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California Energy Markets / Bottom Lines

[March 1, 2019 / No. 1529]

Developers See Huge Growth for Storage as Capabilities, Usage Expand

Energy storage appears to be on an inexorable path to huge growth, with a new federal rule pushing widespread integration into wholesale energy markets, an effort that so far has been most robust in California.

For developers and other financial interests, the movement toward storage is fertile ground and represents a potential seismic shift as the need to balance solar and wind resources grows, especially in California. But those working to integrate the new resources find themselves wrangling with issues of technology and grid operation, and the need to develop new market rules in a way that ensures storage is integrated in an equitable way to other resources.

New applications for storage are rapidly being developed, judging from comments by developers and others on Feb. 26 at Storage Week in San Francisco, held by Infocast at the Hotel Kabuki in the enclave of Japantown. The conference tackled myriad subjects around storage, discussing the challenges of a brave new world for the technology in terms of energy planning, contracting, grid operation, regulation and markets.

Fluence Energy Chief Operating Officer John Zahurancik.
Fluence Energy Chief Operating Officer John Zahurancik. Photo: Jason Fordney
Cypress Creek Renewables Director of Business Development/Energy Storage Brian Knowles.
Cypress Creek Renewables Director of Business Development/Energy Storage Brian Knowles. Photo: Jason Fordney

An often-cited role of storage technologies like lithium-ion batteries is to absorb excess renewables such as solar and inject energy back into the grid when fast ramping is needed. While battery storage is a primary area of focus, other technologies are being explored. Storage technologies also include traditional hydro-based resources like pumped hydro, gravity-fed systems where water is stored for later release and power generation, illustrating the wide parameters around the storage concept.

Storage was initially useful for regulation service and other ancillary services that provided a beachhead to getting into the market as storage proved its technical value in providing fast response, Fluence Energy Chief Operating Officer John Zahurancik said during a panel discussion. But in recent years, the price of storage has dropped, and it is now doing jobs related to capacity, energy, replacement of natural gas peaking units, and backup of intermittent solar generation.

"I think it is that the core economics have gotten better over time as these systems have matured, and I think more people are recognizing these flexibility dynamics as having value, too," Zahurancik said. Fluence is an Arlington, Virginia-based storage developer that is a unit of Siemens and AES.

"People are really starting to really look at storage as a viable solution for a lot of traditional problems," Brian Knowles, director of energy storage at Cypress Creek Renewable Energy, said. He mentioned the island of Nantucket, Massachusetts, where National Grid elected to install a 45-MWh battery system rather than construct a new undersea transmission line to the island.

"That just makes a lot more sense to serve that summertime peaking capacity," Knowles said of the Nantucket battery project, which is contracted to utilize Tesla batteries. When asked if storage is only useful for niche applications, Knowles said: "There's Nantuckets all over the grid." Storage is likely to play a growing role as an alternative to the difficulties around building new transmission lines to solve congestion issues, he said.

In December, California Independent System Operator President and CEO Steve Berberich told the CAISO Board of Governors that storage—particularly behind-the-meter—is the most significant planning challenge facing the ISO (see CEM No. 1518 [14.1]).

As of late summer last year, CAISO had in its queue 116 interconnection requests by energy storage resources totaling 23,139 MW. Since 2016, more than 200 MW of greenfield energy storage has interconnected to the CAISO transmission system, and other storage resources have interconnected to the distribution grid. The onslaught of storage projects comes as the ISO is also dealing with the operational impacts of massive additions of rooftop solar, natural gas-fired generator retirements, electric-vehicle growth, and other developments.

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CAISO and other ISOs and regional transmission organizations around the country recently filed compliance plans for a new landmark federal rule on storage integration that is poised to advance the technology. The Federal Energy Regulatory Commission's Order No. 841 required reduction of barriers for storage to compete in wholesale markets [ER19-468]. CAISO, driven by state mandates, was already in compliance with most of the federal rule, which is drawing comment from industry and others (see CEM No. 1517 [14]).

CAISO recently launched the latest phase of its multiyear effort to further enable participation of energy storage and distributed energy resources in its markets, known as Energy Storage and Distributed Energy Resources Phase 4 (see CEM No. 1526 [19]).

"We start with the niches and the beachheads, but as the costs of storage continues to decline and as all the various different use cases are recognized and valued by utilities, it becomes a very, very big market," esVolta President Randolph Mann said at Storage Week. He estimated the capacity of gas-fired peakers around the country at 100 GW, "but storage can do a lot of those jobs," he said, and can also help to manage the forecast higher penetration of wind and solar on the grid.

"I think it becomes a very, very big market compared to where it is today," Mann said. –Jason Fordney

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