Harnessing the Potential of Energy Storage the Potential of Energy Storage Edison Electric Institute 1 Executive Summary Energy storage technologies—including batteries, flywheels,

Harnessing the Potentialof Energy StorageStorage Technologies, Services, and Policy Recommendations

May 2017

Harnessing the Potential Of Energy Storage Storage Technologies, Services, and Policy Recommendations Prepared by: Edison Electric Institute May 2017

This report was prepared through a collaborative process by members of EEI's Energy Storage Task Force. If you have any questions, comments or concerns, please contact: Alison Williams Manager, Clean Energy 202-508-5026 [email protected] Lola Infante, PhD Sr. Director, Generation Fuels and Market Analysis 202-508-5133 [email protected] © 2017 by the Edison Electric Institute (EEI). All rights reserved. Published 2017. Printed in the United States of America. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system or method, now known or hereinafter invented or adopted, without the express prior written permission of the Edison Electric Institute.

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Harnessing the Potential of Energy Storage

Edison Electric Institute 1

ExecutiveSummary

Energystoragetechnologies—includingbatteries,flywheels,compressedair,thermalstorage,andpumpedhydropower—areoperationalacrosstheUnitedStates.Useofstorage,particularlybatteries,isgrowingatarapidrate,withanestimated260megawatts(MW)installedin2016alone,up300percentfrom2014.1Ofthemorethan24gigawatts(GW)ofoperationalstorageintheUnitedStates,includingpumpedhydropower,electriccompaniesarethelargestusersandoperators—representingmorethan98percentofactiveenergystorageprojects.2Theyareusingstorageforawiderangeofpurposesthatresultinimprovedoperationoftheenergygrid;increasedreliability,resiliency,andoperationalflexibility;andtheintegrationofmoresolarandwindpower.

Whileinstalledcostsarestillrelativelyhighformanyenergystoragesystems,costsarerapidlycomingdownforsomestoragetechnologies.Atthesametime,policies,regulations,andmarketsdonotalwaysrecognizethebenefitsandflexibilitythatenergystoragecanprovidetotheenergygridandsociety.Aswelooktothefuture,itisimportanttorevisitpoliciesandregulationstomaximizethevalueachievedbyenergystorage.Furthermore,withtechnicalimprovementsindesignandcontrol,thevalueandusesofenergystoragewillcontinuetoevolve.Therefore,itisimportantforthenation’selectriccompaniestocontinuallyexplorethetechnicalperformanceofenergystoragetoensureappropriateplanninganddeploymentofstoragetechnologiesthatcanbestenhancethereliabilityandresiliencyoftheenergygridforthebenefitofallcustomers.

Tocontributetothediscussion,thispaperprovidesanoverviewofoperationalenergystorageintheUnitedStates;itsownership,useby,andvaluetoelectriccompanies;andpotentialbarriersandchallengestogreateradoption.Finally,thispaperofferspolicyrecommendationsonenergystorageforpolicymakersandregulators.

1GTM/EnergyStorageAssociation,U.S.EnergyStorageMonitor,Q12017,March2017.2U.S.DepartmentofEnergy,GlobalEnergyStorageDatabase:http://www.energystorageexchange.org/.


2 Edison Electric Institute

WhatIsEnergyStorage,andWhyIsItValuable?

Insimpleterms,energystorageprovidesawaytosavepreviouslygeneratedenergyanduseitatalatertime.Thatenergycanbestoredaspotential,kinetic,chemical,orthermalenergyandthencanbereleasedinvariousforms,mostcommonlyaselectricity.Theabilitytobankenergy

forlaterusemakesenergystorageausefulandversatileresourceforelectriccompaniesandtheircustomers.

Forelectriccompanies,thelargestusersandoperatorsofenergystorageintheUnitedStates,theprimarybenefitsofenergystorageareaddedflexibility,reliability,andresiliencyinoperatingtheenergygrid.Morespecifically,energystorage,deployedattheappropriatescale,canbeusedinvariouswaystoenhanceelectriccompanyoperations,optimizeandsupporttheenergygrid,andenhancethecustomerexperience.

Flexibility

Storageallowsenergygridoperatorstobettermanageconstantfluctuationsinsupplyanddemand.Aselectriccompaniesintegratemorerenewableenergyresources,

likesolarandwind,intotheenergygrid,energystoragecanprovidemoreflexibilitybyhelpingtomanagethesevariableresources.

