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The energy storage market is maturing, and there's now less focus on physics and more emphasis on projects, system intelligence and grid integration. It’s when project development and execution become quotidian and efficient that energy markets really take off.
Here are three beautiful energy storage projects that drive home larger themes in this booming market.
- Battery as peaker plant (AES, NextEra, GE)
- Epic load shift / solar savior (SolarCity, KIUC)
- Aggregating behind-the-meter sites to utility scale (AMS, Tesla)
But first, some market context.
The U.S. deployed 60.3 megawatts of energy storage capacity in the third quarter of this year and 108 megawatts through the first three quarters of the year, according to the latest edition of GTM Research and the Energy Storage Association’s U.S. Energy Storage Monitor.
The report forecasts deployments of 192 megawatts this year, triple last year’s total.
FIGURE: U.S. Energy Storage Deployments, Q3 2013-Q3 2015 (Megawatts)
Source: U.S. Energy Storage Monitor
The majority of deployed capacity in the U.S. this past quarter was in the utility-scale (front-of-meter) segment, with 46.6 megawatts deployed.
California added 11 megawatts of behind-the-meter battery systems in the third quarter of 2015 -- the lion's share of the U.S. total of 13.7 megawatts, most of which were in commercial deployments.
FIGURE: U.S. Energy Storage Deployments by Segment, Q3 2013-Q3 2015 (Megawatts)
Source: U.S. Energy Storage Monitor
“As expected, 2015 is turning out to be a breakout year for the U.S. energy storage market,” observed Ravi Manghani, senior storage analyst at GTM Research. There will be almost 500 megawatts of energy storage installed across the globe in 2015, according to Pratima Rangarajan, General Electric's GM of energy storage.
AMS: Aggregating behind-the-meter sites to utility scale
A water-energy nexus storage project from AMS is about aggregating distributed storage resources as a tool to scale, as well as market verticals with billion-dollar potentials.
Susan Kennedy, CEO of Advanced Microgrid Systems, has observed, “The entire electrical distribution system is designed around a single premise: you cannot store energy.”
We caught up with Kennedy at a recent More Than Smart event, where she said, “What we're doing is we're offering utilities a customized solution using energy storage behind the customer's meter, harnessing that load to provide specifically what the utility needs in a particular region. It’s a clean, fast, flexible product that doesn't exist in the utility world today.”
Southern California’s Inland Empire Utilities Agency (IEUA), along with AMS, just launched a project that will install a total of 3.5 megawatts of energy storage systems, ranging in size from 150 kilowatts to 1,250 kilowatts, spread over a number of pump stations and other facilities that will integrate PV, wind, fuel cells and grid resources at the water agency. AMS will design, install and manage the assets to optimize IEUA's on-site energy production.
IEUA is a regional wastewater treatment agency and distributor of water serving more than 830,000 people throughout western San Bernardino County.
The Tesla-battery-powered behind-the-meter storage gets IEUA more effective renewable generation, lower energy costs and more reliability, while providing the utility with what AMS President Kelly Warner described to GTM as “demand response on steroids.”
Integrating IEUA's on-site renewable energy resources will reduce its peak demand from the grid by as much as 14 percent and decrease total energy costs by 5 percent to 10 percent, according to the water agency. AMS’ Warner told GTM that the IEUA situation was a microcosm of the utility system, with its own duck-chart-type challenges. Energy storage allows for better utilization of on-site renewables while lowering demand charges.
AMS investor Nancy Pfund of DBL Ventures called Kennedy “the utility whisperer” in a recent GTM Squared interview.
Pfund said, “You need to go beyond pilots. Susan's company got a 50-megawatt contract with SoCal Edison. That was very early in its gestation, and that was a huge reason why she has been able to attract very high-quality investors. She wouldn't have gotten that if it were some 3-megawatt pilot somewhere. There are appropriate uses for pilots, but some of this is not rocket science. (We have [SpaceX] in our portfolio, right? I can make that distinction.) We need to be really bold here. […] This is not something that we can...relegate to pilots. In the law of innovation, if you have too many pilots, you lose time, and time is your enemy when you're an investor. We need to get this commitment going.”
