ESA: Now let’s not get carried away

The 'Duck Curve'.

The ‘Duck Curve’

Despite the enormous hype at the annual US Energy Storage Association conference in Washington, D.C., there are too many outstanding issues to be truly ready for prime time, finds the Editor. This article was first published in the Summer 2014 issue of Batteries & Energy Storage Technology.


The first commandment of dealing drugs is “Don’t get high on your own supply.” At this year’s annual Energy Storage Association conference in Washington, D.C. the dealers were higher than a Colombian cocaine cartel with a habit.

Of course, when there’s around 700 people congregate for an energy storage event, it’s all too easy to believe the hype. But BEST is not buying it quite yet.

This publication is a keen supporter of energy storage, for obvious reasons. But it is our role, dear readers, to pick holes in what was a conference hall-sized energy storage hype balloon. By the end of the week at ESA, so much hot air had hissed out of the balloon this author was wondering whether energy storage is EVs all over again – immense promise of imminent sales, but relatively small beans in reality.

Muchos hype

The hype started with a bang via the keynote address by the CEO of SunPower, Tom Werner, who has seen his company grow from a turnover of $2.5m in 2003 to $2.5bn in 2013, helped by its acquisition by French oil giant Total.

His sermon, entitled ‘The Convergence of PV and Storage’, was delivered at full volume, but this author was not as convinced as Werner that energy storage is on the cusp of a solar PV-like boom of the kind witnessed over the past decade.

Energy storage, says Werner, is an integral part of SunPower’s plans over the coming decade. Having made a bundle on manufacturing and selling PV panels, the Californian company intends to be an “energy service provider”, integrating solar and energy storage to steal customers from the likes of PG&E, ConEdison and other utilities.

Their vision is of sexy “optimized” energy bills, rather than something people just pay and forget about, often not even bothering to look at the bill. SunPower has hired 30-40 people charged with transforming the company to be just that.

On a system level, storage was said to be essential due to the ‘duck curve’. The neck of the duck is the increasing ramp rate of peaking power plants as backup for the ever-deeper penetration of variable wind and solar power.

The belly of the duck is excess generation of solar and other renewables. The bigger the excess, the fatter the duck. Energy storage could flatten the curve and make use of some of that surplus.

Energy storage, said Werner, would grow 12,000% from 2012-2022. However, virtually in the same breath, Werner proffered battery storage would economic “within 3-5 years”; it was exactly at this point the hype balloon was punctured.

SunPower CEO Tom Werner

SunPower CEO Tom Werner

SunPower’s ambition is to be commended but it is a big leap to go from manufacturing high quality solar panels to becoming an energy storage/energy service provider via batteries, of which it knows relatively little.

This author questions SunPower’s business model; it is basing its future on something out of its control – the cost and performance of battery energy storage. Werner confirmed to BEST that SunPower had no intention of becoming a storage technology manufacturer, although parent Total is an investor in liquid metal battery MIT spin-off Ambri and flow battery manufacturer Enervault.

Werner’s speech was one of many in a show bursting with optimism, but in truth they were mostly “within five years, this” and “within five years, that”. There is no doubt energy storage makes sense from a system point of view, but do the numbers stack up?

Undoubtedly there will be growth in energy storage, but as usual, the hype will not be borne out by reality. As we shall see, there are simply too many issues to be ready for prime time.

EPRI drills through the spin

One of the more hype-free sessions was a pre-conference workshop by Sandia National Laboratory and that respected stalwart of the US electricity industry, EPRI (Electric Power Research Institute). EPRI’s Haresh Kamath was a treasure trove of useful nuggets, most of them pretty negative about the prospects for the energy storage.

The arbitrage opportunities arising from the ‘duck curve’ – storing power when cheap to be used at peak times – are much less anticipated and the difference is too small to finance storage. Where storage does make sense now is on islands with limited grid infrastructure, like Hawaii, or the US Virgin Islands, where the retail electricity price is an astronomical $0.52/kWh.

In mainland USA, storage works for frequency response in markets such as the New York ISO, which rewards the inherent advantages of storage, i.e. response in milliseconds rather than minutes as for gas-fired peaker plants.

Reality check for grid storage

Kamath warns, however, that the frequency response market for energy storage – which has not only seen batteries but also Beacon Power’s flywheel technology installed – is in danger of becoming “saturated” over the next five years. By then, he says, the market will have “collapsed”.

Unlike SunPower’s Werner, Kamath was generally down on grid energy storage, saying “there is not a market”. This, of course, comes down purely to costs.

And the costs are not just down to the battery. Power electronics and the balance-of-plant account for up to 60% of the system cost. Concrete pads to park battery storage systems can be surprisingly expensive, as too can the permitting process.

Moreover, the industry does not yet have the reliability desired by financiers to be bankable. Just because a battery may come with a warranty, developers cannot be 100% sure that the batteries will perform as they should, when they should. Cycle life data of ‘real world’ energy storage data is very limited for systems deployed in the field.

Getting utilities interesting in grid storage will be a challenge. Utilities tend to think in decades of operation, rather than years, when it comes to investing in components. Furthermore, energy storage is seen as having relatively poor ROI and utilities were said to be worried about ‘hidden costs’.

