Battery Storage: After 100 Years, The Market Finally Arrives

Author: Lewis Milford, Clean Energy Group | Project: Energy Storage

Thomas Edison’s 1906 patent for an alkaline battery

The inventor of the battery had few realistic hopes for its success.

In 1893, Thomas Alva Edison, with the light bulb created, had nothing but contempt for his battery competitors’ claims to store electricity, and nothing but praise for his own invention. He told this to a reporter:

The storage battery is, in my opinion, a catch-penny, a sensation, a mechanism for swindling by stocking companies. The storage battery is one of those peculiar things which appeal to the imagination, and no more perfect thing could be desired by stock swindlers than that very self-same thing. In 1879, I took up that question, and devised a system of placing storage batteries in houses connected to mains and charging them in the day time, to be discharged in the evening and night to run incandescent lamps.

But despite his confident public stance, privately he was aware of his own battery’s limitations. Frustrated by years of design problems, with over 140 battery patents, he wrote to his wife that “he hoped there would be no batteries in heaven.”

As it turned out, his nickel-iron battery didn’t fare much better than his competition.

While it was an early success in the first generation of electric cars, it was driven into the trash heap of technological history by the more reliable, mass produced, gas-powered Model T.

But time often proves some geniuses to have been right all along.

It has taken over a century for the technology to overcome many of its nascent shortcomings. Today, battery storage seems finally on a solid path to match Edison’s early boasts.

The world’s leading technology consultant, McKinsey, now says battery storage is the “next disruptive technology in the power sector.” According to a 2017 report, “low-cost storage could transform the power landscape.” The implications are profound:

At today’s lower prices, storage is starting to play a broader role in energy markets, moving from niche uses such as grid balancing to broader ones such as replacing conventional power generators for reliability, providing power-quality services, and supporting renewables integration.

The impressive results for storage are in for 2017. Battery installations were up 27 percent to 431 megawatt hours in 2017. And that growth is expected to double in 2018.

The long-term future potential for market growth is also huge, according to a 2018 study from the Brattle Group:

The study finds that storage market potential could grow to 50,000 MW over the next decade if storage costs continue to decline and state regulatory policies…remove barriers that prevent storage resources from realizing multiple value streams.

This long arc of technological history is important context for how advocates, foundations, and policymakers have approached clean energy strategies in more recent times—with targeted programs and persistent patience—and why such an approach for battery storage is needed now.

Since the 1980s, energy and environmental advocates have promoted technology-specific clean energy policies and public investments. Thirty years ago, these early movements were focused on energy efficiency. The strategies expanded to utility-scale wind in the 1990s and then to distributed solar at the turn of the century.

Targeted utility incentives for energy efficiency jump-started the clean energy market, and they are the mainstay today, three decades after their inception. State and federal policies have created tax credits for wind and solar, state-level utility investment charges, renewable portfolio standards, and net metering for solar photovoltaics (PV) systems, which have led to extraordinary cost reductions and scale up of clean energy markets.

More recently, advocates have called for environmental justice and equity strategies to ensure that these clean energy programs are fairly designed and justly administered to benefit low-income communities.

Now, after a hundred years of technology improvement, an old enabling technology — battery storage — has emerged anew. Whether the title is deserved yet, it is repeatedly called the “holy grail” of clean energy as it could solve the variable production problem faced by many renewable energy technologies, the same power shifting challenge Edison tried to solve.

The technology might well transform all sectors of the economy, with the potential to enable the eventual decarbonization of our energy system. As shown on Figure 1, battery storage is a complex technology that has ever growing applications:

  • It can be scaled to work with different electric generation systems, from building level to baseload power.
  • It can be combined with distributed generation technologies such as solar or wind (onshore or offshore) to reduce fossil fuel emissions.
  • It can produce versatile benefits, including economic, health, safety, and energy resiliency.
  • It can reduce utility demand charges and electric bills for commercial customers and vulnerable low-income residents.
  • It can be used by utilities to reduce regional capacity payments.
  • It can generate revenue from grid applications like frequency regulation.
  • It can provide resilient power for community microgrids like those envisioned for Puerto Rico.
  • It can work in transportation, by enabling electric vehicle (EV) public charging stations to reduce their utility charges, or perhaps, according to some of its wildest boosters, to power electric airplanes.

