Everybody knows that grid-scale energy storage belongs firmly in the category of “well… maybe someday.”
Well… maybe today, at least according to a top European consultant. While we've been paying attention to other things, storage has tiptoed to the threshold of viability. Utilities who fail to pay attention may be missing one of the cleanest, most effective ways to solve a wide range of grid issues. And, perhaps, even a new line of business.
It was Dirk-Jan van Ouwerkerk, the Paris-based Senior Manager of Corporate Value Associates, who helped me notice how the equation has changed. CVA’s recent research into grid-scale storage was eye-opening, van Ouwekerk told me during a recent confab. How has storage gotten to the tipping point while staying in stealth mode? At least three factors are at play.
1. The intersection of two trendlines. Energy costs are going up. Storage costs are coming down. Neither change has been fast enough or dramatic enough to make the case for storage by itself. But the two lines have now crossed so that storage can legitimately pay for itself in certain high-value grid applications (where constraints prevent other solutions). And those trendlines are accelerating. Electricity prices are clearly on the rise in most parts of the world. Meanwhile, the billions earmarked for R&D for automotive batteries seems certain to bring battery costs down even further.
2. The intersection of multiple business cases. Previously, utilities often tried to justify grid storage through a single benefit. Today we realize that storage can often provide multiple benefits and multiple savings. Examples include deferring transmission, peak shaving, ancillary services, backup capacity, and renewables integration. Combining multiple benefits can often create a compelling business case.
3. The arrival of sufficient pilots and deployments. Although it has gone largely unnoticed, the industry is garnering enough installations to provide sufficient real world data points. American Electric Power, for instance, now has 7 MW (50 MWh) of sodium sulfur batteries operating at four different substations, with an additional 4 MW coming online in early 2010. In addition to load leveling, the batteries provide backup power to thousands of residential and commercial customers through dynamic islanding. Just recently, AEP obtained a $75 million DOE grant to scatter 25 kW lithium ion battery banks throughout neighborhoods in a scheme it calls "community energy storage." Detroit Edison won a smaller grant that will pay half the cost of a $10.8 million project with similar goals.
When it comes to the suppliers of grid-scale storage, there’s Japan’s NGK and its proven product line and then there is everybody else. NGK garnered several significant multiyear battery orders in 2009, including 300 MW worth to Abu Dhabi's Water & Electricity Authority and 150 MW to France's EDF.
In search of business models. AEP’s foray into distributed storage may be the harbinger of a new line of business -- managing “virtual” storage that could ultimately encompass hundreds of small, distributed batteries under central control (perhaps linked with distributed generation as well). “Most utilities are staring too hard at technology costs,” warns van Ouwerkerk. “They are just waiting for them to come down to the point they can substitute storage into existing business models. They should also be looking at new business models.”
I agree that new business opportunities are appearing around storage (and around many other new technologies) and that utilities need to decide whether to participate -- or whether to cede those markets to others. I’ll return to that topic in future posts. In the meantime, I urge you to pay attention to energy storage from both sides -- from the technology side and from the business side.
Smart Grid energy storage projects at AEP (T&D World article) Smart Grid energy storage community energy storage project at AE) (SGN article) Smart Grid energy storage community energy storage project at Detroit Edison Community energy storage resources at AEP Community energy storage resources at EPRI (FTP site)
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