The Top Three Benefits of Energy Storage to Utilities Today
Rapid Growth: The Energy Storage Sector Today
Utility-scale battery energy storage system (BESS) installations in the US grew 196% to 2.6GW in 2021 according to the American Clean Power Association (ACP). Measured in energy, utility-scale BESS capacity quadrupled to 10.8 GWh over the course of the year.
Today, the ACP notes 187 projects in the 12.5GW pipeline for battery storage – of which 48 are stand-alone with 139 hybrid (paired with a renewable power source).
The market is growing and the time is right to start thinking about how storage can integrate within your utility system.
Why Energy Storage: What can Energy Storage do for Your Utility?
Historical transmission rates have gone up by double digits in many markets, including ISO-NE, ERCOT, PJM-AEP, and MISO. We’ve seen a huge increase in transmission costs, and we’ve been seeing more transmission owners investing money into infrastructure (which only means that rates are going to continue to increase).
For utilities looking to reduce capacity and transmission costs—or hedge against future cost increases—energy storage is an optimal solution. Often referred to as the “Swiss Army knife” of solutions, the versatility of energy storage can do many things, depending on the application.
The primary benefits of energy storage includes reducing costs for utilities (and your communities). Other benefits include decreasing carbon emissions and integrating or maximizing renewable energy, and improving reliability. Energy storage can provide benefits to your utility on its own, or paired with solar energy (solar-plus-storage).
Further, the features of battery storage (the most common form of energy storage), include a small footprint, quiet and pollution-free operations, instantaneous response, and the ability to provide added capacity during grid peaks, making it an ideal solution for utilities.
Top Three Benefits of Energy Storage for Utilities
There are many benefits of energy storage to utilities and their customers but those benefits partly depend on the application. Regardless of the application, however, these are the top three benefits of utility-scale energy storage:
1: Cost Savings.
With inflation and increasing transmission costs, we know that reducing costs is a top priority for utilities and their customers. Energy storage can add capacity, which provides diverse services to utilities, such as lower costs and new revenue streams. Ultimately, utilities will be able to pass any savings from an energy storage system on to their customers (members or ratepayers) in the form of lower electricity bills. These services include peak shaving (coincident and non-coincident), frequency regulation, voltage support, demand response, system resiliency, and emergency power during critical outages, among others.
Energy storage is also an instrumental tool in the Non-Wires Alternative (“NWA”) toolkit – a category of projects that includes energy storage, DERs, energy efficiency, and demand response – that aim to defer or eliminate the need for traditional, costly, transmission and distribution infrastructure upgrades. In other words, because energy storage allows utilities to defer or eliminate the need for infrastructure upgrades, those costs are also deferred or eliminated, benefitting both the utilities and their customers.
Generally speaking, Convergent’s customers will save around seven-figures over the life of a battery storage system or solar-plus-storage system, depending on their capacity and transmission costs or peak demand costs, their risk tolerance, and other variables. In some cases, utility customers can save their communities around 10 million dollars over the life of the system. For a custom quote, please reach out to us!
2: Sustainability.
To meet the electric grid’s highest periods of consumption, also known as “peak demand,” utilities often rely on natural gas peaker plants, which can quickly ramp up production to meet the needs of the grid. Those plants, however, are expensive, oftentimes inefficient, and carbon-intensive. On the other hand, battery storage systems (especially when paired with solar), produce zero on-site greenhouse gas emissions and may be deployed to augment peaking capacity or replace the need for peaking generation entirely!
The battery storage system is typically charged during off-peak times using clean energy and discharges during peak times, thus replacing fossil fuel generation. In this way, battery storage can defer the construction of new peaker plants, expedite the retirement of existing fossil generation, and avoid costly transmission and distribution system upgrades. New York and Massachusetts have both established “Clean Peak” and “Time-of-Use” standards for this purpose, developing a market for renewable energy players to accelerate the pace of renewables and energy storage deployment. Energy Storage helps to enhance grid resiliency and power quality by providing benefits to the electricity grid more broadly.
3: Reliability.
