When looking at developments in the world of energy, I often like to break hurdles, accomplishments, and developments in three key areas: what’s happening with the tech, what’s the relevant public policy, and how are the markets responding? All important power sector stories will fall into one (or multiple) of these three pillars—so when I was reading this week about the opportunity for battery storage technology to potentially displace gas peakers, in terms of providing an influx of energy needed during hours of peak demand, I got curious what some of the recent developments were in the tech, the policy, and the markets.

To provide a sweep snapshot of this potential development into utility load management and how flexibility might look for the utilities of tomorrow, let’s grab an overview of one story in each of these areas:

Technology: AES starts building largest battery peaker, highlighting technology’s potential

In the beginning of July, a story came out about a coming battery energy storage installation that would be over twice the size of the current largest operating system in the United States. The AES Alamitos Energy Battery Storage Array in Long Beach, California, is being touted of a preview of how grid-level energy storage might look in the coming decades as utilities and grid participants adapt the increasingly advancing technology.

The AES storage projected is a demonstration of the overall modernization strategy from the sector and will eventually provide 300 MW, the first step of which is an 100 MW/400 MWh phase, over the course of a 20-year contract with Southern California Edison Co., starting at the end of 2020.

This project is only one of a number that are in the works and expected to come online in the coming years. As the story notes:

Planned to come online at the same time and in the same place is the PG&E Corp. subsidiary's 182.5-MW Tesla Moss Landing Battery Energy Storage Project (Elkhorn), an approved utility-owned project to be supplied by Tesla Inc. Other major utility-scale battery projects, some coupled with solar farms, are planned around the country, including in Arizona, Colorado, Florida, Hawaii, Nevada, New York and Utah.

Policy: Minnesota to consider using energy storage for peaker plants

Just this week, Associated Press noted that a provision in an omnibus jobs and energy bill being debated in Minnesota would seek to “put energy storage on a level playing field with natural gas plants and other resources.” The legislation would, among other things, allow utilities to recover costs associated with energy storage pilots as a way to encourage otherwise risk-averse utilities to bet more on the emerging technology.

In the debate of these policies there are, as always, to sides to the debate. On the pro-energy storage side, a 2017 study commissioned by the Energy Transition Lab dictated that gas peaker plants are:

A marginal resource for meeting capacity needs and that storage, and solar-plus-storage, are becoming increasingly cost competitive. By 2023, the report predicts, the cost of storage becomes less than building new peaker plants.

On the other hand, the same report warns that:

The current state of battery storage technology does not have the ability to match the duration of such events without significant (and very expensive) over-build of those resources,” the report states in an executive summary.

The goal of replacing gas peaker plants, which only come online during periods of high demand that the baseload energy mix cannot alone handle, with energy storage would theoretically allow more of that peak demand to be met via clean energy resources that aren’t otherwise dispatchable, but the policy debate on the issue underscores how that transition is anything but a consensus at the moment.

That said, the markets are another area completely, where money being spent on energy storage as a replacement for peaker plants is coming into focus…

Markets: The Potential for Battery Energy Storage to Provide Peaking Capacity in the United States

One of the more authoritative voices on this matter has come from the National Renewable Energy Laboratory (NREL), a lab in the U.S. Department of Energy’s national lab system, who put out a report this June analyzing the market potential for battery storage to take on this important role. Any story you read on energy storage for peaker plants is likely to reference this study, but some notable quotes to paint a picture of the current and future markets for such a switch in technology include the following:

The fleet of conventional generators that provide most U.S. peak capacity today is aging, and future retirements will provide opportunities for substantial amounts of battery storage to enter this market

The results show significant potential for energy storage to replace peaking capacity, and that this potential grows as a function of [solar] deployment

We demonstrate the opportunity for utility-scale battery storage to satisfy a substantial portion of U.S. peak capacity needs and thus expand beyond its current role in the relatively small ancillary services market. This analysis demonstrates roughly 28 GW of practical potential for 4-hour storage providing peaking capacity, assuming current grid conditions and demand patterns. This deployment could help decrease storage costs—and storage deployed primarily to provide peaking capacity can provide additional benefits, such as a sink for low- or zero-value PV generation during non-peak periods. This in turn can enable greater PV deployment, which then increases the potential of 4-hour storage.

So there you have it, a brief tour of the tech, policy, and markets influencing energy storage as peaker replacements. You see that there’s a bit of a push and a pull and a long road to go, and without any of these three legs the stool will end up tipping over. Watching the next 5-10 years will be incredibly telling as to whether this strategy will be able to sink or swim.