Storage Bringing Change to Energy Markets

Energy industry experts speaking at the MEGA Symposium in Baltimore, Maryland, on August 21 agreed that storage is becoming more important to the overall mix of U.S. power sources. They also said utility-scale storage solutions remain "years away," even as technology advancements in battery systems occur more rapidly.

Panelists at the session entitled "The Transformation of the Power Industry and the Role of Energy Storage," representing utility, finance, research, and coal industry interests, said storage has proved its mettle when it comes to energy, but there is no "one-size-fits-all" solution when it comes to deploying storage assets across the power grid.

"Energy storage can transform how we make, move, and sell electricity across the grid," said Steve Baxley, manager for renewables, storage, and distributed generation for Southern Co. "It can transform the whole marketplace. It's a capacity resource, a flexibility resource, and reliability and resiliency resource, and a voltage and power quality resource. But there are a lot of emerging questions in this field. How do we implement [storage]? How do we interconnect to the grid?"

The experts said storage is valuable to provide backup power and balance intermittent sources of power on the grid, such as solar and wind. They also said it's not a substitute for baseload power during extreme events such as the "bomb cyclone" that hit much of the eastern U.S. in early 2018, bringing frigid temperatures and icy precipitation.

"During the bomb cyclone, coal provided about 55% of the generation across six [independent systems operators]," said Peter Balash, senior economist for the Department of Energy's (DOE's) National Energy Technology Laboratory (NETL). "Without coal, we would have had a [power] shortfall in PJM," the regional transmission organization (RTO) that serves all or part of 13 midwestern and eastern states. "The second largest [amount of generation] came from fuel oil. Constraints in the pipeline system led to price spikes in natural gas," and those constraints also meant the supply of gas could not keep up with demand, particularly in the Northeast.

"Increases in power prices during the event offset the lower price of natural gas," Balash said, noting the extreme weather event showed how generators don't want to rely on just one energy source to maintain reliability and resilience on the grid. He said that while energy storage facilities often are located near major population centers, "less than 40% of [those] are capable of producing more than 1 MWh of power"-not nearly enough to keep up with the demand for heat during the January event, or the polar vortex event that struck much of the same area in 2014.

Deck Slone, senior vice president of strategy and public policy for Arch Coal, noted the U.S. coal fleet has lost "about 30% of its generation capacity" over the past decade, which he said puts baseload power at risk. "It's going to take a while to get to large-scale energy storage," to a level that could begin to replace the lost capacity, he said.

"Storing power is hard, storing coal is easy," Slone said, noting discussion of energy storage should include storage of coal. "It's something we should be mindful of when we think about resilience and reliability" of the grid.

Investments in Storage

Matt Moore, executive director of portfolio strategy for ACES, a nationwide energy management company headquartered in Carmel, Indiana, said battery storage can provide ancillary services, particularly for regulation of power on the transmission grid. But he said project developers need incentives to make investment financially viable.

"Developers need investment tax credits (ITCs), especially in the first five years," Moore said, noting that may mean developers need to partner with a wind or solar farm to receive the ITCs. He also noted the financial peril of continually falling power prices to the entire generation sector. "I would say most resources are going to be at some sort of risk" as prices continue to fall.

Slone agreed. "[Falling power prices] seems to be a danger to the whole market structure. We need to preserve baseload [generation]." He said the market needs to compensate baseload generators, echoing comments from the Trump administration about changing pricing rules to benefit coal and nuclear plants.

The panelists agreed there should be a compensation structure, with Moore saying that could take many forms. "It really depends on what market you're in," he said.

"The cost of battery storage is decreasing rapidly," Baxley said. "So when will that start to affect [power generation]? It's starting to now, especially in the commercial and industrial sector. Different customers are willing to pay a premium for reliability and resiliency."

Balash noted how Xcel Energy is closing units at its coal-fired Comanche plant in Pueblo, Colorado. Xcel on August 20 said it plans to replace the generation for its largest retail customer, a nearby steel mill operated by Evraz, with solar power from a 240-MW facility built at the mill.

Michelle Aguayo, a spokeswoman for Xcel, said the deal represents the first such contract Xcel has filed under Colorado law that uses customer-sited renewables. David Eves, Xcel's executive vice president, said it illustrates Xcel's evolving business: "It is indicative of our move away from coal-fired power and towards zero-emission resources to serve our customers," he said.

"Colorado will be an interesting market to keep an eye on," said Slone, noting Xcel's plans to pair storage with renewables in its generation portfolio. Said Moore: "The timeline is now for this combination of renewables and storage."

As for when utility-scale could arrive? "The technology doesn't exist for long-term energy storage. We're still years away from that," said Baxley. Which, noted Slone, means coal needs to remain in the mix, even if it's not generally thought of when talk turns to energy storage.

"Our view is, we've seen support mechanisms in place for renewables. We really haven't seen any of that for coal," he said. "We need to continue to look for support mechanisms to reward the power that's always there."

-Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).

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