Historically, power on the grid has flowed in one direction (from generation to transmission to distribution to customers) but with more and more customers producing their own power, i.e., solar panels at businesses or residences, power is now flowing in multiple directions. The grid was not built for this. Nor was it built for the proliferation of extreme weather events produced by climate change.
The future of energy depends on our ability to store it.
Energy storage can increase reliability in multiple ways. First, energy storage can “firm up” renewable resources, maximizing their value to the grid. Second, by increasing capacity and resiliency on the grid at the most strategic times, intelligently deployed energy storage avoids or defers the need to build out new infrastructure (wires), which is called a Non-Wires Alternative. Third, energy storage can provide additional local and system capacity at the most critical times.
Energy Storage: Key Decisions and Next Steps
When it comes to energy storage, there are a few key decisions to make including whether to own the system outright or contract for its services with a partner like Convergent. There are benefits to both options, and we try to help customers find the best solution for their needs. You can read more about owning versus contracting a battery storage system in a recent blog post.
Once you decide whether or not you want to own the system, other key decisions will fall into place (the system size and location, the type of technology, operations, and maintenance).
Energy Storage Adds Value Immediately: Start the Conversation Today!
Energy storage is necessary for our power system; it’s the key to not only saving your community money but also creating a more flexible grid.
The future of energy storage is now. We’re having more and more conversations with utilities that are looking to deploy a battery storage system to reduce costs, increase sustainability, and improve reliability.
It’s an exciting time for us at Convergent; it’s rare that a business creates a win-win-win. Our energy storage solutions are a win for our customers, (a win for us!), and a win for communities and the environment.
If you’re interested in learning more about how energy storage can benefit your utility, please contact us today for a free, customized evaluation.
ESSs can help alleviate thermal overloading on transmission lines, manage power flows, and balance renewables by reducing peak loads and absorbing excess power, thus potentially extending transmission asset life and deferring the need for new infrastructure.
Further, integrating these resources with advanced grid automation technologies can help detect and respond to grid disturbances such as power outages or voltage fluctuations, thereby potentially providing operational flexibility and increasing resilience. The Midcontinent Independent System Operator and Southwest Power Pool have implemented storage as transmission-only assets, while other regions are still assessing feasibility.34
Business models and use cases
- Virtual power plants: By aggregating BTM ESSs with other DERs and controllable loads using software, virtual power plants can help balance the grid without investment in additional power generation plants.
Use case: In 2021, Green Mountain Power (GMP) introduced a program that allows 200 customers with Tesla Powerwall batteries to create a virtual power plant. The batteries are intended to help balance the regional power grid, replacing fossil-fuel peaker plants during peak demand. This initiative aligns with GMP’s four-year-old Powerwall program, which reportedly saved over US$3 million in 2020 by reducing electricity purchases during price spikes. GMP pays participating customers US$13.50 monthly, benefiting the environment and all customers through reduced power supply costs.35
- Storage as a transmission asset: Deploying storage systems strategically on the transmission network can help address multiple grid challenges and provide valuable services. Several states have initiated studies to evaluate the role of energy storage as a transmission asset.
Use case: A recent New York study proposed adding a 200 MW/200 MWh storage as a transmission asset instead of a new 345 kV tie line to help increase the power transfer capability and reduce congestion. Its estimated cost would be US$120 million, compared to the US$700 million capital cost for a wire-based solution. In addition, depending on where it was situated, local congestion savings could add up to around US$23 million annually.36
Electrification and decentralization support
The primary objective of this dimension is to facilitate the electrification of end-use sectors and support the integration of DERs in a decentralizing electric grid. The industry can leverage various storage strategies to help support electrification and decentralization.
