“We talk about the great wind resources and the great solar resources of the United States, and the United States is blessed with enormous resources. But we also have to remember that renewable resources, like wind and solar, are transient — they go up and down. At the level of 2.8 percent — roughly, what we are today, that’s okay. But, imagine a world of 15, 25, 30 percent renewable going up and down. That’s a bigger problem, a much bigger problem.
“Certainly that’s why we need a long-distance transmission system to port the energy, because somewhere in the United States — whether it’s the Great Lakes, North Dakota, the Pacific Northwest, Texas, the wind will be blowing, but we don’t have large-scale power storage yet. We should start to invest heavily in pumped-hydroelectric storage, we should start to look at compressed air storage, so when the wind blows — because in the Dakotas, there aren’t hydro sources, but there is the capability of putting in compressed air storage, bringing that compressed air up, burning it with natural gas to create electricity more efficiently.”
Remarks by United States Department of Energy Secretary Steven Chu at the National Clean Energy Project Forum, February 23, 2009
Energy Secretary Chu is the latest of a series of energy leaders to regard energy storage technology as a key element in deploying renewable energy more widely. As for renewable energy itself, President Obama is a leader among those who support more renewable energy development as being necessary to engender long-term economic growth, break America’s dependence on foreign oil and combat global warming.1 In a key early speech outlining his plans for the national economy, President Obama called for a doubling of the production of alternative energy over the next three years.2 Without greater deployment of energy storage technology, however, these aspirations are likely to remain unmet.
This article will outline some of the major benefits of energy storage technologies and discuss some of the barriers as well as significant sources of encouragement for their deployment. An appendix, intended as an aid to the reader, will identify leading energy storage technologies with the potential for utility-scale applications and list their key features and some examples.3
The Need for Energy Storage
To understand why energy storage technology is vital to building a future where clean renewable energy sources meet significant portions of the nation’s electricity needs, consider that the absence of a wide-scale means to store electricity means that electricity generation and load must be in instantaneous balance. Consequently, electric generation capacity has been built to match peak demand. Power plants relying on nuclear fuel, coal or natural gas can generate electricity more or less continuously and are quite capable of responding promptly to fluctuations in demand, including throughout the daily cycle. These plants, either as “base load,” “spinning reserve” or “peaking” units, represent approximately 92% of the nation’s electric generation capacity.4 Hydroelectric generation, which is readily dispatchable at certain times of the year, also provides a helpful supplemental resource. Today’s set of generation resources generally has provided reliable and affordable electric power. Nevertheless, due to increasing concerns about the environment and, to a lesser extent for electricity, a greater focus on energy security, policymakers and industry leaders want to develop a new portfolio of generation resources.
A move to clean renewable energy sources on a large scale would introduce a new model. To some greater or lesser extent, resources such as wind, solar, geothermal, hydroelectric and hydrokinetic (tidal) energy are all considered to be clean and renewable sources of energy. For the most part, however, these energy sources are not today readily dispatchable because they are frequently affected by time of day or night or changes in weather conditions. The wind and sun are both highly variable energy sources to the point of being considered intermittent, or even “transient” as Energy Secretary Chu described them. First, wind is typically much greater at night (when electric demand is lower), and the wind changes direction and speed on a regular basis, even stopping at any time. Second, the sun generates at most 10 to12 hours a day of power, and this can be affected by clouds. Thus, there must be storage to enable the ready dispatch of renewable generation and a closer matching of the electricity generated by renewable sources with the demand for power.5
Benefits of Energy Storage
Energy storage technology can address challenges related to the variable nature of renewable energy sources as well as issues facing the current electric power system.