Kennedy added, “That's a really critical point. We went to market with the strategy that we needed to scale. In order to get distributed resources at a viable price point so that they were adopted by utilities in a competitive way with traditional resources adopted by consumers, you have to get the costs down. The only way you get the costs down is scale. What we decided our entire project around [was] getting a large enough contract from the utility that will allow us to negotiate supply contracts that were large enough that we could get the economies of scale, where you'll be able to offer the utility something that is more competitive than you would if you were doing a pilot or a small project. We're able to pull off something that is valuable and cost-effective for the consumer. If we can't get out of pilots and get to scale, distributed resources will always be at the margins.”
“These are large projects that are designed to be aggregated for grid support -- we are not selling technology to a single building owner. That scale is a really important part of what’s making the technology affordable and competitive with other resources, and it’s what makes AMS unique in this space,” said Kennedy in an earlier interview.
The IEUA project is small potatoes compared to the 50-megawatts of behind-the-meter battery storage AMS and SunEdison have destined for the West Los Angeles Basin area for as part of Southern California Edison’s 2013 Local Capacity Requirement solicitation.
As Jeff St. John reported, AMS isn’t signing up customers for behind-the-meter batteries and then looking for ways to sell their capabilities to the utility. Instead, it’s working with SCE from the start to identify the optimal amount of load-shifting it could use at local stress points, like the Santiago and Johanna substations in the area where it’s building its first hybrid-electric installation.
Kennedy noted, “Whether it’s for local capacity, up and down regulation, ramping, where it can help them reduce distribution upgrades -- we design the system for what the utility needs.” The host customer, in turn, gets a no-hassle, cost-free upgrade to its energy profile, with batteries that are usually discharging during the same afternoon hours that coincide with peaks in commercial building energy use.”
Meanwhile, back at the water agency, Joe Grindstaff, the general manager at IEUA, told GTM that AMS’ storage-as-a-service product was a “no brainer” for the “very conservative business” of water companies. AMS was paying for some of the O&M and sharing the guaranteed minimum cost savings. He said it would reduce costs by $56,000 per year.
Pratima Rangarajan, General Electric's energy storage GM, recently said, "Scaling is not about just the product. [...] It is about fitting into the ecosystem of the grid where this product lives. It is about doing the grid integration study, and the modeling, that tells us where to position the product. Where is the right place, how big should it be, where can we relieve the congestion?”
AMS' Kennedy added, “If we get this right with the utilities we're working with, it opens up the customer side -- the customer as the prosumer, as the one who is actually generating a grid resource and opening up that value stream for the utility.”
She continued, “Utilities are going to spend probably a trillion dollars over the course of the next decade in the United States chasing the loading curve. We can harness the consumer as a manager of loads. It is the cleanest, fastest, most flexible resource for the grid. It will actually allow us to shape the loading curve instead of chasing it.”
SCE has signed long-term procurement contracts for more than 100 megawatts of behind-the-meter storage, including 85 megawatts of batteries from Stem and 25 megawatts of thermal energy storage from Ice Energy. Consolidated Edison has joined with SunPower and Sunverge on a solar-plus-storage virtual power plant demo (PDF) to aggregate “a total capacity of 1.8 megawatts and an aggregated energy output of 4 megawatt-hours.” California is looking to open its grid markets to aggregated distributed storage.
Aggregation could be the killer app for storage, as the value of the asset is clear and monetizable by the customer, utility and storage provider.
AES, NextEra, GE: Energy storage to replace and augment peaker plants
NextEra's CEO Jim Robo recently said that he and his team expect energy storage prices to experience a cost plunge similar to those seen in the solar space over the last seven years. "If that happens, energy storage will be competitive with gas peaker plants," said Robo, adding, "Post-2020, there may never be another peaker built in the United States -- very likely you'll just be building energy storage instead."