Energystoragecanhelpwithrenewablesintegrationintwoprimaryways.First,storagecanhelptoaddressthevariabilityofrenewableenergygeneration.Whileweatherforecastingisimproving,thereisstilluncertaintyaboutwhenthewindwillblowandthesunwillshine.Energystorageprovidesanoptionforstoringwindorsolarenergythatmaybeinexcessofimmediatedemandandsavingituntildemandishighenoughtodischargeorreleaseitoutofstorage.Inthisway,certainstoragetechnologiescanallowavariablerenewableenergyresourcetoperformlikeonethatislessvariableandmeasurablyreliable.

Second,therapidresponsetimeofsometypesofenergystoragemakesthemeffectivetoolsformanagingchangesinenergyoutputthatcanoccurwithsomerenewables,suchaswhenwindspeedsfluctuateorcloudspassoversolarpanels.Inadditiontouncontrollableweatherchanges,thereareinherentoperationalchallengeswithvariableenergyresources.Forexample,whenthesunrises,outputfromsolarresourcesescalatesquickly(andviceversaintheevening),resultingineitherasteepincreaseordecreaseinoutputthatcanmakeit



challengingtomatchavailableresourceswithloadrequirementsinreal-timeoperations.Assomeformsofenergystoragecanrespondattheirdirectedcapacityinlessthanonesecond,thespeedofoperationisakeyconsiderationwhenweighingstorageasanoptionforprovidingbothflexibilityandreliability.

Fast-RampingEnergyStorageCanHelpBalanceRenewableGenerationOutput

Somekindsofenergystoragecanhelpmanagespikesanddropsintheoutputofrenewablesgenerationbystoringexcessenergyorreleasingitonamoment-to-momentbasis.Thisabilitytoquicklyrampuporrampdownmakessomestoragedevicesespeciallywell-suitedforbalancingfluctuationsinrenewableenergyoutput.

Reliability

Thereliabilityoftheenergygridisenhancedbyenergystorageinavarietyofways.Storagecanprovideahostofgrid-supportorancillaryservices—includingmanagingpeakload,essentialreliabilityservices(voltageandfrequencycontrol),reserves,andblackstart—thatarecriticaltomanagingtheenergygridandmaintainingservicewithoutinterruption.

Oneuseofenergystorageisasaresourcetohelpmanagepeakload—aprocessalsocalledpeaksmoothingorpeakshaving.Traditionally,peakloadismetwithresourcesthatareabletostartquicklybutrunforlimitedtimes(i.e.,peakerplants)—mostoftensimple-cyclenaturalgascombustionturbine(CT)plants.Whenproperlysizedforthisusecase,energystoragetechnologiescanprovideanalternative.Storagesystemscanbedispatchedveryquicklyandcanholdseveralhoursofenergythatisgeneratedduringoff-peakhoursatlowercostandthendeployedduringmorecostlyhigh-demandperiods—apracticeknownasenergytimeshifting.Certaintypesofenergystoragecanbeimportanttoolsforgridoperatorswiththeirabilitytomeet,shift,orsmoothpeaksindemandforenergy.



StorageCanHelpMaketheEnergyGridMoreReliableThroughPeakShifting

Energystoragecanhelptomanagepeakenergydemandbychargingatlowdemandtimesofday,suchasatnight,andthendischarging(orreleasingenergy)duringpeakperiods,likeinlateafternoonandearlyevening.

Energystoragecanprovidetwoessentialreliabilityservices:frequencyregulationandvoltagesupport.Frequencyregulationisthemoment-to-momentreactiontofrequencydeviationsfromthestandard60HzintheUnitedStates.Controlisnecessarytopreventacascadingfailureofthesystemandharmtocomputersandotherelectricaldevicesthatusethesystem.Sometypesofenergystorage,withnear-instantaneousresponsetimes,canplayakeyroleincorrectingforunintendedfluctuationsinoutputfromgeneratorsthatcancausefrequencydeviations.Voltagesupportisnecessarytomaintainproperoperationofequipment,preventdamagetoconnectedgeneratorsfromoverheating,facilitateenergytransfers,andreducetransmissionlosses.Energystoragecanservevoltagesupportbyprovidingorabsorbingreactivepowerandbyhelpingtomaintainaspecificvoltagelevelontheenergygrid.

Reservecapacityisanotherimportantaspectofgridreliabilityinwhichenergystoragecanplayarole.Electriccompaniesarerequiredtokeepcertainamountsofavailablegenerationcapacity(knownasreserves)thatcanbeaccessedquicklyincaseofdisruptionorunexpectedswingsinthedemandforenergy.Similartothewayitcanbedispatchedquicklyforpeakloadmanagement,energystoragecanbeusedtohelpmeetorreducetheneedforthesereserverequirements.

