Skip navigation

Deploying Advanced Energy Storage Makes Sense

February 28, 2011

by Chris Campbell, A123 Systems Inc.

As the industry continues to move toward a smarter, more efficient power infrastructure, advanced energy storage has shown potential to facilitate a cleaner means of producing and delivering electricity by addressing existing and long-term challenges. 

In the near term, utilities can replace expensive, inefficient generation mechanisms used for ancillary services–including frequency regulation and transmission and distribution (T&D) investment deferral–with next-generation storage technologies and techniques.

Looking to the future, advanced energy storage can help accelerate renewable energy adoption by addressing wind and solar intermittentcy. Energy storage makes these sources more predictable, allowing utilities to integrate them more seamlessly into the existing power grid.

Many utilities remain unaware of these and other significant benefits, however, viewing advanced energy storage as theoretically advantageous but not practically deployable. Now, thanks to state and federal policy and breakthrough technologies, the business case for deploying advanced energy storage for existing and near-term applications is more compelling.

Historical Policy Framework– Shaping Today's Energy Storage Opportunities

Starting with the Federal Public Utility Regulatory Policies Act (PURPA) of 1978, deliberate and admirable progress in U.S. regulatory policy has opened the provision of electrical services to new resource technologies (including renewable resources and storage) and market participants (including independent power producers, load aggregators and independent transmission owners). 

The Department of Energy's (DOE's) Energy Information Agency (EIA) has touted PURPA as "the single most important factor in the development of a commercial renewable energy market." Since PURPA was enacted, grid-connected capacity of U.S. renewable energy resources jumped from zero to more than 30,000 MW at the end of 2007. 

In addition to providing the impetus for the commercial-scale renewable energy industry in the U.S., PURPA contained key provisions that later culminated in the aggressive end-user interactive environment envisioned for the smart grid. Specifically, PURPA called for state regulators and nonregulated municipal utilities to consider equitable customer rates via pricing structures including time-of-use and interruptible rates. 

The next major policy breakthrough came in 1996 with the Federal Energy Regulatory Commission's (FERC's) Open Access Order 888. This policy provided the mechanism and framework for new market participants to access wholesale electricity markets via the Pro Forma Open Access Transmission Tariff (OATT).

With this mechanism, nontraditional electrical market participants gained access to the shared electrical superhighway: the grid. This allowed transportation and delivery of competitively procured electrical energy products and related ancillary services–including frequency regulations, operating spinning reserves and energy imbalance services–to be sold via open markets.

The unbundling of ancillary services from provision of energy was a powerful step to enabling today's participation of advanced storage devices to provide grid support.

More recently, the Federal Energy Policy Act (EPACT) of 2005 included provisions that have set key elements of the smart grid vision in motion by promoting consistency and defined functionality for interconnection of distributed resources, as well as requiring time-based metering and two-way communications between utilities and customers.

FERC's Open Access Tariff Revision Order 890 of 2007 enabled participation by non-generation resources in FERC-jurisdictional electric wholesale markets, which opened competitive participation of energy storage and demand response in FERC-jurisdictional markets.


Beyond federal regulations, individual states are starting to enact policies that further the progression of advanced energy storage as an asset for utilities and power producers.

For example, in September, California's Assembly Bill 2514 (AB 2514) was signed into law. It established a storage planning process for California's investor-owned and municipal utilities and directed utilities to consider storage investments as part of their long-term integrated system plans.

California AB 2514 recognizes some energy storage solutions benefits, including: reducing greenhouse gas emissions; reducing demand for peak electrical generation; deferring or substituting for an investment in generation, transmission or distribution assets; and improving the reliable operation of the electrical transmission or distribution grid.

As the first state to implement a legal storage requirement, California demonstrates leadership in bringing the benefits of cost-effective storage to its ratepayers.

But AB 2514 and similar state and federal laws and regulations should not be viewed as the only reason utilities should consider energy storage solutions.

Policy should be a catalyst. The true tipping point is the business cases, including existing, near-term and long-term applications, for implementing next-generation energy storage systems.

Business Case No. 1: Frequency Regulation

Aside from satisfying policy requirements, applications for advanced energy storage technology can yield short- and long-term benefits. For example, frequency regulation, an ancillary service performed using fossil fuel-powered systems, can be accomplished more efficiently and economically by leveraging advanced energy storage.

The purpose of regulation is to balance the constantly changing, moment-to-moment imbalance between generation and demand in a given control area. Regulation services are designed to allow a grid operator to comply with North American Electrical Reliability Council's (NERC's) Control Performance Standards 1 and 2 (CPS1 and CPS2) that are part of the grid-balancing requirements (NERC BAL-001-0.1). The generation and demand imbalance is measured by the area control error (ACE), typically on a second-by-second basis, and assets deployed for regulation are instructed to regulate up or down in response.

Historically, this service has been provided by traditional generation assets, including gas turbines or coal generation plants, often as a requirement to grid participation. This has been an imperfect approach to regulation; traditional generators are slow to respond, often taking as much as 10 minutes to regulate and requiring complicated and imperfect control mechanisms to the ACE.

Traditional assets performing regulation also exhibit increased wear and tear and reduced efficiency, which translated directly into increased emissions.

In contrast, advanced energy storage assets are ideal for providing regulation services.

Because the ACE represents the short-term fluctuations in supply and demand, it is energy-neutral. During a measureable time, an asset providing regulation service neither generates nor consumes energy. Therefore, a storage asset with finite capacity can provide the regulation service successfully. Energy markets are typically managed on an hour-by-hour basis, but a storage asset with robust energy management capabilities can provide this service successfully with as little as 15 minutes of energy stored.

