Last week, EPRI released a white paper on energy storage, which generated a lot of excitement. Many read the white paper as concluding that the market for grid-connected storage was 14 gigawatts and that the market would open once the price of electricity storage falls to $700-750 per kilowatt hour.
The reality, as always, is a bit more complicated. EPRI’s white paper on storage was one of three major white papers released within the last year (the other two published by Sandia National Laboratory and Southern California Edison; all three can be read at: http://naatbatt.org/publications/articles/). All concluded that the market for grid-connected energy storage was potentially quite large but that the costs of building new energy storage facilities did not yet in most circumstances justify the benefits that electricity ratepayers would receive from them.
The focus of the white papers on the benefits of storage was proper. It is important when talking about energy storage not to fixate on the costs of the storage itself, but rather on the value of the benefits that energy storage can bring. This is, by and large, what EPRI, Sandia and SCE did. The $700-750 per kilowatt hour figure EPRI cited is not so much a price target as it is EPRI’s estimate of the value that storage can bring to the grid in certain circumstances. The EPRI white paper noted (as did Sandia and SCE), however, that the value of the storage benefits vary wildly depending upon where the storage is located and for what purpose it is used.
One consistent theme of all three white papers was the possibility of maximizing the theoretical value of storage by having a single storage facility perform, or “bundle”, a number of different functions. For example, one stationary battery might during certain hours of the day be deployed to provide frequency regulation, during other hours to arbitrage peak power prices, and at other times of low electricity demand to wheel power into areas where peak power demands would otherwise accelerate the depreciation of transmission and distribution infrastructure.
The EPRI, Sandia and SCE white papers all provide a detailed analysis of the dollar value of storage to electricity ratepayers. What the white papers did not do, however, is value the energy security benefits that energy storage can provide to the nation as a whole.
The energy security benefit of grid-connected storage largely arises from two attributes of certain storage applications. The first is the ability of energy storage, when deployed on the distribution portion of the grid, to permit the formation of local micro-grids, which can protect the grid from disruption cause by attacks and natural disasters. The second is the ability of distributed energy storage systems that use vehicle-compatible batteries to help bring down the cost of electric vehicles and reduce petroleum imports.
The energy security benefits of storage are problematic because they are hard to value in economic terms and impossible for individual utilities or storage developers to monetize. It is one thing to ask a regulator for permission to invest in a storage facility in Ohio that will save Ohio ratepayers $1 million in maintenance expenses. But it is quite another to ask permission to invest in that same facility because it will reduce the cost of electric vehicles and save Florida consumers $1 million in gasoline purchases.
Many of the benefits of storage are national in scope and do not, and never will, enter into the cost/benefit analysis that utilities and state regulators make in deciding on energy storage investments. The energy security benefits of storage are, however, very real. Federal energy policy must find a way to recognize those benefits and to share them with the utilities and local ratepayers that are being asked to invest in energy storage systems. If the energy security benefits of storage could be recognized and shared, the $700-750 per kilowatt hour value attributed to storage by EPRI could turn out to be much higher, and the 14 gigawatt market much closer, than assumed.
Photo by tungphoto.