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Elevating the role of energy storage on the electric grid

Nov. 28, 2023
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ESSs can help alleviate thermal overloading on transmission lines, manage power flows, and balance renewables by reducing peak loads and absorbing excess power, thus potentially extending transmission asset life and deferring the need for new infrastructure.

Further, integrating these resources with advanced grid automation technologies can help detect and respond to grid disturbances such as power outages or voltage fluctuations, thereby potentially providing operational flexibility and increasing resilience. The Midcontinent Independent System Operator and Southwest Power Pool have implemented storage as transmission-only assets, while other regions are still assessing feasibility.34

Business models and use cases

  • Virtual power plants: By aggregating BTM ESSs with other DERs and controllable loads using software, virtual power plants can help balance the grid without investment in additional power generation plants.

Use case: In 2021, Green Mountain Power (GMP) introduced a program that allows 200 customers with Tesla Powerwall batteries to create a virtual power plant. The batteries are intended to help balance the regional power grid, replacing fossil-fuel peaker plants during peak demand. This initiative aligns with GMP’s four-year-old Powerwall program, which reportedly saved over US$3 million in 2020 by reducing electricity purchases during price spikes. GMP pays participating customers US$13.50 monthly, benefiting the environment and all customers through reduced power supply costs.35

  • Storage as a transmission asset: Deploying storage systems strategically on the transmission network can help address multiple grid challenges and provide valuable services. Several states have initiated studies to evaluate the role of energy storage as a transmission asset.

Use case: A recent New York study proposed adding a 200 MW/200 MWh storage as a transmission asset instead of a new 345 kV tie line to help increase the power transfer capability and reduce congestion. Its estimated cost would be US$120 million, compared to the US$700 million capital cost for a wire-based solution. In addition, depending on where it was situated, local congestion savings could add up to around US$23 million annually.36

Electrification and decentralization support

The primary objective of this dimension is to facilitate the electrification of end-use sectors and support the integration of DERs in a decentralizing electric grid. The industry can leverage various storage strategies to help support electrification and decentralization.

Integrate storage with electric vehicle–charging infrastructure for transportation electrification: Energy storage can gain from transportation electrification opportunities, such as investments made through the Infrastructure Investment and Jobs Act to deploy a network of EV charging stations nationwide.37 Integrating energy storage with EV charging infrastructure can enable fast charging during peak demand periods, especially in supporting regions where grid infrastructure lags behind in EV adoption. This integration may not only alleviate grid stress but could also help EV fast-charging station profitability, which prohibitive demand charges can challenge.38 Moreover, electric power companies can leverage EV batteries to offer innovative solutions like vehicle-to-home backup power and upcoming vehicle-to-grid infrastructure support. The emerging secondary market for repurposed EV battery storage could hold promise for stationary grid storage system applications, potentially fostering technological advancements and embracing opportunities for a sustainable circular economy.39

Power and heat storage solutions for industrial electrification: The industrial sector represents 28% of US primary energy-related CO2 emissions annually, or 1,376 MMmt of CO2.40 As industrial companies electrify assets to help reduce their scope 2 emissions, many will have 24/7/365 demand requirements. This demand growth could occur during periods when renewables are not generating. Different energy storage technologies can facilitate industrial electrification and decarbonization, while tailoring solutions to each sector’s unique needs. In the chemicals sector, process heat requirements can create opportunities to electrify and incorporate storage to add flexibility and resiliency. In the mineral manufacturing industry, synthetic, fused, and engineered oxide minerals are manufactured in electric arc furnaces. As the processes are primarily electrified, they can already leverage battery storage paired with demand response programs. Additionally, electric furnace waste-heat capture and utilization using thermal storage could store process heat for later use. The iron and steel industry could benefit from hydrogen storage for both fuel and process reactions. Process electrification can offer further opportunities to harness battery storage, while waste gas can provide operational backup. Meanwhile, cement manufacturers could potentially meet thermochemical heat requirements through solar thermal energy or electric heating coupled with thermal storage solutions.41

Integrate energy storage in microgrids and community-based solutions: A community resiliency energy storage program could be integrated into utilities’ IRP processes, which can focus on identifying and serving customers’ needs and addressing their energy vulnerabilities. Implementing community-based microgrids integrated with energy storage and renewables in underserved areas could potentially provide access to more reliable and affordable electricity. The microgrid generally deploys localized energy storage systems within a community, helping to ensure energy security, demand response, and grid independence during emergencies and peak demand periods. It can enhance resiliency and affordability and act as an equity asset, potentially providing reliable and affordable electricity to underserved communities.

Use storage to support potential peer-to-peer (P2P) energy trading platforms: P2P trading platforms on which consumers and prosumers42 trade electricity among themselves can be a challenge to implement, but they may be a potential future use case. The electric company could connect, manage, and maintain the P2P sharing network and use energy storage to facilitate energy sharing. They could charge transaction fees for grid stability assurance, efficient settlement processing, and energy storage utilization.