Storage is not just for ancillary services anymore.
GE's Rangarajan seemed to be responding to Robo's claim when she said, "We've heard about peaker-free systems, and everyone asked, 'Are we going to be peaker-free soon?' The answer really is that peakers are here, they're all through our ecosystem, and they're going to be here for a little longer. I don't see any of us going and pulling out peakers from the ground. [...] Peakers do have a bit of a problem. The utilization factor of a peaker is a little more than 4 percent in the United States. What do we do about that?"
She continued, "We're going to add some storage to these peakers, and we're going to raise their utilization rates, and make them much more profitable for our customers. This is the way for energy storage to drive into the current ecosystem, harden the current ecosystem, and for us to take a larger fraction of the pie."
AES (which had $17 billion in 2014 revenues) is deploying its next-generation battery-based energy storage at the Warrior Run generating station in Cumberland, Maryland, describing the product as “a battery-based alternative to peaking power plants.” Its certified battery suppliers, so far, are LG Chem and Parker Hannifin.
Coming soon to California, AES is replacing a peaker plant with what will be the world's biggest battery: a 100-megawatt front-of-meter battery system in SCE’s West Los Angeles Basin region. John Zahurancik, president of AES Energy Storage, said, "This contract marks the emergence of energy storage as a cost-effective alternative to peaking power plants for local power capacity and reliability."
A few facts and figures about the battery:
- It is 100 megawatts, able to provide 4 hours or 400 megawatt-hours of battery-based energy storage
- The resource must be completed by January 1, 2021
- The battery will be installed in one large building at the Alamitos Power Center in Long Beach, Calif.
- AES is providing services under a 20-year power-purchase agreement
Zahurancik said, "It's the first time that energy storage has been included in all of the services for local capacity and given a fair playing field. The storage we're delivering can do a lot more than balancing intermittency."
GTM Research’s Manghani noted, "As part of the Southern California Local Capacity Procurement Obligation, the system will be expected to provide Resource Adequacy services (and other services when applicable) each day of the delivery period. The long duration and daily cycling requirement will test the limits of lithium-ion technology."
Currently, the largest operating electrochemical battery in North America is Southern California Edison's recently unveiled 32-megawatt-hour lithium-ion demonstration project at the Monolith substation in the Tehachapi Mountains. Southern California Edison has been working with LG Chem on the 8-megawatt, 32-megawatt-hour lithium-ion battery system since 2010. LG Chem provided the batteries, and ABB provided the balance of plant. The region around the Tehachapi Mountains, where the project is sited, has the potential to produce up to 4.5 gigawatts of wind energy by 2016.
According to Zahurancik, when SCE, the independent system operator, or a public utility commission goes about the process of grid capacity planning, ensuring that the grid will be able to weather its "peakier moments" while accounting for "retiring plants and grid mix" and looking ahead four to seven years, "the verdict is that energy storage is more cost-effective."
NextEra’s Robo said, "We're starting to make very good progress in our energy storage business," noting that energy storage is one of "three growth platforms" at NextEra. According to the CEO, "We're going to deploy probably $100 million in [energy storage] projects in the next 12 months in places like PJM, California and Arizona."
When a player like AES or NextEra Energy, a Fortune 200 firm with utility revenues of $17 billion and 44,900 megawatts of generating capacity, starts to tout energy storage, the utility industry and the renewables industry take notice. “Battery storage is the holy grail of the renewables business,” said Robo, adding, “If we can deliver firm power to renewable customers at a cost-effective rate, you’ll see renewables explode even faster than they already are.”
Robo noted that energy storage "isn't going to be just to firm renewables."
About 30 gigawatts' worth of gas-fired peaker plants are added each year to keep up with increased global demand -- now a huge market that is increasingly addressable by energy storage.
