Energy storage is storming the U.S. power industry, driving changes from the bulk system level to the customer level.

At the system level, February's Federal Energy Regulatory Commission (FERC) Order 841 required bulk system operators to design new rules to integrate storage. April's Order 845 rewrote the rules on interconnection, opening new opportunities for storage.

At the customer level, state lawmakers and regulators in 32 states considered 57 policy actions on deployment, targets, studies and rebates for energy storage in Q1 of this year.

Until about 2015, utility executives and renewable energy skeptics regarded cost-competitive battery energy storage as unachievable. Today, it is a central focus of the power sector.

"We always called it the 'holy grail' because we knew too much wind and solar would break the grid without energy storage, but we thought it would always be too expensive," former Southern California Edison VP Jim Kelly told Utility Dive a 2015 conference.

As the stack of services storage can offer, including capacity and resilience, became understood, it went from a holy grail to the hottest topic in energy. Lithium-ion batteries have captured the most attention, but there are several other fast-advancing battery chemistries and storage technologies, according to the November 2017 Levelized Cost of Storage Analysis from Lazard.

Battery storage's cost is highly variable because of the range of technologies and applications, but the much-discussed cost plummet is real. The overall estimated cost fell 32% in 2015 and 2016, according to the 2017 GTM Reseach utility-scale storage report. That will slow over the next five years, GTM reported. But battery storage is — in certain places and applications — on its way to cost-competitiveness.

Industry insiders expect a cumulative drop in the levelized cost, depending on location and application, as much as 36% between 2018 and 2022, according to Lazard.

Those prices are leading many renewable energy developers to pair their solar projects with energy storage. In California, the nation's dominant solar energy state, the Solar Energy Industries Association chapter formally revised its name to the California Solar And Storage Association this February.

The early success of solar-plus-storage is leading some developers to consider combining batteries with large wind projects, but researchers and industry officials say storage technologies will need to develop further before the paired resource is competitive.

The current capital cost for storage, which was $1,000/kWh in 2012, is estimated as low as $200/kWh, according to a study from the National Renewable Energy Laboratory (NREL) previewed May 10 at the American Wind Energy Association's (AWEA) annual national wind energy conference. The study foresees the capital cost for battery storage falling to $100/kWh — but does not conclude it will be cost competitive for wind.

A double-edged sword?

NREL acknowledged its assessment of the wind-storage value proposition omits potential value streams, including capacity and ancillary services. The study focuses on energy arbitrage, which is storing energy when its price is low and delivering it to the grid when the market price is higher.

Impact of PV on 4-Hour Storage

The net demand before and after the addition of storage, and the amount of storage that can be added before the incremental peak demand reduction credit falls below 100%. NREL

This makes storage dependent on available transmission capacity, according to NREL engineer and study co-author Jennie Jorgenson. But it is a double-edged sword. When there is congestion, stored energy can't be readily moved to arbitrage, but without congestion, stored energy's value in arbitrage drops.

Energy Storage Association (ESA) Executive Director Kelly Speaks-Backman disagrees with this assessment. "Storage absorbs excess wind, when it is at its lowest cost, so it does not have to be curtailed," she told Utility Dive. "And it sends wind into the grid when the price is higher."

For GE Renewable Energy and RES Group, two of the world's major wind builders, the wind-storage value proposition is more complicated and more critical. And it has important implications for wind and storage developers.

Wind energy and battery storage

The storage boom is real. There were 7.8 GWh of global installed storage capacity in 2016 and 11.3 GWh in 2017, according to Bloomberg New Energy Finance data provided by Krys M. Rootham, Operations VP for global wind developer Acciona Energy. That is forecast to grow to 14.6 GWh in 2018 and 81.3 GWh in 2024, Rootham reported in a session on storage and wind at AWEA's national wind energy conference.

For the U.S., 2017’s cumulative installed 431 MWh capacity is forecast to grow to 1,233 MWh in 2018 and more than 9,000 MWh in 2023, according to GTM Research data reported by Rootham.

"Wind needs longer term storage to be valuable." Ryan Wiser Senior research scientist, LBNL

It is not, however, necessary for storage to be directly paired with renewables generation, ESA's Speaks-Backman said. "A specific wind developer can earn from wind that would otherwise be curtailed through arbitrage, but whether the value proposition is viable depends on the specific market."

Storage works better for solar than for wind, LBNL senior research scientist Ryan Wiser said. "It is only necessary to shift solar a few hours into the evening," he told Utility Dive at the conference. "Wind needs longer term storage to be valuable. Transmission is a more logical and less costly solution for integrating wind, at least in the near term."

RES Group Chief Technology Officer Andrew Oliver agreed. "Putting storage with wind provides a cost saving for storage by allowing it to use the same interconnection point," he told Utility Dive. "To impact wind curtailment, there would have to be long duration storage and, at present, long duration battery storage systems like flow batteries have not broken into the mainstream."

