Siting batteries “behind the meter” makes major economic sense

Every week there are more and more articles on the so-called “energy storage revolution.” Chris Mooney writes a good article in the Washington Post about the findings of a recent new study. What are your views?

 

How batteries for homes and businesses could already make economic sense

Last week, a study in Energy Policy gave a new glimpse into why, despite much anticipation, the so-called energy storage revolution — in which adding batteries or other energy storing devices to the grid lets us decide when we actually want to use electricity that has been generated — has been stalled. In particular, the research found that cheap natural gas has presented direct economic competition to two major uses of energy storage on the large-scale electric grid, rendering storage less profitable.

But if new research from the energy think tank the Rocky Mountain Institute is correct, that still leaves eleven major possible uses for one leading form of energy storage – batteries. The study finds 13 separate ways that batteries could help the electric grid and electricity consumers, and argues that thus far, power companies and other users have failed to adequately recognize how many of these uses can be paired together, giving batteries multiple roles and thereby, much larger economic value.

The result is that even where they’re installed, we’ve often been under-utilizing batteries — and that the devices might already be a smart economic bet for power companies (and customers) if employed to their max. “Under prevailing cost structures, if batteries are allowed to deliver a stack of services to both customers and the utility, they could be cost effective today,” says the Rocky Mountain Institute’s Jesse Morris, an author of the new report.

Granted, Morris also acknowledges that electricity regulations would have to change to allow for some of these possibilities — but he notes that some states, like New York and California, appear to be already moving in that direction anyway.

Batteries burst into broader view earlier this year when Tesla Motors introduced the Powerwall, a home battery with two different versions — one for backup power, and one for daily use storing and discharging electricity. But according to the Rocky Mountain Institute, backup power is just one possible battery use, and leaves the battery doing nothing most of the time (hopefully, anyway).

The same is true for bigger batteries deployed to help the grid, says the Rocky Mountain Institute report. “Most systems deployed to date are comprised of single-use, underutilized batteries,” it states. “These batteries may sit unused for anywhere between 50 to 95 percent of their useful life when dispatched to provide only one primary service. This is a waste of a useful asset, and increasing the utilization factor of batteries by re-dispatching them for an additional stack of services once they have performed their primary intended use … can create additional value for all electricity system stakeholders.”

Indeed, the new study finds that siting batteries “behind the meter” in homes, businesses, and large buildings, and then freeing them up for multiple uses — including aggregated ones in which large numbers of distributed batteries are paired together — makes major economic sense.

For example, the report notes, a large battery in a hotel in San Francisco — one of the report’s case studies — could save the hotel a lot of money by kicking on to help avoid “demand charges,” which the utility assesses whenever electricity use exceeds a certain level.

But that doesn’t use up all of the battery. “They might only need their battery to be charging or discharging for 3 hours” to serve this role, says the Rocky Mountain Institute’s Garrett Fitzgerald, the report’s lead author. “The remaining 21 hours is capacity that’s not used.”

During these hours, the report argues, the battery could be “dispatched” elsewhere to helps smooth supply and demand on the grid, or to help reduce peak demand, thus contributing to the avoidance of costly investments by utility companies. And these kinds of additional uses could make the battery system more valuable and earn its owners more money. Adding it all together, according to the Rocky Mountain Institute’s modeling, makes the whole system more than worth the initial investment.

The report finds similar value propositions for smaller batteries in individual homes, which can be used both to store solar energy for use at times when electricity is more pricey, but then also – at least theoretically – aggregated with similar systems to perform other roles.

Moreover, these calculations are for current battery technology costs, and the Rocky Mountain Institute researchers — and many other experts — expect batteries to get cheaper and cheaper over time. “The proliferation of electric vehicles is going to do wonders for bringing down costs,” says Morris.

However, it is important to underscore that these kinds of multiple uses, while all theoretically possible, tend to be rare right now (with some exceptions). We’re still in very early stages of using batteries in homes and businesses, and moreover, key regulatory pathways are currently blocked for much of this redispatching, according to the Rocky Mountain Institute report.

“We’re basically saying, these assets are a less capital intense way of running the electricity system,” says Morris. “That just doesn’t line up with the way utilities are regulated,” he continues.

In sum, the Rocky Mountain Institute report is presenting a pretty dramatic vision of distributed batteries in homes and businesses all becoming networked and aggregated with one another, and then performing myriad roles that filter throughout the vast electric grid, improving its performance and saving money.

It’s a very different vision from how the grid currently works — but then, that’s sort of the point. And in states like California, where a battery aggregation pilot project just got started, the future already seems pretty near.

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