. The trend, as analysts conclude, shows no signs of slowing down as the world’s storage capacity is projected to hit 1TW by as early as 2030 according to BloombergNEF.
What’s remarkable isn’t only the trend of lower Lithium-Ion batteries but what they can be used for instead of direct energy storage. By deploying cheaper Li-Ion batteries for ‘energy shifting’ protocols, utilities can manage their distribution systems better. This is because utilities are better equipped to manage the energy consumption profile in times of peak demand using the enhanced energy storage capacity that has become available as a result of a declining trend in the prices of Lithium-Ion batteries. This, inevitably, gives rise to utility companies the opportunity to better negotiate with power suppliers for lower costs.
Increased Legislative Support
In the United States alone, as much as 20% of all states have introduced legislation to incentivize energy storage for utilities. Most of these measures have revolved around:
- Financial incentives for distributed as well as utility-scale storage systems.
- Mandating energy storage requirements by making them part of current renewable portfolio standards (RPS).
- Formulating consultation methods on future legislation concerning energy storage.
These legislative measures have become a driving force for American utilities in their push towards building, deploying, and expanding energy storage systems. Texas Senate Bill 943, for example, allows the consideration of energy storage systems as generation assets under certain requirements. This opens the door for these installations to several commercial benefits, not limited to, giving utilities the right to:
- Offer electricity or other related services on the wholesale market.
- Get approval for and get access to transmission service, and,
- To interconnect with the grid.
Energy storage has to be an integral part of internal investment strategies for utilities in the coming years. Not only has it gained even more prominence in the years past, but it has also become incredibly lucrative to deploy and manage. Utility company managers and C-suite executives must consider storage tech in the face of stiff competition, a global climate crisis, and a rapid shift towards renewables.