Without long duration battery storage, energy arbitrage "does not pencil [out]," Oliver said. "If moving 1 MWh from one part of the day to another earned even $50, which is a lot, and if that could be done twice a day, 1 MW would earn $100 per day. That is $36,500 per year. A 1 MW battery is at least $180,000 installed for the batteries alone, and could be more."

"There is not one reason for pairing wind and storage, there are several, depending on the market, the value for grid solutions, and the capacity factors." Danielle Merfeld Chief Technology Officer, GE Renewable Energy

Only a "significant" further drop in the cost of battery storage "to the point that it intersects with the needs of wind would make most secondary-use cases" economically viable, Oliver said. "As penetrations of renewables rise and more markets like capacity open, the economics could shift in the favor of storage," he added.

Speaks-Backman argues that wind developers may be underestimating the economics of storage. "In the Xcel Energy 2017 solicitation, the median bids were $36/MWh for solar plus storage and $21/MWh for wind plus storage for 2023 delivery for long term PPAs," she said. "And there are deliveries today for storage-only in the range of $40/MWh to $50/MWh, which is competitive now."

"There is not one reason for pairing wind and storage, there are several, depending on the market, the value for grid solutions, and the capacity factors," GE Renewable Energy Chief Technology Officer Danielle Merfeld told Utility Dive. "We are trying to hone in on which solutions match which markets because this is not a one solution kind of problem."

GE was working on storage ahead of the 2015-2016 price drops and technology breakthroughs. It began by trying to understand whether storage advantaged wind more at the turbine level or the project level, Merfeld said.

"The answer so far is that as long as the storage is before the grid interface, it has value," she said. "It allows double use of the interconnection and the grid does not know whether the cleaner power curve is coming from the project level or the turbine level."

Broadly, energy storage is competitive when energy has higher value at certain times of day or can make using available transmission more efficient, Merfeld said. Market and policy factors define its economic viability and they are still evolving.

"GE is experimenting around the edges of all the scenarios for storage to identify the market conditions storage works in," she said. "Once that landscape is built out, as the markets settle into place, we will know where storage will work."

Other markets, services, and kinds of storage

As the NREL paper acknowledged, opportunities in capacity and ancillary services markets could change the storage value proposition.

RES Group's Oliver said many secondary-use cases, like absorbing excess ramp generation and providing power electronics services, don't provide significant returns.

FERC Order 841 is likely to be important for the storage market, Oliver said. When new rules are put in place to allow storage to derive multiple revenue streams from its value stack, it could change storage economics, he said. But it will not likely change the economic viability of pairing it with wind, he added.

"FERC Order 845 is more important for wind developers because it changes the interconnection rules," he said. "A developer with underused interconnection capacity can now add storage without a new interconnection. allowing the wind developer to profit from underused interconnection capacity in a way that was not possible before."

Speaks-Backman agreed that 841 is a "game-changer" for storage. "Most markets have only allowed storage to capture one of its multiple potential revenue streams," she said. "System operators are developing market products for the multiple services it offers."

Order 841 requires system operators to recognize its value in energy and capacity markets, and in providing the many ancillary services they require to maintain reliability, she added.

Wind developers should also recognize the resilience value of other types of storage, including pumped hydropower, compressed air, and recapturable thermal energy, Speaks-Backman said. “Storage is a way to serve the system more efficiently than with infrastructure upgrades, and to find a way to not waste generation.”

Merfeld agreed. GE is studying "the entire ecosystem of renewables and storage" and wants to take advantage of "the full palette of colors so we can paint whatever picture we want," she said.

An important advantage of batteries is that they can be sited anywhere, but "storage is the generic solution and the cheapest type is not necessarily electrochemical batteries," she said. "There are locations where we feel pretty confident there is a good value proposition for large scale energy storage and where hydro pumped storage is an easier, cheaper solution than batteries."

Oliver said thermal storage, like the demonstration work being done by Siemens, is also more potentially viable than battery storage. "It has a very low round trip efficiency, but if it is used to reduce curtailment, curtailed energy is lost anyway, so it can be cost-effective."

Future Energy Solution thermal storage for wind power research project

Merfeld said storage already has value in places where there are ancillary services and frequency regulation markets, where there are time-of-use rates, or where there are demand charges. In other places, geographically-dispersed wind projects and ample transmission limit the cost effectiveness of storage because "the grid acts as storage," she said.

Things change

Utility CEOs who see policy and economics driving higher penetrations of renewables should be aware that they can get more value out of renewables assets with storage, Merfeld said. "It makes renewables fungible, and the more renewable electrons, the less valuable they are if they are not fungible."

In the longer term, she said, the system is moving toward "baseload renewables and a 100% renewables future," she said. "That is not possible without some amount of some types of storage. "For utility CEOs to understand the value of storage, all they need to do is think about preparing for the long term."

Oliver agreed. "The economics of wind-storage projects do not pencil without a significantly lower price for storage," he said. "But as the markets and policy evolve, the opportunities to add value streams will increase, the price of storage will continue to drop, and there will be more types of commercially viable storage. Things will not be the same in three years to five years."