Resiliency

Electriccompaniesconstantlyplanandprepareforrestoringservicesafelyandefficientlyintheeventofdisruptions.Tore-energizetheenergygridafterapoweroutage,electriccompaniesuseblack-startresourcestorestoreservicequickly.Someenergystoragetechnologieshave



particularcharacteristicsthatfittherequirementsofblack-startresources.3Storagealsoprovidestheshort-termbenefitoffastresponse,acrucialattributeforquicklyrestoringpowerinablack-startsituation,althoughthedurationofdischargemaylimittheeffectivenessofsomestoragedevicesforthisapplication.

Energystoragealsocanserveasabackupenergysourcetoindividualloadsorevenentiresubstationsintheeventofatransmissionordistributionoutage.Thismaybeaneffectivealternativetoatransmissionordistributionupgradeormayserveasaninterimsolutionwhilealong-termplanisimplemented.Similarly,storageresourcesplayavitalroleinmicrogrids.Thesestandaloneenergysystems,whichusedistributedgeneration,canoperateinparallelwithorindependentlyoftheenergygrid.Thevalueofamicrogridisitsabilitytomaintainservicewhenthebroaderenergygridexperiencesinterruptions.Electriccompanies,theU.S.military,severalindustries,andcitiesandcommunitiesaroundthecountryareusingorconsideringmicrogridsasawaytoincreasetheirresiliencyandtomanagetheirownenergyneeds.Inallofthesesystems,energystorageisavitalcomponent.

CustomerBenefits

Inadditiontothemanybenefitsthatenergystoragecanprovidetotheenergygrid,energystoragetechnologiesalsocanprovideservicestocustomersdirectlyoneithersideofthemeter.Asmentionedabove,resiliencyisanimportantservicevaluedbymanytypesofcustomers.Othercustomerusesincludetheopportunitytomaximizethebenefitsofprivatesolarproductiontoreducethedemandforgrid-providedelectricitywithstorageusedtosmoothproductionanddemand,forexample.

EnergyStorageIsUsedToSupportAllPartsoftheEnergyGrid

3Blackstartistheprocessofbringingapowerplantbackonlinewithouthelpfromthetransmissionnetwork.Itisanessentialservicetorestorepowerafteranoutage.

Energy storage can provide benefits along all parts of the energy grid, including improving operations of generation, transmission, and distribution, as well as serving residential, commercial, and industrial customers. Table 1 (below) provides a list of storage services by customer and technology.



Table 1. Storage Services by User and Technology

Application User Major Technologies

Description

Energy Grid Services

Frequency Regulation Electric company Batteries Provides safety and decreases fluctuations

in load managing the variability in the grid's frequency ISO/RTO Flywheels

Reserve Capacity Electric company

Pumped hydro Batteries

Contributes to electric company’s adequacy/reserve margin requirement

Grid Asset Optimization

Electric company Pumped hydro Load levelling and peak shifting of grid assets ISO/RTO Compressed Air

Batteries

Spinning Reserve

Electric company Flywheels Batteries Compressed Air

Maintains system frequency stability during emergency operating conditions and unforeseen load swings ISO/RTO

Transmission & Distribution Upgrade Deferral

Electric company ISO/RTO

Batteries

Can provide a portion of peak demand that is served by transmission and distribution equipment whose capacity must be increased due to demand growth or whose life is to be extended

Energy Arbitrage Electric company Batteries Allows electric companies to provide/buy

power when electricity prices are highest/lowest ISO/RTO Pumped Hydro

Variable Resource Integration Electric company Batteries Reduces ramp rates and helps electric

companies integrate higher levels of variable resources

ISO/RTO Compressed Air

Voltage Support Electric company Batteries Helps manage delivery of reactive power

to maintain voltage ISO/RTO

Other: Black Start, Power Quality/Harmonics, Inertia Response

Electric company Batteries Suppresses system harmonics, supports system during system restoration, provides dynamic functional equivalent of synchronous generation ISO/RTO Compressed Air

Customer Services

Load Shifting

Commercial & Industrial (C&I)

Batteries

Peak shifting of residential or C&I loads to save on energy costs, such as demand charge reduction and time‐of‐use optimization

Residential Thermal May help reduce grid‐supplied electricity

Load Shifting with Solar

C&I Batteries with solar

Same as load shifting, but with the ability to flatten load between battery and solar technologies

Residential Helps provide steady emergency backup power

Emergency Backup C&I Residential

Batteries

Provides emergency power during outages such as grid failures and weather‐related incidents