SolarCity and KIUC: Epic load-shifting better utilizes solar
Kauai Island Utility Cooperative, a member-owned cooperative serving 30,000 customers on the island of Kauai, recently announced a contract with SolarCity to build a solar project attached to a massive lithium-ion storage project.
Bob Rudd, SolarCity's director of energy-storage project development, noted, “Anyone that's been out to Kauai will notice that they have a lot of solar on the island and really don't have any appetite at all for solar at midday. If anything, they were already in a bit of a curtailment state during certain days. So what we've done here is taken a 13-megawatt-AC PV system, and coupled it with a 13-megawatt/52-megawatt-hour battery bank, and effectively shifted...at least the vast majority of that midday solar production to the evening hours when they have their true peak event on the island, where they're spending all their units at somewhat inefficient heat rates."
Shayle Kann, GTM’s VP of research, breaks the figure shown above: "This is how the generation mix looks over the course of one day [October 14 of this year]," said Kann. "It starts out where there's basically one baseload gas plant that's operating pretty much all day, and then a bunch of smaller diesel plants."
"Already, you can...see the impact that all of this solar and hydro is having on the market. It's pushing down in the middle, and you're slightly under-utilizing the baseload gas already, today,” Kann continued.
“Imagine first if KIUC had just contracted for 13 megawatts of solar alone. It just pushes down in the middle of the day. That means you end up under-utilizing the baseload plant even further. That's expensive. It's also not optimal from a greenhouse-gas-reduction standpoint. It doesn't actually take away that much of the diesel, which is really what you want to be getting rid of. It just doesn't provide that much value, and it doesn't help you in the evening, when you need it,” he said.
Kann continued: "Basically, they're going to take all of the solar generation in the middle of the day, they're going to charge the battery, and they're going to shift it all out into the evening peak, from about 5 p.m. to 10 p.m. Instead of stressing that baseload plant, it ends up generating right when you would have had the expensive peak in resources, and a lot more diesel use, so it's good from a greenhouse-gas-reduction standpoint, and it saves you a lot more money."
“In reality, had it not been for the possibility of storage, I think you can pretty safely say KIUC wasn't going to contract for any more solar, so we would have hit the penetration limit in KIUC territory, or at least very close to it. Instead, they get the solar-plus-storage project," Kann said.
“KIUC has been investigating energy storage options for more than two years, and price has always been the biggest challenge,” KIUC CEO David Bissell said in a statement. “This is a breakthrough project on technology and on price that enables us to move solar energy to the peak demand hours in the evening and reduce the amount of fossil fuel we’re using.”
SolarCity’s Rudd added, "This is a project we're focusing on right now with a signed contract" and working through permitting and PUC rules. "We're intending to COD in Q3 or Q4 of next year. It's pretty exciting because... it really proves the concept of firm, dispatchable solar power at scale, without grants, without any economic influence other than just a purely commercial transaction."
Brad Rockwell, generation manager at KIUC, said that the SolarCity project is “transformational.” Rockwell expressed some concern as to whether battery performance will live up to what SolarCity is guaranteeing in the PPA, however.
While we’re on the subject of the small island of Kauai, we also spoke with Drew Bradley, director of business development at REC Solar Hawaii. He spoke about Kauai’s largest solar array, a 12-megawatt-AC solar array for KIUC complete with storage, now on-line. The 60-acre solar PV system will be located in Anahola on the northeast side of the island of Kauai. A 6-megawatt Saft lithium-ion battery system will be installed alongside the array to smooth the integration of solar power on the grid. ABB provided the controllers and inverters.
“This installation is a game-changer for Kauai and will set a precedent for utility cooperatives across the U.S.," said Bradley.
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Greentech Media will be delving into the details of big storage deployments and other key issues for the fast-growing grid battery industry at its Energy Storage Summit this week in San Francisco. Click here to watch the live stream.
