The Many Faces of Battery Storage

Much of the popular discussion around energy storage has focused on its utilization as part of a broader "edge of grid" strategy for homeowners and businesses.

For example, a residential battery storage solution, if competitively priced, could permit a homeowner who has deployed roof-top solar panels to arbitrage electricity prices by filling up batteries with cheap power (from an abundant solar resource that generates electricity during the workday) and using that stored energy rather than peak-priced electricity purchased from the local utility to serve the increased home load that results from the family's return at day's end.

But even in a world of sharply falling lithium-ion cell prices made possible by the likes of Tesla Motors' planned gigafactory in Sparks, Nevada, the near-term demand for energy storage is less apt to be a result of people seeking to leave the grid and more likely to come from utilities seeking fast-response resources to regulate the frequency of electrical current and keep the grid stable.

In jurisdictions like California where renewable generation resources are plentiful as a result of both policy and geography, the juxtaposition of renewable resource availability and demand requires an abundance of standby power most often in the form of gas-fired peaking facilities. As California strives to achieve its aggressive renewable portfolio standard, the need for peakers and their importance to grid stability continues to increase. That said, gas peakers are not inexpensive to build, are subject to commodity price risk with respect to their fuel requirements, emit greenhouse gases, and take several minutes to come online for their intended purpose.

Battery storage provides a compelling alternative to the traditional gas-fired peaking facility for purposes of frequency regulation and grid stability. As prices for battery storage have dropped, the cost of a grid-level battery storage unit has achieved rough parity with the construction cost of a simple cycle combustion turbine gas-fired peaking facility. For example, at the 2014 NY–BEST Capture the Energy Conference, John Zahurancik, Vice President of AES Energy Storage, quoted pricing for AES's Advancion lithium-ion battery storage solution of $1,000 per kilowatt and $250 per kilowatt-hour. That equates to an installed grid-level battery storage system for $1 million per MW with a four-megawatt-hour discharge capability.

In addition to a competitive acquisition cost, battery storage generally has the added advantage of a zero fuel cost and, due to fewer moving parts, a more predictable and likely less burdensome operating cost. As importantly, a battery bank can respond to power demand almost instantly: less than a millisecond as opposed to several minutes. Finally, a battery storage unit can serve both as load—storing the energy produced by wind and solar resources, for example—as well as a generation resource.

In 2013, California mandated that by 2020, the state's three large investor-owned utilities add a huge amount of storage—about 1.3 gigawatts, or more than 10 times the amount of storage deployed worldwide in 2011. For now, in California and elsewhere, the likes of those utilities are most likely to use battery storage solutions to relieve their distribution systems of peak loads that would otherwise require the construction of gas-fired peakers, the expensive improvement of wires and other equipment, or both. That said, grid stability and frequency regulation are only two of energy storage's evolving faces. With time and the continuing reduction in costs, batteries will no doubt also play a meaningful role in the ongoing and rapid development of distributed generation, in particular moving away from large utility-scale, centralized solar farms and toward residential or neighborhood-scale solar power.