Microgrid Support C&I Batteries Flywheel

Supports local power systems that can disconnect from the larger grid and operate autonomously



EnergyStorage:ManyTypes,ManyUses

Giventhemanybeneficialattributesofenergystorage,electriccompaniesarebuilding,procuring,andoperatingdifferenttypesofenergystoragesystemsinvariouspartsofthecountry.Itisimportanttonotethatenergystorageisnotasingletechnologybutratherahostofdifferenttechnologieswithvastlydifferentoperatingcharacteristics,coststructures,andbenefits.Thetechnologythatisdeployedinagivenlocationlargelyisdeterminedbythatarea’sresources,needs,andmarketstructure.

Theenergystoragedescriptionsbelowareintendedtoshowthewidevarietyofoperatingtechnologies,howtheyareused,andexistingbarrierstogreateradoption.

PumpedHydro

Pumpedhydrostoragesystemsprimarilyworkinconjunctionwithmajorhydropowerdams—calledanopen-loopsystem.Insimpleterms,waterispumpedfromalowareatoahigherreservoirduringoff-peak(i.e.,lowcost)times.Thewateristhenstoreduntilitiseconomicaltousetheresource.Atthatpointthewaterisreleased,spinningturbinestogenerateelectricitythatissuppliedtotheenergygrid.ManyofthepumpedhydrosystemsintheUnitedStateswerecommissionedinthe1960sto1980s,withthemostrecentbecomingoperationalin2012insouthernCalifornia.Duetoissuessuchasinitialcostandsitingdifficulties,onlyalimitedamountofnewpumpedhydroisexpectedtocomeonlineinthecomingyears.

Batteries

Batterytechnologiesarepartofthelargergroupofelectro-chemicalstorage.Therearetwocategoriesofbattery:solidstateandflowbatteries.Solidstatebatteriessuchaslithium-ionhavesolidelectrodesandsolidelectrolytes.Incontrast,flowbatteries,orredox(reduction-oxidation)batteries,operatewithtwochemicalcomponentsdissolvedinliquidsoftenseparatedbyamembrane,astructurethatenablesnear-instantaneousrecharging.Ofallofthebatterytypes,lithium-ionisthemostpopular.Theircostshavedeclinedsignificantlyinrecentyearsand,asaresult,theyarefindingapplicationsinelectronics,electricvehicles,andindustrialoperations.Electriccompaniesprimarilyareusinglithium-ionandsomelead-acidbatteriesbecauseoftheiravailability,price,anddurability.Batterylifespanvariesbytype,withsolid-statebatteries(lithium-ion,zinc,etc.)typicallylasting5-15yearsandflowbatterieslasting15-20years.4

4Lazard’sLevelizedCostofStorageAnalysis—Version2.0,December2016.



Thermal

Thermalstoragetechnologiesallowfortemporaryenergystorageintheformofthermalenergy(heatorcold)—similartohowaninsulatedmugkeepsadrinkhotoricecubeskeepadrinkcold.Themostcommonformofheatstorageismoltensaltthermalstorage,althoughthereareotherformssuchasmoltenglass.Moltensaltcurrentlyisusedinconjunctionwithparabolictroughstostoreheatproducedviasolarpower.Inthesesystems,sunlightisfocusedviamirroredpanelstoheatsalttotemperaturesofupto1050⁰F.Themoltensaltisstoredininsulatedtanksuntilenergyisneeded.Toconvertstoredheattoelectricenergy,themoltensaltturnswaterintosteaminheatexchangerswithsteamusedtogenerateelectricityinasteamturbine/generator.Heatstorageoftenisusedforstoringpowerduringlowdemandperiodsandreleasingitwhendemandincreases.Italsoisusedtohelpmanageminute-to-minutefluctuationsinrenewablegeneration.Storedheatalsomaybeusedinmanufacturingprocessesorbuildingspaceconditioningsystems.

Iceandchilled-waterthermalstorageuseexcesslow-costenergytochillorfreezewater,whichisthendeployedinavarietyofsystemsfromairconditioningsystemstofreezers.Thiscoldstoragemostoftenisusedbycustomerstoreduceelectricdemandandbyelectriccompaniesfortimeshifting.

CompressedAirEnergyStorage(CAES)

Inacompressedairstoragesystem,atmosphericairiscompressedandstoredunderpressureinundergroundgeologicalsitessuchasretiredminesorsaltcaverns.Whenenergyisrequired,theundergroundcompressedairisreleased,drivinganexpansionturbinetogenerateelectricity.TheestimatedusefullifeofaCAESsystemis15-20years.5Thereisonlyonelarge-scaleoperationalCAESplantintheUnitedStates:a110-MWplantinMcIntosh,AL.6WhileCAESuseremainslimited,thereareseveralsuitablesitesforitsexpansionacrosstheUnitedStates.

