Analysis: Energy storage not ready for mass use

OREANDA-NEWS. April 27, 2015. Regulators and electricity market participants increasingly talk up the value and importance of energy storage technologies for renewable energy generation in key US power markets, but greater commercial application still appears to be years away.

California state utility regulators have set a 1,325MW target for energy storage procurement by investor-owned utilities in that state and are considering measures to enable even more storage capacity. The PJM Interconnection — the largest US wholesale power market — has 100MW of storage resources on line and another 500MW in the interconnection queue, according to PJM senior analyst Scott Baker.

The numbers belie a niche application for the technology. PJM is using energy storage for frequency regulation, an ancillary service used to maintain constant electric grid frequency. PJM's current and future storage capacity is less than 1pc of total generation. And California's current energy storage target is about 3pc of its power market.

Cost and infrastructure are significant deterrents. Pumped hydropower facilities used to be the most widespread type of storage, but commercial applications increasingly turn to batteries. And unless technological advances reduce costs for battery-based technologies, investors will be wary and the market size will remain small, ROTH Capital Partners senior research analyst Craig Irwin said this week at a discussion hosted by Johns Hopkins University's School of Advanced International Studies (SAIS) in Washington, DC.

Energy storage will remain a niche market for PJM, Baker said. The size of the frequency regulation market is 700MW at peak hours.

Several orders by federal energy regulators in recent years allowed storage resources to participate in ancillary services markets. The Federal Energy Regulatory Commission is observing storage performance in PJM and other markets, office of energy policy and innovation acting director Arnie Quinn said. But it is hard to find investors for ancillary services, he said.

Where exactly storage fits in the traditional power market model is an open question. Generation, transmission and distribution have different reward structures. Storage could be seen as a transmission resource, connecting generation and consumers. Technological advances have blurred the division between utility-scale and retail applications of storage, California's primary grid operator said recently.

"We are increasingly viewing energy storage as a capacity product," Quinn said. That could enable storage to compete with generating resources and load management tools in capacity markets.

So far 90pc of storage resource projects are utility-scale, with the rest behind the meter, Energy Storage Association policy director Katherine Hamilton said. The industry group predicts that grid operators' efforts to build up grid resiliency and proposed federal CO2 regulations for power plants will be key drivers in enabling more storage to join the grid.

At grid level, battery storage will be cost-effective, Texas utility Oncor chief executive Robert Shapard told the IHS CERAWeek energy conference in Houston yesterday. "Ultimately, batteries will play a role as the price comes down," Shapard said.

Oncor's proposal to change the rules in the Texas electric market to allow transmission companies to invest in battery storage met with stiff opposition from power plant owners.