“Energy Storage Is There”

New use cases and lowering costs transform the battery storage market.
Published: Wed 07 Jan 2015

Battery energy storage is now “there,” Andy Tang, SVP Business Development at storage startup Greensmith, told Engerati in a recent exclusive interview.

“It’s been interesting to watch the progression from the small 5kW/30kWh system going to 500kW/1.5MWh to 1MW/3MWh to ultimately our largest 20MW/9MWh system,” says Tang, who previously led Pacific Gas & Electric’s smart grid effort. “The industry is now moving away from pilots to multi-megawatt systems. We are now at the end of the beginning and at the beginning of the middle with energy storage.”

Focus on energy storage management

Tang says that Greensmith, which was founded in 2008, has focused on developing a technology-agnostic platform that allows integration of multiple battery technologies – 12 to date and growing.

“As the market matures and turnkey deployments become less important, we feel the software layer will become increasingly important,” Tang explains. “With fleets of batteries, utilities will need a centralized control dashboard."

Each battery type also has its own charge/discharge performance profile and how they are managed can have a major impact on performance. Batteries have a bias towards discharge and ultimately poor management could easily knock a couple of years off the lifetime. “With an expected lifetime of 10 to 20 years in the field, management is critical to ensure the asset generates the highest ROI based on balancing the performance score with the asset lifetime,” says Tang.

Battery applications

The platform itself comprises three layers. The lowest layer provides the external connectivity, i.e. the control layer for batteries, inverters, and other hardware components. The next layer up is the operating system where the computational power resides. At the top is the application layer that users and system operators are calling upon for storage, such as frequency regulation, capacity shifting, electric vehicle charging etc. – and it is here that much of the innovation is taking place.

“There’s no shortage of applications, and a lot of our conversations with utilities right now are how to keep a battery working for 20 hours in the day,” says Tang. “Often batteries are thought of as single use-case devices, but as they are both a generation and load source there are opportunities to stack the revenue opportunities to get the net cost down. For example, resource adequacy may require a 4-hour block in the day, leaving another 20 hours for putting the asset to use for other purposes.”

Energy storage trends

Tang says that most of the demand for storage currently is from utilities, especially in North America.

“AB2514 [storage mandate] in California is having a big influence on the industry,” he says commenting on other opportunities in the US as well as for example in Ontario. [Engerati- California's Energy Storage Mandate-Will Others Follow? and Ontario Energy Storage Procurement Enters Next Phase]

As an example of a recent project Greensmith was involved in, he mentions a T&D deferral use case by San Diego Gas & Electric (SDG&E). For a 5MW load customer at the end of an old feeder, a 1MW/3MWh battery system was installed to reduce the peak, thus deferring the need to reconductor the feeder.

He also cites another project in Illinois of a 20MW system for frequency regulation and describes it as “better” than a state storage mandate. “The price of storage has fallen to such a level it is possible to make money by building a system and selling frequency regulation into the PJM marketplace,” Tang says.

Currently approximately 100MW of battery storage is being used for frequency regulation in the PJM and Tang foresees another 200MW in the next 18 months. “It’s better than a regulatory mandate as a merchant wouldn’t build a system if there is too much risk with the technology or the costs won’t pencil. It says the costs are getting in line and there is little technology risk.”

Supporting this view Tang comments that a cost-benefit review by Greensmith put battery storage at around US$350/kWyear in California compared with US$150-800+/kWyear for other generation. “Based on prices today, we think storage is there, particularly where there are stringent environmental [emission] restrictions, such as in the LA basin.” [Engerati-SCE Leads Energy Storage With Record 261MW Purchase]

Energy storage growth

Tang says that growth in storage is foreseen to come from multiple directions. In the immediate future, the majority of growth is likely to come from developers and IPPs (independent power producers) who will sell storage on to the utilities via power purchase agreements. Then, in three to five years, when utilities are more comfortable with the technology, their procurements will increase.

“This makes sense from a utility perspective as it transfers the risk to the developer. But when utilities are comfortable, they will start using storage beyond capacity in ways that can’t be structured in a power purchase agreement, i.e. in their distribution network.”

A particular opportunity Tang sees is that with increasing penetration of distributed generation, storage will offer a readily scalable solution on the distribution line for maintaining power quality, in preference to a solution at the very edge of the grid, i.e. customer homes. “I see an ideal solution in 40 foot containers placed south of substations and north of the neighbourhoods.”

At a national level, Europe will be a growth market, as will for example South America and the Caribbean. “We are seeing a lot of activity on island-type environments, where grids are fragile and solar is viable because of the high costs of diesel. Storage is necessary for stability there.”

Technology development for energy storage

When it comes to battery technologies and future developments, Tang notes that the majority of installations are the lithium-ion type because these are the most developed. However, each battery chemistry has a “position where it is most optimally suited.”

Innovations are taking place with new technologies, but in the long term, “the ultimate winner will be the one that can get the price down and do as many as possible of the multiple use cases competently. It may not be the best at any one but will be a hybrid across many.”