These varied uses, which will only expand over time, are what makes battery storage technology so important to clean energy and climate change. While we are at the earliest stages of this technology’s development, storage could be a critical transformational enabling energy technology for this century.

Whether it lives up to this potential will depend on technology developments and policies.

We have seen an historic reduction in the cost of battery storage in the last few years. No longer a distant dream of Edison, cost declines have made battery storage an everyday part of our lives—from laptops to electric vehicles to stationary, building-sized batteries.

The price of lithium-ion batteries dropped more than 70 percent between 2010 and 2016, following a pattern of 19 percent cost reductions with every doubling of global capacity, a trend that is expected to continue, as shown in Figure 2.

And, right on time, according to Bloomberg New Energy Finance’s most recent 2017 numbers, the costs of battery storage have “fallen by a remarkable 24 percent since 2016”—far exceeding their earlier projections. In a late March 2018 cost update, BNEF wrote, “the conclusions are chilling for the fossil fuel sector.”

Battery technology is not made by hand as in Edison’s day, and its costs are not tied to volatile fossil fuel prices. Rather, this is the first time in history that energy technologies like solar—and now battery storage—can benefit from the same cost-reducing, manufacturing economies of scale that produce ever cheaper and ubiquitous information-age technologies like personal computers, cell phones, and disk drives.

Due to cost reductions, there are three obvious storage applications where the economics work now.

First, they make financial sense for commercial-customer applications located behind the meter, where batteries can reduce demand changes and provide resiliency, while adding value to solar installations at the same time.

Second, battery storage also could replace economically a significant number of the hundreds of gas peaker plants—especially those polluting, less frequently run plants located in heavily congested grid areas with high utility costs—in the next few years.

And third, there are numerous utility-scale storage projects coming on line in many states that will enable more renewable energy resources onto the grid and reduce transmission and capacity costs.

These three, reasonably certain, economically-driven markets could propel storage into the mainstream and produce significant environmental and economic benefits.

Additionally, in future energy markets, there might be ways for renewables and storage to replace or reduce reliance on baseload fossil-fueled plants, a topic of intense debate.

To crack these markets, there are still numerous barriers inhibiting greater storage adoption, as was the case for the solar industry about 20 years ago. For storage, these barriers include information gaps about technology options, costs, safety, benefits, and other market barriers; an absence of coordinated state and federal policies and programs to achieve cost reductions and encourage market uptake; and a lack of constancy across available incentives, financing options, and business models.

We have seen some limited combination of federal tax credits, state mandates, incentives, and other programs begin to shape the direction of early storage market development. But to overcome these obstacles and scale up the technology in time to address climate and other pressing energy needs, more supportive policies and strategies are needed.

Future storage policies are likely to resemble more the socket wrench than the hammer, geared to fit the multiple and still emerging applications that this technology offers. Like technology innovation itself, this policy process should be driven by progress and adapted to new data and opportunities—ratcheted to fit new markets taking shape. Different types of analyses and policies will be needed for each application.

The environmental community and its philanthropic supporters should lead this effort. They can help shape this 100-year-old technology curve to serve public purposes today—reduced carbon emissions, broad clean energy equity, and expanded economic benefits—and not just to serve short-term, private interests, but to benefit all.

We need to jump-start new strategies for clean energy, climate, and environmental justice advocacy that fully incorporate the benefits from battery storage.

The environmental community and its philanthropic supporters should lead this effort. They can help shape this 100-year-old technology curve to serve public purposes today—reduced carbon emissions, broad clean energy equity, and expanded economic benefits—and not just to serve short-term, private interests, but to benefit all.

Clean Energy Group wrote a comprehensive new report on how this can be done – read it here.

Recharging the Clean Energy Transition with Battery Storage

Author: Lewis Milford, Clean Energy Group | Project: Resilient Power Project

It’s rare to have an opportunity to shape an energy technology market as it emerges.

Today, battery storage is that energy technology.

The world’s leading technology consultant McKinsey now says battery storage is the “next disruptive technology in the power sector.” According to its 2017 report, “low-cost storage could transform the power landscape.”

“At today’s lower prices, storage is starting to play a broader role in energy markets, moving from niche uses such as grid balancing to broader ones such as replacing conventional power generators for reliability, providing power-quality services, and supporting renewables integration.”

