How Does Energy Storage Help Customers and the Grid? Let Us Count the Ways - all 89 of Them

Posted by Coley Girouard on Oct 6, 2016 1:14:56 PM


Energy storage is a game changer. Ultimately, it could free the electric power system from matching generation and consumption on a minute-by-minute basis, saving electricity until it’s needed. Policymakers, utilities, and customers are beginning to recognize its value. Doug Little, chair of the Arizona Corporation Commission, summed up the potential of behind-the-meter (BTM) storage this way: “Energy storage technology is really the 'secret sauce’ for the future of residential rooftop solar.” At AEE, we agree, but add that it could be the secret sauce for numerous other applications - on both sides of the meter. That makes energy storage a key  technology for modernizing the energy grid and leading to an advanced energy future.

The secret sauce of energy storage is leading states from coast to coast to take action. The map below shows 89 state regulatory and legislative actions taken on energy storage recently. Clearly there is no shortage of interest. (Click the full screen button for a clearer view.)

Here are some highlights: the California Public Utilities Commission adopted an $8.7 million energy storage request for offers for Southern California Edison to address reliability concerns from the Aliso Canyon natural gas leak; the Public Utility Commission of Oregon opened a proceeding to develop energy storage program guidelines, consider project proposals, and implement a procurement program; the Colorado Public Utilities Commission approved a $9.1 million investment for two energy storage projects as part of Xcel Energy’s Innovative Clean Technology Projects Program; and the Massachusetts Department of Energy Resources and the Massachusetts Clean Energy Center partnered on a $10 million energy storage initiative to advance the energy storage industry and accelerate deployment of commercial storage technologies.

Falling prices, advances in system integration, and more sophisticated rate designs are driving growth in the burgeoning energy storage market, which grew more than tenfold in the U.S., from $57 million in 2014 to $734 million in 2015. But even that does not explain why energy storage is the hot topic in energy today.


First, think about what storage can do for the electric power system.

Energy storage allows electricity to be held for use when it is most needed or most valuable. When the average person thinks of energy storage they think of batteries, which power everything from flashlights to cellphones and laptops to electric cars, and large-scale battery systems do make up an increasing number of customer-sited and grid-scale storage systems today. But energy storage today comprises a wide range of technologies, including pumped hydro, compressed air energy storage (CAES), flywheel systems, flow batteries, and thermal storage, as well as electrochemical batteries. Until recently, pumped hydro - water pumped from low-elevation reservoirs to high-elevation reservoirs when electricity is cheap, then released downhill through a dam with generators to produce electricity when it commands a higher price - has made up the vast majority of the storage market, commanding 95% of the entire 25 GW worldwide capacity. But advances in technology and the subsequent fall in costs have recently made other technologies increasingly cost-effective and valuable assets for the grid.

What makes storage so valuable is its flexibility. It can be sited either on a customer’s property, BTM, or on a utility's distribution or transmission network. For wholesale markets, energy storage can provide frequency regulation, capacity reserves, voltage support, and energy arbitrage - holding excess electricity for when prices are high. For utilities, energy storage can act as a non-wires alternative to transmission and distribution (T&D) infrastructure investments as well as provide congestion relief on constrained parts of the grid. For customers, energy storage behind the meter can reduce demand charges when stored energy defrays usage at their own demand peak, provide bill management when on a time-of-use rate, supply backup power, and decrease reliance on the grid when coupled with rooftop solar.

Many benefits of energy storage are going unrealized because of outdated utility business models, distribution planning that does not account for resources like energy storage, and rate designs that do not recognize where costs actually comes from. Regulators could help by adopting utility business models that provide financial incentives for outcomes rather than inputs and make utilities as financially interested in distributed energy resources (DER) like storage as they are in traditional infrastructure investments. They should require utilities to consider non-wires solutions in their distribution system planning on an equal basis with traditional solutions. They should adopt rates that account for the value - both temporal and locational - that storage can provide to the grid. Finally, they should develop methodologies that consider the entire suite of benefits that energy storage, as well as other DERs, can provide to the grid. For example, BTM energy storage systems can not only manage customers’ demand charges and shifting their load from on-peak to off-peak periods, but also provide ancillary services, such as frequency regulation, for the grid.

Here are some other recent developments showing how energy storage is gaining momentum in the market and regulatory spheres:  

On September 16, AEP Texas North Company (TNC) proposed installing two utility-scale lithium-ion batteries on their distribution system. The storage system would defer a traditional infrastructure investment, increase system reliability, and cost less than the alternatives. Allowing TNC to own and rate base the batteries could be a bellwether decision for Texas, where distribution utilities are prohibited from owning energy storage facilities that sell energy or ancillary services in the wholesale market.

On September 23, Mayor Bill de Blasio of New York City adopted the country’s first citywide energy storage target, calling for 100 MWh of storage by 2020. The deployment is intended to remove barriers for rooftop solar and increase resiliency by acting as a backup power source during blackouts.

On September 26, the Maryland Public Service Commission opened a proceeding to transform Maryland’s distribution system and “ensure that electric service is customer-centered, affordable, reliable, and environmentally sustainable.” One of the seven topics the Commission wants to tackle is properly classifying and correctly valuing energy storage. Initial public comments are due October 28.

On September 27, California Gov. Jerry Brown signed four bills into law that will drive energy storage growth in the Golden State. AB 1637 increases funding for the Self Generation Incentive Program (SGIP) by $249 million, with 75% of the program budget earmarked for energy storage incentives. AB 2868 directs the state's three largest investor-owned utilities (Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison) to deploy up to 500 MW of new distributed energy storage. AB 2861 expedites and streamlines the interconnection process for BTM DERs. And AB 33 instructs the California Public Utilities Commission and the California Energy Commission to investigate the role of bulk energy storage in smoothing out renewable energy generation on the grid.

Energy storage is undeniably gaining traction. Its flexibility provides a wide range of benefits to customers and the power grid. Improving economics, business model and rate design changes, and a grid that increasingly covets agile and flexible resources are sure to cement energy storage’s role in the grid of the future.

Learn more about storage -- and all the other technologies that make up advanced energy -- in This Is Advanced Energy, available for free below.

Download This Is Advanced Energy

Topics: State Policy, PUCs