Energy Storage Set for Massive Growth on the U.S. Grid

Published: September 23, 2021

By: Concentric Staff Writer

The presence of energy storage—dominated by lithium-ion battery technology—is surging across the U.S. electricity grid, particularly in the West, driven by new rules at the federal level and the need to balance renewable generation.

A wave of solar and wind energy coming onto the grid, plus escalating decarbonization efforts in the sector, are bolstering new installations of storage, which helps balance the grid by storing energy in the early afternoon for use in the evening. One of the hottest markets for energy storage is California, where a preponderance of renewables has led grid operators and state lawmakers to push storage as a solution.

The amount of energy storage in the California Independent System Operator’s interconnection queue has skyrocketed from 2.6 GW in June 2014 to 69.2 GW in June 2020 and 147 GW in July of this year, CAISO data shows. According to CAISO staff presentations and comments at a recent Board of Governors meeting, most projects in the interconnection queue are not actually constructed due to lack of financing or other reasons, leading to discussions among the ISO’s management as to how to make the queue process more efficient.

The vast majority of new storage due to come online in California is battery energy storage, with a few GW of pumped hydro storage mixed in. Planned battery storage is almost evenly split between stand-alone energy storage projects and hybrid projects that pair storage technology with generation, usually solar. Areas with a large energy storage presence include Kern County, an oil and gas producing area; Riverside County; Los Angeles and Orange Counties; San Francisco; and San Diego. Storage output crested 1 GW on the CAISO grid in early August for the first time in history. Storage reaches maximum charge level around 2 p.m. when solar is peaking and then typically discharges energy in the critical 7-9 p.m. period when the grid is most stressed with high demand after the sun goes down and solar is no longer producing, CAISO said.

In a February report on energy storage, the North American Electricity Reliability Corp. (“NERC”) noted that the benefits of storage technology include fast-ramping support for the grid when solar begins to decline in evenings, rapid frequency response, and assistance with addressing operational uncertainty caused by adding large amounts of renewables to the grid.

In the report prepared with the Western Electricity Coordinating Council, NERC said that bulk energy storage systems “are projected to grow at an increasing pace across North America.” Advances in technology, cost reductions, and new rules at the federal level and within wholesale energy markets are also driving the technology, NERC said. The organization, which enforces mandatory reliability standards, created an inverter-based working group to develop guidelines for the integration of energy storage systems. Strategically located battery storage systems could help prevent blackouts, the organization said.

According to the report, entitled “Impacts of Electrochemical Utility-Scale Battery Energy Storage Systems on the Bulk Power System,” existing NERC reliability standards adequately reflect battery storage as a generator, ensuring that the NERC transmission-planning performance requirements, plus model and data standards, are applicable to the current number of storage systems on the grid. However, data on battery storage tends to be non-uniform and lacking in consistency among reporting entities, which will require better reporting mechanisms for energy storage data, the organization said.

“Because battery storage is an emerging technology, the development of utility-scale battery storage has lagged the integration of renewable resources,” the NERC report says.

The storage industry got a major boost in February 2018 when the Federal Energy Regulatory Commission, which regulates the bulk power system and wholesale energy markets, issued its landmark Order No. 841. The rule requires regional transmission organizations and independent system operators around the country to remove barriers to participation of electric storage resources in their capacity, energy, and ancillary service markets.

Each RTO and ISO in the U.S. was required to make compliance filings under the order, which mandated them to establish a participation model of market rules that recognizes the physical and operational characteristics of electric storage resources and facilitates their participation in the markets. The participation models must ensure that a resource is eligible to provide all capacity, energy, and ancillary services that it is technically capable of providing in the RTO/ISO markets, and that a resource can be dispatched and can set the wholesale market clearing price as both a wholesale seller and buyer. The participation models need to account for the physical and operational characteristics of energy storage resources through bidding parameters or other means. FERC has established a size requirement for participation in RTO/ISO markets that does not exceed 100 kW.

FERC rejected rehearing requests to Order 841 from state utility commissions that said storage integration was a state matter, and in July 2020 a federal appeals court upheld FERC’s Order No. 841, rejecting arguments that states should be free to control energy storage participation. Petitioners included the National Association of Regulatory Utility Commissioners, the American Public Power Association, the National Rural Electric Cooperative Association, Edison Electric Institute, and American Municipal Power, Inc.

“Because the challenged Orders do nothing more than regulate matters concerning federal transactions – and reiterate ordinary principles of federal preemption – they do not facially exceed FERC’s jurisdiction under the Act,” the U.S. Court of Appeals for the D.C. Circuit said in its decision.

Recognizing the limitations of four-hour battery storage technology, the U.S. Department of Energy launched a “Long-Duration Energy Storage Shot” research initiative. The goal of the shot is to “accelerate breakthroughs of more abundant, affordable, and reliable clean energy solutions within the decade,” DOE said. Having more long-term storage in place will help the country tackle the remaining barriers to addressing climate change and reach the Biden Administration’s goal of net-zero carbon emissions by 2050 more quickly while creating jobs, the agency said.

With new efforts at the grid operator level and at the federal government to integrate and develop new storage technologies, the resource appears to be here to stay on the U.S. grid and is poised to play a major role in integrating renewables and meeting climate goals.

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All views expressed by the contributors are solely the contributors’ current views and do not reflect the views of Concentric Energy Advisors, Inc., its affiliates, subsidiaries, or related companies. The contributors’ views are based upon information the contributors consider reliable at the time of publication. However, neither Concentric Energy Advisors, Inc., nor its affiliates, subsidiaries, and related companies warrant the information’s completeness or accuracy, and it should not be relied upon as such.

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