Flywheels

Flywheelstoragesystemsuseelectricitytopoweramachine,actingasamotorthatspinsaseriesofrotors.Astherotorsturn,electricenergyisstoredaskinetic(orrotational)energy.Whenelectricityisneeded,theflywheelturnsthemachinenowactingasagenerator,convertingthekineticenergyintoelectricitythatisfedtotheenergygrid.Tomaintainefficiency,flywheelsoftenarecontainedinavacuumonmagneticbearingstoreducefriction.Flywheelsgenerallyarelowmaintenance,havealonglife,andrespondquickly,makingthem 5Lazard’sLevelizedCostofStorageAnalysis—Version2.0,December2016,https://www.lazard.com/media/438042/lazard-levelized-cost-of-storage-v20.pdf.6PowerSouthCAES:http://www.powersouth.com/mcintosh_power_plant/compressed_air_energy.



usefulforelectriccompaniesasspinningreservecapacityaswellasfrequencyandvoltagesupport.Additionally,manydatacentersintheUnitedStatesrelyonflywheelstoragetomitigateshort-termenergydisruptions.

CurrentDeployment

Ofthemorethan24GWofoperationalenergystorageintheUnitedStates,pumpedhydroisbyfarthemostcommon,representingmorethan93percentofinstalledstoragecapacitybysize.Thenextlargestsegmentisthermalstorage,followedbybatteries,compressedair,andflywheels.WhilepumpedhydrostoragedwarfsotherenergystoragetechnologieswhenconsideringalloperationalstorageintheUnitedStates,batteriesaredrivingthestoragemarkettodayintermsofthenumberofprojects.Large-scaleoruniversalsolarpowerplantshavegivenrisetoahandfuloflargethermalenergystoragesystems,makingthisstoragetechnologythelargestplayerbysizeinrecentyears.

ComparisonofEnergyStorageProjectsByTechnologyType

ElectricCompaniesArePrimaryUsersofStorage Electriccompaniesarethelargestownersandoperatorsofenergystorage.Theyuseenergystoragefacilitiesthroughtheassetstheyowndirectlyandalsothroughthosethattheyprocurevialong-termcontracts,orpowerpurchaseagreements.Manylarge-scalestorageprojects—includingpumpedhydropowerstorageandthermalstorageprojects—wouldnotbeeconomical



withoutaguaranteeofusebyelectriccompaniesintheformofalong-termcontract.AccordingtotheU.S.DepartmentofEnergy,electriccompaniesrepresentmorethan98percentofenergystorageprojectsintheUnitedStates,7includingpumpedhydropower,andareasignificantcontributortothesector’srapidgrowth.Lookingonlyatnewerenergystoragetechnologies,andexcludinglarge-scalepumpedhydropowerstorageprojects,electriccompaniesremainthelargestusersandoperators,representing75percentofU.S.energystoragecapacity.

Ofthe22electriccompany-ownedstorageprojectscommissionedin2015and2016,allbutonewasabatterystoragesystem.Lithium-ionsystemsrepresented98percentofthebatteryprojects,makingelectriccompaniesasignificantcontributortotheadoptionofthefastestgrowingenergystoragetechnologyintheUnitedStates.8

Map1.OperationalandPlannedEnergyStorageProjects

Source:U.S.DOEGlobalEnergyStorageDatabase(AccessedonApril27,2017).

7U.S.DepartmentofEnergy,GlobalEnergyStorageDatabase.8U.S.DepartmentofEnergy,GlobalEnergyStorageDatabase.



StorageCostsAreDeclining

Energystoragecostsareasvariedasthetechnologiesthemselves.Broadly,however,energystoragecostsarefalling.Batteriesarethemostcommontypeofenergystoragedeployedtoday.Withinthiscategory,pricesvarywidelydependingonthespecifictechnology,thestageofdevelopmentandcommercialization,andthewaythetechnologywillbeused.Advancesintechnology,aswellaseconomiesofscale,havehelpedtodrivedownlithium-ionbatterycostsinrecentyears.Themediancostoflithium-ionbatteriesfellbymorethan10percentfrom2015to2016.9

Onalevelizedcostbasis,storagecostsareprojectedtocontinuetofallforbatteriesandflywheelsbetweennowand2020.10Costsareexpectedtodropmostdramaticallyforbatteries—especiallylithium-ionandflowbatteries.AccordingtoLazard’sindustrysurvey,overthenextfiveyears,lithium-ionbatterypricesareexpectedtodropby50percent,flowbatteriesareexpectedtodropby40percent,andlead-acidbatteriesareexpectedtodrop25percent.11

Ifthesepricedeclinesarerealized,thethreetypesofbatteriescouldbecomemorewidelydeployed.

