Battery Energy Storage Is Economically Viable (In Some Cases)

A regulatory framework that values storage is necessary to advance its use.
Published: Tue 02 Feb 2016

For some while now we have been reporting that energy storage is becoming economically viable. [see e.g. Engerati-“Energy Storage Is There”]

This has been confirmed again in a new report from the Global Smart Grid Federation (GSGF), which reviews several case studies on the use of battery energy storage in grid operation support. The report finds that in some cases, the technology is already economically viable. However, for most power grid application uses, there are still economical hurdles to overcome.

This new report comes hot on the heels of a report from the World Energy Council on the value and business case of energy storage, and gives some further substance to this earlier report. [Engerati-World Energy Council - Energy Storage Value Underestimated]

Storage use cases

The five storage use cases reviewed in the GSGF study are:

• Frequency control by AES Corporation in the PJM market in the US

• Renewable energy integration by NEC in Hawaii and NEDO in New Mexico in the US and by Enel in Italy

• Microgrids implemented by Okinawa Electric Power Company in Japan and by Duke Energy and Electric Power Board of Chattanooga in the US

• Load leveling/peak shifting by Southern California Edison and Pacific Gas & Electric in California and in the Nice grid project in France

• Voltage control by DTE Energy in Detroit.

Looking to the economics of storage the study finds that two applications are currently feasible businesses: the frequency regulation example above in the PJM market and Ergon Energy’s use of its grid utility storage system (GUSS) as the lowest cost option for peak demand management in rural Queensland. [Engerati-GUSS Coming To Queensland’s Networks]

Battery storage market

On a larger scale the GSGF envisions that these applications will be the first to employ battery storage. As this happens, battery production should increase and costs should decrease, opening up the market to microgrids and renewable energy integration.

Of these the frequency regulation and peak shifting markets are limited in size. Renewable integration is believed to be the potentially largest market for energy storage, since storage can be supplied at each generation point, and will probably have to be supplied once renewable energy penetration rates go up.

Voltage control is not perceived as a market that will open up on its own; it is rather thought of as an auxiliary service.

Battery storage regulation

The study identifies the largest obstacle to battery storage as bridging the gap between using batteries for demonstration projects and them becoming a viable economic solution.

Key is to create a regulatory environment that can adequately value battery energy storage economically, which will then drive up the production and lower the costs. By way of example the report cites FERC’s Pay for Performance rule in the PJM market, which has increased the average regulation prices but lowered the total amount of resources needed for regulation, resulting in more efficient grid operation. Currently, a total of more than 200MW of batteries have been introduced, and PJM is considering applications for over 500MW of additional power.

Another example cited is the rule changes to enable new system services such as fast frequency response in Ireland as part of a programme to ensure that the Ireland-Northern Ireland power system can securely operate with increasing levels of variable renewable generation.

Further reading

Global Smart Grid Federation: Power Grid Electrical Energy Storage