U.S. battery installations were up 27 percent in 2017, and that growth is expected to more than double in 2018.

Whether the title is deserved or not, battery storage has been called the “holy grail” of clean energy as it could solve the variable production problem faced by many renewable energy technologies, the same power shifting challenge Thomas Edison tried to solve when he invented the battery over a hundred years ago.

The technology might well transform all sectors of the economy, with the potential to enable the eventual decarbonization of our energy system.

But there are still numerous barriers inhibiting greater storage adoption, as was the case for the solar industry about 20 years ago. For storage, these barriers include an absence of coordinated state and federal policies and programs to reduce costs and encourage market uptake.

For the last five years, Clean Energy Group has been working to understand how battery storage will change future clean energy markets. Over this time, groups as diverse as state policymakers, cities, low-income community-based organizations, industry, environmental advocates, foundations, and investors have asked us questions about what is needed to ensure energy storage serves environmental, equity, and economic needs.

Now, we are setting out our best answers to those questions in a new report out today entitled “Jump-Start: How Activists and Foundations Can Champion Battery Storage to Recharge the Clean Energy Transition.”

This first-of-its-kind report is designed for activists and foundations—and for the policymakers who should respond to them—who want to understand how battery storage can become a new part of their clean energy, environmental justice, and climate advocacy efforts.

The analysis tries to answer two basic questions: (1) What do leaders need to know to understand these opportunities, and (2) what actions should we take to realize them?

The report describes 10 key trends for battery storage in the energy system.

In response to these trends, the report proposes more than 50 actions to accelerate the uptake of battery storage as a major part of the clean energy transition.

These 10 areas are:

  • Lower Electric Bills: Reducing Demand Charges. The commercial customer-sited economic case for behind-the-meter storage is working.
  • Resilient Power: Providing Protection in Storms and Outages. In disasters and everyday life, resilient solar PV and battery storage (solar+storage) systems prove better options to protect against power outages.
  • Equity and Justice: Bending the Arc of the Technology Curve toward Vulnerable Populations. Low-income people should benefit from resilient power now, not years from now through technology trickling down.
  • Public Health: Creating Greater Protection for Medical Care and Hospitals. Health care facilities should start to explore use of solar + storage for cost reductions and power protection.
  • Finance: From Mainstream to Low-Income Markets. A tale of two financial worlds demands more action to get new resilient power technologies to the poor.
  • The Future of Solar: It’s Storage. With changing net metering policies, evolving utility rates, and the need for more flexible generation, storage is essential to the future success of solar.
  • Emissions Reductions: Replacing Fossil-Fueled Peaker (and Maybe Baseload?) Plants. Battery storage could soon put many fossil-fueled peaker plants at economic risk now, a competitive disruption possibly facing existing or new fossil-fueled baseload plants over the longer term.
  • Utility Markets: Emerging Role of Large-Scale Energy Storage Systems. In-front of-the-meter battery storage is a way to reduce grid-level capacity payments and secure other system benefits.
  • Electric Vehicle Charging: Optimizing Price and Reducing Power Outages at Public Charging Stations. Utility demand charges and the risk of power outages demand use of onsite storage at public EV charging stations along major highways and transportation routes.
  • International: Becoming a Global Market. The time is right for an international collaborative effort to scale up storage and overcome market obstacles.

The actions will accelerate the rate of storage adoption, which will, in turn, facilitate increased renewables deployment, reduce emissions by displacing fossil-fueled power plants, increase energy democracy through decentralization, and boost the efficiency and reliability of the grid.

And it bears noting here that the advance of storage is especially important for metropolitan and urban populations. Instead of the typical, delayed technology trickle-down, the report recommends that policymakers act to ensure that low-income, vulnerable people in urban areas have access to battery storage technology from the start. One way to do that is to use solar and battery storage to replace potentially scores of existing, infrequently run gas plants—called peakers—that are today polluting many urban neighborhoods, with disproportionate impacts of low-income communities.

 

This blog post was also published in Brookings Institution – The Avenue.

FERC 841 Opens Markets to Energy Storage

Author: Todd Olinsky-Paul, Clean Energy Group | Project: Clean Energy States Alliance

Photo by Ryan McKnight via Flickr.