Levelizedcostsarethemostprominentcomprehensivecostfiguresforevaluatingtheeconomicsofenergystoragetechnologies,butthisisanimperfect—andoftennotuseful—metric.Althoughlevelizedcostanalysisprovidesonemeansofcomparingdifferentstoragetechnologiesandcompetingtechnologies,levelizedcostsdonotaccountfor

themultiplewaysstoragecanbeusedand,therefore,donotcapturethemultiplevaluestreamsfromwhichenergystoragecouldbenefit.

Thestackedvalueofenergystorageisdeterminedbasedonthespecificationsandusesoftheindividualproject,makingitdifficulttocomparecostsacrossenergystorageprojects.Somestoragetechnologies,forexample,aremoreappropriateforintegratingrenewables;othersaremoreappropriateaspeakingplantreplacementsorforprovidingancillaryandessentialreliabilityservices. 9Lazard’sLevelizedCostofStorageAnalysis—version2.0.10 Ibid. 11Ibid.

Theeconomicviabilityofstoragedependsonthewayitsvalueiscalculatedandtheway

servicesitprovidesarecompensated.



Ultimately,thedecisiontobuildandfinanceenergystoragedependsonthetypeofstorage,thewaythestoragesystemwillbeused,itssize,anditslocation.Further,theeconomicviabilityofstoragedependsonthewayitsvalueiscalculatedandthewayservicesitprovidesarecompensated(intermsofusecases),aswellasonthecommercialbackingofthetechnologyprovider.

ChallengesToWiderDeploymentOfEnergyStorage

Despiteitsgrowingpopularity,energystoragecontinuestofacechallengesthatarepreventingthesetechnologyoptionsfromachievingtheirmarketpotentialandmaximizingthebenefitstheycanprovidetocustomersandsociety.Today,themainchallengesforenergystorageare:therelativelyhighcostforsometechnologies;limitedpublicknowledgeregardingtechnicalperformance;regulatoryrequirements;andmarketrulesthatcanmakeitdifficultforthesetechnologiestoparticipateinthemarketsonacomparablebasiswithotherresources.Incombination,thesefactorsareimpactingtheacceptanceandadoptionofsomeenergystoragetechnologies.

Cost

Highcostsarestillachallengetowiderdeploymentofenergystoragesolutions.Althoughthecostsofsometechnologiesaredeclining,energystoragedevicesremainexpensiverelativetoothertechnologiesprovidingonlyoneservice.Whilesomestoragetechnologycostsaredecreasingrapidly,itiscriticaltoremoveotherbarrierstoenergystorageadoption,sothatthefullrangeofbenefitsofenergystoragecanberealizedastheseresourcesbecomemoreandmoreprominent.

Forelectriccompanyandwholesalemarketapplications,energystorageisfinancedeitherthroughelectriccompanyinvestmentstoimprovesystemreliabilityandtoreducetheneedfortransmissionanddistributionupgrades,orthroughparticipationinelectricitymarkets(wholesaleenergy,capacity,andancillaryservices).Althoughenergystoragedevicesareabletoprovidemultipleenergygridservicesandtoparticipateindifferentmarkets,theyoftencannotcaptureallvaluestreamsduetoexistingmarketperformancerequirementsandcode-of-conductrestrictions.Theabilityofenergystoragetobecomecost-competitiveandmeettheseperformancerequirementswouldhelpthemtomonetizeallvaluestreamsandrealizetheirfulleconomicpotential.

TechnicalPerformance

Widespreadadoptionofenergystoragesystemsdependsupongreaterinformationandcertaintyabouttheirperformance.Experiencewithsomeofthenewertechnologiesislimited,



sothereareincompleteorunreliabledataontheirperformanceinvarioussituationsandatdifferentscales.Electriccompaniesandmarketsneedtohaveahighlevelofconfidenceintheperformanceandtechnicalcharacteristicsoftheirassetssotheycanoptimizethemanagementoftheenergygrid.