Business models and use cases

  • Storage as an equity asset: By deploying decentralized storage assets, electric power companies can help provide reliable, resilient, clean, and affordable electricity to low-income communities.

Use case: In a recent IRP document, Portland General Electric explored community-resiliency microgrids and solar and storage setups with islanding controls for continuous power during grid outages. Microgrids differ from other solar plus storage plants by incorporating advanced communications and controls to coordinate diverse DERs within microgrids.43 The investigation identified 100 MW potential by 2030. Portland General Electric expects it to help enhance grid resilience, promote sustainable energy solutions, and fulfil equity objectives, potentially making electricity more affordable in low-income communities.44

  • Microgrid-as-a-Service: The Microgrid-as-a-Service (MaaS) business model can offer customers, especially in the commercial and industrial segments, turnkey access to microgrid infrastructure, battery storage, and renewable energy sources through subscription-based arrangements, helping to ensure reliable and resilient energy supply without any upfront investment.

Use case: Xcel Energy (“Xcel”) introduced the Empower Resiliency program for Minnesota’s large commercial and industrial customers. The microgrid-based service is designed to enhance reliability for customers requiring higher-than-standard service. Xcel owns, installs, and maintains microgrid assets, including battery storage and renewable energy, providing a turnkey resiliency solution and upfront capital. The program, which Xcel previously offered in Wisconsin, reflects a growing trend of microgrid adoption, as the US market is expected to expand 19% annually through 2027.45

What are the benefits of energy storage?

Benefits for a Flexible Clean Energy Grid

One reason that the deployment of energy storage is accelerating is that it increases flexibility in grid operations, offers multiple services, and can be used in different applications. Storage systems can also be located in multiple segments of the electricity grid—in the transmission network, the distribution network (where electricity is delivered to consumers), the generator (for example, co-located with wind or solar), and in the case of smaller scale systems, at the commercial building or residential level.

Because some renewable energy technologies–such as wind and solar–have variable outputs, storage technologies have great potential for smoothing out the electricity supply from these sources and ensuring that the supply of generation matches the demand. If charged during periods of excess renewable generation and discharged at times of increased demand, energy storage can help maximize the use of renewable energy and ensure that less is wasted. And residential battery storage can help the utility to balance electricity customer demand with power supply to better align the more variable wind and solar supply with electricity demand.

More broadly, storage can provide electricity in response to changes or drops in electricity, provide electricity frequency and voltage regulation, and defer or avoid the need for costly investments in transmission and distribution to reduce congestion. Energy storage is also valued for its rapid response–battery storage can begin discharging power to the grid very quickly, within a fraction of a second, while conventional thermal power plants take hours to restart. This rapid response is important for ensuring the stability of the grid when unexpected increases in demand occur.

Energy storage also becomes more important the farther you are from the electrical grid. Homes in rural communities that are farther away from the transmission grid are more vulnerable to disruption than homes in large metropolitan areas. Islands and microgrids have smaller service areas that are (or can be) disconnected from the larger electrical grid. Because they may not be able to rely on the larger grid, these communities can use energy storage to avoid blackouts.

Benefits to Communities

Deployment of energy storage can increase access to and deliver benefits for low-income communities and communities historically overburdened with the impacts of pollution and climate change.

A key benefit of energy storage is its ability to provide the grid services currently fulfilled by fossil fuel peaker plants—or “peakers”— that only operate during limited times throughout the year at periods of extremely high demand for electricity, such as during a heat wave. Peaker plants are usually sited in areas of high electricity demand like urban centers—often in or near low-income communities or communities of color. Most peakers are powered by natural gas (although a few even run on coal, oil, and diesel fuel), increasing air pollution and exacerbating already poor public health impacts in these overburdened communities. Energy storage can replace existing dirty peaker plants, and it can eliminate the need to develop others in the future. Battery storage is already cheaper than gas turbines that provide this service, meaning the replacement of existing peakers will accelerate in the coming years.

Related to this, storage can help customers avoid peak pricing (price spikes) by smoothing out demand. Similar to how car rideshare services spike in prices on holidays or other times of high demand, in some places electricity gets more expensive when demand is high, such as during heat waves as more people rely on air conditioning. Energy storage can reduce high demand, and those cost savings could be passed on to customers.

Community resiliency is essential in both rural and urban settings. Energy storage can help meet peak energy demands in densely populated cities, reducing strain on the grid and minimizing spikes in electricity costs. Energy storage can help prevent outages during extreme heat or cold, helping keep people safe. Storage can be used alone or in addition to community solar or aggregated home or commercial building rooftop solar projects to create community-level microgrids or resiliency hubs. By providing localized backup power, these systems can help communities during natural disasters—for example, in meeting energy demands during floods, wildfires, and extreme weather events, all of which are becoming more frequent and intense with climate change.

By charging storage facilities with energy generated from renewable sources, we can reduce our greenhouse gas emissions, decrease our dependence on dirty fossil fuel plants contributing to pollution and negative health outcomes in communities, and even increase community resilience with solar plus storage systems.

Elevating the role of energy storage on the electric grid

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