Enabling storage integration through market-driven procurements
Rising renewables growth shows mandates and incentives for them work. But customer demand for renewables has not slowed, creating a need for more energy storage to stabilize the grid.
That need for storage is estimated to be significantly bigger than current build-out plans, driven by existing policies, are likely to achieve. Many say more use of the competitive auctions that have helped drive renewables growth can also accelerate the deployment of storage.
In November 2018, 100 or more cities had 100% renewables commitments. Fortune 500 companies with 100% goals more than doubled in 2018 to 53. To reliably integrate such high levels of variable renewables into the grid, far more energy storage may be necessary, although storage incentives and mandates are lacking, with some notable exceptions like California, New York and Massachusetts. But market-based auctions may propel procurement of energy storage.
Energy storage “is particularly well suited” to cost-effectively meet the “critical challenge” to grid reliability created by high levels of variable renewables, according to a new study from the Environmental Defense Fund (EDF). This is because it can store excess renewables generation when prices are low and dispatch the power on demand.
Energy storage can make it “easier, quicker, and cheaper” to integrate those rising levels of renewables because it can smooth the supply disruptions caused by “cloudy days or calm nights,” David Hart, Information Technology and Innovation Foundation (ITIF) senior fellow recently wrote.
Getting the United States to very high levels of renewables “could take 10,000 GWh of battery storage, which is a huge amount of an expensive technology,” Maureen Lackner, EDF Economics and Policy Analyst and paper co-author, told Utility Dive. A December 2018 Wood Mackenzie-Energy Storage Association (ESA) report found the total U.S. installed battery energy storage capacity at just over 500 MWh.
“Solicitations that put all bids on a level playing field, define attributes the utility needs, and are open to all sources are proving to be the storage industry’s best friend.”
Reversed auctions
Recent renewables procurements have reversed the traditional auction structure of a single seller and multiple buyers. Instead, one utility buyer has solicited bids from multiple sellers. These market-driven procurements, designed to maximize competition, have long been used by utilities to procure resources. In recent solicitations, they have unexpectedly delivered not just low-cost renewables but low-cost renewables-plus-energy storage products.
It is important to have technology agnostic competition into procurements to obtain the most benefit for ratepayers, Lon Huber Navigant energy director told Utility Dive. “Solicitations that put all bids on a level playing field, define attributes the utility needs, and are open to all sources are proving to be the storage industry’s best friend.”
Some say the early successes of competitive solicitations may not be sustainable. Auctions could induce under-bidding that forces out smaller providers, leaving fewer competitors in the market to drive down prices, Meredith Fowlie, economics professor at University of California, Berkeley, recently wrote.