Technicalissuesgobeyondthestoragetechnologiesthemselves.Equallyimportantisthewayinwhichstorageisconnectedtotheenergygrid.Storageinterconnectionmaybeachallengeinsomeareas,andinfrastructureandregulationsmayneedtobeupgradedtoaccommodatetwo-wayflowsofelectricitysostoragecanchargeanddischargeenergyonthegrid.Thetechnicalaspectsofstorageinterconnectionarebeingtestedinpilotprogramsinmanypartsofthecountry.Furtherdeploymentofenergystoragewillrequirethatinterconnectionalsobeaddressedfromtheregulatoryperspective.

RegulatoryChallenges

Becauseexistingregulationsweredevelopedatatimewhenpumpedhydrowasessentiallytheonlyformofenergystorage,theydonotaccountfortheparticularcharacteristicsandintrinsicflexibilityofsomenewerstoragetechnologies:

• ClassificationandFlexibility:Classificationrulesatthestateandfederallevelsmayneedtobeupdatedtoaccommodateresourceslikestoragethatareabletoprovidemultipleservices.Updatingtheseruleswillhelptoensurethathowaresourceisclassified(e.g.,asgeneration,transmission,distribution,orload)doesnothamperorprecludeitsabilitytoprovideotherservicesonacomparablebasiswithotherresources.Marketrulesshouldbeclarifiedormodifiedsothatallresourcesthatarecapableofprovidingaproductareabletoparticipateinthatmarket.Marketproductsshouldbedefinedinatechnology-neutralwaysothatmarketproductsandrulesaregearedtowardtheserviceneededratherthantowardspecificresourcetypes.Thiswillhelptoensurethatproductrequirementsandeligibilityaretiedtotheunderlyingoperationalneedsofthesystemandnotthecharacteristicsofspecifictypesofgeneration.TheFederalEnergyRegulatoryCommission(FERC)andRegionalTransmissionOrganizations(RTOs)alreadyareworkingtowardmodifyingexistingrulessothatclassificationrulesaccommodatemultipleusesandallowenergystoragedevicestomaximizetheirapplicationsand,thus,enhancetheirenergygridandsocietalbenefits.

• Ownership:Incertainareasofthecountrythathaverestructuredtheirelectricitymarkets,electriccompaniesmaynotbeallowedtoowngenerationassets.Accessrestrictionsderivedfromexistingassetclassificationrules(when,forexample,storageisclassifiedasagenerationasset),meanthatelectriccompaniesinsomepartsofthecountrymaynotbeallowedtoinvestinenergystoragedevices.Yet,electriccompanies



areresponsibleforensuringthereliabilityoftheenergygrid.Theirinabilitytoownenergystorageinsomecasestakesawayanoptiontoenhancethereliabilityandresiliencyofthenation’senergygridtothebenefitofallcustomers.Forexample,electriccompanies—withtheirextensiveknowledgeoftheelectricsystem—areinthebestpositiontobeabletoidentifythemostvaluableapplicationsandtheoptimallocationstositeresourcesontheenergygrid.Thelocationmatterswhenitcomestothedeploymentofdistributionsystemassets,includingenergystorage.Thesameresourcecanhelporhurtthereliabilityandresiliencyoftheenergygriddependinguponwhereitislocated—byalleviatingcongestion,forexample.Thisisnotonlyimportantforreliability,butitalsohasadirectimpactoncostsasnewtechnologieshavethepotentialtodeferortoreducetheneedforincrementalinvestmentsor,onthecontrary,requireadditionalinvestmentsinnewcapacityordistributionupgrades.

• InterconnectionandOperation:Electriccompaniesareresponsibleforinterconnectingandoperatingnewenergystoragedevicessafelyandreliably.Instudiesanalyzingtheimpactofthesenewinterconnections,energystoragedevicesgenerallyareassumedtochargeanddischargeatlevelsandtimesthatareinconsistentwithactualoperations.Integrationofdistributedenergyresources,suchasbatterystorage,intoelectrictransmissionanddistributionoperationsiscomplexandrequirestheadoptionofadditionaldistributionautomationtechnologies.Likeallresourcesthatinterconnecttotheenergygrid,energystoragedevicesshouldberequiredtodefinetheparametersunderwhichtheywilloperate.Forinstance,itshouldbeclearwhatservice(s)theenergystoragesystemwillprovide,whereitwilloperate(i.e.,transmissionordistributionsystem),whenitwillbeavailableandforhowlong(duration),andhowthesesystemswillaccomplishthosetaskscoordinatingwithelectricsystemsoperations.Inaddition,regulationsshouldbeclarifiedorrevisitedtoallowforenergystorage.Forexample,historically,regulationsaddressedconsumptionatgeneratingplantswithnetdeliveriestotheenergygrid.Thesetypesofregulationsarebeingappliedtostoragedevices,butareill-suitedtoaccommodateenergystoragesystemsthatreceiveelectricitytostoreforlaterdischargetotheenergygrid.