A storage asset is also capable of responding significantly faster than a traditional generation asset, without the wear and tear or efficiency loss associated with ramping up or down. With response times measured in milliseconds, storage can provide significantly more value because the correction to the ACE is virtually instantaneous. In turn, traditional generator assets can be used at their optimal efficiency, improving asset utilization and reducing emissions.

In deregulated energy markets where the rules have been adjusted to allow advanced storage to participate and regulation services to be traded, storage already has demonstrated its fast response value. For example, in the New York Independent System Operator market, participants are completing construction of 40 MW of fast-response storage dedicated to regulation service using advanced lithium-ion batteries and other technologies. These are ideal for this use because of their ability to ramp aggressively with short duration storage and cycle hundreds of times each day.

The return on investment based on revenue generated from providing regulation services is expected in as few as three years, given today's market conditions. When ancillary benefits such as improved asset utilization and emissions also are considered, the payback is even faster.

Business Case No. 2: T&D Investment Deferral

Another existing scenario where advanced energy storage demonstrates significant promise is in helping defer investment in costly transmission and distribution upgrades, especially where right-of-way is limited or accessibility is reduced.

Transmission and distribution assets are sized to meet peak demand but rarely are used at those levels. Average use is typically 30-50 percent below the peak, even within the days that see the highest demand. As demand increases, transmission and distribution assets must be upgraded to serve growing load while maintaining all assets in the transmission and distribution delivery chain within their ratings. When capacity ratings are exceeded by load growing at 1 or 2 percent, load-triggered transmission and distribution capacity upgrades tend to be lumpy, as when adding a transformer bank to increase substation capacity by up to 100 percent.

Conversely, modular storage at 1 MW as deployed by American Electric Power (AEP) at several substations demonstrates how 1-2 MW battery systems can defer relative 10X substation capacity upgrades.

These successful demonstrations also show how battery-based systems can provide several coincident benefits, including VAR/voltage support and load islanding backup capability. The energy storage systems demonstrated at AEP substations also are relocatable. When the transmission bank upgrade is executed, the storage (along with its incremental deferral capacity) can be moved to assist a different, marginally stressed substation for several years.

In addition to mitigating the lumpiness in transmission and distribution asset investment, energy storage for transmission and distribution deferral can increase asset utilization by eliminating the need for capital upgrades to meet brief duration peak system loads.

The ability to peak shave at the circuit, substation and even system level through aggregation will offer utilities a reliable, effective, new alternative to increasing total system asset capacity factor, which measures asset utilization. Better asset utilization means delivering maximum value for utilities' ratepayer investment in transmission and distribution delivery assets.

The Not-too-Distant Future: Renewable Integration

In addition to frequency regulation and transmission and distribution investment deferral, advanced energy storage helps facilitate the increased penetration of renewable energy sources to the grid. It enables wind and solar to overcome their intermittency, a remaining hurdle to adoption within the current power infrastructure.

With the increased penetration of renewable generation, the grid is experiencing a shift from steady (dispatchable) generation to intermittent (non-dispatchable) generation. This adds new uncertainty and volatility to the grid and causes problems. Because generation from renewable sources is unpredictable, it becomes difficult to schedule and manage traditional generation assets to compensate.

Renewable sources also tend to be geographically concentrated and isolated, causing problems related to transmission constraints. Furthermore, the continuous change in generation results in imbalances and volatility, increasing the ACE.

Grid and renewable operators struggle to respond to these changes. Options such as adding additional gas turbine plants to compensate are discussed, but they are imperfect given that they counteract the benefits and purpose of deploying renewable sources. Wind farm operators can curtail their output to reduce the impact, but doing so forgoes generation and reduces the value of wind output.

Advanced energy storage can address the unpredictability of renewable generation. Technically, storage can address most of the issues associated with intermittent generation. Short-term, fast-response storage already has been demonstrated as a viable means of managing grid imbalances and volatility through the regulation service. In the longer term, storage can be deployed to shift energy in time to smooth the output of renewable generation or reduce the peak load on constrained transmission assets.

Can advanced energy storage provide an economically viable solution? While regulation services using short-duration storage produce measurable return on investment, increasing the duration of storage increases the cost.

Renewable energy and power grid operators should consider multiple functions for storage assets–for example, performing shifting and regulation–or taking advantage of price differences during the day, often referred to as inter-temporal arbitrage. Combining multiple functions can provide multiple revenue streams, making the economic benefits of advanced energy storage for renewable integration more prominent.

Energy storage has played a significant role on the U.S. electric grid for decades–pumped storage, for example, represents some 2 percent (or 20,000 MW) of the installed resource capacity in the U.S.

In recent years, more advanced energy storage has reached technology and commercial maturity thanks to advances in federal and state policy that facilitate the widespread deployment of these systems for existing and near-term applications.

With this policy framework, multi-megawatt deployments of advanced energy storage solutions have been implemented for existing commercial services, including frequency regulation and transmission and distribution investment deferral. In addition, these storage projects have attracted funding for demonstration of emerging applications including smart grid systems and renewable integration.

Utilities that understand the relevant policies and recognize the current and future business cases for advanced energy storage stand to gain a significant competitive advantage with long-term implications.

About the Author

Chris Campbell is vice president of marketing and business development of A123 Systems Inc., a developer and manufacturer of advanced Nanophosphate lithium ion batteries and energy storage systems for the transportation, electric grid and commercial markets.

This article first appeared in Electric Light & Power magazine, March 2011. 

Share |