The electric industry is going through a period where long prevailing planning and operating assumptions are being upended. Significant, multi-faceted changes in energy supply and demand technology are compelling electric utilities to fundamentally rethink their legacy business models and develop profoundly different visions of their role in the energy market. With expected technological innovation, storage will grow in importance, making it imperative for planners to consider storage for energy, capacity, and ancillary service needs in all parts of the industry value chain.
Join Siemens in an exclusive 4 part mini- series with Energy Collective as we decipher the energy storage value proposition. For a full download of our whitepaper on the energy storage value proposition, please visit our website.
While energy storage has grown rapidly over the past couple of years and several hundred MWs of projects are under development, the value to investors of energy storage remains somewhat nebulous. This series identifies leading energy storage technologies, defines key applications, reviews current leading battery projects, and estimates investor returns for differing applications and markets. Further, this series also discusses the key factors driving storage economics and investor returns.
Today, in the right application and market, battery storage can provide attractive returns. Clearly, there are other applications where the economics today do not meet a minimum threshold. The storage economic proposition will improve in all applications as capital costs fall, which they are expected to do. By its very nature, storage offers multiple value streams. A rational investor would take advantage of all possible value streams, so long as each value stream in practice can be realized and there is no “double counting” of benefits.
Storage End Uses and Value Streams
As mentioned briefly, storage applications can range from very short duration requirements like frequency response and regulation, operating and planning reserves, to longer term needs of energy management (e.g., to store energy from renewable resources generated in off peak periods an consume it during on-peak periods). The graph below indicates the rated power and discharge time for each key storage technology available to meet the system frequency response and regulation, operating and ramping, and energy management needs. As shown, Li-Ion batteries are quite versatile in terms of the range of applications they capture. For example, such batteries can respond quickly (seconds) to cover frequency response and regulation needs with small storage sizes and at the same time cover longer duration storage needs where speed of response is less critical. Flywheels, on the other hand, can provide an even quicker speed of response and hence are ideal for frequency response applications but the storage duration or capability is much smaller.
As discussed above, energy storage may serve three generic system needs – frequency response and regulation, operating and ramping, and energy management. By applying storage in either the transmission, distribution, or customer portion of the electric delivery system, the energy storage owner/ operator may solve one or many system issues and in doing so, earn revenues from supplying multiple service to the grid. For example, in some jurisdictions batteries are paired with renewables to supply quick power bursts to network segments thereby assisting in frequency response when, for instance, clouds pass overhead. After that burst, additional slower acting higher power resources step in to maintain system frequency.
Energy storage applications in the transmission and distribution systems are sometimes termed “utility scale” or “in front of the meter” solutions, while those sited with consumer facilities are often termed “behind the meter” solutions. Storage applied in transmission infrastructure support the bulk delivery of electricity, ancillary services, and infrastructure weaknesses. When added in the distribution systems, storage may also support a challenged infrastructure, as well as enhance customer energy management. When applied “behind the meter”, storage may improve energy quality, support local infrastructure, or help to reduce customer energy costs.
The chart below represents the range of potential storage applications (end uses) across the electric delivery system. A storage system could earn revenues from several sources, depending upon where it is placed in the system (geography), what services the system is designed to serve (design), the market in which the system operates (market), type of owner (owner), and incentives. As the color coding in chart below indicates, there are several common storage value themes including: upgrade deferral, voltage/ VAR support, power quality, reliability, load time shifting, and renewable firming.
Battery Energy Storage End Uses
The table below examines each storage theme in further detail.
This concludes part one in our four part mini-series on the energy storage value proposition. Tune in next week as we move to part two and examine the fundamental of economic storage.
For a full download of our whitepaper, please visit our website.