Keeping current: how advancements in electricity storage can save money for consumers

This is the most interesting time in the energy space since Samuel Insull perfected the modern utility model in Chicago over one hundred years ago, in large part because of the tremendous cost declines in energy storage technology.^{Reference Schewe7} Cost-effective storage is a holy grail for the electrical grid and for consumer advocates.

Consider that the electricity enabling you to read this article was generated a fraction of a second ago and that generators immediately deliver whatever they produce from moment to moment. Next, consider that electricity itself is not only an essential service but also the lifeblood of the modern economy. Without power, the world as we know it would simply not be able to function, and it is for good reason that the electrical grid is acknowledged as one of the most important inventions ever. But, finally, consider that electricity demand can vary substantially from month-to-month, day-to-day, and hour-to-hour, and that grid operators need to make sure we have enough power to meet every level of usage.^{Reference Yohanis, Mondol, Wright and Norton8}

These considerations led system planners to build the electrical grid to meet the highest expected level of peak demand, even levels that are only reached for a few hot hours in the summer when air conditioners are running full blast. And this need to meet peak demand through instantaneous generation can get very expensive, as a power plant that only runs for thirty hours a year still needs to cover its costs. Indeed, according to Faruqui et al. (2007), “even a 5% reduction in peak demand in the United States could lower consumer energy costs by at least $3 billion a year.”^{Reference Faruqui, Hledik, Newell and Pfeifenberger1}

This is one of the reasons why nothing is more encouraging from a consumer advocate point of view than the continuing cost decline of batteries and other storage technologies. Storage provides grid operators with flexibility. Instead of building costly power plants that run only a few hours a year, electricity can be stored at times of surplus and used at peak, unlocking consumer savings in the process by avoiding or reducing the need for generation equipment.²

There are other values provided by storage in addition to time-shifting and helping to more cheaply balance supply and demand. In Illinois, for example, there are now over 100 MW of battery projects providing frequency regulation in the PJM market.(d) The electrical grid must stay in a narrow frequency range at all times, as power outages can occur if it is either too high or too low. Traditionally, frequency was provided by coal or natural gas power plants, but increasingly it is battery storage that serves the market. Batteries can respond in just a few seconds to frequency regulation signals, unlike traditional generators, where response can take as much as ten minutes. This rapid response provides significantly more value to grid operators, and it is key reason why PJM estimates that increasing participation by storage can reduce overall frequency regulation costs by up to $50 million a year.³

Reducing the cost of renewables integration is another value that storage can provide the grid. Renewable technologies such as wind and solar power continue to improve and, like with batteries, we have seen substantial yearly cost curve declines.⁶ Renewables in many places around the country are now the least-cost option, a truly exciting development for both consumers and the environment.^{Reference Greene5} At scale, however, the intermittent nature of wind and solar power can require backup generation or curtailment, potentially increasing costs and reducing environmental value. By storing power when the sun is shining and the wind is blowing, storage can complement renewables, allowing for higher clean energy deployment, improved grid flexibility, and reduced system costs.

So far, then, we have identified the following consumer values potentially provided by storage:

• • Lower market cost (e.g., frequency regulation)

• • Deferred T&D/capacity investments

• • Reduced cost of renewables integration

• • Increased grid flexibility and reliability

• • Reduced peak demand

All these can be considered grid values, in the sense that they identify opportunities where storage can help lower overall electric system costs. But advances in battery technology offer value to individual budgets as well, with the potential for electric vehicles (EVs) to significantly lower household transportation spending as the best current example.

Once a subject of prophecy, EVs have arrived. While currently a small share of overall car purchases in most countries, they are becoming a familiar sight on roads—and industry analysts predict EV sales will grow at a robust clip in the next decade, as consumers become familiar with their technological advantages, and as anticipated cost reductions and extended driving ranges turn EVs into appealing alternatives to gasoline-burning cars.^{Reference Zethmayr and Kolata9} EVs are becoming popular because not only they are healthier for the environment and cheaper to operate, but their performance characteristics are superior to Internal Combustion Engine (ICE) vehicles. With immediate torque, quicker acceleration, low maintenance, smoother ride, and lower noise levels (not to mention no exhaust fumes), EVs have been the highest ranked cars in recent consumer satisfaction surveys.⁴ Charging at home instead of making a trip to the gas station is an unfamiliar consumer convenience—now made even easier by the introduction of plug-free automatic wireless charging—and the potential to power your car from solar panels on the roof of your home is alluring for customers in sunny climes.

While there are thus many good reasons for advocates to be bullish on electricity storage, maximizing the full consumer value depends on continuing the impressive cost declines of batteries and other storage technologies we have seen over the last decade.⁶ How can we facilitate this? Well, a large part of the answer will be maintaining and increasing R&D investment at our universities and National Labs, as we are of course dependent on scientific advances to continue improving the efficiency and cost profile of storage.

But it is equally important for states, regional power markets, and public utility commissions to get policy right. Although there are options here, we believe particular policymakers should:

1. (i) Improve interconnection rules, making it easier for storage to connect to the grid

2. (ii) Clarify the role of 3rd party providers and encourage competition

3. (iii) Allow for “value stacking,” so storage can capture revenue from multiple services

4. (iv) Create a framework to encourage utilities to lower peak demand

5. (v) Adopt procurement strategies aimed at decarbonizing peak electricity supply

6. (vi) Maximize consumer and environmental value from transportation electrification

7. (vii) Deploy pilots aimed at reducing business process and implementation costs

A future where cost-effective storage is an increasingly major factor in electric system dynamics is an encouraging future for consumers and consumer advocates. Keeping up with the evolving storage market and maximizing consumer and environmental value will require proactive policies aimed at facilitating integration, aligning incentives, and promoting innovation. Given the great potential here, now would be a good time for stakeholders and policymakers to start moving forward.