Battery storage

Energy storage – maximising the benefits

‘Stacking’ multiple value streams with energy storage is able to unlock more value than targeting single applications.
Published: Sun 17 Sep 2017

It may seem intuitive that using energy storage for multiple use cases should improve its value. But what does this amount to in real world terms?

Obviously, this value will vary from one market to another based on factors such as the cost of electricity and the regulatory regime and not least the cost of storage.

Consider then the case for California, which has now been assessed by energy economists the Brattle Group in an initiative for solution provider Eos Energy Storage.

Eos is supplying systems for two energy storage demonstration projects hosted by Pacific Gas & Electric and the University of California San Diego. An Eos system was used as the basis for battery operational characteristics in the study.

‘Stacked’ storage benefits

The Brattle Group uses a modelling approach that is “designed to accurately quantify the benefits of multiple value streams”, based on a range of local market conditions and costs and different battery discharge cases.

The key finding is that that, in many cases, such ‘stacked benefits’ of battery storage compare favourably to recent estimates of new battery costs. For example, under the base case assumptions with limited foresight on future market prices, the total value of stacked benefits for 1kW/4kWh of battery storage in California could be around $280/kW/yr.

Recent estimates of battery costs have been in the range of $200 to $500/kW/yr, varying significantly by technology type and configuration.

Furthermore, accounting for the stacked benefits of battery storage by optimising its dispatch across all the analysed value streams significantly increases the total value of the battery relative to any individual value stream by a factor of at least two to three times over individual uses cases.

The largest sources of value are found to be avoided generation capacity, frequency regulation and energy price arbitrage. Other sources of value considered were spinning reserves and avoided transmission and distribution capacity.

However, the ‘depth’ of each market needs to be taken into consideration when valuing large quantities of energy storage. Frequency regulation in particular is a highly valuable service with a very limited system need. At the same time, the need for frequency regulation is likely to increase with greater renewable resource deployment.

While the findings are sensitive to the marginal cost of generation capacity, sensitivity cases suggest that uncertainty about the capacity value of storage could significantly impact estimates of total value. In the short run, excess supply means that the capacity value of energy storage in California will be modest unless there are local needs for resource adequacy. In the longer term, as planning reserve margins tighten, system-wide capacity value could approach the levels quantified in the study.

Energy storage challenges

California has been – and continues to be – a leader in energy storage, with pilots and utility scale deployments driven by a mandate and aggressive procurement targets for the large investor owned utilities.

Nevertheless, there are still some challenges to overcome to improve the value of storage by capturing multiple value streams, the Brattle report points out. Primarily these pertain to the nature of the market and may be overcome through new policy initiatives, while new battery management algorithms and software may overcome the technical barriers.

Offering new or revised rate designs which more fully reflect the time-varying nature of the cost of generating and delivering electricity is one of many possibilities.

The costs of energy storage are expected to continue to decline, and market adoption is likely to increase as a result, the Brattle Group adds in a message applicable not only in California but in any jurisdiction introducing energy storage.

“In this scenario, considerations at both the retail and wholesale level will play an increasingly important role in the formation of energy storage policy initiatives.”

States Brattle Principal and lead author of the study Ryan Hledik: “Our analysis focused on the California market, but the conclusions are broadly relevant to other markets in North America and around the globe.”