FERC order 841 was hailed by some as a watershed moment in energy storage history, but the devil’s in the implementation.

Taken at its most basic level, what the FERC did was simple: its order 841 states that operators of regulated wholesale electricity markets – otherwise known as Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) – must make sure those markets are open to the provision of services by energy storage resources.

That doesn’t sound particularly earth-shattering – more like common sense. What’s surprising, or should be, is that such an order was needed in the first place.

The fact is, in many cases, energy storage resources that are technically capable of providing important grid services at competitive rates are not currently allowed to do so, simply because the rules governing such markets exclude them. In other words, the existing rules employed by independent grid operators serve to protect incumbent resources, like gas peaker plants, from competition in the form of energy storage resources, which are often faster to deploy, may ultimately be cheaper to operate, and provide a faster and more accurate response to market signals.

If this sounds obscure, it is. Most people don’t even realize these energy markets exist. But that doesn’t mean they are unimportant. They are critical for maintaining a balanced electric grid; furthermore, they are big business. In ISO-New England alone, some 500 market participants bought and sold energy services worth $6.1 billion in 2012. For this reason, the importance of opening these markets to the energy storage industry can hardly be overstated.

Order 841 signals FERC’s recognition that technology has outstripped regulation in these markets. In it, FERC observes that “barriers to the participation of new technologies, such as many types of electric storage resources, in the RTO/ISO markets can emerge when the rules governing participation in those markets are designed for traditional resources and in effect limit the services that emerging technologies can provide.” FERC also asserts that “existing RTO/ISO market rules are unjust and unreasonable in light of barriers that they present to the participation of electric storage resources,” and finds that such market barriers “reduce competition and market efficiency…. Where such conditions exist, resources that are technically capable of providing services are precluded from competing with resources that are already participating in the RTO/ISO markets.”

It’s a classic case of markets, policy and regulation not keeping up with advances in technology. This is a pervasive problem; it’s what the Massachusetts State of Charge report identified as the major barrier to bringing energy storage deployment to scale, and it’s what FERC 841 aims to fix in the markets FERC oversees.

The fix comes in the form of a blanket order to make markets accessible to storage, plus some specific requirements. Grid operators are given nine months to create a “participation model” for storage – a set of rules that ensures storage is allowed to provide any and all services it is technically capable of, even if the service is one the grid operator doesn’t purchase through an organized market.

FERC 841 also requires that storage resources be allowed de-rate their capacity to meet minimum run-time thresholds. This is particularly important in that it recognizes the inherent flexibility of energy storage. A 1-MW, 1-hour battery, for example, would not be able to meet a minimum 2-hour run time threshold if it bids in as a 1 MW resource, but the order recognizes that the same battery can discharge over two hours, at a rate of 0.5 MW/hour. So, by derating its capacity 50%, the resource is now able to meet the threshold requirement, and bid into the market. FERC has also stipulated that the minimum resource size to enter these markets must not exceed 100 kW (grid operators serving the Midwest, New York and New England all currently limit resource sizes to a minimum of 1 MW, effectively excluding most distributed resources).

Once the ISOs and RTOs have obtained FERC approval of their proposed participation models, they will have one year to implement them. Implementation, of course, is where the rubber meets the road, and in this case, there is some latitude for interpretation that could mean 841 has greater impacts in some markets than in others.

We’ve been through this before; after FERC’s order 755, which required equitable pay for performance in the frequency regulation markets, PJM, the ISO serving the mid-Atlantic states, swiftly and aggressively created a two-tiered system with premium payments for faster, more accurate resources. The result was a temporary boom in energy storage deployment in PJM. Some other grid operators implemented 755 less aggressively, and did not create similarly dynamic markets.

What is already clear is that some grid operators and utilities intend to fight FERC’s new requirements.  The Midcontinent Independent System Operator (MISO), along with several utilities and utility groups, has already filed for a rehearing on the FERC order.

The Clean Energy States Alliance (CESA) hosted a webinar on April 4 with speakers from Customized Energy Solutions to discuss FERC Order 841 – slides and a recording are available here. In another webinar on April 26, CESA is joined by guest speaker John Moore, Director of the Sustainable FERC Project at NRDC, for a broader discussion on FERC and clean energy. Read more about this webinar here.

 

This blog post was also published in Renewable Energy World.