STORAGE PROSPECTS
As an aid to power system operation, storage can play a useful role, provided it can pay its way. For a few specific tasks, some types of storage may have advantages over alternative options
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..Storage of electricity is not essential for reliability of supply on a power system with significant volumes of fluctuating renewable energy. Just as with coal, gas and nuclear power, reliability of supply from renewable energy can be secured from a range of generating options and from sophisticated management of both supply and demand. Grid stability is not reliant on storing electricity for later use.
Achieving the high reliability standards demanded of a modern electricity system does not require renewable energy to mimic the behaviour of thermal plant and wrap its supplies into a “firm power” product. Balancing the variations in wind and solar supply can be done without using stored power, which rules out paying for storage solutions at any cost. When and where the value of storage is greater than its cost a market will evolve that is driven by power system need, not by the needs of storage providers to make ends meet.
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From the perspective of the grid as a whole, storage can be useful in helping system operators match supply and demand. But even when charging on cheap wind and solar, storage systems add cost. When the grid comes under pressure, rather than relying on stored power it may often be cheaper to curtail generation surplus to requirements, to shift demand away from times of peak use and to call up other supplies, preferably from clean sources of generation. An abundance of cheap wind and solar does not change this fundamental market force.
For storage providers, the business case improves greatly if they can supply a whole range of grid requirements over weeks and months, tapping into multiple revenue streams, or “revenue stacking” to use the latest jargon, but there are limitations. Not all types of storage can meet all requirements and storage multi-tasking may not be needed by a power system, depending on the mix of generation available.
In markets with the highest proportion of renewable energy, demand for storage is not growing exponentially. As experience of managing power systems with high proportions of renewable energy grows, the expected sizable market for storage is not materialising. Power system operators, however, are awake to the falling cost of batteries and the advantages of having instantaneously available electricity to draw on for some system services, whether or not renewables are a large part of the mix.
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BATTERIES EDGE INTO SUB-MARKET
The ability of batteries to rapidly respond to demand and their plummeting price is, for the first time, giving them an occasional edge on the grid services sub-market for ultra-fast frequency response; they can potentially provide other grid services, too. Lithium-ion battery prices have fallen from $2000/kW in 2009 to around $600/kW in 2013 and continue downwards, taking advantage of the economies of scale that come with mass manufacture in large factories. They are providing energy for $350/kWh and on the current downward trajectory are projected to fall to below $100/kWh in the next decade.
An opportunity for major improvements to the economics of providing grid services from battery energy storage systems (BESS) is co-locating them with a renewable energy facility of sufficient size. When a wind plant is not generating at full power, its grid connection has spare capacity that can be used to import electricity from the grid to charge the batteries and discharge them as needed. By sharing the site’s grid connection, the BESS can inject bursts of power to maintain grid frequency, a service renewable energy struggles to provide, at far less overall cost.
Swedish utility Vattenfall is building 22 MW of battery storage on the site of a 228 MW wind farm in Wales, the largest in Britain outside Scotland, to gain access to the grid for commercial storage through the existing connection line. It reports a huge cost saving, without which the grid connection would have made the storage facility prohibitively expensive. Renewable energy would appear to be offering a chance for storage to be financially viable for the first time, though it is a limited market.
Supply of ancillary grid support services represents only a fraction of the overall market for electricity. As a sub-market its total value is relatively modest. Storage providers will share that constrained market with electricity generators. Still, battery energy storage system sales are projected to grow from under 1000 MW in 2015 to 8000 MW in 2021, according to the International Renewable Energy Agency (IRENA), quoting a Navigant Research report. To put that into perspective, the annual market for new renewable energy capacity reached 160,000 MW in 2016, most of that from 70,000 MW of new solar capacity and 50,000 MW of new wind turbines, reports IRENA.
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THE BOTTOM LINE
Electricity markets can be structured to achieve a variety of desired outcomes, including making storage of electricity a profitable business for storage providers. Whether such a market benefits consumers, or is needed, is questionable. Ultimately it is up to legislators to get market structures right for an affordable renewable energy future.
Energy efficiency regulations that encourage less consumption in peak periods, when electricity is most expensive to procure from generators, will reduce the overall cost of power supply, as will slick management of both supply and demand. In contrast, supporting homeowners and businesses to install solar panels on the roof and batteries in the basement is a more expensive means of only potentially achieving the same aim of a reliable green power supply, even should the batteries hold sufficient charge for long enough to maintain stable supplies.
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Renewable energy, by sharing its existing
grid connection, may be offering a chance for
battery storage to gain financial viability for
the first time, though that market is limited
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A power system operator can use weather forecasts to project likely volumes of rooftop solar generation along with the resulting drop in demand for grid power. Solar is predictable. But the system operator cannot predict how much of the privately owned battery capacity is fully or partly charged, or if the owner is prepared to use it now or later. The unpredictability of demand reduction from home-based BESS means it is likely to increase rather than reduce overall volatility in demand and supply.
The more volatility that has to be managed, the greater the cost to customers. If electricity markets are designed to encourage the uptake of storage solutions with little understanding of their purpose on a power system, the risk of making the energy transition far more expensive than it need be is serious. In most cases today, uptake of storage is more likely to drive total costs up rather than down, while serving no essential purpose.
While “most cases” may reduce to “many cases” in future, without a proper understanding of the different types of storage and their specific uses, the right decisions on future market design and regulations are unlikely to be made.
For an affordable transition to clean energy, utilisation of existing thermal capacity, bought and paid for, to occasionally supplement renewable energy, is a common sense option. The need for support from thermal plant should decline as renewable energy increasingly displaces fossil fuel and nuclear generation and as management of the entire energy system evolves to combine electricity markets with those for heating, cooling and transport. Electricity storage is not the key to a sustainable future, but one piece of the giant energy puzzle, a piece that may never be that large. •
TEXT Lyn Harrison & David Milborrow ILLUSTRATION Hvass & Hannibal
This article is part five of our five-part special report on grid-scale electricity storage. Find parts one-four linked below or get the key takeaways at a glance