In most cases, an energy storage system needs to cost $350/kWh to be in the money. The average system cost of $1000/KWh, not to mention an operations & maintenance cost of $200/kWh suggests this may some time away from being viable without subsidies, mandates with regulated returns etc.

Kamath said storage is where computers 30 years ago. This was damning with faint praise; it meant storage is pre-Windows, not particularly user-friendly, not plug ‘n’ play, with few standards and codes for utilities to be comfortable with connecting an energy storage system into, for example, a transformer.

The so-called ‘value stack’ of energy storage for utilities – frequency response, network investment deferral, arbitrage, voltage regulation, peak shaving and so on – is great in theory but in practice, no-one yet knows the capex cost, or indeed, if a battery system is up to the task of such multi-functionality.

Of course, the developers will be armed with performance guarantees, but for 10 years plus? 20 years? Not yet. For developers like S&C Electric, whose real expertise is switchgear and grid connections, their battery knowhow is more or less limited to bolting together other companies’ kit.

Raging against the dying of the light?

Jim Rogers, who retired as CEO of utility giant Duke Energy in 2013 after seven years at the helm, used the word ‘inevitable’ about storage a great deal, albeit in a preachy sort of way that suggested the exact opposite.

Rogers is no mug; he noted Thomas Edison said energy storage was “around in the corner” in the 1890s. Rogers suggested energy storage was still around the corner, but the corner is the 2020s and predicted a 47.3% global compounded growth until 2020, when total installation will reach 11.3GW.

If this sounds a lot, it must be remembered 11.3GW represents just 1% of the total predicted renewable energy capacity in that magic year of 2020.

In this author’s opinion, Rogers’ speech was rather duplicitous. For all his talk of solar and storage, the ex-Duke man spoke a great deal about the need for coal and nuclear, and seems far more comfortable in extolling the virtues of ‘Big Energy’ than of distributed generation.

Former Duke Energy CEO Jim Rogers

Former Duke Energy CEO Jim Rogers

But it was interesting to hear Rogers speak about the clear and present danger posed by solar and storage to utilities, and what they should do about it. Rogers cited Kodak, which, contrary to public belief, actually did work on digital photography, but because it was very much a non-core business, its film division did not invest in it.

In other words, utilities will not cannibalize their core business of generating and distributing electrons via energy storage – Wall Street will not allow it. The challenge for utilities is to see that change is coming and make money from it by accelerating that change. However, as Rogers, said, “Utilities do not control their change”.

Regulation, regulation, regulation

Of course, there are some barriers to change which utilities cannot control, but can be heavily influential – regulation. In many nations, not least the USA, regulations stand in the way between a viable energy storage market and a virtually non-existent market.

Aside from the so-called energy storage mandate by California, there are market mechanisms to encourage frequency regulation and other balancing services in the New York ISO. In the big bit of the US in between the two coasts, there are dozens of states with no measures to encourage energy storage.

How to encourage state regulators to create a market for storage? With great difficulty. Slothful regulators make utilities look fast-moving and getting regulations changed is like pulling teeth.

But utilities are not exactly chomping at the bit to make storage happen. Commissioner Anne Hoskins of Maryland Public Service Commission said she did not know of one utility which had come forward with suggestions for how energy storage could be implemented, saying its “one for the next generation”.

One of the big issues for utilities is the rate and timing of recovery; risk-averse utilities like steady investments that pay off over long periods – can they be sure storage is such an investment? No-one really knows.

Commissioner Jeffrey Goltz of Washington Utilities & Transport Commission was highly cautious about the cost burden on consumers, and with very cheap electricity costs thanks to largely hydropower-based generation, with good reason. Goltz cited the example of California PSO that invested $24m in a compressed air energy storage system with no real idea about whether it is in the interests of billpayers for regulated return purposes.

In the short term, the sweetspot appears to be islands – both the Hawaiian/Puerto Rican variety as well as – possibly – islanding capability to ensure security of supply whenever natural disasters like Hurricane Sandy batter the shores.

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Utilities uncertain

And what of the utilities themselves? Well, by far and way the most revealing session was a fascinating and genuine debate featuring New York City utility ConEdison, the US Army, developers Convergent Energy and hybrid power technology firm SMA Solar.

The US military is rightly seen as a progressive force in energy technology but Melanie Johnson of the US Army Engineer Research & Development Centre made it clear it is under no pressure to do energy storage. Army bases are pretty much the same as everyone else; they buy grid power from utilities and back it up with diesel gensets.

The US Army is not about to replace those diesel gensets at bases – there is simply not enough juice to be cost-effective – but it could use batteries to reduce usage of diesel to make fuel savings via peak shaving. Moreover, making the numbers work for the Army, e.g. via participation in balancing services, is problematic because by law it is not allowed to pay the penalties for not being available – its taxpayer money.

In general, Johnson was underwhelmed by energy storage, particularly after ZBB Energy’s vanadium redox flow battery failed to perform in a microgrid demo at, of all places, Pearl Harbor.