Integrate storage with electric vehicle–charging infrastructure for transportation electrification: Energy storage can gain from transportation electrification opportunities, such as investments made through the Infrastructure Investment and Jobs Act to deploy a network of EV charging stations nationwide.37 Integrating energy storage with EV charging infrastructure can enable fast charging during peak demand periods, especially in supporting regions where grid infrastructure lags behind in EV adoption. This integration may not only alleviate grid stress but could also help EV fast-charging station profitability, which prohibitive demand charges can challenge.38 Moreover, electric power companies can leverage EV batteries to offer innovative solutions like vehicle-to-home backup power and upcoming vehicle-to-grid infrastructure support. The emerging secondary market for repurposed EV battery storage could hold promise for stationary grid storage system applications, potentially fostering technological advancements and embracing opportunities for a sustainable circular economy.39
Power and heat storage solutions for industrial electrification: The industrial sector represents 28% of US primary energy-related CO2 emissions annually, or 1,376 MMmt of CO2.40 As industrial companies electrify assets to help reduce their scope 2 emissions, many will have 24/7/365 demand requirements. This demand growth could occur during periods when renewables are not generating. Different energy storage technologies can facilitate industrial electrification and decarbonization, while tailoring solutions to each sector’s unique needs. In the chemicals sector, process heat requirements can create opportunities to electrify and incorporate storage to add flexibility and resiliency. In the mineral manufacturing industry, synthetic, fused, and engineered oxide minerals are manufactured in electric arc furnaces. As the processes are primarily electrified, they can already leverage battery storage paired with demand response programs. Additionally, electric furnace waste-heat capture and utilization using thermal storage could store process heat for later use. The iron and steel industry could benefit from hydrogen storage for both fuel and process reactions. Process electrification can offer further opportunities to harness battery storage, while waste gas can provide operational backup. Meanwhile, cement manufacturers could potentially meet thermochemical heat requirements through solar thermal energy or electric heating coupled with thermal storage solutions.41
Integrate energy storage in microgrids and community-based solutions: A community resiliency energy storage program could be integrated into utilities’ IRP processes, which can focus on identifying and serving customers’ needs and addressing their energy vulnerabilities. Implementing community-based microgrids integrated with energy storage and renewables in underserved areas could potentially provide access to more reliable and affordable electricity. The microgrid generally deploys localized energy storage systems within a community, helping to ensure energy security, demand response, and grid independence during emergencies and peak demand periods. It can enhance resiliency and affordability and act as an equity asset, potentially providing reliable and affordable electricity to underserved communities.
Use storage to support potential peer-to-peer (P2P) energy trading platforms: P2P trading platforms on which consumers and prosumers42 trade electricity among themselves can be a challenge to implement, but they may be a potential future use case. The electric company could connect, manage, and maintain the P2P sharing network and use energy storage to facilitate energy sharing. They could charge transaction fees for grid stability assurance, efficient settlement processing, and energy storage utilization.
Business models and use cases
- Storage as an equity asset: By deploying decentralized storage assets, electric power companies can help provide reliable, resilient, clean, and affordable electricity to low-income communities.
Use case: In a recent IRP document, Portland General Electric explored community-resiliency microgrids and solar and storage setups with islanding controls for continuous power during grid outages. Microgrids differ from other solar plus storage plants by incorporating advanced communications and controls to coordinate diverse DERs within microgrids.43 The investigation identified 100 MW potential by 2030. Portland General Electric expects it to help enhance grid resilience, promote sustainable energy solutions, and fulfil equity objectives, potentially making electricity more affordable in low-income communities.44
- Microgrid-as-a-Service: The Microgrid-as-a-Service (MaaS) business model can offer customers, especially in the commercial and industrial segments, turnkey access to microgrid infrastructure, battery storage, and renewable energy sources through subscription-based arrangements, helping to ensure reliable and resilient energy supply without any upfront investment.
Use case: Xcel Energy (“Xcel”) introduced the Empower Resiliency program for Minnesota’s large commercial and industrial customers. The microgrid-based service is designed to enhance reliability for customers requiring higher-than-standard service. Xcel owns, installs, and maintains microgrid assets, including battery storage and renewable energy, providing a turnkey resiliency solution and upfront capital. The program, which Xcel previously offered in Wisconsin, reflects a growing trend of microgrid adoption, as the US market is expected to expand 19% annually through 2027.45