There is a daily and seasonal variation in demand for electricity. More electricity is consumed during daylight hours than at night, and summer sees an increase in demand for electricity due to the extensive use of air conditioning. In the United States, the typical peak in demand occurs on a hot summer workday when air-conditioning units are demanding enormous quantities of electric power. The price of power naturally peaks during these times of maximum demand. As discussed above, weather-dependent renewable energy sources, such as wind and the sun, have added variability in the amount of energy they produce at any given point in time. By absorbing excess power during low-demand periods and providing an alternative source of power during shortages, energy storage technology can be used to mitigate both demand and supply variability, thereby reducing the frequency and size of fluctuations in pricing and availability, which may deter investment. This would allow for greater economic benefit to power generators because the price of power at peak demand increases, but the cost of production would essentially remain constant. It would benefit customers by providing more generating capacity at the peak. Moreover, when coupled with a “Smart Grid” that could help customers shift their demand from the peak to other times, energy storage technology utilized by the customer could provide a means to help balance demand and supply and reduce peak prices. The savings could make the “Smart Grid” more attractive to investors and customers.6
Efficient Utilization of Generation Facilities and Transmission Infrastructure
Power plants relying upon renewable energy sources often produce substantially less power than their nameplate generation capacity due to the variable nature of their energy sources. The incorporation of energy storage technology into a power project could enable the power plant to operate closer to maximum power and peak efficiency continuously, storing surplus power at off-peak times when production exceeds demand, and releasing it at peak times when demand exceeds production. Energy storage technology also provides a means of capturing energy from renewable sources during times when transmission infrastructure may be subscribed. In this way, energy storage technology can allow more complete utilization of existing generation and transmission assets, thereby enabling power generators to operate more efficiently and making it possible to serve peak demand with a more efficient network of generation and transmission equipment. Last year, the DOE predicted that in order to increase the nation’s wind energy to 300 GW, approximately 50 GW of new “peaking plant” gas turbines would be needed to compensate for wind variability.7 Energy storage technology could eliminate the need for some or all of these new gas turbines.
Reliability and Security of Power Supply
Broad deployment of energy storage technology could provide reliability and security of the nation’s power supply in a number of ways, including the following:
- filling the gap created when a power plant goes offline for any reason, including due to time of day or night or changes in weather conditions that make renewable energy unavailable;
- serving as large-scale batteries to aid in getting power plants back online and restoring electricity service in the event of a widespread failure of the grid;8
- helping to alleviate spikes or dips in voltage on a power line and regulate AC frequency, which can save power and protect equipment;9
- when energy storage is located at a distribution site, enhancing service reliability by enabling the system to respond more quickly and effectively to changes in customer demand; and
- when energy storage is placed at multiple locations ÆÆalong the chain of generation, transmission and distribution, providing protection against sudden disruptions to the system that may occur anywhere in the power system.10
Obstacles to Implementation of Energy Storage Technology
The implementation of energy storage technology on a large scale may face a number of obstacles as discussed below.
Financial and Tax Obstacles
Some detractors assert that deploying energy storage technology is more costly than having a generation plant on standby or, in the case of wind generation, than outright curtailment. 11 They also claim that no facility providing reserve power can be rendered economic on payments made for reserve services alone.12 This issue may simply be one of perspective. If the cost of energy storage is compared with the cost of either a generation facility or a transmission facility, it may not appear to be cost effective. Moreover, if one potential income source created by energy storage is looked at to the exclusion of others, it may appear that the financial benefit of energy storage does not allow for a full cost recovery. However, energy storage can serve multiple roles and provide multiple benefits. For example, as discussed above, energy storage can enable the arbitraging of the price of electricity, defer the cost of new generation and transmission equipment, and increase reliability and security of the power supply.13
Under certain circumstances, incentives for new construction may hinder growth of energy storage. For example, while cost recovery for energy storage technology is not always clear, in most states cost recovery for a new generation or transmission facility is straightforward, making the case for storage more difficult to outline, especially in tough economic times.14 Further adding to cost concerns, reduced demand for natural gas and comparatively lower costs for fossil fuels today may have dampened investors’ current appetite for new energy storage technologies.15
The current tax treatment of some energy storage technologies may also pose a challenge to their development. For example, although the generation of wind power is generally eligible for production tax credits (“PTCs”), the use of wind power to compress air in a Compressed Air Energy Storage (“CAES”) unit prior to being released and used to generate electricity is not eligible for PTCs. This is because CAES is not included among the technologies that are eligible for PTCs under Section 45 of the Internal Revenue Code. However, there is some political support for making qualifying renewable energy storage facilities, such as CAES facilities, eligible for PTCs, and Senator Robert Menendez (D-NJ), a member of both the Senate Committee on Energy and Natural Resources and the Senate Committee on Finance, has expressed an interest in such a provision.16 Moreover, in May, Senator Ron Wyden (D-OR) introduced a series of energy initiatives including the Storage Technology Renewable and Green Energy Act of 2009, a measure that would provide investment tax credits for a wide range of energy storage technologies
There are still few regulations that deal directly with energy storage technology, which can lead to uncertainty surrounding the treatment of investment in energy storage technologies, the recovery of costs, and what regulatory environments will permit energy storage technologies. Also leading to uncertainty is the current debate about whether energy storage technology is a generation or transmission asset. On the one hand, energy storage technology can be used for production levelization and price arbitraging (such as by shifting generation from an off-peak time to a time of peak demand). On the other hand, energy storage technology captures energy that would otherwise be curtailed due to transmission constraints and reserves it for a later time.18 Nonetheless, with the passage of time and increasing emphasis on deploying energy storage technologies as part of the effort to develop clean renewable energy, these uncertainties are likely to be resolved.