The smartest person in the room was Rebecca Craft, director of energy efficiency and demand management at New York City utility ConEdison. If there was once place on the US mainland where grid storage may make sense, it is New York City.

Since Hurricane Sandy, when there were 1.3m outages, resilience is the watchword. Wall Street is technically on a flood plain. Generators are problematic, as storing fuel is not ideal.

There are parts of parts of Manhattan where demand reaches 2GW per square mile. It’s also frighteningly expensive to build in the Big Apple; before corpulent New Jersey Governor Chris Christie killed the multi-billion dollar trans-Hudson ARC (Access to the Region’s Core) ‘Big Tunnel’, ConEd estimated the land cost alone for a replacement substation at $1 billion.

So alternatives to digging up roads and sticking in yet more copper wire underground, of which is there is already some 96,000 miles – the world’s biggest copper mine – are attractive. Craft said 10% of ConEdison’s system demand peak is fewer than 75 hours/year, so shaving just 150-200 MW would be highly beneficial to ConEdison and ratepayers.

Craft holds the purse strings for ConEdison’s new programme to permanently reduce 125MW of demand by June 2016. Naturally, Ms Craft was like a honeypot surrounded by bees.

The programme is political. New York State Governor Andrew Cuomo would prefer to close the 2GW Indian Point nuclear plant in Westchester County, which ConEdison estimates would leave 1.4-1.5GW gap in supply. So ConEd is contracting for permanent demand reduction between 2pm-6pm at a cost of $2100/kW.

Although the programme will consider energy storage, its participation is not mandatory. Judging by her remarks, Craft is not sold on storage. This comes down to, unsurprisingly, cost.

Some peaks, she said, are effectively 10-12 hours long, meaning batteries are not a good solution. “I’d rather dig”, she said. For the demand reduction programme, it seems ConEdison would rather go with demand response and energy efficiency measures like low-energy light bulbs.

Convergent Energy’s Johannes Ritershausen pointed out that demand response is not fully dispacthable, and when push comes to shove people are going to use their aircon – customers can save more money by not going to Starbucks twice a month than turning off aircon at peak times.

Craft replied aggregators may get a contract of 10 MW of demand response from utilities, but aggregators will contract for more than 10 MW with organisations to be certain of fulfilling their obligations, should there be any “phantom” megawatts… Every year New York City gets 300 MW of demand response, it’s always there, she said.

The value of storage to ConEd will be “edge of grid” storage to de-bottleneck grid congestion. ConEd spends $1bn on upgrades to meet summer peak and “we like batteries for areas of very rapid load growth to defer network upgrades in built-up areas”, says Craft.

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Permitting problems

The issue of permits threatens to be a show-stopper if authorities are not presented with technical data that can be easily validated. Craft suggested only lead-acid batteries are permitted by the New York City Buildings Department; no permit, no battery, no contract.

And while the New York Fire Department may not know what causes thermal runaway in lithium-ion batteries, they will certainly have heard of the Boeing Dreamliner incident.

It was not all doom and gloom from ConEdison. Utilities are showing more interest in installing storage at network pinchpoints.

Ms Craft believes the Public Services Commissions will start to rethink the market restrictions, allowing utilities to own and operate storage assets. But the question is, will they want to?

SMA Solar’s Wes Kennedy reminded the audience that residential and commercial energy storage is not a simple case of whacking in a battery hooked to a PV grid tie inverter; it needs current-source inverter, more than double than grid-tie inverters.

Convergent Energy’s Johannes Ritershausen put up a good case for storage. He observed storage increases the number of kilowatt-hours the system uses – good for regulated utilities – and by definition is a net power consumer over a cycle, so it acts as a tool to add load when required, as well as while offsetting losses from PV and renewables.

For behind-the-meter storage, however, Ritershausen admitted that apart from enthusiastic early adopters, most will not be willing to pay upfront for residential/commercial storage. Commercial property firms/tenants lease space; they will not want to buy batteries, so the business model will be for storage customers to enter into 10-15 years electricity supply contract at current market rates, or a little below, and the storage system will be installed with no upfront cost.

Of course, this shared saving model, much like ‘free’ solar panels, will need some form of government support to enable developers to make a buck. Monthly fees, avoided demand charges and lower bills are unlikely to add up.

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The utility always wins

And as more consumers seek to lower their demand charges, utilities will hike their connection fees. It will be a brave/rich/stupid customer who detaches her home from the grid entirely and be solely reliant on PV and/or storage or a genset – utilities are betting few will.

Utilities will remain the backstop, always there, even if millions install storage, so escaping the utility’s grubby mitts entirely will be a challenge. This makes a utility death spiral seem unlikely, particularly when it’s apparently reliant on subsidized programmes to be implemented by those self same utilities.

More to the point, is storage a friend or a foe? Delgates heard how Southern California Edison recently began disallowing residential and small commercial energy storage units because the nightly float current charge was powered by non-renewable grid electrons. This niggardly ruling soon spread throughout the United States.

Despite wanting to believe the hype, this author cannot swallow it. It’s not ready for prime time. Not yet.

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