Energy Storage Changes the Power Profile

The power grid is a pretty complex system. Electricity is generally produced on an as-needed basis. Generators ramp up and down based on demand. However, energy storage systems are beginning to change how demands are being met.

Hydro Is Storage

Energy storage isn't a new concept. In fact, pumped-storage hydro systems have been around since the late 1800s. According to the Department of Energy (DOE), there was 23.6 GW of operational pumped-storage capacity in the U.S. in June 2018, which accounted for 94% of the country's energy storage. Furthermore, some experts have argued that all hydropower is a form of energy storage.

"Our water reservoir[s] are our batteries," Eric Martel, president and CEO of Hydro-Quebec, said in March during a panel session at the BloombergNEF (BNEF) Summit in New York. Hydro-Quebec is a Canadian public utility that operates some 60 hydroelectric generating stations. Martel said Hydro-Quebec's reservoirs are so large that the utility "can store 175 TWh, which is more than enough to provide the whole electricity for the New York state for a year and a half almost."

Pumped-storage hydro systems function kind of like a bank. Owners can make deposits, that is, use electricity to pump water into a reservoir when power is abundant and the price is cheap. Then, they can make withdrawals by reversing the operation and generating power when electricity prices increase, thus pocketing the price difference. There is some lost energy along the way, because the systems are not 100% efficient, but as long as the price difference more than makes up for the losses, the economics work.

Besides arbitrage, energy storage can also help defer generation, transmission, and distribution capacity additions; improve grid flexibility, reliability, and resiliency; provide ancillary services; stabilize power quality; minimize renewable energy curtailments; and assist end-users in managing energy costs.

"If we use the hydro capacity to store energy and to firm the production of other resources, then we are getting to power which is as-consumed power, no longer as-produced," Grzegorz Gorski, managing director of ENGIE's Centralized Generation Mi(C)tier, said at the BNEF event.

Game-Changing Cost Reductions

While pumped-hydro systems dwarf all other forms of energy storage currently in service, significant advancements have been made in batteries and costs have decreased dramatically. According to a BNEF analysis released on March 26, the benchmark levelized cost of electricity for lithium-ion (Li-ion) batteries has fallen 35% since the first half of 2018 to $187/MWh.

"Batteries co-located with solar or wind projects are starting to compete, in many markets and without subsidy, with coal- and gas-fired generation for the provision of 'dispatchable power' that can be delivered whenever the grid needs it (as opposed to only when the wind is blowing, or the sun is shining)," BNEF said.

Lynn Jurich, CEO of Sunrun, agreed that behind-the-meter storage and solar is already economical in some locations. "We're at 20/kWh. So, that beats grid power in Hawaii, California, New York City, Massachusetts, [and] parts of Connecticut," Jurich said at the BNEF Summit. She predicted that within a couple of years prices would be in the mid-teens, and in five years "we'll be at 10 for behind-the-meter solar and storage."

"What's happening now is storage is winning in head-to-head bids against gas in the U.S., which is a dramatic statement, because gas is so low-cost here," said Chris Shelton, president of AES Next.

The New Peaker Plant

Shelton noted that AES connected its first Li-ion batteries to the grid in February 2008. "[AES's] team has gone on over the last decade to build new products that are alternatives to power plants and recently have been winning 100-MW-class power plant alternative bids," he said.

As an example, Shelton pointed to a recent bid that AES won in the southwestern U.S. "Arizona Public Service ran a competitive process for power plants initially. They included storage, and they ended up choosing several hundred megawatts of storage, and AES is going to build one of those," said Shelton. "You may have in your head that you need a power plant, but if you look at what you really need-the fundamental needs behind what you thought of as a power plant-you can easily make a battery make sense and pay dividends for you."

AES made history in December when it inaugurated the world's largest operational solar-plus-storage system in Kauai, Hawaii. The 28-MW solar photovoltaic (PV) system and 20-MW/100-MWh battery system has been dubbed "the PV Peaker Plant." The combined system can deliver roughly 11% of Kauai's power, and it is expected to help Hawaii achieve its goal of reaching 100% renewable energy by 2045.

The PV Peaker Plant is designed to fully integrate solar and storage as a power plant. The new system allows solar to occupy the role that thermal generation has played in varying output to meet peak demand. It's expected to deliver energy principally during early morning (6 a.m.-9 a.m.) and evening (4 p.m.-10 p.m.) hours.

Shelton said AES will develop three similar facilities for Hawaiian Electric Co. (HECO). "That first [power purchase agreement] was 11 [per kWh]," he said. "The HECO ones are about 8 [per kWh]," said Shelton, demonstrating how prices have declined. a-

-Aaron Larsonis POWER's executive editor.

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