The business case for energy storage

Can regulated utilities prove the business case for energy storage?

Many of the most talked about energy storage projects of 2017 were commissioned or supported by regulated utilities. The trend shows no sign of slowing down in 2018.

Utilities in the United States, such as Portland General Electric in Oregon and the Public Regulation Commission in New Mexico are starting to include energy storage in their future resource planning. It can be argued that regulated utilities have an easier time proving the business case for energy storage than in a purely commercial project, as utilities benefit most from the added flexibility offered by storage.

Proving a low cost business case
Tucson Electric Power’s (TEP) solar plus storage facility, a 100 MW solar array with a 30 MW, 120 MWh energy storage system was built by NextEra Energy. TEP claims the lowest price (<$0.045/kWh) over 20 years for any such solar plus storage facility to date, with <3¢/kWh for the solar section of the project. The remaining value of approximately 1.5¢/kWh makes up the energy storage section.

Industry analysts have been skeptical over how such a project could be made viable at this low price, although as the details within the contract are confidential to utility and developer, could only scrutinise publicly available information. Jesse Jenkins, a PhD candidate at the Institute for Data, Systems and Society at the MIT Energy Initiative, maintains that the 3¢/kWh price relies heavily on subsidies and the 30% investment tax credit — without subsidies he estimates project pricing to be around 9¢/kWh. TEP also benefits from the lower co-installation costs of a combined facility.

T&D Deferral
Several regulated utilities have taken on smaller energy storage projects for T&D deferral. Arizona Public Service (APS) is building a 2MW, 8 MWh energy storage system instead of 32 km of new transmission lines to serve a small community. On the island of Nantucket,Massachusetts, National Grid will install a 48 MWh battery energy storage system to replace one of two backup diesel generators and delay installing a new subsea transmission cable.

Emergency response
Large and small energy storage projects were completed this year in response to energy emergencies. Developers in Southern California built multiple energy storage projects in response to gas leaks in Aliso Canyon which affected critical gas power plants.

Tesla’s completion of the 100 MW, 129 MWh energy storage system in under 100 days aimed to fight the South Australian summer blackouts. Currently the largest in the world, even this could be upstaged by a 100 MW, 500 MWh vanadium flow battery storage system in Hubei Province, China.

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