FERC,RTOs,andindividualstatesshouldcontinuetoworktowardremovingbarriersthatartificiallylimittheabilityofenergystorageresourcestoprovidetheservicestheyaretechnicallycapableofproviding.Thiswouldallowenergystoragetomonetizemultiplevaluestreamsandmaximizeitsfullpotentialforcustomersandsociety.



PolicyRecommendations

Expandingdeploymentofstoragerequiresovercominganumberoftechnical,economic,andregulatorychallenges.Asresearch,testing,andusecontinuetodrivedowncosts,policyandregulatorychangescanhelptoallowenergystorageresourcestoachievetheirfullpotentialandimprovestorage’scontributionstomarkets.Policiesandregulationsdonotalwaysrecognizethemanybenefitsenergystoragecanprovide.

Belowaresomepolicyrecommendationsforpolicymakersandregulatorstokeepinmindwhenconsideringenergystorage:

• Deploymentofenergystorageshouldbedoneinasafe,secure,reliable,andcost-effectivemannerthatrecognizesthebenefitsofstorage,includingreliabilitybenefits,whetherinfrontoforbehindthemeter.

• Allelectriccompaniesshouldhavetheabilitytoownandmakeinvestmentsinenergystorageregardlessofregulatorymodel.

• Regulationsandstandardsshouldrecognizetheflexibilityofthevarioustypesofenergystorageandthebestwayseachcanbeusedandallowtheuseofenergystoragetechnologies,onacomparablebasiswithotherresources,regardlessofwhethertheysupportgeneration,transmission,distribution,and/ordemand-sideoperations.

• Regardlessofmarketdesignandregulatoryenvironment,marketproductslikeancillaryandessentialreliabilityservicesshouldbedefinedinatechnology-neutralwaysothatmarketproductsandrulesaregearedtowardtheserviceneededratherthantowardspecificresourcetypes.

• Thespecificbenefitattributesapplicabletovariousenergystoragetechnologiesaredependentonwhichservicestheparticularstoragetechnologyiscapableofproviding.Realizingthefullbenefitsofenergystoragewilldependontheresource’sabilitytoprovidemultipleservicesandtobecompensatedfairlyforservicesprovided.Regulationsandstandardsshouldallowfortheprovisionofmultipleserviceswithoutcompromisingsafety,security,andreliability.

• Whethertransmission-level,distribution-level,ordirectcustomerinterconnectionisimplemented,systemimpactsshouldbeassessedusingcriteriaappropriatetothetechnology,theintendedusesofthedevice,andtheelectricsysteminwhichthedeviceistobeutilized.



• Whetherownedbyelectriccompanies,customers,orthirdparties,energystorage,whendeployedinthedistributionsystem,shouldfollowthesameguidingprinciplesasallothersimilarlysituatedresources:

o Ensureenergystoragesystemsareconnectedsafely.

o Ensurefair,economicallyviablecompensationofservices,whichwilldependonregulatoryframeworkandmarketdesign.

o Ensurethatretailratemakingavoidscost-shiftingtocustomerswhodonotownstoragedevices.

o Enablefullparticipationbyelectriccompaniesintheownershipand/oroperationofdistributedstorageasdeterminedbytheelectriccompanyandtosupportitsbusinessmodel,includingmaximizingthevisibilityandcontrolofdistributedstoragebyelectriccompanies.

o Encourageoptimallocationandothertechnicalspecifications,whenpossible,toincreasethevaluethatdistributedstorageprovidestothedistributionsystem.

o Ensure,forplanningandoperatingpurposes,visibilitybyelectriccompanies,impactassessment,andsomelevelofcompanyinputintoandcontroloftheenergystorageresourcesthatareconnectedtothedistributionsystem.

o Encourageappropriatecoordinationamongthetransmissionanddistributionsystems(andfederalandstateregulators)totheextentthatdistributedstoragewillimpactthetransmissionsystem.

Movingforward,itisimportanttorecognizethemultiplevaluesandvariedusesofenergystoragesothatthesetechnologiescanhelptoenhancetheflexibility,reliability,andresiliencyoftheenergygridforthebenefitofallcustomers.

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Documents

Harnessing the Potential of Energy Storage the Potential of Energy Storage Edison Electric Institute 1 Executive Summary Energy storage technologies—including batteries, flywheels,