Removing Barriers for Energy Storage

Last week, the Federal Energy Regulatory Commission (FERC) approved a rule to foster the development of energy storage, a vastly improved form of generation we think will be fundamental in supporting a grid congested with variable power supplies.

FERC Order 841 will “enhance competition and promote greater efficiency in the nation’s electric wholesale markets, and will help support the resilience of the bulk power system,” the commission said.

The order enables energy storage resources to compete in wholesale power markets. It also levels the playing field with conventional sources of generation. The measure removes barriers to participate in capacity, energy, and ancillary services markets administered by Regional Transmission Organizations (RTO) and Independent System Operators (ISO) by recognizing the “physical and operational characteristics” of the resource.

The order comes more than a year after FERC concluded the rules governing the wholesale purchase of conventional sources of generation barred energy storage from participating in the markets offered by RTOs and ISOs.

This could be the beginning of a boon in the development of utility-scale storage in the U.S. and a path to greater efficiency. That’s because energy storage can absorb and store electricity produced by wind and solar power projects for later use when demand is higher. What’s more, further decline in the cost of energy storage is highly likely as development accelerates under the new rule.

The new order, however, does not include aggregated distributed energy resources (DER), despite demands to give DERs the same ability to participate in wholesale markets. FERC said it wanted to gather more information before eliminating the barriers preventing DERs from competing in wholesale markets. 

A Public Necessity

Energy storage projects using rechargeable batteries will give grid managers the solutions they need to fill production gaps created by sharp fluctuations in wind and solar power. The ability to supply utility-scale power on demand will be key to ensuring reliability and achieving integration amid this renewable revolution.

Storing electricity on a large scale has long been pursued by electric utilities in hopes of using the power to cover periods of peak demand. After years of limited progress, several capable systems for storing large amounts of power have emerged from research and development efforts borne from new mandates for energy storage capacity and public demand for cleaner power supplies. Some grid-scale systems are viable now, while others are on the verge of viability.

The outlook for energy storage was improving before FERC approved its new rule. The order will give utilities even greater confidence to add large-scale storage to their systems. The technology is no longer confined to a handful of states and is being adopted by power produces outside niche areas such as California and Ohio.

In 2016, the U.S. added 221 MW of utility-scale battery storage as the cost of those projects continued to drop. Worldwide, more than 1,300 MW of grid-connected storage was deployed in 2016, according to research from IHS Markit. The global annual growth rate is expected to rise to 4,700 MW by 2020 and to 8,800 MW by 2025. Additionally, prices for lithium-ion battery storage are expected to fall below $200 per kilowatt hour, and global storage capacity is projected grow from 4,000 MW today to 52,000 MW by 2025.

Battery storage is still risky and expensive, and many utility executives remain cautious. For rapid scaling to occur nationwide, analysts say prices must continue to fall. For some utilities, battery storage is still not cost effective, despite progress on projects in California and elsewhere.

But the power sector may be forced to bear the cost of energy storage, because it’s plainly evident that energy storage is the ideal solution to resolving concerns about reliability, resiliency and climate change.

As always, if you have questions, criticisms, praise, ideas or suggestions, you can contact me at russellr@pennwell.com.