“Nothing is more powerful than an idea whose time has come”

-Victor Hugo

Every once in a long while, a sea change comes along, succeeds much faster beyond anybody’s imagination, scares the hell out of the competition, and ultimately causes a change in the rules of the game.

Wayne Gretzky entered the NHL in 1979 and immediately established scoring records once thought unimaginable. Gretzky’s dominance eventually caused the NHL to implement “The Gretzky Rule” which eliminated four-on-four situations by introducing the concept of offsetting penalties.

The rule change turned out to be ill advised and could not stop Gretzky and his team from capturing five Stanley Cups in seven years. The Great One knew the secret to success was to skate to the open ice to where the puck was going, not to where it had been.

No rule could stop that.

The nascent energy storage technology draws similar parallels to the ascent of the messiah of hockey. Rapidly improving techno economics plus another wave of solar and wind proliferation guarantees that battery storage will be a sea change for the energy market, both behind and in front of the meter.

The “open ice” for the energy market is battery storage.

The paradigm shift, however, will introduce a deeper level of complexity to market rules as well as decisions to simultaneously unlock several different value streams.

Battery storage is a solution looking to solve many problems.

Therein lies the complexity.

The Importance of Competitive Cost

The journey to achieving scalable battery storage solutions has been a cost-based discovery played out in the labs of departments of material science and engineering.

When the fracking revolution began, you didn’t need a Ph.D. to quickly understand that gas would be a winner and coal would be a loser. The transformation happened rapidly due to the lower cost of gas. The reduction in carbon emissions was a nice byproduct that pleasantly mirrored evolving public policy.

Once the initial wave of solar and wind generation entered the organized markets, it became quite apparent that we would need more flexible and faster responding resources. Lithium-ion battery storage entered the organized market arena only when it could compete with natural gas.

Plunging Levelized Cost of Energy for lithium-Ion batteries now has natural gas in the cross hairs. The hunter has become the hunted.

The true cost of battery storage depends on how often it is used. If you pay a certain price for a storage device, and you use it a certain amount of times per year, you can calculate a utilization rate and ultimately the price of electricity.

Public utility commissions have taken notice and battery storage will be an important factor in Integrated Resource Planning for the next decade.

Calculating a Benefit to Cost ratio for large scale battery storage systems is complex because these systems can provide multiple benefits depending on the need and the operational capabilities.

The impending battery storage revolution will bring far more optionality and complexity than the fracking revolution brought ten years ago.

This time really is different.

The Importance of Stacking Benefits

Battery energy storage systems service multiple value streams for both energy and non-energy purposes.

Energy arbitrage

Ancillary services

Peak shaving

Capacity

Voltage support

Resiliency

Resource Adequacy

Alternative to transmission

Some value streams offer more promise than others. For example, a recent report by the Clean Energy Group Massachusetts reported that 40% of the Commonwealth’s annual electricity dollars was attributable to just 10% of the top demand hours. Redistributing energy consumption to non-peak hours can save millions by reducing the need to run costly “peaker” power plants and causing congestion on electric lines and substations.

Ancillary markets, on the other hand, may not hold as much potential value in the future than initially estimated. According to a recent article published by PA Consulting, proliferation of new battery storage systems will likely overwhelm relatively finite ancillary service demand in both regulated and deregulated markets.

Battery storage also provides an alternative to building transmission facilities. Besides saving money on the avoided cost of transmission buildouts, they can reduce costly congestion in certain bottlenecks.

The Importance of RTO/ISO Markets

The proliferation of zero marginal operating cost generation has some wondering about the future of organized markets. Especially in the age of large-scale battery storage.

How will hybrid power plants fit in the competitive markets?

Do these markets still deliver value to their regions in a decarbonized, decentralized, digital world?

In my opinion, we need these markets more than ever. Here is why:

Regional Solutions – Regional challenges require regional solutions. For example, challenges integrating large scale solar in Arizona are far different than integrating large scale solar in Florida. The cloud cover in Florida is far more frequent and thus more challenging to model a generation profile to meet load.

The Southwest Power Pool is approaching 70 % wind penetration and thus owns different transmission challenges than CAISO’s Duck Curve issues exacerbated by an explosion of EVs in California.

We know the current market designs will need to be changed, but we also know that it will requite different solutions for different regions.

Consensus Building - While most people associate RTO/ISO markets with efficient economic and transmission operations, very little recognition or value is credited towards the consensus building role regarding the attainment of public policy goals and objectives. From the working groups to the market policy committees to the Board of Directors, RTO/ISO markets provide a forum where stakeholders from a region convene to discuss challenges and propose solutions.

While nobody gets everything they want, the region usually gets what the region needs. The people involved in these discussions own the intellect to adequately discuss and assess these challenges. They are thought leaders who wear two hats- one of the company that pays their checks and the second is the RTO/ISO hat that considers the optimal and equitable solution for their region.

Sometimes it is easy to define value to something if you close your eyes and imagine it doesn’t exist. So, what if we no longer had regional consensus building?

Do we really want a divided and polarized Congress making these decisions?

The energy markets will only get more complex in the future and we need highly educated people with diverse backgrounds with various industry experience levels. RTO/ISO consensus building has weathered the dynamic changes associated with the fracking revolution and the proliferation of wind and solar.

They will handle battery storage as well.

Now is not the time for people to take their marbles and go home.

Reliability – Lest we forget, the name of the game is to deliver efficient and clean energy solutions in an affordable and reliable manner. RTO/ISO markets own an exemplary track record of handling complex challenges in a reliable manner. The increase of intermittent resources during large scale baseload retirements challenges these operators daily. They survive and address these reliability challenges because they have the regional resources to do so.

Large scale battery storage systems provide overarching support to stabilize our grid that has become increasingly unstable due to higher amounts of intermittent energy.

Microgrids may well be part of the future, but the regional grid keeps the lights on today, keeps people safe, and keeps our economic engine running. Battery storage will be an important tool for RTO/ISO markets to maintain reliability.

The Complex Promise

Supply chain, safety concerns and degradation concerns notwithstanding, the future of battery storage is upon us. We have crossed ‘The Chasm” and entered an important new phase in the energy world.

The promise is to deliver a solution to further integrate intermittent resources like wind and solar to achieve challenging carbon reduction goals.

The complexity lies within the optionality battery storage provides both from an energy and non-energy perspective. We need to consider the technical and operational capabilities of these battery storage solutions in an optimal and equitable manner.

The Southwest Power Pool recently published an excellent white paper summary that identifies a number of initial Energy Storage Resource issues that need to be resolved. Issues like analyzing the dual benefits of energy plus transmission are a great example of the promise and complexity of battery storage.

If we remember to skate to where the puck is going, and not where it has been, these challenges will be solved in the most optimal and equitable manner.