Geographical and Environmental Obstacles
There may be geographical and environmental obstacles to the implementation of some energy storage technologies. For example, identifying suitable sites may prove to be challenging. The number of sites with a source of water and changes in elevation necessary for future pumped-hydroelectric (“pumped-hydro”) facilities is limited, and sites with underground caverns suitable for CAES facilities may be difficult to find in suitable volume near to electric loads or existing infrastructure.19 Even so, there are a large number of potential sites for CAES facilities across the United States, which could be developed in a variety of geological formations, including salt domes, depleted gas fields, abandoned hard rock mines or aquifers. There may also be environmental concerns regarding specific energy storage technologies. For example, because CAES facilities use a mixture of compressed air and natural gas to produce energy, they also produce emissions, including some carbon emissions, notwithstanding that natural gas is regarded as clean among fossil fuels.
Legislative Support for Implementation of Energy Storage Technology
There appears to be substantial public and legislative support for the development of clean renewable energy, and energy storage technology in particular, that may work to overcome these barriers. Such support includes the following:
- $59 billion has been allocated to new clean energy tax breaks in the American Reinvestment and Recovery Act of 2009;20
- State renewable portfolio standards (“RPS”) and renewable electricity standards (“RES”), a proposed Federal RES, and the proposed Federal “cap and trade” program all create additional government pressure to adopt clean renewable power generation;21
- The Energy Policy Act of 2005 includes energy storage devices among the advanced technologies that Congress encourages the Federal Energy Regulatory Commission (“FERC”) to deploy;
- The United States Energy Storage Competitiveness Act of 2007, as part of the Energy Independence and Security Act of 2007, establishes a major new electricity storage program with a range of applications, including electricity transmission and distribution systems, and authorizes funding for the next ten years (2009–2018) in the amount of $50 million per year for a basic research program, $80 million per year for an applied research program, $30 million per year for an energy storage systems demonstration program, and $100 million per year for an energy storage research center program;22
- The American Reinvestment and Recovery Act of 2009 allocates $4.5 billion to the Office of Electricity Delivery and Energy Reliability for “expenses necessary for electricity delivery and energy reliability activities to modernize the electric grid, to include … energy storage research, development, demonstration, and deployment …;”23
- In support of the above allocation of funds by the American Reinvestment and Recovery Act of 2009, the DOE’s National Energy Technology Laboratory (“NETL”) has issued a notice of intent to issue a “Funding Opportunity Announcement” intended to support, in part, “Utility-Scale Energy Storage Demonstrations,” which are expected to be demonstrations of major utility-scale energy storage installations with application areas that include “wind and photovoltaic (PV) integration, upgrade deferral of transmission and distribution assets, congestion relief, and system regulations”;24
- President Obama recently announced the creation of a $400 million Advanced Research Projects Agency for Energy (“ARPA-E”), funded by the American Reinvestment and Recovery Act of 2009, which, according to the DOE, will be focused on “transformational energy-related technologies”; and
- The DOE recently announced grants that establish 46 Energy Frontier Research Centers (“EFRC”) for the scientific development of advances in various energy-related fields that include electricity storage. Planned funding for these EFRCs totals $777 million.25
As evidenced above, there appears to be substantial support for the deployment of energy storage technologies. This support stems from a growing national will to enable a significantly new energy infrastructure that would supply the nation with a major portion of its electricity needs from renewable power. Such a transformation is also said to hold the prospect of new jobs, improvements to the economy, and less dependence on foreign oil and other fossil fuels that may be harmful to the environment. Despite the obstacles to the deployment of energy storage technologies, it has always been true in America that “where there is a will, there is a way.” Given the promise of energy storage and the will behind its deployment, these technologies may just be our way forward to a “clean renewable future.”