Power Storage Banks Shift Energy Industry
In October 2015, the Aliso Canyon gas fields in Southern California sprang a leak that took the state’s largest gas-storage system out of service. The leak raised red flags for California’s energy planners, who worried that there would not be enough gas to fuel peakers—generating plants that kick in when summer heat causes electricity demand to soar. In response, the California Public Utilities Commission issued a solicitation for energy storage projects that could help ensure the state would have enough power.
As a result, companies such as AES Energy Storage, Greensmith Energy and Tesla stepped up and within eight months—a fraction of the time it would take to build a gas plant—the state had 70 MW of storage online. “Aliso Canyon was a significant sea change” for the power industry, says Daniel Finn-Foley, senior analyst for energy storage at GTM Research. It showed energy storage could be effective in filling the role traditionally played by gas-fired peakers.
After decades of being just out of reach, a steep decline in the cost of lithium-ion batteries is making energy storage a viable solution for a variety of energy industry applications.
Between 1991 and 2005, the cost of lithium-ion batteries dropped from about $200 per watt-hour to about $0.40 per Wh. The batteries have become ubiquitous in laptops, cell phones and in the rapidly growing market for electric vehicles—pushing up demand and triggering economies of scale. In a recent study, investment bank Lazard says it expects the cost of lithium-ion batteries to plummet by about 50% over the next five years.
Energy storage is still only a very small piece of the power marketplace, but it is growing quickly. There were 234 MWh of energy storage installations in the first quarter of 2017, a 944% increase compared with first-quarter 2016, according to a GTM Research report done with the Energy Storage Association.
Market shift
The falling prices that have led to the growth of energy storage is part of a wider shift underway in the power sector. The industry is moving away from the central-station model that has prevailed for a century to a model where electricity flows two ways, where customers can also be generators. In many states, customers with rooftop solar panels can sell excess electricity back to their utility.
New York is one state trying to come to grips with how technologies like energy storage are becoming market disruptors. The state’s Reforming the Energy Vision (REV) initiative is funding pilot projects and seeking to rewrite the rules for the industry.
In New York City, utility Consolidated Edison’s participation in REV has allowed it to use a combination of energy efficiency, demand management and energy storage to defer a $1-billion investment to upgrade a substation.
ConEd also is looking at energy storage as one alternative to make up for the potential loss of the Indian Point nuclear plant just north of the city, which supplies about 20% of the city’s baseload power. The plant is set to close by 2021.
